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Image source: John Birch Society

THE AMEXIT

AND ITS IMPACT ON THE WORLD
by Charbel Khoury – Chief Financial Architect

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THE U.S. HELLECTIONS

So Trump is president. What a shock! But did you notice that everyone has been focusing on why Trump won, more than on why Hillary lost?

This election was like basing your football game on football rules, while your opponent was really playing baseball. You keep saying “that’s not football!! he’s going to loose!”. But in the end, the people of America played baseball with Trump. And now he’s their president.

I’ve read and heard reactions. Many of them still see this as if it happened by mistake. That Trump won, but the Americans don’t really want him. That there’s an “Amexit” (emigration) “movement” to Canada and New Zealand etc.

We forget that when people receive a call from the poll makers, they would most probably not admit that they’re so angry at the system that they’re going to vote Trump. Many of these people are now probably even protesting. Because they know it’s not going to change anything. Maybe just to save face.

Yes, Hillary got the popular vote from the big number of voters in the states that favor her. In Columbia around 94% of the TOTAL number of votes were hers! Trump got around 10,000 votes there!

The man won nationwide by a landslide! Not a vote or two. They do want him. Just like the British want the Brexit. And I believe more surprises will unfold, every time the people of the world are given the true power to affect anything.

The less we are in denial, the more obvious it gets.

There’s a revolution happening. Because people everywhere are tired of promises. Tired of their quality of life going backwards. Tired of immigrants coming in and posing all kinds of threats. Tired of the same types of people with the same kinds of national and international ties running countries in the same direction.

The old regime put a stick in the Middle East, like you would in an ant hole. And millions of people just went all over the globe. And with terrorism on the rise, people don’t know the difference anymore between muslim refugees and terrorists. And even if they do, they believe refugees are posing other threats related to economy, tourism, bigotry, small crimes etc.

And here came a man who showed he doesn’t care about being political, and promised to close the doors, or even better: to build a two-thousand-mile, ten-billion-dollar wall.

For years the U.S. media has shown my county to the world in a completely false image, so that no one mistakes it for how amazing it really is. I’m not buying all the “shock” I see on U.S. television. And remember that the democrats, who lost this election, are still running the country, and are very influential.

You’re thinking: but in what ways does this impact how I can make money, mister financial architect? 

That’s just it: winning or loosing in any market is all about predicting sentiment. Isn’t it?It’s how people feel about things that defines the demand of those things, and so dictates their value.

You’ve got to open your eyes and see the new world that’s potentially unfolding, before you throw yourself into any endeavor. Because right now, my dear reader, chances are you are in denial of what’s really going on.

IT’S REALLY AN AMEXIT!

Being part of Europe is beneficial in many ways. But a Brexit is an opportunity to take a trip into the past. To reset some givens. To get a chance at unplugging current leadership systems that have gotten nowhere, year after year.

Analysts said that should Brexit happen, many other markets would get inspired. They were talking mainly about Spain and countries who took a bailout. A German/IMF foot on the forehead.

France’s elections are due next April, and chances are LePen and the extreme conservative right are going to win. Isolationists. Borderline racists.

England and France are the true military forces of the EU. Germany is not. And this is looking like a new Era for Europe.

But who would’ve thought that someone in the US would try to stretch the Brexit effect all the way to North America.

If you ask me, I’d say Donald Trump did just that. And he saw an opportunity to offer something similar to the citizens of the USA. He could’ve hidden his clown persona, his extremism, his blah. But that was exactly the point. To show Americans a spontaneous tough successful all-American white man, who would act out, say things like “punch’em in the face!”. A cowboy who just wants “America great again”.

And that was enough for them. Especially versus Hillary, who, despite all she tried to show that she’s bringing something new to the table, failed drastically to convince them of that.

It’s an AMEXIT from the current political trend that has not made any difference in the quality of the lives of people.

Maybe Bernie Sanders would’ve been a much tougher competitor to Trump. Being a softer, more reasonable version of that traditional American persona. Had the democrats been aware of what Trump was doing, they would have never chosen Hillary. But everyone thought it was the usual football game.

And now it looks like the super powers of the world will all have a penchant for conservatism and isolation. In other words: anti-globalization.

SO WHERE’S THE MONEY?

USA:

Notice that while the currency market took a dive at first, Wall Street’s reaction was positive, closing with a positive; and the dollar eventually closed high.

Also notice that Yellen has been bluffing about increasing the Fed’s rate for much longer that she should. There will surely be a big change there, drastically decreasing the chance of a hike in the central bank’s interest rates.

