This is a Far Bigger Risk to Your Money than the Fed or China

Keith Fitz-Gerald Sep 16, 2015

Today we’re going to talk about the 800 pound gorilla in the room. No politician will touch it and no citizen wants to acknowledge it in an era where political correctness has run amok.

But we have to.

“It” is Europe’s desperate refugee crisis, and “it” is by far the single biggest threat to your money today. You’re not hearing about this at the moment but you will in the months ahead.

The situation is considerably more dangerous than a potential Fed rate hike and much more worrisome than China’s economic train wreck. As was the case in 2007 with the Financial Crisis when most viewed it as a localized $300 billion problem and I warned you otherwise, the refugee crisis is a truly global situation, the seriousness of which is unparalleled in modern times.

I have no doubt you have your feelings on the matter just as I have mine. Whether we agree or disagree is moot.

In my role as Chief Investment Strategist for Money Map Press, I do not have the luxury of taking one side or another. My job is to help you protect your money and profit no matter what events are at hand.

That’s what we’re going to talk about today. Then, of course, I’m going to give you my take on what this means for your money and a few specific investments you can make right now to help tame an otherwise unruly situation.

Here’s what no one understands about the refugee crisis… yet.

Put very simply, the refugee crisis is the largest single human movement in Europe since WWII and a religio-sociographic earthquake the likes of which the world hasn’t seen for centuries.

Ultimately, the situation can be a good one.

That’s because adept, intelligent politicians can turn social, political and economic risks into opportunity. Migrants, for example, can backfill an aging European labor pool, are ready to work, and can help by raising overall birth rates to shore up a shaky demographic pyramid.

Wharton University Professor Robert Meyer notes, for example, that refugee immigration can have long term positives. The highly skilled start businesses while the lower skilled or no-skilled take jobs locals don’t want. That’s what happened in the 1960s when Castro sent people packing for the United States. Today, Meyer observes, at least 40% of the start-ups in Silicon Valley have an immigrant as a founder.

Naturally, this is where things get tricky.

Like many people, I am hard pressed to use intelligent and politician in the same sentence these days. A positive outcome is dependent on positive people.

Right now, Europe is a stunted mess and its citizens, like our own, feel economically insecure. Many are still reeling from the global Financial Crisis of 2008-2009.

Citizen trust is at or near the bottom of the barrel when it comes to entrenched political leaders. If even a single Syrian refugee commits an act of terrorism, there’s going to be hell to pay politically. Not surprisingly, nationalist sentiment is building.

Over the short term, this will be played out as humanitarian concerns collide with austerity policies, housing needs and integration. Already strained public finances are going to get crushed. That’s not yet registered for most people.

If Europe is to survive, its self-interested officials have to involve business leaders and private finance in making rapid policy changes. That’s because business leaders are far more direct than political apparatchiks.

They will make decisions based on skills, benefits and training needs that by their very definition involve a level of segregation. Critics will call foul based on the apparent “discrimination” much the way they have lined up against Donald Trump’s position on Mexican immigration. They’re not the same thing.

One is an economic/humanitarian need while the other is a security risk. Countries that have refused to engage abroad are now going to bear the brunt of that failure. Germany and America, for example, still do not grasp that inaction has led to direct battlefield escalation.

There’s also a corresponding danger inside Europe itself from sleeper agents using millions of refugees as cover for hijrah or immigration jihad. ISIS has openly threatened to flood Europe with 500,000 fake refugees and unlike President Obama’s “red line” chances are they mean it.

I am not surprised that the Bulgarian State Agency for National Security, for example, is already investigating five men – refugees – caught at the Gyueshevo checkpoint with decapitation videos, jihadist prayers and ISIS propaganda on their phones. More will follow.

It’s worth noting that not a single Gulf States nation has taken in refugees citing that the risk of terrorism is too high even as Jordan, Lebanon and Turkey have accommodated an estimated 3 million people. Evidently they know something Europe doesn’t or simply doesn’t yet have the stomach to admit.

There is no concept of “burden sharing” notes Sara Leah Whitson, executive director of Human Rights Watch for the Middle East and Africa to CNBC. “The Saudi, Emirati and Qatari approach has been to sign a check and let everyone else deal with it,” she says. Even so, according to Breitbart, Britain has already donated more than Saudi Arabia, the UAE and Qatar combined throwing in more than £920 million versus a collective £589 million.

