Europe is unraveling

If You Own This Asset, You Could Soon Have Your “Head Handed to You”

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CASEY DAILY DISPATCH - Casey Research

Five months ago, Great Britain voted to leave the European Union (EU). The decision shocked investors around the world. It erased more than $3 trillion from the global stock market in just two days.

But the panic didn’t last long.

Two weeks later, the S&P 500 set its first new high of the year. It’s now 4% higher than where it was the day before Brexit. The FTSE 100, Britain’s version of the S&P 500, is 7% higher.

Still, investors haven’t completely forgotten about Brexit…

You see, Britain voted itself out of the EU because many people in England are fed up. They’re tired of making low wages. They feel like the EU experiment has failed them.

In a way, they voted against globalization and in favor of nationalism. They voted to take their country back.

Now, we aren’t here to discuss whether British voters made the right choice. Instead, we want to focus on what Brexit could mean for the rest of the world going forward.

• The world’s most powerful governments haven’t done their jobs…

After the last financial crisis, central banks did everything in their power to fix the global economy.

They cut interest rates more than 670 times. They’ve “printed” more than $12 trillion.

These measures were supposed to “stimulate” the global economy. But the U.S., Europe, Japan, and China are all growing at their slowest rates in decades. Instead, all these policies have done is lift financial assets.

Take stocks, for example. Major U.S., European, and Japanese indexes have all set record highs in the past couple years.

It’s no wonder so many working-class people now feel like “the establishment” doesn’t work for them…or that “the system” is rigged.

Going forward, we expect more people around the world to demand radical change. We could even see more countries enclose themselves from the rest of the global economy like Britain just did. One of the world’s biggest economies could even do this just four days from now.

• Italy will hold a constitutional referendum vote this Sunday…

Nick Giambruno, editor of Crisis Investing, says this upcoming vote could radically reshape Italy.

According to Nick, it would basically be a sign of approval for current Prime Minster Matteo Renzi if the Italian people vote “Yes” on Sunday.

If they vote “No,” he says it would be like the Italian people giving the finger to EU bureaucrats.

• There’s good reason to think Italy will vote “No,” too…

According to The Wall Street Journal, Italy’s economy shrank 8.3% between 2007 and 2015. For comparison, the U.S. economy grew 10.2% over the same period.

The country also has an unemployment rate of nearly 12%. Youth unemployment is at a staggering 37%.

The Journal also reported that 68% of Italians blame the EU for their country’s economic problems. That’s why we aren’t at all surprised to see the “No” vote ahead in Italy’s polls right now.

Unless this changes over the next few days, we could be looking at the end of Italy as we know it.

• Prime Minister Renzi has said he would step down if the Italian people vote “No”…

If the referendum fails, Nick says a new radical government could rise to power within months.

A populist, anti-EU party known as the Five Star Movement (M5S) has already said it wants to abandon the euro and bring back the lira, Italy’s old currency.

Like many Italians, M5S blames the country’s economic struggles on EU bureaucrats.

• Nick says Italy could trigger a domino effect if it drops the euro…

He explains:

If Italy—the third-largest member of the eurozone—leaves, it will have the psychological effect of yelling “Fire!” in a crowded theater. Other countries—notably France—will quickly head for the exit, and return to their national currencies.

Think of the euro as the economic glue holding the EU together. Without it, economic ties weaken, and the whole EU project unravels.

In other words, Sunday’s vote is about much more than Italy. The fate of the entire EU is at stake.

• Jim Mellon also thinks the euro is doomed…

Mellon is the CEO of the Burnbrae Group, a British asset management firm. Some have called Mellon “Britain’s answer to Warren Buffett.”

Mellon also famously predicted Britain would exit the EU. His bold call paid off, too. According to Bloomberg, his portfolio is up 25% on the year.

Like us, Mellon thinks Brexit was only the beginning. Bloomberg Markets reported on Monday:

Mellon, who was cited as a supporter of the “Leave” campaign by pro-Brexit lawmaker Michael Gove, predicts the euro will become a future casualty of a rising anti-establishment tide, causing the currency union to splinter within the next five years.

“Brexit is going to be a sideshow to the problems of Europe that are becoming more and more evident,” Mellon said. “The euro as it stands at the moment is just a very inappropriate mechanism — I give the euro between one and five years of life.”

According to Bloomberg, the all-star investor thinks the euro could plunge in the coming months:

Mellon said the euro will soon fall below parity against the dollar “sometime over the next year,” but warned against selling off the currency now, as it may see a short-term rebound. The euro was trading at $1.059 on Monday.

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One Response to Europe is unraveling

  1. William "Bill" Hicks November 30, 2016 at 10:04 pm

    More than all the economic results of leaving the euro, I see this as a means to limit the invasion of islam into western culture.

    Reply

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