Economists around the world have been scanning the horizon with their high powered Zeiss binoculars in search of the cause of the next global recession.
It has been a conundrum of the first order because a recession has NEVER taken place in the face of LOW interest rates and LOW oil prices.
However, we may have just found the trigger.
The possible impending departure of the United Kingdom from the European community has cataclysmic implications for economies everywhere.
We?ll know for sure when the referendum is held on June 23.
Yikes! I?ll be in England then!
The move is being driven by the same factors present in the American Republican Party presidential nomination race.
Working class Brits have lost jobs to a tidal wave of immigrants from the rest of the EC, whose common passports allow unfettered access to Old Blighty.
Take a weekend trip to London, and chances are that the desk clerk is from Poland, the porter is from Croatia, the waitress is from Italy, and the cleaning ladies are from Spain and Greece.
Actual Englishmen are to be found only in distant suburbs, or in unemployment offices.
The recent influx of immigrants from the Middle East has also placed a massive strain on the country?s social services resources.
Visit your local neighborhood National Health GP, and you will share the waiting room with foreign refugees missing arms or legs, or bearing near fatal combat injuries. It?s almost like visiting a wartime MASH unit.
Net net, the view is that EC membership is costing England jobs and money, probably in the billions of pounds per year.
As with the US, the populist view is at odds with the economic reality.
While the UK is a net contributor to the Brussels budget, that misses the point. It is greatly outweighed by the additional economic growth generated by EC membership.
Goods flow freely, duty free between all 23 member countries.
A manufacturer in Birmingham, Leeds, or Manchester doesn?t think twice about jumping on the Channel train to call on customers in Paris, Munich, or Copenhagen.
I often sit next to them during my summer continental travels and also get an update on whatever business they may be in.
A British departure would take nearly 20 years of business integration and dump it into the dustbin of history.
That would be a crushing loss for the British economy, which would lose much of the nearly ?200 billion pounds worth of exports it sent to the EC in 2015. These exports have grown at an impressive 3.6% a year for the past 15 years.
It would also deliver a fatal blow to the City of London, the financial center for all of Europe and one of its largest employers.
I can see the dominoes fall from here.
Europe would lose a similar amount of trade with the UK, taking a chunk out of GDP growth there.
A weak Europe brings a stumbling China, which relies on the continent as its largest customer (yes, even bigger than the US). And a wobbling China will certainly torpedo US exports, increasing volatility in our own financial markets.
In fact, the EC is the world?s largest economic entity. It is hard to see trouble there not spreading everywhere.
The turmoil is already easily visible in the foreign exchange markets. The British pound (FXB) has suffered a gut churning 10.5% nosedive over the past four months to a new ten year low. It has also smothered in the crib the recent rally in the Euro (FXE).
A newly resurgent dollar (UUP) is starting to once again cast a shadow over US multinational earnings.
It seems like the UK is determined to shrink to a smaller country, either by hook or crook.? Only last year, Scotland mounted a campaign to split off from the UK, an effort that eventually failed.
However, it is another one of those cases of being careful what you wish for.
How do you spell ?GLOBAL RECESSION??
I Don't See Anything Yet
https://www.madhedgefundtrader.com/wp-content/uploads/2016/03/Man-with-Binoculars-e1456964153541.png186400DougDhttps://www.madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngDougD2016-03-03 01:07:482016-03-03 01:07:48Will ?Brexit? Cause the Next Recession?
Mad Day Trader Jim Parker is expecting the first quarter of 2015 to offer plenty of volatility and loads of great trading opportunities. He thinks the scariest moves may already be behind us.
After a ferocious week of decidedly ?RISK OFF? markets, the sweet spots going forward will be of the ?RISK ON? variety. Sector leadership could change daily, with a brutal rotation, depending on whether the price of oil is up, down, or sideways.
The market is paying the price of having pulled forward too much performance from 2015 back into the final month of 2014, when we all watched the December melt up slack jawed.
Jim is a 40-year veteran of the financial markets and has long made a living as an independent trader in the pits at the Chicago Mercantile Exchange. He worked his way up from a junior floor runner to advisor to some of the world?s largest hedge funds. We are lucky to have him on our team and gain access to his experience, knowledge and expertise.
Jim uses a dozen proprietary short-term technical and momentum indicators to generate buy and sell signals. Below are his specific views for the new quarter according to each asset class.
The S&P 500 (SPY) and NASDAQ have met all of Jim?s short-term downside targets, and a sustainable move up from here is in the cards. But if NASDAQ breaks 4,100 to the downside, all bets are off.
His favorite sector is health care (XLV), which seems immune to all troubles, and may have already seen its low for the year. Jim is also enamored with technology stocks (XLK).
The coming year will be a great one for single stock pickers. Priceline (PCLN) is a great short, dragged down by the weak Euro, where they get much of their business. Ford Motors (F) probably bottomed yesterday, and is a good offsetting long.
Jim is not inclined to stand in front of a moving train, so he likes the Treasury bond market (TLT), (TBT). He thinks the 30-year yield could reach an eye popping 2.25%. A break there is worth another 10 basis points. Bonds are getting a strong push from a flight to safety, huge US capital inflows, and an endlessly strong dollar.
A short position in the Euro (FXE), (EUO) is the no brainer here. The problem is one of good new entry points. Real traders always have trouble selling into a free fall. But you might see profit taking as we approach $1.16 in the cash market.
The Aussie (FXA) is being dragged down by the commodity collapse and an indifferent government. The British pound (FXB) is has yet to recover from the erosion of confidence ignited by the Scotland independence vote and has further mud splattered upon it by the weak Euro.
