“One morning I woke up and I knew
You were really gone.
A new day, a new way, and new eyes
To see the dawn.
Go your way, I'll go mine and
Carry on.”

- Crosby, Stills, Nash and Young; 1970

In the midst of working on the Déjà Vu album, Stephen Stills wrote “Carry On” to help him reconcile the inevitable break-up of his band. Hard to say if the EU will eventually reach such equanimity. However, Britain’s June 23rd referendum, decided 52-48%, in favor of exiting the European Union, means that we are about to find out. Today’s note will focus on the potential ramifications of Brexit.

We view this as more of a political than an economic event, but the two seem inextricably linked through the common thread of uncertainty.

“Put your hand on a stove for a minute and it seems like an hour. Sit with that special girl for an hour and it seems like a minute. That's relativity.” - Albert Einstein; 1879-1955

Recognized for creating the world’s most famous equation: E = mc2, Einstein received the Nobel Prize in Physics in 1921. He referred to gravity as the “general theory of relativity”. We will forgo the science lesson but will, instead, focus on both gravity and relativity.

“One man’s trash is another man’s treasure”.
- Idiom originated in Hector Urquhart’s 1860 Popular Tales of the West Highlands

And this year’s award for such ambivalence in the financial markets goes to… junk bonds. In this note we will delve into the origins of the market, an overview of the asset class, causes behind current market struggles and our strategies going forward.

风无常顺,兵无常胜 fēng wú cháng shùn, bīng wú cháng sheng
- Chinese Proverb.  English translation:  A boat can’t always sail with the wind.  

No argument.  We lost the wind in May and suffered a sharp stock market correction in the third quarter.  China, a major source of headwinds, will be the focus of today’s note including:

  • A background on China.
  • The economic evolution of China.
  • Uncertainty arising from China.

We will conclude by commenting on the future direction for those winds and our navigational plans.