Wednesday, November 23, 2016

Dec. 4, 2016: Auxit/Italy's referendum. Europe in Chaos. Buying Time!

Enough hating Donald Trump. Let's talk about hating the EU.

On December 4, 2016, two major decisions will be held in Europe: the Italian Referendum and the Austrian Election.


Italy has something called a bicameral system meaning two houses of equal power. Imagine two large but equally in size and power nations. Italy call these the Chambers of Deputies and the Senate of the Republic. For a law to be passed both nation has to agree ON THE EXACT BILL WORDING AND ALL. Which in other words mean laws move slower than the US congress. So the Prime Minister of Italy, Matteo Renzi, decided to reform the Italian parliament to allow for faster legislation approval. Under the new guidelines
  1. The Senate loses power. Instead of deputies and senate it will be "local and central institutions."  
  2. The Senate goes from 315 to 100 and the senators are picked from regional council (no longer elected)
  3. Pro
    1. Less power to senate means bills are quicker to pass
    2. Centralize power to the central govt 
  4. Con
    1. Basically destroys the senate.
    2. People only vote for half of the Parliament, the other half is based on nepotism. 
    3. Local govt have less say and centralize power to the central govt 
So why does this affect the EU?
  1. Italy has been growing at an anemic pace (sometimes negative)
  2. Renzi is a pro-EUer and stated that if this referendum fails he would step down.
  3. His absence would create a huge power vaccum.
  4. There is strong support for NO from both the democrat and republican.
  5. But I have a feeling the vacuum will be filled by the 5 star party/movement
    1. 5 stars is a proenvironmental, anti-establishment, anti-globalist, and euroskeptic party
    2. the 5 stars represent their beliefs of 1) Public water, 2) Sustainable transport, 3)sustainable development, 4) right to internet access, and 5) environmentalism.
  6. The 5 star has captured 2 mayoral positions (including rome) and is the biggest threat to the left-right parties of the EU. It's basically the populist movement as we've seen in the UK and US. Anyone but a politician.
  7. Last year the 5 star were seen as a far right fringe group. But with the rise of Brexit and Trump I have a feeling the populist movement is gaining momentum. Stagnated economy, false inflation/gdp growth by the central bank, and no wage growth is starting to make the masses angry. Perfect rich environment for a populist. I think this was the reason for Brexit and Trump rising. The economy is booming, GDP is growing, and stock market is higher! But it benefits little for the average person.
  8. Filipino President Duertes came into power the same way.
Austria Election

Norbert Hofer (Freedom party of Austria) vs Alexander Van Der Bellen (Austrian Greens)

On April 24, 2016, Alexander Van Der Bellen was elected as the new president by 30,000 votes. But there were numerous arguments of voter fraud and improper counting. Such as a 147% turnout Waidhofen an der Ybbs and an impossible turnout in Linz. 

On July 1, 2016, the Constitutional Court ruled that the election was improperly handled. 30,000 votes were prematurely tallied, 50,000 votes were counted by unauthorized personnel, and 500,000 votes were invalid. The Court ordered a new election which is now Scheduled Dec. 4, 2016.

Why it matters

  1. Hofer is an anti-EU skeptic like the 5 star party.
  2. Hofer is narrowly leading the polls as of today.
  3. Although Hofer said he would not leave the EU he has indicated his desire for Austria to regain autonomy from Merkel and Brussels,
Investment Strategy

  1. Foreign stocks have been dropping lately in anticipation of these votes. 
  2. If the referendum loses and Hofer wins the Euro will crash and the dollar will skyrocket.
  3. Stocks that relies largely on the euro or foreign monies will crash
  4. Buy list:
    1. Unilever (UL) 
    2. Phillip Morris (PM)
    3. Nestle (NSRGY)
    4. Diageo (DEO) 
    5. National Grid (NGG) 
    6. Multinational American Stocks like we saw after the Trump Election.
Good Luck Everybody.


  1. Interesting read. I just bought 127 shares of UL yesterday. I'm sitting on some cash and waiting for the next opportunity.

    1. hey ND chic, I bought 130 shares of UL in November so far so I'm with you. Give me $35 UL and I'll buy another 100 shares. I predict soros or someone will short the dollar in December. This is an excellent opportunity to make some cap gains along side our dividends.Good hunting my friend

  2. Nice read BDI. We also bought UL recently and wouldn't mind picking up more shares if it continues to slide.

    Thanks for sharing. AFFJ

    1. hi AFFJ,

      guess we're all on the same page. I expect someone to short the dollar in december. Buy as much UL as you can now. When dollar goes up UL goes down. when dollar weakens UL goes up. I read somewhere the other day that it took the dollar 5 years under obama to increase what it did after trump won the election. And we're starting to see the dollar losing steam. BUY NOW BUY OFTEN!