Meanwhile, Greece, Italy and France are merely acting as conduits and sending desperate people onward. Hungary, Austria and Germany have clamped down as I write this.

At the end of the day, you can call “it” Islamophobia, unadulterated racism or even xenophobia but the net result is the same – a massive economic impact at a time when Europe is almost totally unprepared to handle a rolling parade of desperation.

Making matters worse, we are talking about potentially millions of people who, by their own admission, are not culturally compatible and who are showing very little if any desire to fit in to the millennia- old civilization Europe enjoys today.

To put this in perspective, Eurostat reports that the EU never settled more than 7,400 refugees a year between 2008 and 2014, despite having a population of 507 million. The United States with a population of 330 million settles only an average of 66,000 refugees a year.

More poignantly, approximately 516,219 non-EU citizens are ordered to return home each year… and, not surprisingly, less than half do.

Source: – Quartz, Eurostat

The staggering numbers involved here suggest that everything from women’s rights, to law, to intellectual freedom… concepts brought forth in the Age of Enlightenment dating from the 1620s to roughly the 1780s… is at risk.

Europe’s got about 60 days to figure things out before the markets do. I say that because it’ll take about that long for quarterly reporting to reflect what’s happening right now.

The short-term effects are already apparent.

Closed borders are causing traffic jams, delaying rail traffic, and overloading local distribution systems. There are huge backups everywhere from border crossings to the Chunnel. Grocers and pharmacies are particularly at risk with their emphasis on just-in-time delivery.

Medium and long-term effects potentially include an even faster decline in earnings than is underway now, a precipitous drop in cross-border business transactions, and a slowdown in manufacturing and purchasing that  boomerangs back to China, one of the EU’s key trading partners.

We’re also going to see nations decrease benefits. You’d think that they’d be increasing them, but actually I think we’re going to see the Total Wealth Unstoppable Trend of Allocation surface rather quickly.

Denmark, for example, has already declared a new “immigration benefit” of 5,945 kroner for single adults with no children. That’s down 45% from the 10,849 kroner that used to be offered to asylum seekers. That nation also published ads in four Lebanese papers declaring the changes in an attempt to stop smuggling before it begins, or at least redirect it to other more generous countries.

Barring a massive policy change and a unified front from EU leaders and the business community, I see two distinct scenarios.

In the short term, U.S. Treasuries are going to remain strong and the dollar gets even stronger as part of a flight to safety. This will confound Yellen for obvious reasons. Funds like the PIMCO Strategic Income Fund (NYSE:RCS) with its yield of 12% are a great place to start, as is the PowerShares DB US Dollar Index Bullish (NYSEARCA:UUP), which will appreciate as the dollar strengthens.

You could short the euro with a choice like ProShares Ultra Short Euro (NYSE:EUO), but do so judiciously knowing that you’re going to be fighting the ECB every step of the way at a time when the euro has already weakened considerably. It’s a crowded trade.

Buy U.S. equities, which are going to absorb global funds. Right now, the logical choices are technology giants like Apple Inc. (NasdaqGS:AAPL) and defense players like Raytheon Co. (NYSE:RTN) because of their role in global growth and built-in defensiveness.

Gold, incidentally, is a non-starter. There’s simply too much manipulation and too much leverage to get a clean trade at the moment. Owning it as part of a properly constructed hedge against interest rates is still valid, though.

Longer term, the economic chaos associated with millions of refugees will result in a good number of bargains in everything from Greek olives to French wine, German cars and Italian leather. Consumers are going to have a field day.

Investors will, too. Rather than target individual companies, swooping in to grab a little of everything makes more sense.

The Fidelity Spartan International (FSIIX) is a solid start, with holdings like Nestle SA, Novartis AG, Bayer AG and Royal Dutch Shell. If ETFs are more your style, consider the Vanguard FTSE Europe ETF (NYSEArca:VGK), which holds a total of 514 stocks, including many of the same top-tier names I’ve just mentioned. Your goal is to pick up the best companies tied into global trends at a deep discount.

