brexit - what does it mean and what should i do? - gevers wealth management, llc june 2016 - ca

June 2016

BREXIT – What Does it Mean and What Should I Do?

Questions from the Field:

During the course of teaching seminars, writing articles and newsletters, and meeting with clients we

hear lots of questions. We will try to address some of the more timely and relevant questions that

investors, executives, and retirees are asking us. Our question(s) for this month are:

Q: What is the BREXIT, and what should I do?

Q: How is BREXIT impacting my investments and the markets?

England leaves the European Union!

I was up late Thursday night watching the news coming out of England regarding the BREXIT vote.

At end of business day in Seattle the polling was showing the REMAIN vote leading, which confirmed

what the most had been saying for weeks that England would not leave the European Union (EU)

However, by late evening on the West Coast, the tide had changed dramatically, and at the close of

voting, the LEAVE vote prevailed – England had decided to exit the EU.


June 2016

Gevers Wealth Management, LLC

This outcome was a big surprise to everyone. The media, polling data, and leading analysts had all

predicted England would stay. Betting odds were as high as 4 to 1 in favor of staying, and here in the

US, our stock market was up through the day of the vote in anticipation that England was not going to

leave.

So now England is leaving the EU. Some observations to help us discern what this means and might

mean in the future:

The actual departure will be gradual and will be implemented over a long time, perhaps many

years. The current hysteria might be an overreaction to an event that will slowly unfold over

time.

According to financial data firm FactSet, US companies of the S&P 500 make just 2.9% of

their sales from Britain. Coincidentally – or perhaps not – the S&P 500 index is down about

exactly that much as I write this letter.

US stocks as measured by the S&P 500 are almost exactly back to where we started the year at.

The press and media are having a field day trying to create a huge drama, but the reality is, at

least as of now, that the markets have declined some, but not a lot.


June 2016


Commentators are saying that the BREXIT is a continuation of the Bernie Sanders/Donald

Trump/Occupy Wall Street movements of the last few years. The public is tired of the financial

elites; populist movements are gaining momentum.

Why BREXIT? England is rebelling against the EU bureaucracy and their financial burdens

and have had enough. Americans celebrating July 4th Independence Day and the Boston Tea

Party see the irony in all this and certainly should be able to empathize with England, as we

Americans also voted to LEAVE in 1776.

With England’s success and a growing populism momentum, we might next see an attempt at a

GERXIT – Germans clamoring to also leave the EU.

The USD was up sharply on Friday, while the Pound took a big drop. That is great news for

British exporters, and a headwind for US exporters like Boeing and Paccar. (It might also be a

great time for US citizens to go on a trip to England to enjoy a suddenly fantastically improved

exchange rate!)

Gold also jumped sharply on Friday – up about 5%. You might remember that gold also

behaved the same way after the January Bank of Japan announcement for negative interest rates

(NIRP), showing once again gold’s role as an uncertainty/crisis hedge. Gold is now up over

20% for the year.

US interest rates dropped sharply on Friday. Mortgage experts are already forecasting drops in

rates for home loans, which were already at all-time lows before BREXIT. This might be a

great opportunity to consider a refinance or to buy a home. Lower interest rates are usually

great for the bonds and dividend investments in our portfolios.


June 2016


What do the Brits say? It depends who’s talking.

Representing the establishment REMAIN, EU President Donald Tusk stated that BREXIT

could lead to the end of western political civilization.

Representing the LEAVE group, English billionaire investor Peter Hargreaves said, “Every

year in the EU it gets more political, it gets more legislative, more regulative; we don't seem to

get very much benefit from it. We will be far better out... There's a huge amount of vested

interest, a lot people making these comments are politically motivated and also work for big

banks that aren't British...

One thing every country in the world is trying to do is get the value of their currency down.

That's why interest rates are low. It is quite likely the pound will come under a bit of pressure,

initially... That will be compensation for any tariffs, so the tariffs won't bother us.”

World central banks (the Fed, BOJ, Bank of England, ECB, etc.) might join together to respond

to BREXIT. Bloomberg reported that Governor Mark Carney said the, “Bank of England was

ready to pump billions of pounds into the financial system to support markets and wouldn't

hesitate to take additional measures if needed.” The European Central Bank said it will give

banks all the funding they require to counter market turmoil. The stock markets often respond

favorably when Central Banks print more money.

