| Dear 10th Man Subscriber, I hope you’ve been enjoying my weekly thoughts on the capital markets (and a lot of other stuff). I like making people think about things in an entirely different way. Back when I was an intelligence analyst, my mentor would often tell me (probably once a week), “When everyone thinks alike, no one is thinking.” So, when I see everyone thinking alike, I reflexively think the opposite. I’ve been told by several people that they subscribe to my contrarian newsletter, The Daily Dirtnap, for that reason alone. Because when consensus develops in the market, people are often most vulnerable to the one thing that can hurt them the most. And one of the challenges in figuring out when a trade is crowded is to try to work out where consensus is. That’s why I thought it would be nice to pass along my special report on interest rates, The Return of Inflation: How to Play the Bond Bear Market. Two points here. Last year, when interest rates were negative across the globe, the consensus was that rates would go lower and stay low forever. It was at that point—the point at which 60% of government bonds globally were negative yielding—that the market was at its most vulnerable. Today, there are still plenty of people clinging to the idea of perpetual deflation. Now, we have Trump, who most people recognize will end up causing inflation through trade policy and perhaps by running larger deficits or increasing the supply of bonds. He’s the biggest inflationary catalyst in 40 years. The Return of Inflation: How to Play the Bond Bear Market will take you through my thought process for these points. Nearly all of finance is wholly dependent on low interest rates. It is the ultimate pain trade if rates go higher. And we know how pain trades usually work out—the market tends to do whatever hurts the greatest number of people. Get your free special report now » I hope you enjoy it.
Jared Dillian
Editor, The 10th Man
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