All eyes have turned to Britain…

June 13, 2016


All eyes have turned to Britain…

With the Fed taking a backseat in June, all investing eyeballs have turned toward the Brexit vote in two weeks. While a decision to leave still looks like a stretch in the investing and betting marketplaces, some more recent online and phone surveys have caused spilled pints for anyone long the British Pound. The Brexit uncertainty has also increased the volatility in other related currency, equity and even commodity markets. Again, remember the financial markets do not like uncertainty. So with a new spike in global vol, Treasuries and Sovereign Bonds have been the place to hide thus creating new lows in global yields. Within U.S. Equities, Utility and Consumer Staples have continued to benefit from the reach for yield and certainty. On the losing end has been Financials and Bank stocks who continue to lose as interest rates fall. Retail and Consumer Cyclical stocks also had a tough time last week with Urban Outfitters and Restoration Hardware throwing up cautionary comments about current sales.

Perhaps of most interest in looking at the below week, quarter and year-to-date returns has been the continued momentum of winning returns. Metals, Mining, Energy, Commodities, Bonds, and Low Volatility Equities (Utes & Staples), continue to lead the pack for most time frames…

A tight relationship between Financial Stocks and Bond Yields remain…

Here is a chart of the five-year Treasury Yield and the Financial ETF. Each decline in yields results in a sell-off.

Back to Brexit, there are plenty of polls coming out with the vote only two weeks away. Expect the market to react on every new poll release…

Brexit Poll Tracker: Polls are never perfect, and recent history has cast even more doubt on their reliability. The chart below aggregates all public surveys and attempts to address their shortcomings, with greater emphasis given to pollsters who were most accurate in the past. Where they all agree: It’s too close to call, with the still-undecided voters likely to determine whether Britain will leave or remain. (Bloomberg)

And with each new poll, also expect the Pound to react violently. As the recent chart suggests, the odds of a Brexit have been inching higher…

(@SoberLook)

The recent polls have also caused investors in European assets to go on holiday…

(Goldman Sachs)

With money flowing to the certainty of Government bonds, the Swiss 30-year is now yielding 0.07%. Go figure that!

And not just Switzerland, but Global rates have now fallen to 5,000 year lows…

(Bank of America/Merrill Lynch)

Speaking of political polls, there have been some recent changes in the U.S. Presidential polls now that the two front runners have been decided…

(Real Clear Politics)

The betting markets have been moving all over the place in the last month, but they currently look to be still favoring a Clinton Presidency…

Jonathan has much experience following the investment management industry. This is a great list for anyone who spends too much time worrying about their portfolio.

ELEVEN SIGNS YOU OWN THE RIGHT PORTFOLIO

1. You’re so well diversified that you always own at least one disappointing investment.

2. Your livelihood isn’t riding on both your paycheck and your employer’s stock.

3. If the stock market’s performance over the next five years was miserable, you wouldn’t be.

4. You can remember the last time you rebalanced.

5. You have no clue how your investments will perform, but a great handle on how much they’ll cost you.

6. You don’t have any hot stocks to boast about.

7. For every dollar you’ve salted away, you have an eventual use in mind—and the dollars are invested accordingly.

8. Jim Cramer? Who’s that?

9. A year from now, you plan to own the same investments.

10. You never say to yourself, “Wow, I didn’t expect that.”

11. You take tax losses when they’re available—but they aren’t available very often.

(Jonathan Clements)

We love rocket launches on our desk. Thanks to SpaceX, we look forward to seeing eight times the number of them for the same cost as a Delta IV launch…

The Delta IV Heavy may only remain the world’s most powerful rocket for a matter of months. Although it has been often delayed, the Falcon Heavy rocket being developed by SpaceX is likely to fly later this year or early next. Like the Delta IV, the heavy Falcon rocket has three booster cores. However, instead of being powered by a single RS-68 engine, each of the Falcon cores is powered by nine Merlin engines, making for a total of 27 engines firing at liftoff. That makes for a complicated rocket, but if SpaceX can pull it off, it will offer customers the capability to deliver up to 54 tons to low-Earth orbit at a cost of $90 million. Therefore, while the Delta IV comes in at $14 million per ton to orbit, SpaceX might offer customers a similar heavy lift service at $1.7 million per ton.

(ARSTechnica)

(ARSTechnica)

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