Tags: brexit | trade | obama | britain

Brexit Doesn't Have to Kill Trade Deals

Brexit Doesn't Have to Kill Trade Deals
(AP)

By    |   Saturday, 25 June 2016 12:29 PM

Bear markets rarely unfold as a “bolt of the blue,” the military’s code name for an unexpected nuclear strike on the U.S.

Like nuclear wars, bear markets build to the crisis stage. This was true in 2008 when policy makers had ample warning the financial system was unstable. Policy makers failed to stop the crisis then.

In February 2007, two Bear Stearns hedge funds collapsed. At the time, Bear Stearns was trading about $35 for every $1 of equity on its balance sheet. An adverse move of less than 3% in the markets could theoretically wipe out the firm. Regulators could have acted at that point.

Instead they ignored this situation until March 2008, when Bear Stearns failed. The actual crisis accelerated in September 2008 when Lehman Brother failed.

As we now know, a different response to Bear’s problems could have avoided the worst of the crisis.

This time, we have the Brexit vote, a warning that Europe is overleveraged. Policy makers will either respond appropriately or push the global economy off the cliff again.

Brexit seems fairly easy to resolve bullishly.

President Barack Obama could reverse the position he took in April when he said a vote to leave would put the U.K. at the back of the line for a trade deal. He could, for example, say a U.S. president had no right to interfere in Britain’s politics.

Or, he could simply initiate trade talks this week to show there will be no disruption in commerce. This action alone would be likely to prevent a severe crisis.

In London and Brussels, government officials could explain the process for an exit and assure everyone the separation will be a nonevent. That would probably lead to other countries exiting the European Union but it would resolve the folly of the euro quickly and effectively.

As investors, we know policy makers have a few months to avoid a crisis. By watching their actions over the next few weeks, we will know whether we should remain or leave in our stock market investments.
 
Michael Carr, CMT, is a subadviser to a mutual fund family and a chartered market technician. To read more Michael Carr, CLICK HERE NOW.

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President Barack Obama could reverse the position he took in April when he said a vote to leave would put the U.K. at the back of the line for a trade deal. He could, for example, say a U.S. president had no right to interfere in Britain’s politics.
brexit, trade, obama, britain
365
2016-29-25
Saturday, 25 June 2016 12:29 PM
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