Hey There Income Hunters,
Before I get started, let me tell you this …
The MOST important thing you can do to make money trading this week is to attend Mark Sebastian’s live event today where he will turn on the “Money Printing Machine.”
Mark has literally waited three years for a rare shift in a little regarded equity — and it FINALLY happened last week!
Now he’s absolutely ready to unload, and he already locked in a gain of 63% last Friday … in less than 24 hours.
So today — again, that’s TODAY — at noon EST, Mark will go live and release THREE more trades based on this long-awaited market change.
But there’s one more thing you should know about this event and you can only find out what it is by clicking here.
OK, here we go …
I knew it was just a matter of time.
Federal Reserve Chairman Jerome “J-Pow” Powell and Treasury Secretary Janet Yellen have created a new way to keep expanding the money supply, and I gotta say …
I like it!
It’s a Wild West approach I would have never imagined this couple could pull-off. I mean, just check’em out …
Wow, those two look pretty scary!
What’s really scary is that they can be so transparent in their approach to rob Americans — while thinking we won’t figure it out.
But by creating all this new cash through quantitative easing (QE) and then holding onto the excess instead of turning off the faucet, it’s just another sign of how serious they are about pouring gasoline on the inflation fire.
I’ll take you through the process AND give you trade for this week to capitalize on their gun-slinging antics.
Money Guns A-Blazin’
Well, since I first alerted you that banks are overstuffed with cash, the amount of excess money the Fed is taking in rose from $350 billion to $500 billion …
Our central bank is turning into the Hotel California, and just wait, when they launch digital dollars, they’ll be singing, You can check out any time you’d like / But you can never leave.
The Fed, I fear, will eventually control everything we do with our money — that is not an overstatement!
Now, I get it, officials believe they are saving us from the economic devastation caused by the pandemic.
However, they are doing it at the cost of completely crushing U.S. monetary policy.
The funny thing is, no one will call them out on it — because should they stop, the markets would almost certainly crash and we would transform into a zombie economy for years.
The Greatest Money Grab in History
The graph below represents the amount of cash held at the Fed via the agency’s reverse repo facility (RRP).
RRP is simply quantitative easing (QE) in reverse. Approved investors and banks deposit money at the Fed, and the Fed temporarily sells them Treasury securities.
As you can see, there is currently an all-time-high amount of cash being held via RRP.
Now let’s put QE and RRP together …
The Bonnie & Clyde Show
You may be familiar with what I call the “Bermuda Triangle” by now. That’s the black hole of quantitative easing (QE), in which the Fed buys Treasury securities from the banks, then credits the banks’ accounts at the Fed with the proceeds.
The diagram below shows the complete QE process. Banks buy Treasury bonds through the Treasury auction process, then sell the bonds to the Fed when QE is executed.
QE helps the Fed keep interest rates on Treasury securities low. But when the supplementary leverage ratio (SLR), which is a capital charge on bank assets, was reinstated earlier this year, bank's capacity for QE was reduced.
In response, the next step for Janet Yellen was to inject Treasury funds held at the Fed into the economy. This increased the excess cash held by investors — but banks could not take the cash without putting rates into negative territory …
That’s where the Fed RRP facility comes in, soaking up excess cash while keeping rates above zero.
Ultimately, all that allows the Fed to keep printing money to support the markets until digital dollars are ready to go — at which point the Fed can cut out the banks and have all Amercian’s come directly through them for monetary usage.
I think we are closer to that day than many realize.
Trade This Week
Cboe Volatility Index (Ticker: VIX) & SPDR S&P 500 ETF Trust (Ticker: SPY)
We have entered June in the perfect storm — jobs report out on Friday, followed by bond auction and consumer price index (CPI) announcements.
And this month the jobs report will not disappoint the way it did in May.
Check how it went last month (red circles aboce). Vol comes in even lower now, and we’re looking at low risk/high reward play for June.
The nice thing is that it presents a two-way play …
Catch the short-term play into next week and then reverse the trade coming out.
That’s my plan.
Have a question about that? Drop a comment below.
Bring It Home
The Fed continues to show us the pedal is to the metal on inflation. Officials are biding time until they can find a way to get money directly into our pockets.
I have no doubt they’ll succeed
These next couple of weeks present an opportunity to play for some volatility and then play it back down again…
There are some nice pair trades I’m looking at and will share them at Wednesday morning's Power Income LIVE. Be on the lookout for a link later today and be sure to join me!
Until Then …
Live and Trade With Passion My Friends,