Brexit is the Bear Stearns/Lehman Bros. Moment

by John Galt
July 4, 2016 17:40 ET

The United States equity and bond markets resume trading on Tuesday July 5th, but whoa be it for those who are unprepared.

Tonight the breaking news in the English media indicates that Brexit is not only a Bear Stearns v2.0 Moment as ZeroHedge puts it, but in fact could be a lot worse.

The details have made it to the front pages of the U.K. press, starting with the Guardian:

Standard Life shuts property fund amid rush of Brexit withdrawals


Investors in Standard Life’s property funds have been told that they cannot withdraw their money, after the firm acted to stop a rush of withdrawals following the UK’s decision to leave the EU.

The firm halted trading on its Standard Life Investments UK Real Estate Fund and associated funds at midday on Monday, citing “exceptional market circumstances” for the decision. It said the suspension would remain in place until it is “practicable” to lift it, and that it would review the decision at least every 28 days.

The £2.9bn fund, which invests in commercial properties including shopping centres, warehouses and offices, is thought to be the first UK property fund to suspend trading since the 2007-2009 financial crisis, when some of the biggest names in investment management stopped withdrawals because they did not have the money to repay investors.

The bubblevision media will say “don’t worry, it’s just a small blip,” and of course the usual, “Brexit must be stopped to save England!” and other such blather in addition to buy more stocks of course.

The truth is far worse. The United Kingdom would be quite fine without the European Union but due to the intransigence and vile nature of the Germans and Belgian banksters, they will do everything they can to reverse the democratic vote of the British people even if it means destroying the world economy along the way.

More from the Financial Times tonight:

The move by the insurance giant to bar redemptions is one of the most concrete signs of the Brexit shock filtering from the financial markets into Britian’s property sector. The impact could be wide-ranging since property has become one of the most popular choices for retail investors seeking yield in an era of low interest rates.

In another sign of stress in the sector, some closed-ended property trusts are trading at discounts of more than 10 per cent to their net asset value, which reflects fears over the future of commercial property.

“Given the outflows the sector seems to be experiencing, this could well put downward pressure on commercial property prices,” said Laith Khalaf, senior analyst at Hargreaves Lansdown. “The risk is this creates a vicious circle, and prompts more investors to dump property, until such time as sentiment stabilises.”

Standard Life said the decision was taken to avoid the fund’s managers being forced to sell buildings quickly in order to satisfy redemption requests, which have increased “as a result of uncertainty for the UK commercial real estate market following the EU referendum result”.

While Tyler Durden at ZeroHedge used the dramatic part of the headline as Bear Stearns 2.0,”  yet I think a more accurate description would be New Century Financial which imploded in February of 2007 and as such when I warned that the entire real estate bubble was going to destroy the American economy within the year. Although the real effects at that moment were irrelevant to the average schmuck, when New Century went down, the entire domino based series of mortgage lenders and banksters started to fall. Standard Charter’s action today indicates that Europe is about to send a liquidity shock wave throughout the Western world for which none of the central banks are prepared.


And while New Century was a blip, it was the fuse which ignited the Bear Stearns and Lehman moment.

Everyone watched it burn until it was too late. Tonight, Standard Chartered serves as that firecracker fuse heading into a 30 story building full of nitro glycerine. Ignore it at your own peril.

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