Hey There Income Hunter,
Every option trader loves volatility …
But the vol we have seen lately can crush your portfolio’s returns.
I get it. It’s not easy to change your approach to trading when you’ve become so comfortable playing the momentum game.
In 2020 and 2021, traders were spoiled as historic money printing fueled a financial asset price rocket ship. The Fed purposely engineered the “Everything Bubble,” and for the first time in 40 years successfully created an inflationary environment.
But as usual, the Fed went too far with stimulus and has created a real inflation problem this time.
Then the central bank made an even bigger mistake by pounding the table that the inflation was just transitory.
The Fed has since capitulated on transitory inflation and, as buttons in the 1970s blared, must Whip Inflation Now.
That will burst the everything bubble and send the financial markets into a correction that may well be worse than any we have seen in our lifetime.
Today, I will show you my strategy that will allow you to make more money trading single stocks, bonds and commodity ETFs in the 2022-and-beyond bear market than was possible in the bull market of ‘20 and ‘21.
Yes, I said it.
Consider This
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- Central Banks around the world injected trillions upon trillions of new money into the financial markets after the 2008 debt crisis nearly destroyed the entire global financial system.
- The consequence of these actions was a new secular trend in inflation across all asset classes, including stocks, bonds, real estate and consumer prices.
- The 2020s will see the inflation transition from the US financial markets to the natural resource markets and non-US financial markets as investors attempt to preserve their wealth.
- This means you must reprogram your trading strategy in order to benefit from the massive money flows away from the US financial markets into the alternative markets that are in the beginning stages of a new secular bull market.
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The Evolution of Inflation
After working on Wall Street back in the brutal inflation years of the early 1980s, I learned that stacking trading profits during inflation required a very different trading strategy.
You see, inflation is initially born as monetary inflation, and this began in 1971 when the US removed the backing of physical gold to the dollar.
Without the discipline of exchanging dollars for gold, the government removed any limitations on the number of dollars the Fed could print.
Inflation never went away – it just shifted into different asset classes each of the following decades leading up to today:
1980s: It showed up in consumer prices before the 1987 stock market crash caused recession and it subsided
1990s: It showed up as equity price inflation before the dot-com crash caused another recession and deep correction in equity prices.
2000s: Brought about a new inflation as housing prices grew 10% a year for 5-years and grew to 4-5x higher than the average level of inflation. Again, a crash ensued and housing prices collapsed, which caused the greatest financial collapse since the 1930s depression.
That takes us today where inflation has now spread to all three areas; consumer prices, financial asset prices and housing prices.
The Power Income Trader System
Inflation comes in many different shapes and sizes.
It has grown over the past 40-years as the Fed fueled one asset bubble after another ..
Today, they must deal with an everything bubble that has now morphed into an everything inflation cycle.
New traders have never had to deal with inflationary cycles, let alone the everything inflationary cycle …
I spent many years after experiencing 1980s inflation building a systematic approach to trading in all phases of inflation. It is very different from a typical buy-and-hold portfolio of 60/40 stocks and bonds.
My Power Income Trader system breaks down inflation into four stages depending on Fed policy and economic growth …
Once, the PIT system output defines the stage of inflation it then dictates the best and worst performing asset classes to buy and sell based on back-tested results.
This gives me a foundation from which to optimize trading strategies to deploy across asset classes both within the US and alternative markets. That is critical if you want to stack profits during the multiple stages of inflation we will face in the years ahead.
The Changing Stages of Inflation
Power Income Trader killed it in 2021 when the Fed was fueling one of the greatest bull markets in history.
But that was during Stage 2 inflation when money was flowing into the markets at an incredible rate.
Stage 2 is when money printing is explosive and both growth and inflation is accelerating.
Market environments can shift quickly, and today we find the markets at the opposite end of the spectrum in Stage 4 inflation.
Stage 4 is when monetary policy is restrictive and inflation and growth are beginning to decelerate. It requires a very different strategy than Stage 2 and Power Income Trader has gotten off to a great start in 2022.
Here’s a big reason why ..
The Power Income Trader is not limited to the US, because the system can be applied to any country that has a central banking and financial system built on monetary and fiscal policy.
This is where it gets very interesting for traders, because alternative markets increase your diversification and probability for success.
Today, I’d like to share a couple of trades in my portfolio that I delivered to Power Income Trader Members.
Long China’s Broad Stock Market vs. Short US
When developed countries’ monetary policies are at different stages of inflation you have access to incredible low risk/ high reward trade opportunities.
China is heading towards a Stage 2 market environment while the US is at the opposite spectrum of Stage 4.
So China is injecting new money into their system while the US is draining money out of theirs.
The optimal trade, as dictated by the varying China/US stages of inflation was to buy China’s broad stock market, the Xtrackers CSI 300 China shares ETF (Ticker: ASHR) and sell the US SPDR S&P 500 ETF (Ticker: SPY).
Using simple option strategies I found the lowest risk/highest reward volatility weighted “paired trade” and sent an alert to the my members.
Paired Open Strategy
In Stage 4 inflation, a stock market is at risk of a serious correction, potentially sending the economy into recession and a possible market crash of at least -32% on average. .
In Stage 2, a stock market is firing on all cylinders with upside potential to rise 20% or more.
This presents an ideal scenario for a Paired Trade, which is a long/short strategy that capitalizes on diverging trends.
I manage the legs separately with a potential to make gains on both.
Here are the numbers and charting patterns:
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- 2/16/22 Buy to open 1 SPY Jun-17 440/430 put spread @ $2.97
- 2/16/22 Buy to open 3 ASHR Jul-15 38 call @ $1.35
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Two days later, the US S&P leg was up 30% and the China ASHR leg was up 7%
I closed the trade on Friday with a nice two-day profit.
When a trade works that fast in this environment, I book the profit because volatility is running high and I am confident I’ll get another opportunity to reset.
There are half-dozen paired trades that I have on right now …
And I have never seen an environment that offers so many excellent low risk/high reward trades.
Having a disciplined systematic approach in a highly uncertain market environment provides a foundation that can stack profits in every market environment.
In 2021, I averaged a 60%+ average gain for the year and expect to beat that this year with many very large moves ahead of us.
The key is with my experience tracking central bank policy and knowing the stage of inflation, all I have to do is trade the Power Income Traders system process and stack profits.
Sure, you can get blindsided by external shocks but you will always be risking a small amount of capital for high rewards. But my goal is to never risk 100% of your investment on any trade, so you always stay ahead.
Bring It Home
I take trading and risking my own capital very seriously.
And I hate losing more than I like winning, so I am always learning new markets and strategies that can improve my process.
Inflation destroys wealth, so I not only want to help you make money trading inflation … but more importantly I want to help you protect your wealth so you can maintain an excellent quality of life.
Live and Trade With Passion My Friends,
Griff