Eurozone crisis – why you should avoid listening to the mainstream press

08 May

The best use of newspapers?

A few months ago, when I was starting up this blog and my trading, I would begin my day by reading the finance section in the Telegraph and the Financial Times on my smartphone. At the same time, I discovered blogs like The Slog and Zerohedge.

As time passed, though, it became ever clearer that most journalists in the mainstream financial press were trapped in a 24/7 news cycle, and never analysing the real underlying issues. One moment they would praise Merkozy for solving the problems of the Eurozone – markets would rise and the world was saved. The next, the Eurozone was falling apart and it seemed as though nothing could be done to save the peripheral eurozone states.

However, if you were reading the aforementioned blogs, and/or had an independent and an analytical mind – you would have realised that the crisis was always there all along, and all the politicians were doing was kicking the can down the road. The eurozone crisis was/is not going to go away without either a collapse of the Euro or a large scale default by some Eurozone countries.

Now tonight I was reading the column by Philip Aldrick in The Telegraph – which almost made me spit out my tea.

Greece is at the epicentre of a new euro crisis – and its chaos will spread

If Greece refused the money, or if the IMF refused to lend, the consequences would be dire. With the economy plunged into immediate crisis by the currency’s collapse, an even more severe austerity would be thrust upon the people. There simply would not be the money to public sector pay wages, for example. With tensions seething, the neo-Nazis might even gain further ground.

Oh dear, oh dear, oh dear.

Firstly, the crisis was there all along, so it is not a “new euro crisis”. It did not miraculously reappear overnight after being solved. The Greek election was planned for the weekend, and a collapse in the pro-bailout parties’ support was always on the cards. If you don’t believe me, you were not reading The Slog.

Secondly, if Greece left the Eurozone and the new drachma collapsed, then the Greek economy would not nosedive, rather, it would stride onwards. Tourists would flock to Greece to take advantage of cheap (drachma) holidays, and a devaluation would make Greece’s general price level much lower to foreigners. Growth would return, and unemployment would tumble from an export-led recovery.

Thirdly, there seems to be a real issue with political correctness regarding the neo-nazi Golden Dawn party. Of course, they may be a bit nutty – but Greeks were putting two fingers up at the old political establishment, Brussels’ draconian bailout terms and savage austerity. Keeping Golden Dawn out of power should not be a priority – they are merely a symptom of rebellion against the EU. If you repress the Greek people through humiliating bailout terms, then they will vote for anyone who will stand up against them.

However – most of that is tangential to my point, which is you should not use the newspapers as your primary source for information these days. Read The Slog, Zerohedge, & Seeking Alpha (for several opinions) too, and you will be surprised at what you find and how accurate many of their predictions are.

But this also has ramifications for traders and journalists.

Traders who are armed with the truth, despite what is being said in the mainstream press, will surely profit from the information disparity between themselves and the other market traders who digest the FT, and the newswires.

As for journalists, if they were prepared to go out on a limb more, do more investigative research, or even just copy stories from the blogosphere – like the recent pillaging of Greek university and hospital funds – then they would have some incredible scoops which would propel their careers.

In the meantime though, I rather like this information gap – because I can see what the news agenda will be before many people are aware of it. But then again, maybe the Eurozone crisis will be resolved (once more) by the end of the week?

1 Comment

Posted by on May 8, 2012 in Trading Ideas


Tags: , , , , , , , , , , , , , , , , , , , , , , ,

One response to “Eurozone crisis – why you should avoid listening to the mainstream press

  1. Rob

    May 14, 2012 at 1:59 pm

    If you borrow beyond your means and cannot pay it back then you default… end of story. The problem is that there is no concept of government debt ownership. You and I are in debt thanks to our ownership of government debt. There’s no collateral and there’s unlikely to ever be a way to pay it back so its almost certain that those that lent money are going to loose what they lent. For all the fancy analysis this is a simple borrowing and means testing exercise.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: