Five Twenties, Please

 
When all else fails blame the consumer.

That's the strategy of policy wonks, market gurus and other Keynesian trolls. NIRP, ZIRP, increased public spending and all those others kinds of economic deep burps didn't work, so what's left--the favorite whipping dog of all Keynesians, young and old: those dirty, rotten, stubborn, cheap consumers.

For any and all who can still afford one, there's no more room in the garage to stack imported Chinese junk, a huge blow to the ego of Keynesian worshipers. And now here comes more unpalatable economic fare. The history of American consumers is fraught with many passing things, drinking their liquor from old fruit jars, trolling around shopping malls in their blue suede shoes, but they almost never, ever drive past a fast food window.

We all know the ones, those folks in the UK who finally stepped up and voted for their freedom and liberty, the ones who decided to look after themselves and take personal responsibility for their own lives, every interventionist and centralist nightmare. In the U.S. it looks as if those chintzy crowd members are dorsiflexing their hands and pushing themselves away from the fast food tables, according to the WSJ.

Restaurant visit growth has completely stalled in the last three months, signaling that consumers, jittery over economic uncertainties, are retrenching. Visits to fast-food restaurants had been growing at a quarterly clip of 2% since September 2015, but haven't grown at all in March, April or May, according to as-yet-unpublished data from market research firm NPD Group Inc.

When fast-food growth comes to a halt, “that’s a red flag because it’s been an area of growth and it’s 80% of the industry,” NPD restaurant analyst Bonnie Riggs said.
Restaurants are among the first industries to benefit when consumers are feeling flush, but recent economic indicators may be giving people pause about dining out. Job growth slowed last month, and gas prices are starting to climb again. Now, with the U.K. planning to exit the European Union, analysts say any related turbulence in U.S. financial markets could exacerbate the pullback.

We don't know if fast food visits are important enough to make the dot-plot list of Fed Chair Janet Yellen, but it might be another thorn in the side of further interest rate hikes this year. Instead of the coming helicopter money drops, why burn up that expensive aviation fuel, passing it out at the fast food pick up window, Janet, might prove more effective.

"A couple of cheeseburgers, hold the onions and mayonnaise, some fries, a large coke and five twenties, please!"

Overnight

With post-Brexit still much in the news, Asian shares continued with the exception of Japan to trade lower as concerns about volatility weigh on markets. The Hang Send dropped 1.4%, the Shanghai Composite Index fell 0.5%, the Kospi lost 0.7% while the Australian ASX 200 traded flat.

The Nikkei recovered from last week's sell off after the UK voted to leave the EU, rising 1.8%, still way down from last Friday's almost 8% drop. But China being China devalued the yuan in the largest drop since last summer.

The volatility should not surprise as investors seek to get a fix on what Brexit means on a longer term, focusing on whether it will lead to more countries move to egress the EU. The People's Bank of China fixed the yuan at 6.6375 to the U.S. dollar, nearly a 1% depreciation and that almost matched the 1.1% depreciation the PBOC implemented last August. Some will deny it, but this is about trade.

The expectation is that trading will remain volatile this week, as investors continue to factor in the implications of the U.K. referendum outcome. They are monitoring how the country will go forward in its relations with Europe, as well as any further financial contagion. Reuters reported: "MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS shrank losses to 0.6 percent as companies with UK exposure in particular came under more pressure."

Safe-haven assets like government bonds and gold also rallied with gold finishing at $1,323.68 an ounce.

Partly True

 
Now that a stalwart of PC financial news group, CNN Money, has laid the bad news on us, London financial market in a panic after Brexit turns out the light and closed the door on UK EU membership, we're all suppose to quiver and shake and act contrite as if we're going to miss Big Brother.

Dutch finance minister Jeroen Dijsselbloem, a key euro official, said losing full access to the rest of Europe would be the "price" Britain would pay for Brexit. Speaking to Dutch TV station RTL on Friday, Dijsselbloem said rival financial centers like Amsterdam and Frankfurt would benefit.The governor of the Bank of France also questioned London's future as the financial capital of Europe. 

