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June, 2016 Archives

Has the UK Really Collapsed?

by Benjamin J. Butler

 

Marbella, Spain

 

Brexit

 

Britain “has collapsed politically, monetarily, constitutionally and economically.”

-- Mark Rutte, Dutch Premier,

 

I wrote half of this note in Marbella, Spain and now I am on a flight to London. I fly to the UK with both excitement and trepidation. Whilst I was in Spain, my country voted to make one of the biggest constitutional and political decisions in the post-war period in leaving the European Union. The ramifications are profound and global -- and incredibly difficult to articulate in just one column.

 

We had warned investors for months about this strong likelihood, although I must admit at the 11th hour I saw a slightly diminished probability because of the murder of British Member of Parliament Jo Fox. I hope that our readers were at least positioned defensively as we suggested.

 

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Daily Recap

Today brought a second day of higher prices after the Brexit chaos of a few days ago. Apparently, investors have decided that a UK-less EU may not be such a disaster after all. To whatever extent that is the case, the fact that US stocks have been able to regain more than half of their previous decline is impressive and hints that their future path is more uncertain than outright bearish.

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Math is the Key

by Jon S. Strebler

 

“Mathematics is the language in which God has written the universe,” or so said Galileo Galilei centuries ago. Certainly, math is critical in the world of finance, and an absolute necessity for successful investing. Richard Russell often wrote about two keys to successful investing: 1) buying items only when they represent compelling values, and 2) the power of compounding. Understanding math was essential for both strategies. In his classic piece Rich Man, Poor Man, Mr. Russell reminded us of the huge advantage that truly wealthy people have over the rest of us: They do not need the markets

 

 

 

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Bond Mechanics in a Negative Interest Rate World

By Matthew Kerkhoff

 

We’re going to talk about bonds today but before we get to that, I want to briefly point out why the Brexit event is impacting U.S. markets so heavily.

 

As we’ve discussed many times here at DTL, the strength of the U.S. dollar dictates the cost of U.S. goods to our trading partners. When the dollar goes down, our goods go on sale; when the dollar goes up, it’s equivalent to a price hike across the board. And it goes without saying that higher prices stifle demand, which means less revenue, profits etc.

 

With Europe thrown back into turmoil, investors are flocking to the U.S. dollar for safety. This is how the dollar reacted on Friday and today.

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Richard's Thoughts on Dow Theory

By Mary Anne and Pamela Aden and the Dow Theory Team

 

Richard's Comments

 

I consider the Dow to be the most important of all U.S. stock averages as far as trend analysis is concerned. The reason I accord such importance to the Dow is because the Dow includes thirty blue chip stocks that are analyzed, followed and bought by the institutions.

 

Ever since I first started writing Dow Theory Letters back in 1958, I've had to defend the validity of the Transports as a valid gauge of transportation.

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Brexit Day

By Benjamin J. Butler

 

Royal Palace of Madrid, Spain

 

I have been in Madrid this week attending a fintech (financial technology) conference called Money Conf (https://moneyconf.com). I was asked to speak again in Moscow on the future of the global economy this week but unfortunately the logistics didn't work so well, as I was due to be on holiday in Spain with my family. So I decided to combine some work and pleasure and hit a tech conference here in Madrid. 

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