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Why Brexit (and a Trump Presidency) Are Not HappeningBy
Thursday, June 16, 2016
"So... do you think Brexit is going to happen?" I asked while driving in Colorado last week.
"Not a chance!" the two guys in the car with me both replied, in unison.
Their reply wasn't scripted.
"But the polls say there's a double-digit lead for the Brits to EXIT the European Union," I said.
"It isn't going to happen!" the two guys said – even louder this time.
Their reasoning was simple but powerful. And the same logic tells us why Donald Trump has little chance to win the presidency in November, as I'll show.
So, who are these two guys? Why do they feel so strongly? And what is Brexit?
I will answer these questions today...
As a full rainbow shined brightly in front of us on I-70 at sunset, I asked Eric Fry and Chris Gaffney the Brexit question. You'd be hard-pressed to find two more experienced guys to answer this question...
Eric is a brilliant guy with great investing ideas. He's a former hedge-fund manager who has worked closely for years with newsletter legends including Jim Grant and Bill Bonner. Today, Eric writes The Non-Dollar Report.
Chris is the president of EverBank World Markets. He and I have talked for more than 20 years about currencies and international investing.
Brexit, by the way, is a big deal...
It's the term people have coined for Britain's potential EXIT from the European Union...
Next week, Brits vote on whether they should stay in the European Union. (The BBC put together a simple guide explaining the situation here.)
Last week, while I was in Colorado, the polls said Brits in favor of EXITING the European Union had a double-digit-point lead over Brits who wanted to stay.
So why do Eric and Chris feel so strongly that Britain will stay in the EU... even when the polls say the opposite?
It comes down the real money – the betting odds, instead of the polls.
"Look at the odds at Ladbrokes," Eric said. Ladbrokes is Britain's largest bookmaker, and calls itself "the world's sports betting and gaming company."
"While the polls say Britain will go, the real-money bets say that Britain will stay," he said. "My money is on the real money."
I asked Chris what he saw.
"It's obvious that investors don't believe that Great Britain will exit the EU," he said. "Like Eric said, money is not being laid down on the side of an exit."
"But what if the polls are right?" I asked. "What if Brits vote to get out of the EU?"
"Then so much volatility would hit the markets," Chris explained. "Britain's exit would lead to others wanting to do the same, like Ireland for example. If Britain decides to exit, then you would want to own the U.S. dollar and precious metals for the short term."
I actually agree with them... I believe that REAL MONEY trumps the polls.
Speaking of the real-money bets... Right now, bets on the election lean heavily in Hillary Clinton's favor.
Traders are willing to put up 65 cents today to get paid out $1 if Hillary wins. But traders are only willing to put up 35 cents today to get paid out $1 if Trump wins.
Summing up... Pay attention to real-money bets. They suggest that Britain will stay in the EU and that Trump has a big mountain to climb between now and November.
Good investing,
Steve
P.S. For more on EverBank's unique international offerings, click here. For more on Eric Fry, click here.
Further Reading:
In April, Steve explained why the real-money bets said Hillary will win the election in November. Get the details here: Real Money Says Hillary Clinton Is Our Next President.
Steve isn't putting his own money into betting on the election. But in March, he shared what he does with his own money. "I break 'the rules,'" he writes. Learn more here.
Market NotesTHIS INCREDIBLY 'BORING' BUSINESS CONTINUES TO SOAR Today, we check in on one of the world's most "boring" businesses that continues to beat the market.
Regular readers know we're fans of simple businesses that provide products and services that will never go out of demand. More often than not, these are "boring" businesses that don't get much attention in the financial headlines. One of our favorite examples of this idea is Waste Management...
Waste Management (WM) is a $25 billion waste disposal and recycling giant. It provides valuable services in an industry that will never go away, no matter what's going on with the stock market, interest rates, or politics. Americans will continue to generate millions of tons of trash every year.
This remarkable consistency has been great news for shareholders. Despite recent volatility in the stock market, shares of Waste Management are in a steady uptrend. They're up close to 20% in 2016 – and have nearly doubled over the past five years. Taking care of other people's trash may not be exciting, but the profits are anything but boring...
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