This is post-financial earthquake aftershock tremors, thinly veiled threats designed to strike fear and angst. Here's another quote: "Leaving the union may disrupt this link, with some high-profile EU officials already calling the so-called "passporting rights" of U.K. banks into question."  Another big lie is set up under the straw man stratagem. You wave in front of the sinners what they supposedly had but now through their foolishness lost. "Britain has already lost an influential voice in Brussels, after Britain's EU commissioner Jonathan Hill resigned over the weekend. He was in charge of the financial services portfolio within the commission, which proposes European laws and enforces them. Latvian commissioner Valdis Dombrovskis will now take over the crucial post."
This is typical MSM journalism to inject guilt, like sellers' remorse in the stock market. To hear the shills tell it the EU was a paragon of goodness dressed all in pure white robes. Here's another CNN hatchet job: money.cnn.com/2016/06/24/investing/brexit-uk-companies/index. The ink is hardly dry on the papers and the sky is falling. Notice how this next piece is worded. 

British Airways owner IAG (ICAGY) almost immediately issued a profit warning. The company said it anticipates minimal long-term impact, but it issued a profit warning because of a difficult trading environment and current market volatility. 

Low cost airline EasyJet (ESYJY) was slammed. The stock fell over 14% Friday. CEO Carolyn McCall said the company doing everything it can to ensure "the U.K. remains part of the single EU aviation market" so planes can still fly freely around Europe.So here's a question: how freely were planes flying around Europe before the advent of the EU?  These people want you to think you to think a return to prehistoric times is certain without the Brussels bureaucrat stooges. 

And that's half true. Keep following them them and that's where we'll all wind up.

You Never Know

 
If you ever played poker, you know deception is necessary. It's called bluffing.

The contempt and arrogance of Brussels bureaucrats showed up big time in the Brexit saga. They didn't miscalculate the British people. That's too deceptive, too dishonest a term.You can't miscalculate something you don't recognize or believe exists. Their views from the beginning were utter contempt and disdain for common people.

In a WSJ Weekend piece, Fraser Nelson, the editor of Spectator and Daily Telegraph columnist, writes in his "A Very British Revolution," The world is looking at Britain and asking: What on Earth just happened? Those who run Britain are asking the same question.

Never has there been a greater coalition of the establishment than that assembled by Prime Minister David Cameron for his referendum campaign to keep the U.K. in the European Union. There was almost every Westminster party leader, most of their troops and almost every trade union and employers’ federation. There were retired spy chiefs, historians, football clubs, national treasures likeStephen Hawking and divinities like Keira Knightley. And some global glamour too: President Barack Obama flew to London to do his bit, and Goldman Sachs opened its checkbook.

And none of it worked. The opinion polls barely moved over the course of the campaign, and 52% of Britons voted to leave the EU. That slender majority was probably the biggest slap in the face ever delivered to the British establishment in the history of universal suffrage.

Mr. Cameron announced that he would resign because he felt the country has taken a new direction—one that he disagrees with. If everyone else did the same, the House of Commons would be almost empty. Britain’s exit from the EU, or Brexit, was backed by barely a quarter of his government members and by not even a tenth of Labour politicians. It was a very British revolution. 

But the truth is it goes way beyond the British establishment. There are others lining up now, Sweden, the Netherlands, Italy, maybe even France. In America it could be called a Texit. Mr. Nelson goes on to try to make a point--incorrectly and completely misunderstood in our view--others are trying to make summarized in these two paragraphs of his.

Donald Trump's arrival in Scotland on Friday to visit one of his golf courses was precisely the metaphor that the Brexiteers didn’t want. The presumptive Republican presidential nominee cheerily declared that the British had just “taken back their country” in the same way that he’s inviting Americans to do—underscoring one of the biggest misconceptions about the EU referendum campaign. Britain isn’t having a Trump moment, turning in on itself in a fit of protectionist and nativist pique. Rather, the vote for Brexit was about liberty and free trade—and about trying to manage globalization better than the EU has been doing from Brussels.

