Just as I've been predicting for weeks now, June 23 is the United Kingdom's Independence Day.
The political intelligentsia and elites, and the bond and equity markets, misjudged the will and determination of the free people of the United Kingdom, who voted 52% to 48% to leave the European Union.
Now, a full disclosure: I'm one of those people, although I'm a permanent resident of the magnificent United States of America.
And that means I cherish freedom, and the rights of citizens of sovereign nations to determine their own future… and not be chained to some cabal of political elites serving the global banking oligarchy.
Cleary, the British people are the winners in this outcome. As a Brit, I'm thrilled.
But there are going to be losers, too. Hundreds of billions of dollars are at stake here, as you'll see.
But first, let me show you why this happened in the first place…
How the European Union Went Pear-Shaped
The commonwealth concept of a European Union, where commerce was freed up to happen with less and less friction across sovereign state borders, made sense.
In fact, it made perfect sense. But it should have ended there.
The EU should have been about the free flow of goods and services across European borders. It should have been about business and facilitating economic growth by doing away with tariffs and national politics.
But that wasn't the grand plan. The plan needed financing: the euro.
And that's where it all went wrong.
With a "common currency" there would be no currency differences, no increase of value or devaluation of trading partners' currencies. I mention this because, as you'll see, it's all about currency.
As long as everyone adhered to a common currency, it would be easy to lend to one country, or any bank or business in any other country in the union, because it was all the same money. There wouldn't be any threat of currency appreciation or depreciation.
There would be peace in the neighborhood and lots of trade…
Everyone's money would be equal, even if every country wasn't. And they weren't…
…And there would be credit. Lots and lots of credit.
It's here that the European dream became a nightmare of economic servitude.
The Germans wanted everybody to get credit (in euros, of course) to buy their exports. That's how the German economy grows, that's why they are the engine of economic growth in Europe.
And that, among other things, didn't sit well with the British, who weren't content to sit idly by and take orders from Berlin.
That's why the British, or most of them, anyway, said: Enough!
Others, however, could soon cry: Uncle!
Now, Here's Who Didn't Do So Well on Thursday
The British people may be the winners here, but what isn't being talked about yet is the American multinationals, whose earnings are already on the ropes, and who stand to lose a lot more.
According to a recent Bank of America research piece by Joseph Quinlan, managing director and chief market strategist at BoA's U.S. Trust Private Wealth Management unit, since 2000, U.S. multinationals have generated 9% of their global foreign affiliates' profits from the UK.
Output of U.S. affiliates in the UK was $153 billion in 2013 alone.
Besides Britain being a destination for investment and American companies' goods and services, it's also a gateway to the rest of Europe for America's biggest companies.
John Manley, chief equity strategist at Wells Fargo Funds Management, says American firms "use Britain as sort of the shoehorn into the continent."
That makes sense because of the ties so many multinationals have had to Great Britain since long before the European Union came into being.
But now that the Brexit is a reality, those ties could be severely stressed. Friday's incredible stock market rout is just the start of that.
Interconnected business relationships will be exposed to potentially devastating credit market gyrations and what George Soros says could end up being a 20% devaluation of the pound sterling. Over the past year, the pound is down 10% against the dollar, with 5% of that drop coming since January 2016.
A further depreciating pound would have immediate knock-on effects on the euro, possibly knocking it down 10% or more. It's looking like that will be the case.
These currency hits put U.S. multinationals in the direct line of fire.
Companies generating revenue in the UK and across the EU would suffer huge earnings hits if they have to translate their overseas earnings and profits back into U.S. dollars, which ends up costing them dearly when it takes billions more devalued pounds and euros to buy what would be relatively more expensive U.S. dollars.
With S&P 500 earnings approaching three-year lows, even as markets near record highs, any hard and fast further erosion of earnings for the remainder of 2016 and beyond would require a massive revaluation of stock prices based on most standard earnings multiple metrics.
The American Companies with the Most to Lose
Some of America's biggest companies have huge exposure to the UK and Europe.
JPMorgan Chase & Co. (NYSE: JPM) employs 16,000 people in the UK and generates substantial revenue from banking services and deal-making in the UK and across the EU.
Ford Motor Co. (NYSE: F) employs 14,000 people in Britain and gets 18% of its revenue from the UK. It is the number one auto brand there.
The Coca-Cola Co. (NYSE: KO), Abercrombie & Fitch Co. (NYSE: ANF), Gap Inc. (NYSE: GPS), Invesco Ltd. (NYSE: IVZ), and Wal-Mart Stores Inc. (NYSE: WMT) all derive huge revenue and profits from the UK and countries all across the EU.
The list of U.S. companies doing billions of dollars each in the UK and across the EU includes more than half of all the S&P 500 companies.
The Brexit will be devastating for these companies' revenue and profits, but because so many of them are such a big part of America's big stock market benchmark indexes, U.S. markets are likely to head a lot further down the tubes alongside UK and European equities markets.
The next institution to fall to the Brexit could be central banks. In fact, it might be one of the most significant developments to come out of this historic vote. The European Central Bank is on borrowed time, and so is the United States Federal Reserve…
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.