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The Brexit Vote: The Outcome and What Happens Next




The Brexit Vote: The Outcome and What Happens Next

What comes after the Brexit Vote?

The Brexit vote that took place on Thursday has left the world in a state of uncertainty. 

Investors have begun raising questions. 

Speculations have been made about whether or not the Federal Reserve should reverse its strong plan and start cutting interest rates.

However, to fully understand the situation, you need to know the Brexit Vote first. 

You should also understand the factors that weighed into the decision and how the decision impacts the global economy.

What is Brexit?

Investopedia defines Brexit as an abbreviation for “British Exit.”

The nickname refers to the British leaving the European Union after the referendum that took place on June 23. 

The referendum asked voters whether or not the United Kingdom should leave or stay within the European Union.

The European Union is a combination of both a political and economic union called a politico-economic union. 

It is made up of 28 members, most of which are located in Europe. 

Below is a diagram showing which countries/states make up the European Union:


Those who fought for this move framed the act as one that was necessary. 

They said that the culture, independence, and even the identity of the United Kingdom relied on its exit from the Union. 

You’ve probably heard this same argument in a debate surrounding immigration issues.

On the other side, those who fought for Britain to stay stated that the Union was better for the overall economy of the nation. 

They further argued that concerns about migration, and other issues surrounding the move to exit, were not important enough to equate the consequences to the economy if they left.

Why Did they Leave?

According to the financial times, Britain has not left the EU. 

Despite the fact that many believe otherwise, they state that the referendum that took place was not legally binding. 

They further report that the UK has made no moves to leave.

However, it is stated that the majority of Britons did vote to leave. 

The majority of politicians have even stated that the vote should be honored.

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Why Did the Vote Turnout How It Did?

The truth is that Britain has never been fond of the EU. 

If you have ever visited the United Kingdom, you may have noticed locals referring to the rest of Europe as a separate entity. 

Their displeasure with the Union was reflected in the referendum that took place on June 23, 2016, as demonstrated by the following chart:


Britain initially refused to become part of the European Economic Community in 1973, when it was founded.

However, two years after joining a referendum lead to a similar exit by 67% of the vote.

Afterward, an opposition of Europe followed. 

One example of this opposition is found in Britain’s refusal to use the Euro for their currency. 

Another is in their refusal to participate in the Schengen Area open borders agreement made by the Union.

Brexit and the U.S. Economy

A 6% probability that the Fed’s policy rate could potentially fall by .25% by July.

This was shown by interest rate futures.

Interest rates are a popular tool used by money managers and hedge funds to place bets on the policy moves the Fed will make in the future.

The futures showed a 17% probability that the September contracts would feel a rate cut. 

At the same time, the contract coming up in December also finds itself facing a 16% chance of reduction before it comes to pass.

This mirrors the anxiety that investors are feeling over the impact Brexit may have on the U.S. economy.  Many believe that Brexit will undermine the growth momentum of the U.S. economy.

This will cause the Fed to shift policy. 

The Fed raised interest rates in December for the first time in nine years.

Brexit and the Global Economy

James Athey stated that the biggest risk at the moment is the negative impact this will have on the global economy.

He further stated that if growth does not continue at its current speed, it will cause central banks to step in likely and stimulate economies.

James Athey is employed as a money manager for Aberdeen Asset Management. 

The company currently has around $420.9 billion under management.

Highly sensitive the outlook of the Fed’s policy, the yield on a two-year Treasury note fell from .653% on Friday and .779% on Thursday to .594%. 

This percent is barely over the .25-.5 percent Fed Policy rate range. 

Because of this, many investors are not expecting rates to be raised by the Fed any time soon.

Ward McCarthy stated that the rate normalization has currently fallen low on the priority list of the Fed. 

He further states that it will remain low on the list until things settle within the financial market and around the economic consequences caused by the Brexit vote. 

Ward McCarthy is a chief financial economist at Jefferies LLC.

Brexit and England

It is also being said that England might have to cut rates if their growth outlook begins to deteriorate. 

The current yield on the two-year government in the U.K. recently was at .153%. 

This is below the .5% rate of the BOE.

The following chart from the Bank of England shows that the OIS curve suggests rate cuts in the future:


What’s the Final Word?

Mark Cabana stated that expectations for any rate cuts from the Fed taking place near-term are “overdone.”

Mark Cabana is a U.S. rates strategist employed at the Bank of America Merrill Lynch located in New York.

Cabana further stated that growth uncertainties mean that the Fed needed to take another look at and reassess its current rate policy. 