The Brexit campaign started as a cry for liberty, perhaps articulated most clearly by Michael Gove, the British justice secretary (and, on this issue, the most prominent dissenter in Mr. Cameron’s cabinet). Mr. Gove offered practical examples of the problems of EU membership. As a minister, he said, he deals constantly with edicts and regulations framed at the European level—rules that he doesn’t want and can’t change. These were rules that no one in Britain asked for, rules promulgated by officials whose names Brits don’t know, people whom they never elected and cannot remove from office. Yet they become the law of the land. Much of what we think of as British democracy, Mr. Gove argued, is now no such thing.

What Mr. Nelson seems to miss just as in the UK, there are rules in the U.S."promulgated by" officials whose names Americans don't know, "people they never elected and cannot be removed from office. Yet they become the law of the land." We will cite just too easy examples, both of which profoundly effect the lives of many, many people, not just in the now but more importantly the future, one local and one national: the Federal Reserve Board of the United States and any regional coastal control board.

Instead of grumbling about the things we can’t change, Mr. Gove said, it was time to follow “the Americans who declared their independence and never looked back” and “become an exemplar of what an inclusive, open and innovative democracy can achieve.” Many of the Brexiteers think that Britain voted this week to follow a template set in 1776 on the other side of the Atlantic.

Mr. Gove was mocked for such analogies. Surely, some in the Remain camp argued, the people who were voting for Leave—the pensioners in the seaside towns, the plumbers and chip-shop owners—weren’t wondering how they could reboot the Anglo-Scottish Enlightenment for the 21st century. Perhaps not, but the sentiment holds: Liberty and democracy matter. As a recent editorial in Der Spiegel put it, Brits “have an inner independence that we Germans lack, in addition to myriad anti-authoritarian, defiant tendencies.”

The America that your praise, Mr. Nelson, was founded on that "inner dependence...in addition to  myriad anti-authoritarian, defiant tendencies," characteristics much adopted at least in part from it's UK roots.

You then, Mr. Nelson, in all your glibness spread a little of your own deception, citing if only the Germans would have a cut a better deal for the UK to control its own immigration problem things might have turned out different.  "The EU," you write, "took a gamble: that the Brits were bluffing and would never vote to leave."A large segment of Americans, hardly what they've been unjustly labeled, "haters" or "xenophobes" by MSM and others, and evidently you, want the same thing, a little more say in their immigration problem and in their lives. We seem to recall Angela Merkel facing a similar outcry in Germany.

Trump traction has much more to do with the issues that you cite pushed Brexit into the leave win column that people like you are willing to understand or admit.  One wonders who the real xenophobes are? The Trump movement is hardly a turning in, to use your condescending view, "a fit of protectionist and nativist pique." It's a turning away from smothering centralized control, a breath of liberty, sovereignty and freedom your beloved Brits just demonstrated they so desire and so deserve, sir. You conclude, suggesting: You never know: the principles of democracy,sovereignty and freedom might just catch on.

You never know:  And people like you, sir, might get it some day; that's what others also want.

On His Way Out

A dog's going to scratch we're he itches and the chips will falls where they will.

It's a decent idea, unless you're short, to avoid those falling chips if you can . After the Brexit experience half the globe is trying to assess the damage and where some of those chips will hit the ground next. Mixed therein is a constant--human emotions like anger, resentment,  joy, relief and revenge. You can count on it. Another thing one can count on is the range of these assessments.

If moderation is, as it's been suggested over the centuries, a good thing, it's probably even more significant now. In retrospect, it's clear many were way to overloaded the long side of the Brexit gambol. So far that seems to have been pushed adrift by the tragic side. In this case, last one out turn off the lights. Maybe. Winston Churchill reportedly remarked most of us whenever we're fortunate enough to trip over opportunity simply pick ourselve up, brush ourselves off and move on down the street. Unless you need the money, don't be too quick to get flushed out.