Countries generally don’t like it when their own currency appreciates a lot, as it makes exports

less competitive and tends to hurt their balance of trade. Watch for moves by other countries to

protect their currency – which is coded language indicating they intend to weaken it.

Expect higher volatility – more ups and downs this year, especially if some of the issues

mentioned above happen. That is: currency devaluations, central bank money printing, and

copycat exits like a GERXIT.

Bottom line – US stocks dropped some in early response to BREXIT, and the US stock market is now

flat for the year. However, other parts of a diversified portfolio like bonds and gold are up sharply.

We have been reviewing risk strategies the last few months and many of our clients have implemented

some of these strategies.

(Please see our May newsletter, Dow 18,000 Again…What Should I Do About Risk? You can read it

on our website at:

http://static.contentres.com/media/documents/8c237f75-3ff8-425e-849c-5f6381b97fa9.pdf




June 2016


BREXIT reminds us that we need to periodically review risk in our portfolios, understand what it

might do, and have a philosophy and strategies in place to try and mitigate some of the risk.

Let’s keep watching BREXIT in the coming days to see what the long term impact might be.

Remember that England’s actual departure from the EU will take quite some time, and it is possible

that the tempest might cool down a little.

Remember the investment fundamentals; we want to concentrate on what we can control; rebalance

our portfolios and dollar cost average into the market if we are still making new investments, exercise

patience, and stick to a process. These are time proven steps to creating long-term wealth and a good

investment experience – no matter how BREXIT turns out.

I look forward to our next review meeting and discussing this with you in more detail. May you and

your family enjoy a pleasant summer.

Warm Regards,

Willy

William R. Gevers

President/Financial Advisor

PS: We have been repeatedly asked by clients if they could share these e-mail notes with their friends

or neighbors. Please feel free to forward this with the stipulation that it may only be forwarded if done

so in its entirety with no portions omitted. We would be delighted to share our comments and opinions

with your friends, and welcome your comments and feedback. If you received this and would like to be

included on our newsletter list, please email us at [email protected]

Copyright 2016 William R. Gevers. All rights reserved.

Gevers Wealth Management, LLC 5825 221st Place SE

http://www.linkedin.com/pub/willy-gevers/4/b15/71a


June 2016


Suite 102 Issaquah, WA98027 Office: 425.902.4840 Fax: 425.902.4841 Email: [email protected] The views are those of Gevers Wealth Management, LLC, and should not be construed as individual investment advice. All information is believed to be from reliable sources; however, no representation is made as to its completeness or accuracy. All economic and performance information is historical and not indicative of future results. Investors cannot invest directly in an index. Please consult your financial advisor for more information. Securities and advisory services offered through Cetera Advisor Networks LLC Member FINRA/SIPC. Cetera is under separate ownership from an any other named entity.

mailto:[email protected]


June 2016


US Money Supply, US Dollar, and Inflation/Deflation Watch

"Neither a wise man nor a brave man lies down on the tracks of history to wait for the

train of the future to run over him." - Dwight D. Eisenhower

US Money Supply – Adjusted Monetary Base

http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D=AMBNS#


June 2016


US Dollar Price – (DXY) USD Index measured against other currencies

(http://barchart.com/chart.php?sym=DXY00&style=technical&template=&p=MC&d=H&sd=01%2F01%2F20

00&ed=&size=M&log=0&t=LINE&v=1&g=1&evnt=1&late=1&o1=&o2=&o3=&sh=100&indicators=&ad

dindicator=&submitted=1&fpage=&txtDate=#jump)


June 2016


Inflation/Deflation -Year to Date price increase in commodities and basics as measured by

futures

(http://www.finviz.com/futures_performance.ashx?v=17)


June 2016


Velocity of Money – Velocity is a measure of how quickly money is spent. High velocity is

typically a precondition for inflation.

(http://research.stlouisfed.org/fred2/series/MZMV)

brexit - what does it mean and what should i do? - gevers wealth management, llc june 2016 - ca

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