Is History Rhyming Again? - Weekly Blog # 934

 

 

 

Mike Lipper’s Monday Morning Musings

 

Is History Rhyming Again?

 

Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018

 

 

 

Preface

Before the New Jersey Symphony’s inspirational playing of Beethoven’s Pastoral Symphony there was a brief concert by the New Jersey Symphony Youth Orchestra’s Academy Orchestra, who are gifted and wonderful. However, what was more wonderful was thinking that these talented young people not only learned their musical skills very well but also learned a bit of the history and discipline of classical music. Hopefully, it will give them the skills to manage the messed-up world we are passing on to them.

 

I couldn’t help my own burdened brain sitting there Friday night after what may have been the most important stock market week in some time. The Standard & Poor’s 500 pierced the low set in September. Classically trained market analysts will likely suggest how difficult it will be for this most important of all indicators to quickly recover the 10% loss from its high point. Pundits will likely blame the current military and diplomatic failures to end the war.

 

Those in leadership positions are not paying attention to ancient history. Iran is the modern name of what was called Persia for centuries. The rulers of Persia controlled much of what passed through the “silk road”, which not only passed new foods to the western world but also mathematics, science, paper money, and gun powder. Persia had a large and powerful army that kept would be conquerors away, although it was not particularly successful at adding to its piece of the Asian land mass.

 

I believe the main threat to the US and other countries is not their incipient nuclear warfare, but their successful sponsorship of proxies who damage other established governments and societies through the destruction of people and property. Recently, the US experienced a couple of wanton killings carried out by US citizens who received local training and support. We have seen the Iranians do this not only here, but in the UK, Europe, Middle East, and Africa. Because their sleeper cells easily entered the US through an open border, we don’t exactly know the size and capability of the problem.

 

The US has a history of winning wars and losing the peace because we are not very good as occupiers. Also, it is worth pointing out that Iran has never successfully been occupied by foreigners. In my opinion, the dream of a fully formed new government structure for the country appears naïve.

 

In exposing the problems which led to the market drop, we need to address an approximately 100-year period of excessive debt creation and the confusion between a top-down education and a bottom-up learning process.

 

This Week & Beyond

We got one violent rally this past week and could get one or more this coming week because a gap opened between the S&P 500 and NASDAQ on Friday. The gap must normally be filled before a sustained move can occur. Friday can perhaps be summed up in three numbers:

• S&P 500 -1.67%
• Price of oil +7.07%
• ECRI industrial prices rallied again to the 130 level, putting the year-over-year gain at +9.25%

In the first three days of the week there was a positive tone to US stock prices, but they were swamped with declines in the last two days, putting the SWX down for five straight weeks and on Friday it fell below its September returns.

 

The declines appeared to be coming from retail-oriented accounts, many of which were housed at large retail brokerage firms years ago. Coincidentally, both the number of listed stocks and the number of primary retail brokerage firms significantly declined during this period. They were replaced by larger more diversified firms whose brokers switched from commissions to fees, making them look more like “wealth managers”. However, many of them are still short-term oriented and prefer stock exchange listed securities for their accounts. Most of these new recruits to the business have not experienced a full economic recession and very few investors or investment committee members have any direct experience with depressions.

 

The latter point, in my opinion, is causing great risk to the market, not that I can estimate the starting date of a new depression. However, as someone who has studied old races and other ancient track conditions, I am conscious that bad things do happen. Thus, I feel a need when examining investment possibilities to include an alternative negative future in reviewing future strategies. There are not many investors or advisers who do.

 

Most down markets, but not all, are caused by a forced repayment of debt at an inappropriate time, like in William Shakespeare’s “The Merchant of Venice”, or in margin calls. We may be due for such a period!! Coming out of the expansion of most global economies after WWI in the nineteen twenties, there was a ballooning of debt creation. Borrowing against securities became popular with retail investors in the US and other countries, particularly by those of the farm community in the US. By the late 1920s, many US farmers, merchants, suppliers, and local small banks were heavily in debt, with their crops and land used as collateral. When the price for domestic crops was impacted by lower-priced foreign competition, it led to dire conditions. They appealed to their congressmen for help in putting tariffs on incoming food items and they convinced a reluctant President to enact The Smoot-Hawley tariffs, causing foreign governments to respond in kind. This led to the disruption of global trade, which was one of the initial causes of the recession. The recession was turned into a depression by a new government which needed a ten-year long depression and a new World War to pull us out of this self-administered trouble. I AM NOT PREDICTING THIS, BUT I AM SAYING WE SHOULD CONSIDER IT A REAL POSSIBILITY.      