In closing, crisis investing is never fun, especially when the crisis in question is not yet fully understood.

But that doesn’t mean “it” has to be a disaster for your money.

There is always opportunity in chaos.

Until next time,


20 Responses to This is a Far Bigger Risk to Your Money than the Fed or China

  1. Joerg Fink says:

    Thank you

  2. Ilka says:

    Excellent analysis of a complicated situation. Still, I wonder why there is never any discussion of the looming necessity of closing the borders at the source of the crisis: Along the Syrian, Mediterranean and Turkish borders, cutting off access to routes leading to Europe.
    Humanitarian aid should then be sent over there along with military support in the fight against jihadists. It would be cheaper and safer for Europe in the long run.

    • Keith says:

      Good morning Illka.

      Thanks for the kind words. I suspect that the reason more humanitarian aid is not offered externally is an internal struggle with the ideals supporting it. The Age of Enlightenment was not only a time of great growth, but continues to set standards today that we are not yet fully aware of not the least of which is the line between compassion and survival. That’s particularly tough because the former is almost always less expensive than the latter.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

    • fallingman says:

      There’s fighting going on. It’s a war zone. That’s exactly why innocents are fleeing. They’re human beings, and most have no more to do with the prosecution of the war than you or I. They’re just caught in the middle. What purpose would penning them in serve, other than relieving Europe of its refugee problem?

      But can’t the Turks close their side of the border with Syria? They still control it … if you don’t put too fine a point on it. No. They’d be accused of trapping fish in a barrel for one. Second, the border is a hot spot. Control is a relative thing, as is permeability. The border is 545 miles long. Like they could stop people fleeing for their lives from crossing .

      But can’t the governments of the region prevent those who’ve made it to Syrian or Jordan or Lebanon prevent them from leaving? No. These borders are porous. And there’s always the sea. But let’s assume they could. What would their incentive be?

      There is none. They don”t WANT them the refugees any more than Europe does. They’re expensive. They’re potentially destabilizing. They’re at headache. If they choose to move on to Europe with its generous welfare benefits and easy transit courtesy of the Schengen agreement, they’re delighted to see them leave.

      Of course, Israel could take them in.

      Just kidding.

      I wish them well. I can’t imagine what it would be like to leave everything you know and own behind and flee for your life … with pretty much nothing … to foreign lands where nobody wants you.

  3. fallingman says:

    “Germany and America, for example, still do not grasp that inaction has led to direct battlefield escalation.”

    This disaster has made in the USSA all over it. And the problem is precisely the opposite of what you allege. This is what happens when you repeatedly and blindly stick your nose in other people’s business. It creates chaos. But hey, how else is Raytheon gonna make money?

    What action would you now propose? Bomb Assad’s forces … the ones fighting ISIS and Al Qaeda? Send ground troops? To fight Assad’s forces … or Abu Bakr al-Baghdadi’s boys … or Al Nusra? Or how about all three? After all, no engagement is too moronic or open ended for the neocons.

    And how about let’s be very specific, because I can’t see how anything the government does at this point won’t simply cause more trouble. You don’t get out of quicksand by mindlessly flailing around.

    The tragedy is that, as usual, it’s the regular, innocent people who get abused and displaced while government “leaders” play chess with their lives.

    • Keith says:

      Well said, Fallingman.

      The people are almost always the pawns in a game being played at the very highest levels by our “leaders.” Indeed, this crisis has Made in America, Germany and probably about 30 other countries written all over it. I cannot help but wonder about the similarity between remarks made today and those conveyed by British Prime Minister, Neville Chamberlain, in 1938 when he met with Hitler and proclaimed that the Nazi leader signaled “peace for our time.”

      There have been so many squandered opportunities bringing us to where the world stands today – diplomatic, military, economic and otherwise.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

      • fallingman says:

        We need to get every single one of our people out of the middle east and stop swatting hornets nests in the future. Those are internecine conflicts we have no business being involved in. How much have we spent in those ratholes? A couple of Trillion dollars? How many have died and been wounded? For what? Absolutely nuthin’. Only the military industrial complex benefits. But they run the show, so …

        Time to concentrate on defending the territory and the cybersystems of the United States. Time to keep the money here and leave the rest of the world to sort out their own problems.

