Over the past month, everyone and their mother had an opinion on Brexit. Bloomberg managed to put a lot of food for thought in the image below:
I suggest you check out Mauldin’s post (click here) for an excellent analysis of what has changed and the realization by the EU leaders that in order to keep things together they will have to try a new approach. We will have to wait and see if the slow moving EU will learn the lesson of Brexit or just keep the current status quo which will in my opinion will lead to an eventual breakup. I also don’t think it is a coincidence that the Italian government got authorization by the European Commission to guarantee $150bn of Italian bank issuances. I couldn’t help but laugh when I read that only “solvent” banks would qualify. Sound familiar?
The U.S. equity market appears to continue to defy gravity despite all the potential blowups that could appear. During the vicious Brexit sell-off, the portfolios which are positioned well for such an event did well with an alpha of over 3.5%. This changed quickly as the market turned around and in a few days covered those losses as if Brexit never happened. The rebound makes no sense to me. End of quarter window dressing? If so then we will see soon enough. While Niall Ferguson and John Burbank can debate about the current global economic trajectory at a much higher level than myself and should be read here, I prefer to look at the facts. Take a look at the chart on the right. As you can see, over the last 100 years, we have never had a drop in industrial production this large without a recession. Feel free to reach you own conclusion…
As I mentioned last month, Tim du Toit (of Quant Investing) and I will be organizing an Equities Investment Event on September 29th and 30th in Nicosia, Cyprus at the Cleopatra Hotel. I have attached a draft program. There are only 50 places so if you are interested in attending then drop me an e-m
ail. Cost will be around EUR 250 which includes 2 lunches and gala dinner. People have been signing up and some are combining the event with a holiday. Cyprus weather will be fantastic at the end of September, so I highly recommend it and have suggestions if anyone would like in inquire about the island.
Speaking of holidays, I will be taking the rest of the week off as my wife and I will try to relax (away from our little monsters). Accompanying me will be Montier’s “Little Book on Behavioral Investing”. If are looking for some summer reading and haven’t read any of his work then I highly recommend his book “Value Investing: Tools & Techniques for Intelligent Investing”
Subscribe in order to receive the newsletter at the beginning of the month. Here it is posted with minimum one month delay. Click here to read the entire letter