 

Caution: As these worries are disturbing, they should not be discarded, even though none of us wish they come to be. However, prudence requires that they should be examined regularly to see ensure their chance of occurring stays small and doesn’t creep up to a higher probability. The odds still favor expansion.

 

Please share your views which can help us.      

 

 

 

 

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Not Yet! - Weekly blog # 800

 

Mike Lipper’s Monday Morning Musings

Not Yet!

 

Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018

 

 

 

The Thinking Behind Blog 800

When I realized the 800^th blog was coming up I tried to think of something special to discuss, like a critical turning point at the beginning of a new long-term market cycle. I see a turning point in the future which will begin a new corrective cycle. It will address multiple imbalances facing the US stock market, a reflection of increasingly problematic domestic and global problems.

 

However, it now appears we are likely going more toward a shallow dip, which could be labeled either a “soft landing” or a ripple in a stagflation period. Regardless, the underlying tensions continue to build and they will eventually lead to a deep corrective stage. With the 100^th blog less than 4 full years away, I have high confidence we will see a major correction.

 

Regardless of the timing and depth of the correction, we remain largely invested in equities and stock funds. These funds will need guiding principles to survive the correction and prosper from the following “bull” market.

 

Sources of My Guidelines for Long-Term Successful Investing

• Fidelity has published their views on 5 mega trends.
• Marathon in London has written about the benefits of low turnover and stable managements.
• Howard Marks expressed his views on escaping extreme investing.
• Finally, my own observations on the investment decisions of funds, commuters, and actuarial lessons on betting.

 

Productivity/Profits- Fidelity

Fidelity probably invests in almost every investment any place in the world. They serve different types of clients in many capacities and countries. Of the 5 Mega Emerging Trends, the most easily measured is the slowdown in the growth of productivity, more specifically in the productivity of labor. Labor is easily measured in terms of the number of hours committed to work, likely for compensation. (What is not evaluated is the quality of the work.) The number of hours worked in the US is in the upper portion of the lower half as shown below:

   More than US      US    Less than US

UAE          2709  1892   UK        1866

India        2480         Germany   1783

China        2392         Australia 1669

Mexico       2220         Canada    1664

South Africa 2154         France    1565 

Thailand     2108

Poland       2085

Indonesia    2043  

Philippines  2039  

Russia       1965

 

Implications

1. In a world that has higher interest rates and is short of opportunities, there are more places competitive with the US.
2. When US proclaims politically motivated holidays, such as Labor Day.

 

In an article by Howard Marx, he warns about extreme stock prices. When extreme enthusiasm pushes prices to record highs or lows, investors sell stocks priced for perfection, or buy/retain stocks which can never generate good news. Most of the time securities trend in one direction or the other. A dangerous condition is when all opinions on a security are totally one-sided. Very few investors understand that it is rare for there to be no salvage value for knowledgeable investors with patience and legal backing.

 

An example of too many one-sided beliefs was the 50 institutionally favored stocks in the early 1970s (Nifty Fifty). It was believed that these stocks could be bought and never sold, after the recommendations of the leading institutional brokerage houses didn’t work out. In 1972 the list contained Eastman Kodak, Polaroid, Sears, and Kresge. In the years that followed, all four disappeared through bankruptcy. To demonstrate how much reputational power these stocks had. One senior investment officer was an early promoter of Polaroid and managed to ride that performance into being hired as the senior investment officer at a New York based mutual fund house. He didn’t last long in a company that was studied daily, including its longer-term performance.

 

Marathon in London has a successful record with its European fund and others. They are a low portfolio turnover shop who pay a lot of attention to industrial and corporate capital cycles and meet with long-term senior management extensively. They are very proud of the 26% of their portfolio that has been held for more than 10 years in the European fund. Those positions represented 45% of that portfolio at the end of the period. When I visited them, I was amazed at their detailed knowledge of their companies, managements, and critical competitive information.

