After a late night of watching the Brexit referendum on BBC and the wild fluctuations in the Asian and US futures market, we wanted to express our thoughts:

• In the last week we saw the British pound rise only to collapse 8% so far this morning. This says to me there were some big winners and some major losers.  Don’t be surprised to hear about some firms going bankrupt.
• Anyone making an investment on expectations of the Brexit vote was not making an “investment” – they were gambling!
• Expect other countries to vote on leaving as well. Those that are part of the common Euro currency will certainly cause more economic disruption.
• Globalization is reversing. One only had to see that with the Paris attack a few months back.  People weren’t waving EU flags and closing the borders around the entire Euro area.  It was French flags and France closing their borders.  Nationalism is on the rise around the globe.
• Establishment and elites will continue to suffer blow backs. When the BBC reporter (with an arrogant and pompous voice) says that those “degreed” people in cities voted to remain while those that were “un-degreed” voted to leave, and this morning on MSNBC’s Morning Joe, a Financial Times reporter saying “those that voted to leave don’t understand what they voted for”, says it all.  Elites are smarter and know better than Joe six pack (or George Pint in UK) does.  Elites will continue to be surprised.
• Europeans will be looking to protect their assets. Just imagine if you lived in Italy and had almost all your investments in Euros.    Wouldn’t you be looking to move your money out of the country or buy gold/silver?  That is why gold is up $60 an ounce this morning.
• Dislocations like this are “normal” for the world and one just has to look at economic history over the last 100 years. The last 30 years, the elites have kept the lid on the pressure cooker without letting out any steam.  Expect more disruptions in the future.

What does this mean for your portfolio?

What is most important is how you are invested BEFORE something like this happens, not after.  We invest much time and research in making good investments in your portfolio as opposed to making bets on events that could go either way.  We look to buy (sell) undervalued (overvalued) investments.  The key points that will likely have a significant impact on your portfolio going forward are:

• We continue to be underweight equities overall, with US based large cap companies as the most underweight sector given their valuation. Those companies are global and will be hit the hardest with higher costs in a world that is de-globalizing.
• In addition, as we mentioned in our last market update, we are overweight Master Limited Partnerships (MLPs) and Business Development Corporations (BDCs).   Those businesses are not greatly impacted by events in Europe.  These businesses should continue to perform well and be less impacted than large global companies.
• We are overweight alternatives in your portfolio which are likely to generate positive returns today (long/short fund, managed futures, gold miners).
• If the dislocations cause valuations to become more attractive in the equity market, you can expect us to increase our equity exposure when others are panic selling. Follow the old adage – buy low, sell high.