Hey There Income Hunter,

Japan and US policy could not be further apart right now.

But if you understand what the Finance Ministry and Bank of Japan are doing, you will know what the future holds for the US.

Since 1995 Japan has been basically giving yen away for free and it never boosted its gross domestic product (GDP). The Japanese never even produced inflation, although that may change now …

You see, everything I have been saying the US will ultimately have to do, Japan is doing today, including forcing interest rates lower, buying back all debt and devaluing currency. 

When you can not create real economic growth, all you have is a financial market economy built on money printing.

That is sad for the western economies but great for traders …

Today, I’ll give you an idea on how to turn Japan’s loss into your gain.

Three Decades

Twenty-seven years since Japan shifted to printing new yen to revive a deadbeat economy … and nothing to show for it.

Well, guess what? The US is headed down a similar path, which began in 2008!

Our government had a chance to let the real economy heal itself after a massive housing bubble burst but instead chose to print new dollars to prop up a financial marketplace.

This Chart Tells the True Story

In the US, our economy is as strong as the consumer.

Consumer spending represents 70% of the US real economy. Without the consumer we are simply a financial marketplace run by the Federal Reserve and banking system. 

Well the graph below tells you the real story of the consumer. Allow me to tee it up for you.

It starts with the University of Michigan consumer sentiment survey (UMich) and subtracts the conference board consumer confidence survey (CBoard). 

Now, the UMich survey is much more “inflation-sensitive.” It is weighted more heavily towards durable goods purchases, whereas the CBoard survey puts more weight on the job conditions. 

So in other words, the UMich survey is all about affordability and peoples’ perception of job security. The CBoard survey is more tied to the unemployment rate so it tends to stay optimistic for much longer since it is a lagging economic indicator..

Now, as you can see below, when you subtract this week’s CBoard survey from the UMich survey, you get a negative number …

And in the past 40 years, when the survey spread was -30 or lower, the economy suffered a serious recession … Obviously the 2020 version was again saved by enormous money printing, which will make it that much harder to recover from the next one. 

Bring It Home

Inflation all over the world except Japan, which may soon get it as well, makes it that much tougher on the consumer because the increase in the cost of goods is not met with higher wages.

This situation will push the economy into recession, especially with the Fed raising rates. Once that narrative is obvious to investors, bond prices will soar as their interest rates plunge. 

Now is a great time to sell some equity holdings and buy bond ETFs.

Consider the iShares 4-7yr Treasury Bond ETF (Ticker: IEF). My subscribers have been riding this trade to nice gains since I gave it to them on Monday and it has much further to go. 

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Live and Trade With Passion My Friend,

Griff