 

There are many investment lessons I have learned from just observing and listening to people. For example, I suspected the market was getting frothy in the late 1960s when a person I commuted with on a 6 AM train mentioned he had gotten a personal computer and was going to stay home and day trade a handful of stocks. He was a mid-level executive at a famous financial institution and appeared to have average intelligence. I was working for a firm that had a very active trading desk that regularly dealt with some of the sharpest trading shops. Very occasionally I heard one-side of a phone conversation between the traders. I felt I needed a translation regarding their words and tactics. I am sure my former train buddy knew no more than I did about institutional trading. Hopefully he learned quickly or found a new job. I never saw him on the train again.

 

I owe UPS a gift for the two investment lessons I learned from them this week. There was a public announcement that the company was offering early retirement to 167 senior pilots. Each of their planes carries about 30,000 packages and is designed to fly every day. Consequently, in terms of delivery capacity, it meant UPS would deliver 1.8 billion fewer packages or these packages would be flown by less expensive junior pilots. It suggested to me that UPS was expecting less business after their expensive settlement with their truck drivers. Within the week our friendly regular UPS driver delivered some low value drug store items, which may have come from a warehouse or a local store under half mile away. In either case, it was not a bullish indicator for me.

 

During the very same period institutions were locking into long-term investing in the nifty-fifty stocks, there was a more valuable lesson a few miles from Wall Street. On a Saturday in June of 1973 the Belmont Stakes was run. It was not much of a contest. Secretariat won by 31 lengths, setting a track record. While that was interesting, the real lesson of the day was that I didn’t bet on what was clearly the best horse in the race. More importantly, I did not bet on any horse in the race. When Secretariat won, the horse paid $2.20 for each $2.00 bet. What I learned was that even with the best horse in the world things can happen, or if you will “racing luck” might happen. (Sounds as if I was conscious of Howard Marx’s avoiding absolute certainty.) I was practicing good actuarial science, which excludes events so rare that they are unlikely to reappear. What I learned was that to not bet is a bet. Wagers should only be made when the odds of winning are high enough to cover losses in the past or in the future.

 

Conclusion

Investing should not be considered a single chance to make or lose money. The more you are aware of the world around you, the better your chances of finding some winning investments and keeping your losses small.

 

 

 

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We Allow Our Investment Professionals to be Lazy - Weekly Blog # 776

 

Mike Lipper’s Monday Morning Musings

We Allow Our Investment Professionals to be Lazy

Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018

  

 

 

The Indictment

Short-term investors are often confused with speculators. While they may produce the most trades, long-term investors own the most securities. This is why the financial media is jammed with views of short-term consequences, e.g., the next announced move and statement of the Fed.

 

Whatever the Fed does, the impact on long-term assets will be minimal at best. The key numbers for long-term investors in declining order of importance are:

1. The purchasing power in local currency at the planned terminal date.
2. An discounted valuation caused by a premature sale.
3. Third is the aggregate value of distributed income while the asset is held. This could conceivably be larger than the first case on very long-held assets in a generational transfer.

Most pundits would rather pontificate about near-term prices than speculate on the three long-term numbers which are difficult to guess and won’t be known until many years in the future. These very long-term guesses are however what owners need in selecting the current assets that should be owned. While it is almost impossible to determine the exact future valuation, it is possible to come up with relative value ranges. In many long-term portfolios there are bonds and other securities with contract relationships. What is far from certain is the price and value of these instruments.

 

Historically, possibly bigger but more uncertain returns are earned from risker equity investments than from more predictable bond-like instruments. Bonds are also characteristically less volatile, but can only possibly recover their face value plus interest.

 

Nevertheless, the lure of higher potential returns attracts investors to equities and with it higher compensation for the advisors involved. This is the ballpark I choose to play in. To do so I take the inherent risk of attempting to make reasonably accurate projections regarding the relative performance of various equities and equity funds.

 

The Playing Field

As most of our clients are US dollar-based investors my primary interest is in US activities and how non-US actions impact US beneficiaries. The following is a list of primary concerns I have about the future of the US from an investment perspective. These current conditions are rarely discussed by the popular pundits.

