World markets continue to spin with the what-ifs of the unexpected Brexit vote in Britain on Thursday.
That is mostly because no one has any idea of where this will go and what an EU minus the UK will look like, nor do they have any idea of how many more countries will divorce themselves from the EU.
All sorts of scenarios are being played out, none of them particularly good, and some are downright frightening. At the very least, the economic repercussions of all the maybes in this development are likely to hit major world economies hard.
“The Guardian” Monday published an editorial about the uncertainties of this divorce proceeding and why the world is in such a state following the unforeseen vote results. In the piece, the writer laid out the difference between a similar exit vote in Scotland in 2014.
In that case, a long white paper outlining what an independent Scotland might look like had been published long before the vote took place.
Not so with the Brexit vote. In fact, information was so scarce that all the people were voting on was whether they wanted to remain in the EU. As it turns out, some of the issues they took exception to, like immigration, will hardly be stemmed in a post-Brexit UK, news sources say.
What’s more, as more details become available, they become increasingly destabilizing, at least in the short term. Prime Minister David Cameron is hobbled in what he can do because he has resigned. His successor cannot do anything because he or she has not been chosen.
MARKETS HATE A VACUUM
Stepping into the void are stocks, bonds, currency and commodity traders. And, since markets hate a vacuum, they are running to any safe haven they can think of.
However, some see an investment opportunity in the premise that traders of all of these markets are betting on the future and are digesting only bad news for now. The reality may be much less harrowing than many can see currently.
In other words, the markets may overreact, something they do all the time.
The current focus is on crude oil and the possibility that the rest of Europe retaliates against the UK by refusing to trade. Some traders also are concentrating on the issue of sovereign debt.
Legendary investor Jim Rogers, chairman of Rogers Holdings, said on Yahoo Finance’s Market movers program Monday that debt all over the world is much higher than in the 2008 Great Recession, and that this would exacerbate the effects of trade imbalances.
And trade issues could be worsened by the possibility that Scotland now leaves the UK and takes its North Sea oil along with it. This may not affect supplies much since the oil will want to be sold, but who gets the money could be an issue.
CASH CATTLE MARKET QUIET
Cash cattle markets Tuesday were quiet with no bids. Asking prices were $118 to $120 per cwt on a live basis and $190 dressed.
Cash markets last week were $5 per cwt lower at mostly $116 on a live basis and at $184 to $186 on a dressed basis, down $12 to $13.
The USDA’s choice cutout Tuesday was $2.56 per cwt lower at $208.04, while select was off $0.95 at $196.44. The choice/select spread narrowed to $11.60 from $13.21 with 128 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Friday was $140.67 per cwt, up $0.46. This compares with the Aug settlement Tuesday of $140.67, up $0.50.