All eyes will be on the upcoming ‘Brexit’ vote in the United Kingdom next week, now that polls are showing that the Brits are more likely than not to shock conventional wisdom and exit the European Union.
Wherever she is, Margaret Thatcher will be beaming at the wisdom of her former constituents seeing the wisdom of exiting the deeply flawed and ultimately unsustainable confederation of European countries.
Markets will no doubt react very badly if the vote tracks the current polls, but this type of short-term pain is child’s play compared to what has to happen to return the global economy to some semblance of sanity and growth in the years ahead.
Take the U. S. stock market, for instance…
Wanted: Strong Corrective Measures
Something radical is certainly required to snap investors out of the complacency.
While stocks sold off sharply on Friday, they were flat on the week with theDow Jones Industrial Average rising 58 points or 0.3% to 17,865.34 and the S&P 500 losing 3 points or 0.15% to close at 2096.07.
The Nasdaq Composite Index fell 1% to 4894.55. The Dow danced above 18,000 a couple of times during the week, giving rise to the predictably idiotic CNBC news flashes despite the fact that this was not news (unless you believe that profound investor stupidity is news, but unfortunately it is all too predictable).
Junk bonds also kept rallying despite deteriorating credit quality with the average yield on the Barclays High Yield Index moving closer to 7%, which in case anybody asks you is an oxymoron since 7% is a low yield, not a high yield.
Investors have clearly checked their brains and good sense at the door; when they check out, they are going to leave a good deal poorer.
This post was published at David Stockmans Contra Corner on June 12, 2016.
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