Dear CIGAs,<\/p>\n
BREXIT!\u00a0 I have to admit, I did not believe it would happen.\u00a0 Rather, I did not believe it would be \u201callowed\u201d to happen.\u00a0 In retrospect I believe the elites will look back and wish they had \u201cDiebold\u201d doing the vote count.\u00a0 This vote has so many various ramifications, it is hard to wrap your head around what it means but let\u2019s take a look at what stands out most.<\/p>\n
First and foremost, the \u201cpeople stood up and spoke\u201d.\u00a0 The vote to exit is without a doubt the largest protest vote the world has seen in many years.\u00a0 It is important to note that the Brexit vote is symptomatic of what is happening worldwide.\u00a0 I would also say it is very similar to the Trump phenomenon here in the States, people are angry.\u00a0 (I would also say the results are very encouraging to the Trump camp).\u00a0 Next, we must wonder \u201cwho\u201d is next?\u00a0 Italy, Spain, France?\u00a0 Then, the next exit is the curtain for the EU experiment as a whole.\u00a0 It is only a matter of time before the next referendum (Italy in October), Brexit is only the beginning of an end where individual countries will prefer to steer their own destinies.\u00a0 \u201cGlobalization\u201d has been dealt a huge blow!<\/p>\n
It should be noted, the vote yesterday was only a referendum and does not guarantee the Parliament will petition to leave the Eurozone.\u00a0 It will be interesting to see how the Brits react if Parliament defies their wishes.\u00a0 All of this will take \u201ctime\u201d to occur, but time is not something I believe is available and will most likely be cut short by the markets short circuiting.<\/p>\n
As for markets, Brexit is being called a six sigma \u201cBlack Swan\u201d.\u00a0 I had planned to write today that the entire system itself is the fabled Black Swan, I think we will soon see if this thought is correct.\u00a0 The world will wake up Monday morning to all sorts of margin calls.\u00a0 You must understand, the \u201ccarry trade\u201d is held on very thin margin.\u00a0 No matter what market you are looking at, they all moved several percentage points versus 1% or much less used to carry positions.\u00a0 My point is this, many \u201ccounterparties\u201d were outright blown up today and are dead entities unable to perform.\u00a0 Yes I am sure the Fed, ECB and BOJ will provide liquidity but that will not erase the losses, it will only postpone the pronouncement of death.<\/p>\n
I believe it is VERY important to look at the \u201cdirection\u201d that all markets have taken since the Brexit news.\u00a0 THIS is the direction of Mother Nature versus the direction of the elite controllers.\u00a0 You can call the moves \u201cout of control\u201d if you wish, the important thing to understand is the control of markets was temporarily lost and went in \u201cbad\u201d directions.\u00a0 These \u201cbad\u201d directions are your road map as to which direction various assets will move in the upcoming re set.\u00a0 I say the above with one caveat, capital flowed into U.S. Treasuries and German bunds, a reset will not be kind to the owners of debt from any issuer.<\/p>\n
To finish, clearly today\u2019s unanimous winner in ALL currencies was gold.\u00a0 As I wrote above, I believe the action today is your road map and a \u201ctell\u201d as to where we are headed.\u00a0 Financially, the system blew up behind the scenes and we will soon hear \u201cwho, where and how much\u201d.\u00a0\u00a0 We have gone nearly eight years with \u201cunlimited paper\u201d pushing, pulling and \u201cpricing\u201d markets in directions that supported the Alice in Wonderland world.\u00a0 The knee jerk reactions you saw today will only become more violent as today was only for starters.\u00a0 The only question remains, how long can they keep markets open?\u00a0 The carry trade unwind can only go so far without control being totally lost.\u00a0 Central banks will be mere straws in a hurricane of fear.\u00a0 A complete re set of \u201cpricing\u201d is not far off!<\/p>\n
Standing watch,<\/p>\n
Bill Holter
\nHolter-Sinclair collaboration<\/p>\n