The post Brexit bounce might be turning into a rally as the Dow gained another 235 points to close at 17,929. Trading volume was higher indicating that big investors are coming back into US markets. The London FTSE index was up over 2% and the German DAX index gained 0.7%. What is noteable about this is that the British market is up more than the German market indicating perhaps more investor confidence in the UK than the EU. Today also marks the end of the 2nd quarter.
The official bank stress test results were issued and the only banks that failed were the US divisions of European banks Deutsche Bank and Santander. Upon getting the news Citigroup announced that it would triple its dividend and buy back $8.6 billion in stock while Bank of America said it would increase its dividend by 50% and repurchase $5 billion in shares. Of all the banks that took the stress test and passed it, the cumulative share buyback and dividend increases amount to about $98 billion smackers! Not bad for the “3 – 5 – 3” crowd. The IBD article about the stress test results contained a side note in which the IMF said that Deutsche Bank “possess the largest threat to the global financial system”. I hope to get more color on this comment since to me it is significant.
The Brexit triggered a bull market for “bull”ion. Several large banks including “Gold”man Sachs, Chinese Banking Corp and Australia & New Zealand Banking Group upped their price targets for gold following the Brexit vote. It seems they think gold can trade to $1,400 an ounce. As paper currencies, most notably the euro, face pressure, gold is being seen as a global currency instead of just a commodity. Kind of like how people in Seattle view coffee. It’s not just a hot drink in the am it’s the juice that makes the world go round. Gold finished the day off a buck eighty at $1,325 per ounce.
Next week I will be at a Boy Scout summer camp in Oregon herding lunkheads. Troop 100 in Ballard is heading to Camp “Doug” Baldwin on the east slopes of Mt. Hood to ride horses. We will have 40 boys on the trip. Cleo will be holding down the fort.