1. Productivity is declining, which means the US is producing less sales and profits for each dollar of investment or hours of work. Productivity translates into long-term price gains in the marketplace. In last week’s blog I noted that the S&P 500 Index had gained an annualized return of over 10% since 1871. Prior to Covid the S&P 500 rose 9% per annum. We are growing even less this year. Depending on which prediction you choose, the expected gain is between slightly above zero and 7%. My guess is that “social spending” by industry and government has cost us at least one percent. The FTC, reshoring, and energy policies are likely costing at least another 1%.
2. We have lost the drive to win a war and the related peace after our conflict in Korea, Vietnam, Iraq, and Afghanistan. Our military now has a social mission, not primarily a military mission. To win we must want to win. Our current military is underfunded and not structured to win.
3. Excluding immigrants, we like China, are not growing our native-born population. This is not going to help improve productivity. Before 2050 India will have the largest population and by the turn of the century, Nigeria and possibly another African country will likely be the leader.
4. We are likely to see a new generation of global political leaders, possibly with more authoritarian tendencies. US industrial and commercial leaders will also change.
5. US schools are producing a generation of students who do not want to work hard and effectively. Our leading STEM oriented universities will produce good managers for a while, although some of the best will leave. That is too bad. Note the number of top leaders who are foreign born or first-generation Americans. We shouldn’t lose these leaders, we need them to replace some of the current politically adept CEOs.
6. China is likely to remain the fulcrum of world growth, they work harder and smarter.
7. From an investment standpoint, private companies are growing faster than public companies due to leverage and incentives. Incentives eventually lead to these companies becoming publicly owned, which requires public markets to not be overly burdened by government policies.

 

Restructuring How We Do Things

(The following is just one example of what may occur)

Our medical/insurance complexes have become gigantic bureaucratic political bodies, where patients are cogs in a machine. For instance, a patient living in the UK who has been in remission for over 2 ½ years is likely expected to return to the East coast to see his doctor every six months. Why can’t he go to a UK medical location and electronically tie in with a US facility. If these types of arrangements can’t be worked out, the real estate implications are enormous.

 

These are the types of changes we are looking to invest in.

 

Brief Initial Thoughts on Silicon Valley Bank and Credit Suisse

Both were victims of their own business mismanagement, poorly informed clients, and poor government/industry regulation. I wonder in the long run if our society is better off letting them fail rather than partially bailing people out. I don’t know if the victims learn anything. More importantly, do investors in general learn to be more careful. I am most concerned by the last group.     

 

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WHO YOU SELL TO DETERMINES WHAT YOU BUY AND WHEN? - Weekly Blog # 646

 

Mike Lipper’s Monday Morning Musings

WHO YOU SELL TO DETERMINES WHAT YOU BUY AND WHEN?

Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018 –

This week showed the value of reverse thinking. Most investors choose what to purchase based on the perceived characteristics of the investment. They choose when to make the purchase based primarily on their own needs or possibly a headline event. This thinking has not produced profits over the latest two weeks.

Who to Sell to?

Basic securities analysis textbooks assume that investors sell to investors that think like them, which is long-term, although the eventual buyer may be another company in a merger or acquisition. One of the nice things about life and markets is that each year brings new people wanting to invest. Each generation produces young people wishing to get rich quickly, who believe that making smart decisions and acting very quickly pulls off that trick. (Wouldn’t we all like to find Eldorado, the mythical gold mine.) 

While sheltering in place the youth discovered their brokerage firms allow them to trade on margin (borrowed money). Stocks and bonds cost too much money and move too slowly, so they quickly discovered put and call options. Options normally expire worthless or are sold, but they can require delivery or acceptance of the underlying shares. To protect the sellers of these options they buy or short the underlying shares. During the last two weeks the market has become aware that in aggregate these options plus some owned by a large Asian fund group is huge. This is one of the explanations of the two-tier market we have been experiencing. 

The first tier is about ten stocks including a couple of Asian companies. Through the end of August these stocks gained much more than +20%. The remaining stocks, the second tier, is still down a few percentage points year-to-date. Our intrepid youth has concentrated their attention on these tech leaders in the first tier. Options are written for various time periods, from a day to multiple years. Most institutions using options typically hold them for one or two months, but these youth are often in and out within two days. A complicating issue is the belief that the equity underlying these trades, on both the buy and sell side, could be as low as 7%. This in and of itself is causing rapid trading on the other side of these transactions. Short-term traders expect the other side of their trades to be similarly motivated by short-term views. During the last two weeks this has been the added increment to the market, adding to both volume and probably much more to volatility.

The Time Hurdles

Politics

As I’ve suggested in prior blogs, we have entered an emotional trading period which can last until mid-November. By the end we will have the initial results of the election. For forward-thinking investors who know history, the impact of the Presidential election will prove to be less important than who will be the chair and probable ranking member of various Congressional committees and possibly sub-committees. It will be this small group that puts words to the President’s wishes. Based on history, campaign slogans will either be totally disregarded or so modified that the results will be very different than what voters perceived on election day. 

