Were you surprised by the Brexit referendum result?
Why would Britons want to leave the EU when it’ll crash their house prices, dump their stocks, and hammer their economy? Not to mention having to bring their passports to Europe and apply to live there.
Were you surprised when Trump won the US election?
How could Americans elect a buffoon like him over a Clinton? Are Americans too stupid to complete this pattern: Bush, Clinton, Bush, _____, just because an Obama was thrown into the mix?
Of course, both events had a huge impact on the stock market. The horrors of Brexit and the banality of Trump absolutely crushed stocks, right?
Erm, no.
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British stocks went on an impressive bull run in the 18 months after the referendum. They even hit all-time highs that the FTSE100 still hasn’t surpassed years later…
And the US stock market is the only large one that has delivered impressive gains while Trump has been in office…his corporate tax cut helped goose profits and repatriate earnings.
As readers of this newsletter, I suspect none of this will surprise you. But as I cruise the Aussie media each morning, I get the impression it would make most Aussies delirious with disbelief if I told them those facts. And there would probably be a great deal of anger directed towards me if I dared to.
The anti-Trump coverage is a blanket total in Australia’s media. How anyone could vote for or support the guy is beyond the comprehension of anyone who believes our media.
The disastrous effects and delusional claims of Brexit get a bit of coverage too. It’s like a freakshow you see in a Sherlock Holmes remake.
Between Trump and Brexit, it’s as if the whole world, except Australian journalists, have gone completely and utterly mad.
The reverse is of course impossible…
If you’re a little sceptical about the Aussie media but are able to keep your blood from boiling about their misleading coverage, you might be able to spot the investment opportunity in all this. If you didn’t in 2016, well, both Brexit and the US presidential election are drawing near once again…
You’ve got a second chance to profit.
You see, I believe Trump’s chances of winning the presidential election are being dramatically underrated, again. And the benefits of Brexit dramatically outweigh the costs. Both of which could deliver dramatic gains in certain investments, if you position yourself well.
But, unlike the Aussie journalists who simply presume you know why Trump is a mad dog and why Brexit is a shamble, I better actually explain my claims. You know, arguments and evidence, that sort of thing. Old-fashioned, I know, but that’s how we do it.
The US president is elected by the electors of the electoral college. Each state chooses their electors and then sends them off to Washington to pick their man. Believe it or not, sometimes the electors go haywire and vote for the wrong person. But that’s another story.
How each state chooses their electors varies. In some states, it’s a winner-takes-all system. California’s electors will probably go to Biden, even if Trump manages to gain a huge share of the vote there, because California is a ‘blue state’, end of story. (I’ve included the word ‘probably’ because Biden may pass away before the election. That’s one reason electors are still free to vote for someone else, just in case.)
Other states use a system we’re more familiar with. Each electoral district’s vote is separate, and the state’s electors are a mix of Republicans and Democrats. In such states, it pays for both sides to campaign because there are certain districts within the state which could go either way.
Because of all this, there are only a few states and electoral districts where the electoral college votes are actually up for grabs for the candidates. The point being that the national polls don’t matter. It’s the polls within these swing states, and even swing electorates, that matter. The fact that the 2000 and 2016 elections were won despite losing the majority national vote share is the proof of all this.
So, when you see national polls on the Aussie news in coming months as the presidential race heats up, you can safely ignore them about as much as you should already ignore the rest of the coverage about Trump. The national poll is irrelevant.
Another misleading part of US presidential polls is that they ask two questions, only one of which ever gets coverage in the Aussie media.
Pollsters ask, ‘Who will you vote for?’ and ‘Who do you expect to win?’
The first gets all the attention. The thing is, the latter has a better track record of predicting the winner when the two answers are different…
The rest of our message about that particular point is behind the paywall, for subscribers only. But you’d be shocked by what you find there. And what it suggests about the coming US presidential election.
There are a number of other ways in which polls, betting odds, and other presidential predictors are misleading. Or at least misleadingly used by the Aussie media. Seeing through them is how Jim Rickards predicted both the Brexit referendum result and Trump’s election. Our subscribers know what he’s predicting this time around too.
But my point is that Trump is far more likely to win than you’d be led to expect by the Aussie media. If Trump wins and the journalists go bonkers again, they’ve only got themselves to blame for misleading themselves in the first place.
What about Brexit?
Well, many Aussies don’t know that Britain isn’t part of the passport-free travel zone of Europe. There’s no noticeable difference between travelling from Britain to Australia and Britain to France on the train. The passport control is the same.
As for the right to live in Europe, well, I’ve been spending a rather large amount of time on visas these past few years. I successfully applied to live in Thailand, Indonesia, and Japan, as well as getting visas for my wife in the UK and Australia. By far the hardest place so far was getting me into Spain on my German passport, let alone my UK one…
EU citizens may well have the right to reside anywhere in the EU. But that doesn’t change the practical challenges of having to register your residency in each nation, some of which are more challenging than any Aussie or UK visa. I know this from personal experience.
There’s a thriving industry of immigration professionals helping EU nationals move to other EU nations because of the difficulties that pro-EU believers deny even exist. This is just one example of the ideals of the EU not living up to the reality.
What about trade? Well, favouring European nations for trade relationships, at the expense of trade relationships with other nations, is a trade-off. Because the EU is a protectionist trade bloc, whereas Britain is a global trading nation, I believe Brexit will increase trade in Britain in the future. Britain will do trade deals that other European nations would’ve vetoed. Such as Cyprus’ threat to veto the EU–Canada trade deal over, get this, halloumi.
As for the forecasts of economic doom after Brexit, people in Britain now laugh at them as much as they laugh at pandemic forecasts.
My aim today isn’t to predict a Trump victory and a Brexit boom. It’s to put you in the ‘I’m not surprised by the outcome’ camp should those two events happen. To counter the one-sided coverage you get from the Aussie media. And to help you understand why Trump and Brexit could be successful.
Once you’ve done that, you might want to think about how to position your portfolio. What’ll happen to UK stocks and the British pound if Brexit Britain booms? What’ll happen to US stocks if Trump ‘surprises’ the media pundits again?
That’s the sort of questions we answer in Jim Rickards’ Strategic Intelligence Australia. The Aussie media won’t even consider it.
Until next time,
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Nickolai Hubble,
Editor, The Daily Reckoning Australia
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