Brexit Rips Apart The Global Economy

Welcome to the end of the world as we know it.

The Brits, in one of the most self-absorbed acts in mass myopia, voted to flee the European Union (EU). It shocked the world, but only because the world wasn’t paying attention. I’ve been saying that the Brexit vote posed a greater risk to global well-being than the media and investors presupposed. That risk was precisely why I recommended late last week that you buy put options on the SPDR S&P 500 ETF (SPY). A Brexit success, I warned, was sure to rip across the globe.

And it did — in historic fashion. (Those put options I recommended generated gains of as much as 62% in just a week.)

Like I said originally, Britain might be an island, but the fallout was never going to be contained singularly to its shores.

Now, however, Brexit is in the past. And that past is prologue to a radically altered world we all now confront as investors.

I originally laid out the path by which a Brexit success would boomerang around the world … the dollar would rally, the pound would sink, the yen (a haven currency) would soar and Asian markets would get slammed because of expectations that the strong dollar will create the environment that could lead to a currency crisis. Asia has loaded up on dollar debt since 2008, and a strong dollar makes repaying that debt increasingly difficult.

All of that happened overnight.

The dollar index gained more than 2%, a mercurial daily move in that index. The pound fell to levels not seen since 1985. The yen sank below 100 to the dollar at one point, a sharp appreciation versus the buck. And investors fled Asian stocks, with Japan down 8%.

Now comes the day after…

And it promises to be worse than the event itself.

So let me tell you what we can expect as the ripples of Brexit spread around the world.

The Destruction of Europe

First, there’s a very good chance that Brexit will do what Greece’s debt crisis couldn’t — tear asunder the European Union.

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As a lifelong world traveler, Jeff ...

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