"The Brady Bunch Trade"

Remember that 70s show, The Brady Bunch (the US comedy revolving around a large blended family with six children)? The father, single, has three boys and meets his partner who is widowed with three girls. The couple move in together and in true American style its one big happy family, six kids, a dog and a big car.

You're probably wandering what the relevance is. After all, a traders' goal is to spot the trend, get ahead of the curve and make a profit. We want to go with the trend, either bullish or bearish and profit from it. Our success is based on being able to see reality before the other players around us. To trade profitably we need the true picture, not the illusion that the mass media spins for the ‘sheeple’, which serves to manufacture mass consent for their proprietors so that their political, economic interests can be propelled forward.

Even consuming the economic data fed to US by the Statistic Office can lead us astray, because sometimes there's a conflict of interest between the investor and the monetary authorities.

The investor/trader wants to see the situation as it is, warts and all. Without a true picture, trading decisions, in other words, risking capital with the aim of making profits, would be sloppy with losses likely to rack-up. But the monetary authorities have another goal; to maintain financial stability. They know that the whole fiat system is based on one thing, confidence!

So the pressure is on them to make the data look good, or not that bad, even if the reality is the reverse. Sometimes they are literally putting lipstick on a pig. Does anyone believe the official economic data coming out of say, Argentina? Frankly, you'd be wasting your time even analysing it because it is meaningless. A book entitled, “How to Lie with Statistics,” by former journalist Darrell Huff tells the story.

Assuming you don't own the corporate media, or you’re not a fly on the wall in those central bank meetings, then you have a handicap, but you can still make profits.

How?

By thinking outside the box, by looking at the world in a non-conventional way.

Take the Greek economy over the past year; mainstream painted a picture of a recovery, but in a healthy economy, do people chop-down trees and use the wood to keep themselves warm or for cooking?

When Tesco overstated its profits by 250 million pounds in its fraudulent accounting scandal, while the Board Directors were flying around in a private jets; why did the company not pay dividends to its shareholders?

When a company is liquid and bullish about the future it pays its shareholders' dividends.

Take the recent US economic data. If quarter of a million jobs have been created, then why has US labour participation rate dropped to 62.7 percent, the lowest in 38 years? Does that mean that people have stopped wanting to pay their utility bills, buy food or put shoes on their children's feet? It doesn't tally.

What about these pending US retail figures? Some pundits are optimistic about US retail consumption; their rationale being that lower oil price has resulted in more disposable income for consumers. The argument might hold water, but why have there been so many US retail closures lately? Macy's, the world’s largest store, is closing 14 departments laying off 2200 workers. Radio Shack, JC Penney, Sears and Kmart are all closing down stores. When the economy is doing well, retailers tend to expand capacity, they open more stores, hire more workers, but they are doing the reverse.

What we are witnessing is the march of the middle-class into poverty and the trend is picking up momentum. 

Now back to the Brady Bunch, in the 70s a working man, even blue collar, could afford to maintain a family, a wife and six children.

Today, 2015, a white collar worker doesn't have that same earning capacity. The family needs two people at work. Today, in the UK a white collar worker, say Solicitor can't afford to send his children to a private school.

The middle class is rapidly disappearing, and you can see it in the new retail landscape that is emerging. The cheap and cheerful retailers are doing fine. Their new customers are the millions of the disenfranchised masses, once belonging to the middle-class.

Likewise, the upmarket retailers are also doing well and the losers in this brave new world are the middle-class shops, which are falling like flies.

But with a widening wealth/income gap at levels not seen since the Victorian era, it is no surprise that consumption patterns are changing. In the US the top 10 percent control 86 percent of all the wealth. This phenomenon isn't unique to only the US. The widening wealth gap is occurring too in other advanced economies around the globe.

Wealth inequality is more visible in larger cities, with examples such as the ‘poor doors’ in places like London and New York, which segregate city dwellers from the poverty. Yes, can you believe it in 2015, poor people are segregated from the rich. We have wealth apartheid.

So what is the trading strategy for the new reality?

Be bullish, or trade long on the two extremes, companies that cater for the poor and the top one percent earners.

Sell out, or go short on those companies catering for the middle-class market, they are likely to continue struggling going forward.

But there is a caveat with this trading strategy. The monetary policy, quantitative easing, has aided and abetted asset price rises, which has contributed to a widening wealth gap in the economy. So more QE would mean more profits in this new reality, however, this trading strategy, "The Brady Bunch Trade", might not pay off if QE were to be abandoned by the central banks going forward.