Let Media Induced Drama Be Your Friend in Markets

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The hysterical media is your friend when it comes to trading political risk headlines.  While looking at populism’s global tsunami, the establishment media has been exaggerating the downside risks, helping markets create fantastic buying opportunities.

Our friend Albert Edwards notes:

While we are on the subject of inflation, Brexit has been interesting for the stupidity of many of the headlines trying to support a particular bias (both ways). Perhaps the most stupid was this one in the London Evening Standard just ahead of the June referendum, “Couples delaying having babies because of fears over a Brexit.” –

UK StocksAfter all the Brexit horror headlines, UK stocks are up 23% from the June lows.

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This nonsense persists, with surging headline UK CPI inflation being attributed to sterling’s slump in the immediate aftermath of the vote. What utter tosh. German and US headline CPI inflation have risen even more quickly!

After all the Deflation Fears surrounding the Brexit, the Inflation Surge in CPI has been Impressive

CPI UK GER USA

As the world faced the Brexit vote, there were countless stories of deflation fears.  We witnessed a wide call across the media for a U.S. ten year Treasury bond heading to 1.00%.  Then the unthinkable happened, bond yields surged with inflation fears, we touched 2.62% in December, back at 2.42% today.

We went against the crowd, recommended clients get short bonds in July.

“Yesterday, the U.S. 10 year hit our long held 1.40% target. A sea of bond bears has become an ocean of bulls. Brexit’s risk to the global economy has created an opportunity for those willing to step in and short bonds in the face of a large group of clowns rushing to the exits (abandoning their long held bearish bond positions).  Buy the TBT ETF, bonds are a screaming sell.”

The Bear Traps Report, July 7, 2016

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