GOLD (GLD) could be in a good range pivoting off of the recent $1,140 bottom. The gold miners (GDX) present the best opportunity at catching some volatility. The barbarous relic is pulling up the price of silver (SLV) as well. Buy the hard breaks, and then take quick profits. In a deflationary world, there is no long-term trade here. It is a real field of broken dreams.
Jim is not willing to catch a falling knife in the oil space (USO). He has too few fingers as it is. It has become too difficult to trade, as the algorithms are now in charge, and a lot of gap moves take place in the overnight markets. Don?t bother with fundamentals as they are irrelevant. No one really knows where the bottom in oil is.
Jim is friendly to the ags (CORN), (SOYB), (DBA), but only on sudden pullbacks. However, there are no new immediate signals here. So he is just going to wait. The next directional guidance will come with the big USDA report at the end of January. The ags are further clouded by a murky international picture, with the collapse of the Russian ruble allowing the rogue nation to undercut prices on the international market.
Volatility (VIX), (VXX) is probably going to peak out her soon in the $23-$25 range. The next week or so will tell for sure. A lot hangs on Friday?s December nonfarm payroll report. Every trader out there remembers that the last three visits to this level were all great shorts. However, the next bottom will be higher, probably around the $16 handle.
If you are not already getting Jim?s dynamite Mad Day Trader service, please get yourself the unfair advantage you deserve. Just email Nancy in customer support at email@example.com and ask for the $1,500 a year upgrade to your existing Global Trading Dispatch service.
Euro to the Dollar
https://www.madhedgefundtrader.com/wp-content/uploads/2015/01/Volatility-Weekly.jpg325579Mad Hedge Fund Traderhttps://www.madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-01-08 09:44:082015-01-08 09:44:08Mad Day Trader Jim Parker?s Q1, 2015 Views
Mad Day Trader Jim Parker is expecting the second quarter of 2014 to be an uneventful, low volume, range trading affair. There is insufficient momentum in the major indexes to substantially break out of the ranges established in Q1.
He does see a modest upward bias to the market. But it is going to have to fight for every point. Sector leadership will change daily, with a brutal rotation. The market is still paying the price of having pulled forward too much performance into 2013.
Jim is a 40-year veteran of the financial markets and has long made a living as an independent trader in the pits at the Chicago Mercantile Exchange. He has worked his way up from a junior floor runner to advisor to some of the world?s largest hedge funds. We are lucky to have him on our team and gain access to his experience, knowledge, and expertise.
Jim uses a dozen proprietary short-term technical and momentum indicators to generate buy and sell signals. Below are his specific views for the new quarter according to each asset class with specific pivot points.
Stocks ? It will be a ?RISK ON? quarter for equities, but not by much. Stocks are still digesting the meteoric gains of 2013. A solid close in the S&P 500 (SPX) over 1,895 will take us right to 1,950. A failure brings us back to 1,800 quickly. Far more important is the NASDAQ, which has been the lead index for some time now. A convincing break of 3,700 will take us to the old high at 4,800. Old, big tech (XLK) will provide the leadership.
Bonds ? Are not going anywhere and Jim is a better seller of rallies. The 30-year futures contract is providing the guidance here, and it has been acting particularly poorly. The flattening of the yield curve has been one of the most dramatic in recent memory. If the (TLT) breaks the 50-day moving average at $107, the next stop will be $105. Demolish that, and we plunge to $101, which equates to a 3.05% yield on the ten year Treasury bond.
Foreign Currencies - The big focus of the currency markets now is to be long the British pound (FXB) and short the Japanese yen (FXY). It would be best to buy the cross, but the individual legs should work as well, as I have done in my The Mad Hedge Fund Trader?s model trading portfolio with a short yen position. The Australian dollar (FXA) decisively broke $91.50 to the upside and is now targeting $93. You should buy any pullbacks to $91.50, as long as central bank governor George Stevens keeps his mouth shut. The Euro (FXE) will be a safer sell after this week?s ECB meeting in order to avoid an ambush from president Mario Draghi.
Precious Metals - Gold (GLD) looks terrible and should be avoided at all costs. Gold bugs would be better off finding a long dark cave and hiding. We are dead in the middle of a six-month range and are likely to test the bottom at $1,200 next. Only a major rally would negate this view. As for silver (SLV), it is dead in the water, so don?t bother.
Energy - Oil (USO) looks sickly as well, now that the boost we got from the Crimean crisis is fading. The $92-$107 range continues. Get a good break of $98.50 and it will target $92. Jim is a better seller of Texas tea than a buyer. Jim also wants to sell the next decent rally in natural gas (UNG) going into the summer, looking for surging fracking supplies to swamp the market by then.
Ags - Soybeans (SOYB) are definitely the crop of the year, and the ETF could easily tack on another 10% from here. Corn (CORN) got a boost from yesterday?s bullish USDA report and could follow through. Only wheat (WEAT) is looking poorly from a technical perspective, and lacks the global fundamentals to help it.
Volatility - Buy the dips and sell the rips. The current $13 low is attractive, and Jim expects it to trade as high $22 sometime in Q2 if we break resistance at $15.50. A long VIX position also makes a nice hedge for your other ?RISK ON? positions as well.
If you are not already getting Jim?s dynamite Mad Day Trader service, please get yourself the unfair advantage you deserve. Just email Nancy in customer support at firstname.lastname@example.org and ask how to upgrade your existing Global Trading Dispatch service for an additional $1,000 a year.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/04/SPX-4-2-14.jpg485625Mad Hedge Fund Traderhttps://www.madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-04-03 01:04:592014-04-03 01:04:59Mad Day Trader Jim Parker?s Q2 Views