First “Brexit,” then Trump.
In just the last six months, the world has had two “black swan” events. These are rare events that very few people see coming. When these kinds of events happen, the market reaction can be dramatic.
Heading into the year, most people thought Great Britain would stay in the European Union (EU). When it voted to leave on June 23, investors from London to Tokyo were shocked. A panic followed that knocked more than $3 trillion from the global stock market in two days.
Last week, investors were caught off guard again.
Most people thought Hillary would run away with the election. When Trump pulled off the “unthinkable,” no one knew what to do.
At first, U.S. stocks plunged. That was supposed to happen if Trump won. But they quickly changed course. Over the last few days, U.S. stocks have broken out to record highs.
• To be fair, neither of these events was impossible to predict…
Casey Research founder Doug Casey actually predicted that Trump would win months ago. He even made a couple side bets on the outcome.
We don’t bring this up to brag about Doug’s “guru sense.”
We’re telling you this because it shows that you can predict events most people can't ever anticipate. And if you’re right, you can make a lot of money.
• Less than three weeks from now, we think another “black swan” event will take place…
If this event goes the way we expect, millions of people could see their life savings go up in smoke. The world’s biggest economy could start to unravel.
You might find this hard to believe. But as you’re about to see, we aren’t the only ones worried about this.
The good news is that you don’t have to be a victim. Today, we’ll show you how to turn this coming crisis into big returns.
But before we get to that, you need to understand something…
• Brexit and Trump’s surprise victory had more in common than most people think…
You see, working-class people in England and the United States are fed up right now. They feel like the system is “rigged”…that “the establishment” doesn’t care about them.
That’s why both countries voted for radical change. Even President Obama admits this. Bloomberg Politics reported on Tuesday:
President Barack Obama said that fear of globalization and suspicion of government institutions and elites powered both the U.K.’s vote to exit the European Union and Donald Trump’s election as the next U.S. president.
“Did I recognize there was anger and frustration in the American population? Of course I did,” Obama said in answer to a question about whether he saw parallels between Trump’s election and Brexit.
• To their credit, the American people have plenty of reasons to be frustrated…
After all, the economy has grown at an annualized rate of just 2.1% since 2009. This makes the current “recovery” the slowest since World War II.
What’s worse, the real median household income has fallen from $57,795 in 2007 to $55,218 today. In other words, millions of Americans are now worse off than they were before the last financial crisis.
Meanwhile, the S&P 500 has more than tripled in value over the same period.
This disconnect between the stock market and the “real” economy is why so many people think “the system” isn’t working. And it’s why a lot of people voted for Trump.
Trump’s an outsider. He’s never held public office. He says whatever the hell he wants. And he’s promised to shake things up.
• But Americans aren’t the only people hungry for radical change…
Italians are just as fed up with their government.
Nick Giambruno, editor of Crisis Investing, says they have every reason to feel this way. Nick wrote in the August issue:
Italy has had no productive growth since 1999. Real GDP per person is smaller than it was at the turn of the century.
That’s almost two decades of economic stagnation. By any measure, the Italian economy is in a deep depression. And there’s no end in sight. In fact, things will probably get much worse.
• Italians are now in a revolutionary mood…
This mood has given rise to a populist, anti-establishment political group known as the Five Star Movement (M5S).
According to Nick, M5S wants Italy to hit the reset button. He wrote last month:
M5S blames Italy’s chronic lack of growth on the euro currency. A large plurality of Italians agrees.
M5S has promised to hold a vote to leave the euro and reinstate Italy’s old currency, the lira, as soon as it’s in power. And that could be very soon.
Of course, M5S will have to assume power before Italy can drop the euro. But that could happen as soon as next month.
• Italy will hold a constitutional referendum vote on December 4…
Nick explained what this upcoming vote could mean for Italy’s future:
In effect, a “Yes” vote is a vote of approval for Renzi’s government.
A “No” vote is a chance for the average Italian to give the finger to EU bureaucrats in Brussels.
Given the intense anger Italians feel right now, it’s very likely they’ll do just that.
