Hey There Income Hunter,
As Ben Bernanke, ex-Fed chair once said, 90% of a Fed member’s job is delivering the right message, while 10% is delivering the right action.
That is spot on and Alan Greenspan was a rock star at it. I swear he put marbles in his mouth so reporters couldn’t understand him.
Well, Jay Powell did a pretty good job of that yesterday. Powell has one job – keep raising rates until he is told to stop.
So it doesn’t matter if he is burying the US economy. When he met with Biden at the White House he was told to keep raising rates and the President will take care of the rest.
Now we know how this is going to work out in the end …
Today, I’ll share new data that tells the real story and a trade whose time may have come.
National Federation of Independent Business (NFIB) signals a recession is coming
There are 28.8 million small businesses in the US, with 56.8 million employees. Businesses with fewer than 500 employees account for 99.7% of the total number.
Small businesses drive the economy, employment, and wages. So, what the NFIB has to say is highly relevant to what is happening in the actual economy. Much more so than what Jay Powell spews.
It was reported yesterday that the NFIB’s confidence survey of these businesses plunged to 93.2 from a pre-COVID high of 108.8.
Historically, a reading below 100 is a recessionary warning.
Next let’s look at today’s retail sales report.
Real Retail Sales Declines for Third Straight Month
The May retail sales were a disappointment, but the 0.3% plunge was remarkable relative to a 0.1% expected rise, along with a .7% MoM downward revision to April.
However, when retail sales are adjusted for inflation you get a sense of the direction of consumer spending …
Retail sales is a hugely important indicator for the economy because it reveals the strength of the consumer and their ability to spend.
One thing Powell did say was that overall spending is very strong. I don’t know what he is looking at (sort of like the Biden administration’s insistence we’re in an economic “boom”), but I will continue to give the actual data and trades to consider.
Watch for the SPDR Gold Trust (GLD) Breakout
Yesterday’s market action – interest rates and the Dollar index (DXY) plummeting – were an indication that investors are already looking beyond more rate hikes to the day it will pivot back to QE …
I have been of this view for a while and have been patiently waiting for a sign that gold and silver are breaking out to the upside.
We are not there yet, but there is a chance GLD will put in a higher low versus the 1,787 level below. Then, if it can get through the 200- and 50-day moving averages, we will have our first higher low and higher high …
I am getting more and more bullish on the precious medals. As we get deeper into the growth slowdown, the Fed will have to come clean and admit the tightening cycle must end.
When GLD breaks out above the 50 DMA is the timing to jump on board:
Listen to me closely on this …
Once the Fed goes back to quantitative easing out of necessity to monetize the $32 trillion in debt it now holds, nvestors will begin moving their money into precious metals because at that point cash will quickly become trash .
Bring It Home
I hope you joined the great Andrew Giovinazzi (AG) and I yesterday for our trade the Fed presentation.
Also …
If you missed it, make sure you get a replay of AG’s MARKET SURVIVAL SUMMIT presentation.
He went live last night and I promise, you will learn more about option trading during that presentation than you ever have before – and especially how to thrive in a bear market.
These are crazy times and AG has a strategy that allows you to stay involved and make money in either direction.
Live and Trade With Passion My Friend,
Griff