  4. Werrner says:

    Just a preliminary remark, I am no US Citizen nor resident, but live in the “center” of Western Europe, Switzerland to be precise.
    I read your analysis whith the best attention and can only subscribe to it. Europe is indeed facing a terrible challenge and the potential inclusion of terrorists âmongst those immigrants is highly likely. In some way Christian Europe is paid back in kind for the crusades 700 years ago (GWB made an allusion to the crusades, badly perceived in the Middle East. Europe should send boatloads of refugees across the Atlantic. American interventionism in the ME, well before 2001, but aggravated by the Iraq War (based on y lie) is at least partially responsible for the present situation. Saddam Hussein was a dirty butcher, but at some time his war against Iran was higly appreciated by the USA. We would most likely have less of a mess in the ME if Saddam were still in charge. ME countries are not ripe for democracy. Mind you its not better in some western countries, which are supposedly democratic, but mor like corporate kleptocratic!
    We are heading towards very uncertain times, on both sides of the Atlantic.
    I look forward to further valuable information coming with your analysises.

    • Keith says:

      Dear Werner,

      Thanks for your time and some very thoughtful remarks. My hope, like many people, is that those in power come to their senses prior to those on the ground taking matters into their own hands.

      By the way, I love Switzerland. I’ve got some great memories of Villars-sur-Ollon and Zug, in particular. What a spectacular country you live in.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  5. RJ says:

    Herein are sober terms about the future impact to market economies. Sober and concerning indeed.

    I would say, “thank you, Keith,” for speaking to many sides of this matter. With that said, what is not widely covered are the demonstrations by indigenous Europeans who know their labor pool is diminished, and their experience that the ‘refugees’ will not assimilate.

    Before you call me xenophobic, consider that a 15 year old Danish teen beheaded her OWN MOTHER after watching ISIS videos of the beheading of British hostages online. Her radical Muslim boyfriend, whom she met at a REFUGEE center, participated in the crime.

    Why are the other Muslim countries refusing to let this exodus past their borders?

    Do you know that Saudi Arabia has air conditioned tents in the desert to bar entry?

    Ask yourself why.

    • Keith says:

      Good morning RJ.

      I am familiar with the Danish teen who beheaded her own mother apparently at the behest of her radical Muslim boyfriend who she apparently met at a refugee center near her home. Tragedy doesn’t begin to cover the situation.

      Best regards and thanks for being a part of the Total Wealth Family, Keith 🙂

  6. HLH says:

    I appreciate the financial analysis. However, we have far greater problems. Unless Europe and Obama suddenly acquire brains, there is going to be pitched fighting in Europe and riots in the US.. For whateve stupid reason, the US government dumps refugees in places that are already in economic straits. Add the culture clashes, and there are going to be more problems. That is what happened with a number of the refugees from Viet Nam. For example, culturally at that time it was an accepted practice for people to urinate in the “front yard. When that happened in working class black communities, the citizens went beserk. As of this writing, twenty-four Syrians have arrived in Baltimore. What jobs are they going to be able to get? The city’s unemployment is at 14% and 20% in the black community. So now are these refugees going to compete with the populace for scarce jobs and welfare benefits?

    Durng the so-called “surges” last year, a woman living in a Chicago ghetto wanted to know how she could get refugee status because they were being treated so much better than American citizens.

    These “refugees” see themselves as victimis therefore entitled to special privelege. They also see their religion and culture as superor to those of other countries. They expect to be indulged and that their religion and culture will be allowed to supplant the existing one.

    Hang on folks. We are in for a bumpy ride. Any information that will help protect finances and in turn lives will be most appreciated.

  7. Richard Krokum says:

    As difficult as it is the refuge situation in the Middle East and Europe it is the result of a population that has been brainwashed into thinking that a theocracy that is intolerant of other governments and religions can ever be a productive member of the world community. Radical Islam and its self appointed “leaders” has been ruling the Muslim world for centuries. The battle for control by force, terrorism and intimidation is the calling card of every “leader” and has led to a continuing war of one faction against another. When these leaders squander the resources such as oil on making war and funding terrorism instead of taking care of the people they rule, the U.S. and Europe get the blame. Ignoring the problem in the 21st century doesn’t seem to be an option. The only chance for these people is education about the intolerance of their religion and the separation of their religion and politics or government. Good luck with that. The current radicals will never allow it. They must be killed. Who will do it, fallingman?