According to the latest polls, most Italians plan to vote “No.” If this happens, Renzi, Italy’s current prime minister, has promised to step down. That would make it much easier for M5S to rise to power.
• Even if Renzi breaks his promise, Italy could still have serious problems…
The Wall Street Journal reported yesterday:
A defeat for Mr. Renzi would lead to a period of political instability. Mr. Renzi could follow through on a pledge to resign or be forced into a new coalition until elections are held in 2018. Either way, markets would interpret his defeat as proof that Rome is incapable of reform, raising doubts about Italy’s ability ever to deliver the kind of growth needed to put its debt burden of 135% of gross domestic product on a sustainable footing.
The Journal went on:
That in turn would make investors even more reluctant to put capital into the Italian banking system, forcing banks to impose losses on bondholders, many of whom are ordinary savers. That would create a spectacular political backlash that could bring the deeply euroskeptic, antiestablishment 5 Star Movement to power in 2018, putting Italy’s euro membership in doubt.
• You might not think this is anything to worry about if you live outside of Europe…
But the Italian referendum (or “Quitaly,” as some are calling it) could do far more damage than Brexit.
You see, unlike the U.K., Italy actually uses the euro. If it leaves the EU, Europeans could lose “faith” in the euro…and that’s all a paper currency like the euro has.
Also, you have to remember that Brexit caused stocks around the world to crash. If Italy leaves the euro, the same thing could happen…but the downturn could be much more violent. Nick wrote in August:
The bottom line is this: the entire EU project may very well die in Italy later this year. That would undoubtedly trigger a stock market crash of historical proportions. And that’s why I think it’s very important to keep a close eye on the Achilles’ heel of the EU… Italy.
The Financial Times recently issued a similar warning:
An Italian exit from the single currency would trigger the total collapse of the eurozone within a very short period.
It would probably lead to the most violent economic shock in history, dwarfing the Lehman Brothers bankruptcy in 2008 and the 1929 Wall Street crash.
Even if the Financial Times is only half right, we could be looking at a stock market crash of historic proportions.
• But Nick didn’t just warn his readers about this looming crisis… He told them how to profit from it…
In August, Nick recommended that his readers short the euro. Shorting is when you bet that a stock, bond, or currency will fall. If it does, you make money.
A lot of people think shorting is something only the “pros” do. But Nick found a way to short the euro that’s as easy as buying a share of McDonald’s (MCD).
In just three months, Nick’s readers are up 12% on this trade. But they could see much bigger gains if Nick’s right about the upcoming Italian referendum vote.
And remember, this vote will take place less than three weeks from now.
You can get in on this trade today by signing up for Crisis Investing. But before you do, we urge you to watch this eye-opening presentation we recently put together. In it, Doug Casey explains why the EU is doomed. Click here to hear Doug’s chilling warning.
• In case you missed it: Another must-listen interview with Doug Casey
Doug recently appeared on an episode of “The Big Trade Series.” In this interview, Doug talks about his recent trip to Zimbabwe and shares his blueprint for developing countries. He also discusses technological innovation…globalization…and the “Deep State.” Click here to listen.
Chart of the Day
Italy’s bond market is screaming “danger.”
Today’s chart shows the yield for the Italian 10-year government bond since July 2015. Remember, a bond's yield rises as its price falls.
As you can see, the yield for the Italian 10-year government bond hit an all-time low of 1.04% in early August. Since then, it’s surged to 2.12%. Put another way, it's more than doubled in only three months.
This is a serious red flag. It tells us investors are very nervous about Italy. And they have every reason to be. If Italy’s upcoming referendum goes the way we expect, Italy’s bond market could implode. And that could mark the beginning of the end for the euro.
Nick’s so convinced this will happen that he sent an alert to his readers on Tuesday telling them to short Italian bonds. In other words, he doubled down on his bet against Italy.
You can get in on both of Nick’s euro and Italian bond shorts by signing up for Crisis Investing. But you must act quickly to take advantage. As we said earlier, the crisis in Italy could kick into overdrive just three weeks from now. To see why, watch this eye-opening presentation with Doug Casey.
Delray Beach, Florida
November 17, 2016
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