By: Jeffrey J. Leavitt

On June 23, 2016, in a historical vote, the people of the United Kingdom voted to leave the European Union. The “leave” vote beat the “stay” vote 52%-48%. Not surprising to many, the vote to leave sent shockwaves across world financial markets. In the trading day immediately following the “Brexit”, world markets took a drastic downturn, with equity markets losing more than 2.1 trillion dollars in value. Following the Brexit, the Great Britain Pound also plummeted to its lowest point since the 1980’s.

In the weeks leading up to the vote, world leaders, economists, and financial institutions all turned a wary eye toward the U.K and the looming Brexit vote, asking, “What will happen if the ‘leave’ vote actually wins?” Then the unthinkable happened and the U.K voters decided to cut ties with the E.U., leaving serious questions about the future of the world economy. The idea of what a world looks like without the U.K in the E.U. creates an “uncertainty that businesses don’t wish to see” says Emanuel Adam, the head of policy and trade for BritishAmerican Business.

All Americans, especially those invested in global markets need to pay particularly close attention to the Brexit. Millions of Americans’ retirement and other accounts invested in international equities experienced substantial losses in the days following the Brexit vote. This equity shock has left many Americans worried about another recession.

In 2015, U.S investment in Great Britain topped over $558 billion. That money was invested in everything from banking to manufacturing to real estate. Many large companies with headquarters in the U.K., like Caterpillar, now face an uncertain future as the future of investing in the U.K. becomes less clear.

If one thing is for sure following the Brexit, it is that the future of the world economy is anything but clear. Janet Yellen, the Federal Reserve Board Chair, has even referred to Brexit as a “Lehman Brothers moment,” referencing the financial meltdown of 2008. Only time will tell the true effect the Brexit will have on the world economy and American investors. In the meantime, investors should keep a close eye on the world markets.

By Alex Rudner

Despite the initial allure, investing in oil and gas can be extremely risky for investors, especially those who are invested with smaller oil companies. Over the past few years, oil and gas prices have continued to dwindle as supply has exceeded demand. With oil prices low, some people may believe that now is the perfect time to buy, but proceed with caution, as oil investors have recently been burned.

Brokers often pitch and sell oil and gas investment contracts, such as limited partnership interests and general partnerships, to investors because they pay dividends and offer some tax benefits. However, these types of investments have proven to be risky because they are speculative and illiquid.

On top of those general risks, in the past few years the price of oil has dropped significantly. This drastic price decrease has led to the collapse of smaller companies that used financing from investors, resulting in huge losses.

Brokers are incentivized to sell these types of oil and gas investment contracts to investors because they receive big commissions for selling them. Thus, these brokers will often neglect their due diligence on the oil and gas investments and push these speculative and complex limited partnerships to unsophisticated investors who should not be placed in this type of investment.

A major reason for the decline in oil prices is the large supply of oil that is available. So much oil was drilled over the past decade that many companies could not make money by selling the oil. Due to the huge supply, some companies have shockingly drilled oil and then refused to unload it because they believed oil prices were too low. Eventually, these companies go bankrupt and the investments disappear, causing a total loss for investors. In fact, since the start of last year, 64 oil and gas companies have declared bankruptcy. Additionally, in the past year, the default rate among exploration and production junk bonds has risen to a record 27 percent.

Since the current price of oil is so low, some brokers will push it as a good investment, selling investors on the fact that the prices will rise. However, the oil market has proven to be volatile. Prices could continue to go down, and the emphasis on renewable energy has grown globally. Furthermore, investing solely on a low price does not account for supply and demand, in addition to other industry factors such as the location of wells and cash on hand. Be cautious if a broker recommends an oil investment as your investment tank could end up empty.