  8. abdur qureshi says:

    This has nothing to do what we are discussing here. A different question. It is about dividend. What is it ? is it a certain per cent thke company distribute from its profit to its share holders or it is interest. I will appreciate for clarification. Thank you.

  9. WiseOne says:

    Abdur- it is a share of the companies profits- not interest.

    @fallingman- it’s easy to throw blame at Bush for everything, especially since you are a liberal. We never should have pulled out completely the way we did. We should never tie the hands of our troops the way we do sometimes, especially under Obama. We should never tell the enemy what we will or won’t do and when, like under the simpleton Obama plan. Things weren’t even close to being completely out of control like now when “W” was in charge. We have learned many lessons in trying to convert some countries to capitalism and self governance, to be sure. Looking back tho and remembering how crazy things were on 9/11 and before we had the benefit of hindsight, EVERYONE in the congress agreed to the war and it was only until people started realizing that things were going to get protracted and unpleasant, especially politically, did the Dems turn their support. They wanted credit when things were fabulous, but when it got tough they turned tail and then complained that they were lied to. They were privy to the same info that Bush and the Republicans had, and came to the same conclusions. There were troops that came back from their tours and said they had seen destroyed WMD’s all over the desert. If Hussein didn’t have them, then why did he not let the weapons inspectors in? It makes no sense that he wouldn’t unless he had something to hide. We do know about all of the bad things that happened with Iraq and Afghanistan. We lost 3,000 or so soldiers and many more wounded, a trillion and a half dollars spent (peanuts tho, compared to what Obama has and is spending right now). But there was not complete chaos like there is now, thanks to Obama. We lost that many people just on 9/11 and they weren’t soldiers trained to fight. They were completely innocent men, women and children that the cowards slaughtered and someone had to pay the price for that. The payoff was that we have killed over 100,000 jihadists, some that were the worst of the worst and now they are dead, killed Saddam and his sick and twisted sons and their minions, killed, captured and jailed many responsible for 9/11 and other terrorists attacks- all because of the war that we waged. Was it worth it? Maybe not now that Obama created a power vacuum there. Before then I would have to say yes, even if my own son died there. Do the math. 100,000 less cowards to attack innocent people. It’s better to die like a lion that to wait to be slaughtered like sheep. We need to kill every last terrorist. Get a clue people, you CAN’T negotiate wilh wacko cowards that want to kill you, and your children and families no matter how nice you try to be to them. THEY WANT YOU DEAD! All we can do is kill the rats!

    • Irina Russian says:

      Right on, WiseOne!

      • fallingman says:

        I blame EVERY US President, because they’ve all had an insane foreign policy that differed from that of that “liberal” George Washington. And for your information, I’m about as liberal as Barry Goldwater. I’m a free market guy who thinks the government turns everything it touches to crap, including the middle east.

        What do you mean “everyone” agreed to the war. That’s nonsense. Did Ron Paul agree to it? No.

        Your calculus is ridiculous. Mindless neocon gurgllings. Too bad YOU didn’t go over there and get YOUR legs blown off … for nuthin’.

  10. Omar Al-Askary says:

    Thank you for a very well written article. I always enjoy your writings.

    I, however, feel obliged to comment on the moral aspects that drive people in many European countries and especially in my country, Sweden, to help these refugees. Most people here in Sweden feel obliged to help the refugees and is the same reason why we (most of us) are against meddling in other countries. The general sentiment here is to help other countries to develop and help other people in crises.
    Sweden has settled more than 400000 refugees from 1980-2014. From 2005-2015 the average number of settled refugees averages about 18000/year, which is about 30% of the total incoming refugees. These numbers contradict the numbers in your article that says “Europe never settled more than 7400 per year”.

    I agree with you totally that relocating a huge number of people from one country to another will create all kinds of cultural shocks and collisions. It is undoubtedly a powder keg. However, Europe should learn to be more multi-cultural the way the US and Canada are. Certain countries in Europe are already there. This, however, is not true for most European countries that are stagnating.

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