He said that it made sense that the Fed would be “more cautious” faced with the current environment. 

Cabana’s bank was able to push back the Fed’s rate increase from September to December of this year.

Todd Colvin stated that the Fed had other options available to them other than cutting rates. 

Todd Colvin is senior vice president for Ambrosino Brothers. 

Ambrosino Brothers is a futures brokerage firm.

Colvin further stated that open swap lines and liquidity measures could found between both the Fed and other central banks could increase. 

Colvin isn’t sure that a rate cut is the answer. 

He stated this was especially true because the Brexit effect would not, at least not right now, be directly under the Fed’s mandate.

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Dems Can Only Blame Pelosi For Failure To Secure More Stimulus Money




Dems Can Only Blame Pelosi For Failure To Secure More Stimulus Money

The next round of stimulus money will unlikely include any major concessions for Democrats. With this, the party has nobody to blame but Nancy Pelosi.

Astonishingly, that opinion comes from David Dayen, the executive editor of The American Prospect. The said magazine stays “dedicated to liberalism and progressivism.”

In a recent article titled “A Leader Without Leading,” Dayen says during the passage of the last stimulus bill in late April, Pelosi – along with Sen. Chuck Shumer – chose to forego adding their wishlist to the bill, believing they would have another shot. That shot, thus far, has never materialized.

“Republicans wanted more money for forgivable loans for small businesses. Democrats had a host of liberal priorities left out of prior legislation that could have been paired with the extension. But Pelosi and her Senate colleague Chuck Schumer chose to go along with the Republican framework, leaving everything else for later.”

“Immediately afterward, Senate Majority Leader Mitch McConnell hit the pause button on future legislation. It felt like the Democrats were played.” said Dayen.

Credits for the Republicans

He also credits the Republicans for knowing exactly what they wanted out of each stimulus bill. The Republicans did so all while Pelosi fumbled away every opportunity.

“When the coronavirus spread and lockdowns buckled the economy, Republicans knew exactly what they wanted—protect large corporations and investors—and pursued it unerringly. Pelosi had no coherent agenda to fall back on. She’d spent the past year advancing complex, multifaceted bills and watching them wither in Mitch McConnell’s legislative graveyard.”

Dayen adds, “H.R. 1, the House’s signature legislation during this Congress, which attempted to nationalize voter registration, establish nonpartisan redistricting commissions, add ethics standards to the Supreme Court, add a voluntary public-financing option for campaigns, require presidents to release tax returns, disclose donors for super PACs, make Election Day a holiday, and about 20 other things in a single bill, is a perfect example of this syndrome. There’s no single narrative to grab onto, just a mélange of advocacy group–approved planks. This left House leadership unprepared as the pandemic began its march.”

Pelosi worked on the earlier stimulus bills. While doing so, she allowed the Republicans, led by Mitch McConnell, to craft the CARES Act. Dayen says this meant that Democrats “just got to tweak McConnell’s work, without altering its tilt toward the powerful.”

Pelosi and the HEROES Act

Dayen’s takedown on Pelosi ends with her “pie-in-the-sky” HEROES Act. Somehow, she even managed to make a mess of her own bill.

“Incredibly in the midst of a crisis, was a Pelosi tendency that had grown over the years: obsessive concern with deficits. Pelosi rolled back student debt relief in the HEROES Act after learning that it would cost $100 billion more than expected. This was a $3.2 trillion messaging bill not designed to become law, yet an additional 3 percent cost was considered unacceptable. Pelosi also declined to add “automatic stabilizers” that would maintain expanded benefits until economic stress dissipated, blaming a Congressional Budget Office scoring quirk that made the cost appear artificially larger.”

“So with over 30 million out of work, the important thing to Pelosi was that her pie-in-the-sky, going-nowhere bill was ‘reasonable,’ based on some ineffable standard of reason…”

“Devotion to deficit hawkery in normal times is unwise policy. It’s downright fatal during an economic crisis, where relief could be yanked away from needy families prematurely simply because of an unwillingness to challenge CBO’s scoring model.”

Many expect lawmakers to vote on the next stimulus bill sometime after July 20. If you hear Democrats complaining about how “unfair” the bill is, just remember who is negotiating for their side.

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Why You Should Consider Filing For Social Security At Age 62




Why You Should Consider Filing For Social Security At Age 62

Earlier this week we discussed four common regrets that retirees have when they look back at their golden years. One of the most common regrets was filing for Social Security benefits at 62, the earliest possible age. According to the Social Security Administration, about 1 out of 3 people apply for benefits at that age.