We happen to think the breakup of the EU in the long run in the name of personal liberty will be one of humanity's finest hours before the robots displace the whole tribe. Evolution is what evolution does. One apparently popular MSM theme now is money will avoid heading to the UK and many of those potential UK wannabes. We think just the opposite. We think after the short-term dust settles it will attract money for obvious reasons. A simple one is an independent pound. Not too many so-called safe haven, soverign currencies around. Sovereignty and the EU was a classic get-go oxynoron.

We also believe the UK exit will force the EU to show it's smothering arrogance and drop more money on lost causes like Greece. In short, Greece just picked up more bargaining chips. So did Italy and the perennial rule breaker France. Toss in Spain and Portugal and you have the sauce for an even greater spending spree with the ultimate default later. It often takes a lost cause to recognize one.

So the smart money is leave now if you want to survive later to avoid the rush. A dog is going to scratch wherever he itches. Leave the light on for the last Brussel's bureaucrat out the door. He will probably stop, look and assign the light switch to a committee on his way out.

If You're Smart

If you're smart you will use this Brexit turmoil to pick up some cheap assets, globally, but you need to do your homework.

 One hint is those assets that went the opposite direction of gold, for example. Panic is panic and the species still known as Homo sapiens just can't help it. They're wired that way. A stronger dollar will temporarily dent U.S. multinationals meanwhile upping the pain for commodity-based emerging markets. That could increase the speed of the BRICs coming up with an alternative to the dollar for international trade down the road.

The pundits will, as is their weakness, put too much attention on analyzing the micro. To make money that's a loser's game. Great for the ego, meaningless for your bottom line. There is always fallout. The Swiss franc that many believe was overvalued anyway is now more overvalued. The yen follows the trade winds, like any good clipper ship of days gone long ago.

The currency market as has been already demonstrated will be where a lot of the action happens. Japanese Prime Minister Abe's got more problems now than he thought he had. Eurosceptics from France to the Netherlands to Sweden are demanding their own referendum. Even Scotland's call for one to leave the UK--something they should've done the first time around minus all the heavyweight elitist scaremongering--is an indirect blow to the EU. It's part of a trend and trends as they gather momentum scare the status quo. You got one, we want one too.

A recent pole--if anyone can trust those mostly MSM manipulated jokes--showed French voters more skeptical about the EU than British voters. That should make Germany happy.  A hidden theme here is one MSM and the elites always tried to hide: You're on your own and you should be. Take advantage of the freedom.

Here are a couple of post-Brexit quotes from the Washington Post, just what one would expect from that corner. As is their reputation, they have it all wrong. The open borders didn't fail simply because it was unpopular it failed because it didn't create the big lie the Post wants you to believe. Nor was the single market trading scheme near what these folks claim. There's another question here. Whatever so-called success single bloc trade enjoyed was enjoyed by whom?

In an ideal world, the Brexit shock would galvanize Europe into a muscular response. To borrow an analogy from the 2008 financial crisis, if Thursday’s vote was something of a “Lehman moment,” then we should all wish for the next steps to resemble the fast rescue of AIG and the passing of the TARP bailout plan — in other words, a determined commitment that no more dominoes should fall. But Europe’s problems are too deep, and its leadership too fragmented, for this vigorous response to appear probable.

The project of European integration can be thought of as three experiments in the management of globalization. The first is a triumph: The single market for trade in goods and services spurs competition and efficiencies in a bloc of more than 500 million people. The second experiment is a mixed story: The commitment to free movement for students, workers and retirees across 28 countries has expanded individual freedom and prosperity but is politically unpopular. Meanwhile Europe’s third experiment is a disaster. The creation of the euro, the shared currency now used by 19 countries, was quite simply a bridge too far.