So many things that are subject to question marks, until the Trump administration kicks off.

There will be uncertainty in the US, until the Trump policies become clear. So the USA market is not likely to be predictable until at least mid 2017.

MIDDLE EAST:

Trump promised to annihilate ISIS. He would take that win if he finds a way, like Obama took the BinLaden win.

Although republicans were against the Iran deal, but Trump is not a republican, is he. But he is a businessman. And the Iran market offers more opportunities than any place on the planet. I doubt that it will be let go. Especially if ties with Putin are established. Then the fall of Saudi Arabia would continue. This will also become clearer starting Q2 2017.

Meanwhile, real estate in the UAE could be a good bet. Especially in Dubai. Because if the US moves forward with removing sanctions on Iran, the demand for real-estate in Dubai could increase.

Real Estate in Lebanon should be very attractive around Q2 of 2017. But that has a whole other logic to it. One related to shortage of cash with Lebanese expats in Africa and the Gulf; non-Lebanese real-estate owners putting theirs up for sale in Lebanon. A situation of too much offer and low demand growing daily. Unless something changes in the coming months.

CHINA:

Well first, the Trump win was a humongous gift for Chinese propaganda. China is delighted by the result, that shows that democracy can “allow such a person to lead such a powerful country”. Although Trump described China as one of the US’s top adversaries, he will not attack it for human rights violation, as much as Hillary did, and would’ve done. They love that Trump’s isolation policy wants to pull back on military alliances with Japan and South Korea. Less trouble for China.

Having said that, Trump’s election and Brexit show a trend of de-globalization, which would be a blow to China’s economy. But again, it is not going to be easy for Trump to coerce China. And it is not that simple and easy to start a trade war between the two. I believe they’re going to be forced to find some common ground for most issues.

In the end, it is a self-sustaining economy where the middle class has been growing due to globalization, to the dislike of authorities.

China remains a very promising growing market. Especially on the long run.

INDIA:

India should continue to be the counterbalance to China. Even more so under the Trump presidency.

It is still an undervalued currency, and a very attractive market, especially as long as oil prices are low.

And if Trump goes all-out against terrorism, then the “indo-US” business ties will grow.

The outlook for India is very positive.

LATIN AMERICA:

The “latino” world wakes up to a shock of a Trump presidency.

The Mexican Peso went down 13%, closing at around -9%.
But Mexico, and all the current US trade partners, would never allow a trade war with the US.

Add to that the fact that this region of the world, namely Brazil, has the largest amount of natural resources and fresh water on the globe.

It’s been said that we will soon need two Brazils to be able to supply the world with coffee.

Trump spoke of stopping illegal immigration. These immigrants also affects the jobs of legally working latinos in the US, as much as any tax-paying legal citizen.

Mexico’s situation remains to be seen around Q2 2017.

Brazil, in spite of all the issues its market and political scene are facing now, is in our opinion a good bet for long term investments.

EUROPE:

Now Europe is a very interesting market to watch in the coming year.

Inspired by Brexit and the Trump election, I believe right-wing populists and anti-bailout parties are now charged, and will act at the first opportunity. And this time, the US would not want to step in and save the day. Even worse: the US might trigger it, if Trump moves forward with his trade wars with China, Mexico or Japan. European leaders will not be able to hold on to their chairs.

Remains to see how the Brexit story will end. The French elections in April… too many variables.

Also an unpredictable market until the new US presidency gets to work.

OUR PORTFOLIO:

Some markets we still believe to be attractive throughout all this. Mostly sector-specific, rather than purely geographical.

The way we choose allocations based on our experience that’s now two decades old, is mostly a larger exposure to safe instruments, in the goal of guaranteeing the client’s capital. And then taking a risk with the smaller part; sometimes shorting a part of that, in the goal of achieving a decent return that’s at least three times the inflation rate.

And we’ve been successful in doing that.

TWO BRAINS ARE BETTER THAN ONE

So there you have it. Crazy markets governed by uncertainty due to the unpredictability of a new conservative, isolationist leader of the Free World, and what will follow in the coming year.

But such a market also presents a lot of opportunities that it would be a shame to miss.

Our advice to clients at Atlantis Financials depends on whether the investment is on the short or long term, and which instruments the client is looking at, depending on risk aversion, and desired level of involvement.

As smart and experienced as you may be, this is not a time to take risks without the assistance of your financial advisor (as long as you’ve got a real advisor, not a financial products, or worse, a life insurance salesman).