Today is the center of a turn or trend acceleration risk window. As I warned might happen in my last note, the system was whipsawed out yet again. Also as I feared, the BREXIT polls were indeed rubbish leading to an unexpected market moving event.
The jury is still out as to whether the event last Friday was a black swan (small caps) or a BLACK SWAN (large caps). If the Brits now unite and work together for a quick and clean exit from the EU and more dominoes don't quickly fall, last Friday will probably be a small cap black swan event. If, however, the suddenly undemocratic opposition supported by elements of the fourth estate such as The New York Times succeeds in overturning the will of the majority, there is a very small risk of open revolt. This would be a BLACK SWAN of jumbo jet proportions. When even the ballot box is eliminated as an agent of change, the only tool left for the aggrieved is revolt. Given the current lack of respect for majority rule, it can't be entirely ruled out as a risk. Water cannons, barricades and tire burnings in the streets of the UK would be a shocker of historic proportions. Respect for democratic processes is a critical part of the glue that holds the current aristocracies masquerading as democracies together.
Equally, a rapid, uncontrolled unravelling of the EU would be a gigantic BLACK SWAN event. A series of EU states quickly jumping on the leave band wagon could bring this about. Hopefully cooler heads on both sides will prevail.
I don't have a clear bead on the next risk window. My best guess at this point is next Tuesday or Wednesday July 5th or 6th, but the 11th and 12th are also in the running. Unless the fog lifts, I'll keep them both on the risk window list since better safe than sorry.
Regards,
Douglas