By January, I believe both political parties will be splintered into different groups on many basic issues. Committee chairs will not automatically be able to send their wishes to the “floor” of their house without some support from the ranking (senior) opposition member of the committee. While all members always think of their next election, the defeated party will be focused on how to reverse the past election and how to improve their own chances for the next election. The ranking member has less ammunition than the chair, as they aren’t able to appoint sub-committee chairs. Additionally, members from the minority party will undoubtedly be split as to the reason for their side’s loss in the last election and will blame some of the remaining party members. Thus, they will not be easily led. Their immediate concern will be the 2022 mid-term and regaining the majority in 2024, where the two Presidential candidates will likely be new to those roles. 

COVID-19

We are likely to get frequent reports on the progress of vaccine trials and therapeutics, which are not as much in the news but possibly more important in terms of the number of people treated. Personally, I am very concerned with the execution of production and distribution of these lifesaving or at least life altering medicines. These are very large tasks that frequently run into problems. 

Other News Elements Before 2021

• BREXIT + UK Economic Recovery Faster than Continent
• Some rising commodity prices affecting some consumer prices

Market Indicators

• Very few fund investment categories rose this week - precious metals, agricultural commodities, Japanese and European equities
• NASDAQ fell -11% from its all-time high
• Dow Theory has a buy signal (often late, but sometimes early)
• AAII survey sample increasingly bearish
• Used car prices rising

What Should Investors Do?

Traders should trade, but remember, they want to finish with cash in the end. Investors should sit through this emotional trading period unless the market moves 20% either way. If a specific issue has some unexpected news causing reinterpretation of the situation, perhaps some change might be warranted. In general, sound investors with good portfolios and not too much cash should use a 20% market gain to add to reserves. Investors should use a 20% market drop to look for new bargains, which will benefit quickly if the market adapts to new strategies. (One might consider long-term producers or transporters of natural gas, or companies whose revenues are tied to market prices.) 

  

 

     

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https://mikelipper.blogspot.com/2020/09/turning-point-or-bump-weekly-blog-645.html

https://mikelipper.blogspot.com/2020/08/caution-ahead-emotional-turns-likely.html

https://mikelipper.blogspot.com/2020/08/mike-lippers-monday-morning-musings_23.html

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Lack of Confidence in Brexit Era Could be Costly

Introduction

I am a student of long-term investment performance for our accounts and my family. Some of the money entrusted to us is designed to make future payments many, many years into the future. Thus, I study which are successful and unsuccessful investors and their strategies over long periods of time. In that light I mentioned at a recent meeting of the New York Society of Securities Analysts celebrating the thinking of Ben Graham, the father of value investing, why I believed that the “experts” were wrong that the British would vote to remain within the European Union. They violated my rules for avoiding large losses that I derived from Ben Graham and my old professor David Dodd. The rules are:

A.  Overconfidence (Almost universal belief in an outcome)

B.  Faulty, incomplete, and poorly timed assumptions (Economic only

arguments) - Lack of non-financial milestones (Confusing money bets with bookies and number of bets + % undecided)

C.  The frequency of massive overconfidence in financial history is relatively rare; e.g., “Tulip Bulb” Sub-prime mortgages with house prices never declining. Avoiding those losses are critical to the number one rule of successful investing which is to avoid (big) losses along with the second rule, which is not to forget the first rule.

The First Two Rules Are Not Enough

One could have avoided losses from overconfidence by just moving into an all cash position and one would have saved all or the bulk of one’s capital. But if you stayed in cash you would have missed out on the compounding growth that investors have experienced over many years. Using a no-brainer approach of investing in a market index since 1926, one could have compounded at about 9% which doubles money every 8 years. (This is not a prediction of future returns.)

Our objective relative to the risks assumed is to do better than a mechanical index strategy. However, to beat the index one should analyze the performance of the index compared with actively managed investment accounts. In the periodic market declines, the index declines more than the accounts because first it does not have any cash and second most indices are heavily weighted in favor of the most liquid stocks which typically drop the most as they are the easiest to sell. The reverse is true on the way up from the bottom. The indices have no cash to reduce their rate of gains and are in the most liquid stocks that late-comers plow into.

