The Brexit event — which won’t even be implemented for at least two years, if ever — has taken the odds of a Fed rate hike down to near zero. There is even a little betting going for 0.25%. Germany will definitely be impacted by further Euro nationalism and exits, yet it’s Bunds now trade for a negative 0.25% yield. Speculator “safe haven” bets on the 10-year U.S. Treasury are excessive. The idea that USTs and Bunds — with little, if any yield — are somehow a safe investor refugee in today’s world requires some serious cognitive dissonance to accept.
As closet nationalism moves to ardent nationalism or “populism,” it is not going to be market-friendly. I can also tell you flat out that there are many nationalists who would like nothing better to do than deconstruct banksterism and take some of that crowd on a Pinochet helicopter ride. Part of the deconstruct will be classic defaults and large haircuts on bankster-originated debt. Central banks will take enormous losses. The new nationalists’ message that central banks are actually privately held will start to resonate. That should have been the No. 1 lesson from Brexit. But instead, in knee-jerk fashion, yields dropped more on these vulnerable securities.
This closet nationalist surge is not over by a long shot; and since faux democracy doesn’t work and is hijacked, I can guarantee you one thing: It will spill over into the streets. Therefore, at this juncture, the primero trade will be to bet against NIRP or ZIRP sovereign bonds anywhere they may be found.