The regret is that if they had waited longer to file for their benefits, their monthly check would be much larger. For example, by delaying filing for Social Security until age 70, your monthly benefits can be as much as 75% larger than someone who filed at age 62. That’s because benefits grow by a guaranteed 5% to 8% each year that you delay your claim.

But there are always two sides to a coin. Today we wanted to discuss the benefits of filing for Social Security as soon as possible. With this, you can decide which approach you believe will benefit you the most.

The Case For Filing Social Security Early

The earliest you can file for Social Security benefits is age 62, but each month you file before reaching your full retirement age (FRA) cuts your monthly benefit amount. As an example, if your full retirement age is 67 and you start your claim at age 62, your monthly check will be reduced by approximately 30%.

Despite the reduced monthly benefit that comes with filing early, tens of millions of Americans make that decision every year. And it boils down to one line:

We have no idea what the future holds.

The financial benefits of waiting until age 70 to claim Social Security make complete sense. But we don’t know how long we will live, so we don’t know if the trade-off is worth it. If we knew we would live a long, healthy life until age 100, we would all delay filing until age 70 and reap the maximum reward.

But if you decided to wait until age 70 to claim, and unfortunately passed away before that, you would have foregone all the retirement income from age 62 on.

Waiting to file is a gamble, but so is giving up guaranteed monthly income starting at age 62.

Deciding when to claim your benefits requires serious thought and shouldn’t be a hastily made decision. And we aren’t saying that filing Social Security immediately at 62 or waiting until age 70 is the right choice. Every situation is different. If you are still healthy and working, waiting a few years passed 62 to claim but not all the way to 70 might be a good compromise. You’ll get a larger check than had you claimed right away, and your regular working income can make up for some of the reduced benefit amount since you didn’t wait until age 70.

The most important thing, whether you file at 62 or 70, is to find enjoyment in your golden years.

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Mnuchin: Next Stimulus Coming By End of Month, No More Extra Unemployment Money




Mnuchin: Next Stimulus Coming By End of Month, No More Extra Unemployment Money

Treasury Secretary Steve Mnuchin said the next stimulus bill will be much more targeted than previous bills. He also said the goal is to get the next bill approved between July 20 and the end of this month. That time is when Congress will return from their holiday break and before they leave for August recess.

On Broad Stimulus Measures

It appears the White House will not support the type of broad stimulus measures of the previous bills. Instead, it will focus on direct payments to Americans. In an interview with CNBC yesterday, Mnuchin said “we do support another round” of stimulus checks to individuals. This mirrors the $1,200 payments that the government sent out as part of the $2 trillion rescue legislation passed in March.

Mnuchin didn’t mention whether he supported the idea of a $40,000 income cap to receive a check that has been floated by GOP lawmakers. The income cap for the first stimulus check was $75,000. He did say that he spoke with Senate Majority Leader Mitch McConnell. He also mentioned the “level and criteria” for checks would be discussed when lawmakers return to Washington.

Any new stimulus bill would likely not include proposals from the Democrats that include hazard pay for essential workers. It likely won’t include a longer extension of strengthened unemployment benefits, mortgage and rent relief, and support for state and local governments, too.

Mnuchin reiterated that the White House isn’t in favor of more relief money for states and municipalities to make up for lost revenue. Some state and local governments are considering trimming essential services as costs balloon and revenues drop. He said the administration does not want to “bail out” states that were “mismanaged” before the virus hit.

On Unemployment Benefits

Another critical topic the lawmakers will tackle the end of the enhanced unemployment benefits on July 30. They will do so when they return to Washington D.C.

Mnuchin said the White House has no interest in extending the enhanced benefits any further. Instead, he said it wants to change how they pay benefits. He did not give details. However, he did hint that unemployed workers shouldn’t be able to earn more money compared to full-time employees

“You can assume that it will be no more than 100%” of a worker’s usual pay, Mnuchin said. This echoes many Republicans who argue the additional benefits are preventing some from returning to work. These workers do this so that they make more at home than they would at their jobs.

While Mnuchin says the White House isn’t in favor of extending unemployment benefits, it is extending the Paycheck Protection Program that provides loans for small businesses. Earlier this week the Trump administration released a list of companies that received loans from the government. With that, backlash ensued as numerous businesses tied to wealthy individuals were found to have requested funds. Of the $130 billion remaining in the program, Mnuchin said he wants new relief to be “much, much more targeted” than past rounds of funding.

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