As a student of investment performance of successful managers, I have noted that they have more confidence in what they are doing than others. Often they are lonely in adopting a particular stance or set of securities. Typically they are not positioned defensively in early stages of what proves to be a rising market. Many times this lonely confidence (compared to a market of little confidence) produces a superior compound growth rate. The superior managers don’t always do extremely well, which is why our portfolios have a number of funds that have characteristics that suggest in appropriate markets that they will do well.

Is Brexit an Opportunity?

Caveat emptor or buyer beware: we can not predict the future. My training at the race track is such to wish most of the time to avoid the betting favorites (weight of money) as well as my contrarian nature suggests that Brexit could well represent a major long-term opportunity for investors around the world.

Why?

There are potential parallels between 2016-17 and 1848 as indicated in last week’s post.    There are already eight European elections scheduled plus the re-vote in Austria. Australia finished voting this weekend with the present government weakened. The US will have a new administration and a different makeup of its Senate. There is a likely chance that within Europe there will be Brexit type votes either the in planned elections or in special referenda.

Around the world the existing order is under attack by groups on the right and the left claiming that the politicians and other “experts” have not delivered. Further they claim, governments are too big and therefore expensive and inefficient. Supranational bodies are viewed as even worse, as they are further away from the disgruntled people. In part due to social media, many minorities have expressed unhappiness with majority cultures and are expressing desires for autonomy or even independence. One wonders whether the concept of nationhood will need to change.

The world has changed. Even small companies and to some degree small investors view the world through multinational lenses. In the forthcoming negotiations between the UK and the EC, at the moment the UK has the advantage in that it should not be in any hurry. In the meantime it will be free to develop singular trade deals around the world. At the same time multinational companies and investors will seek out their own best deals. There is a long history of wartime enemies arranging a regular flow of trading between combatants. (I suspect that some in Germany are already at work on this option.) In the eventual final negotiation it would be wise for the UK to have one with the negotiating skills of “The Donald.” This is not a US political judgment, but one that recognizes commercial realities. It would not surprise me if the length of the negotiations is not similar to the twelve-year period between The Declaration of Independence and The Constitution. And that process had the benefit of the Founding Fathers led by Hamilton, Jefferson, Madison, and Monroe.

Perhaps coming out of all this will be a political shift favoring consumption over labor. China is attempting to do this with difficulty. The pro-labor attitude of the existing power structure has not worked. By raising the cost of labor (including benefits), it priced much of labor out of the market to be replaced primarily by automation, if not outsourced production beyond China’s borders. By focusing on consumption the drive will be in terms of price, quality, and safety which can produce a healthier and more satisfied society.

There is Still One Thing Missing.

The two largest economies in the world have been built by risk-takers. In both the US and China, the countries are populated by people who took the risk to move to their present location. Historically in the US, it is important to remember that with the exception of the Native Americans, we all came from someplace else for the past four hundred years. Because we arrived with very little in the way of financial assets, we were, and many of us are still today, risk-takers. This makes us unique among nations at the moment, which will have to be corrected if the Europeans want to catch up to the US.

Pardon a parochial view, but I often view the world through mutual fund glasses. One measure of the risk-taking attitude of investors is the portion of their assets invested in equity funds. On paper, Europe as a whole is the same size as the US economy. As of the end of the first quarter of 2016, the world has invested $16.4 Trillion in equity mutual funds. US registered funds accounted for 60.9%. All of Europe had only 27% in equity funds, including Luxembourg and Ireland which are favored by tax aware global investors outside of the US. Excluding the tax shelter investors, the four European nations with the largest share of the global equity funds were the UK with 4.3%, France 1.9%, Netherlands 1.7% and Germany also 1.7%. The potential of  less expensive and bureaucratic government focus on consumption is great. However, it won’t be achieved if most of the risk-taking comes from US and Chinese sources.

	Assets in Equity funds: as of 3/31/2016
All Equity Mutual funds	100%
US-registered funds	60.9 %
All of Europe? (including Lux & Ireland)	27.0 %
UK	4.3 %
France	1.9 %
Netherlands	1.7 %
Germany	1.7 %

Source:  ICI

How should one invest in the Brexit Opportunity?

This will undoubtedly be a long and laborious task. In a time-segmented portfolio as in our TIMESPAN L Portfolios^®, I would begin with small commitments to International funds which have 40% in Europe and buy more during periodic setbacks. The small fund participation rate in Europe may be an opportunity for financial services investing. I will be happy to discuss privately how we do it in our private financial services fund.    

_________________

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