Chris’ note: Today, we turn our attention to a brewing crisis overseas that’s prime for speculation… our bread and butter here at Casey Research.
If you haven’t been following the news lately, the controversy over Brexit – the UK’s upcoming departure from the European Union – is heating up. Neither side has agreed to a deal on how the separation will actually work… with the deadline at the end of the month rapidly approaching.
And a no-deal Brexit could have devastating consequences…
All of this is presenting a huge money-making opportunity for investors who are paying attention.
That’s why I brought in my colleague Teeka Tiwari, a former hedge fund manager who’s no stranger to profiting from turmoil in the markets. Below, Teeka breaks down why he sees a chance to profit from the chaos… and how you can take advantage…
By Teeka Tiwari, editor, Alpha Edge
The British market is getting no love from investors…
Last week, German Chancellor Angela Merkel announced a Brexit deal with UK Prime Minister Boris Johnson is “essentially impossible.”
As you may recall, Brits initially voted to leave the European Union on June 23, 2016. The media called the decision Brexit.
Over the past two years, British and European officials have tried to negotiate an amicable divorce. Instead, things are getting ugly…
In September, the UK Supreme Court ruled Johnson’s attempt to suspend parliament and ram through a no-deal Brexit unlawful.
Johnson’s younger brother even resigned from government in protest, saying he’s “torn between family loyalty and national interest.”
Look, no one knows how Brexit will play out… but we do know investors are bearish on Britain right now.
The pound sold off after reports about divisions between Johnson and Merkel surfaced. It’s down 12% against the U.S. dollar since April 2018.
And the iShares MSCI United Kingdom ETF (EWU) – which consists of stocks trading primarily on the London Stock Exchange – is down about 5% over the past six months.
I believe this is a typical market overreaction. And I’ve made some of my biggest gains by betting against the consensus. Today, I’ll share why Brexit fears are giving us a chance to be greedy while others are fearful.
Looking Under the Hood
While investor sentiment about Britain is negative, a deeper dive shows the UK economy remains relatively strong despite Brexit uncertainty.
Unemployment is at its lowest since the mid-1970s and growth in employees’ weekly pay has increased 4%… the fastest average wage growth since mid-2008. Meanwhile, housing prices across the UK still appear to be rising.
More importantly, foreign firms have been quietly buying up British companies.
For example, a PricewaterhouseCoopers study after the original Brexit vote predicted the UK would lose up to $240 billion in merger and acquisition (M&A) activity if it left the EU.
However, the exact opposite happened.
In the two years prior to the referendum, overseas companies acquired 294 UK firms for a combined $146 billion. But two years after the vote, Bloomberg reported an increase to 475 acquisitions for a combined $232 billion.
That’s about 60% more acquisition spending – despite the ongoing drama. And therein lies our opportunity…
The initial 2016 vote started the clock on a process over three years long. It was supposed to end with the UK’s exit from the EU on March 29, 2019. But it’s been extended to October 31.
And it’s increasingly looking like Brexit will happen with no deal…
Now, we don’t need to get into all the details. Just know that a withdrawal with no deal would send shockwaves across British society… For instance, after the initial Brexit vote, global markets panicked:
The S&P 500 plunged 5.4% on that day – its largest drop since 2011.
The British pound crashed about 10% against the U.S. dollar – its largest intraday drop in history.
Wall Street’s fear gauge, the Volatility Index (VIX), spiked 49% to 25.76. That marked its highest level since February 11, 2016 – when equities hit their lows for the year.
Under a no-deal Brexit, we could see a similar scenario. Certain stocks could quickly lose 40%, 50%, or even 60% in price. And it’ll spark the greatest buying opportunity we’ve seen since October 2008.
So how do we play it?
Well, in my elite Alpha Edge trading service, we’re using a little-known strategy to capture huge gains from this coming turmoil. It’s an approach used for years by hedge funds and savvy traders.
If you aren’t a member yet, we recommend keeping a cash hoard ready. Chances are, we’ll see lower prices across all stock markets as Brexit plays out.
Meanwhile, if you want to play Brexit uncertainty, keep an eye on EWU. It’ll give you broad exposure to a UK rebound.
Let the Game Come to You!
Editor, Alpha Edge
P.S. Tomorrow at 10 a.m. ET, I’m releasing what may be the most important investment update of the year…
During my special briefing, I’ll show you how to take advantage of a time-sensitive Brexit opportunity between now and October 31.
It could unlock $300 billion in profits for U.S. investors – and put you on the path to collecting thousands or tens of thousands of dollars (and perhaps even over $100,000). But you’ll only have a few hours to act if you wish to take part.