With Stimulus Done, the Reflation Trade Is Back

Hey There Income Hunters,


OK, the $1.9 trillion stimulus is good to go and we still have Yellen’s $700 billion to come.


There were also rumors that the Federal Open Market Committee (FOMC) will increase Treasury Purchases in the wake of the 10-year repo issues last week.


However, I think the most important event of the day was silver and gold finishing strong after a disappointing Consumer Price Index (CPI) number. 


CPI came in a lackluster +.1% for the month, which took the annual inflation rate to 1.3%. The market’s response told you it is now looking ahead to the inevitable inflation to come…


Even the Treasury Inflation Protected Securities (TIPS) closed up .5% yesterday.


So I added a stock to my portfolio that is a potential 3-bagger — I’m talking 200% winner — by the end of the year …


B2Gold Corp (Ticker:BTG) out of Vancouver has killed it all through Covid and as the gold price resumes it uptrend BTG’s stock price will soar …

Revenues, Free Cash Flow, Net Debt and Gold Production

The BTG board pays a quarterly dividend of $0.04 per share or a yield of 3.46% …

B2Gold has zero net debt … and recorded quarterly free cash flow of $647.36 million in 2020.

Quarterly revenues were $479.53 million in Q4 2020.


With the stimulus package getting ready to roll and the economy reopening, we’re going to see a double-barrel effect of accelerating growth and accelerating inflation.

This combination will be explosive and BTG is priced to offer massive returns.


Bring It Home


We will look back on this week as a game changer for the economy and inflation.


Get ready for a wild ride over the next 3-months…


When you have both growth and inflation on your side, you want to be aggressive early in the process so you can trade around your core position


Reflation trades, clean ernergy, consumer discretionary and industrials are the sectors to focus on.


We’ll take a look at a couple of industrials tomorrow.


Until then…


Live and Trade With Passion My Friends,


Griff

How I Avoid the Oil Slick

Hey There Income Hunters,

One thing I stress to #IncomeHunters is this:

Bag the prize and move on to the next opportunity!

When the macro picture shifts, you have to be quick to make your next move.

Here’s an example: Crude put in a negative price/relative strength index (RSI)  divergence this week — a classic reversal indicator …

So I rotated out of energy and into electric vehicle and lithium plays.

Here’s why: President Biden is already salivating over a massive infrastructure spending bill … and you can mark my words, it will be the biggest we’ve seen yet — I’m thinking $3 trillion large.

Biden is plainly hanging everything on outdoing FDR’s “New Deal,” and I’m going to get ahead of it.

It’s LIT
Any investment into EV must include lithium and batteries, so I chose the Global X Lithium & Battery Tech ETF (Ticker: LIT)…

LIT has corrected after initially soaring following Biden’s election and the Democratic sweep of Congress.

 

LIT Holdings

The ETF is filled with companies committed to moving toward a renewable and sustainable clean energy world … 

Forecasts of future demand for Lithium spike in the second half of the 2020s …

And the price of Lithium has already turned and is beginning to trend higher …

My Trade: I had to get LIT up, so yesterday I purchased a 57/63 call spread expiring in July for $2, giving me a clean 3-1 risk/reward ratio and enough time to get to Biden's “Newer Deal.”

Let’s RIDE

The EV producer I chose is Lordstown Motors (RIDE), which will benefit from a partnership with GM …

RIDE’s Endurance pickup truck offers an excellent price point of $45,000 versus $67,500 for Rivian, its closest competitor…

As the Biden administration looks to promote American-made EV’s, RIDE is likely to benefit by capturing available government and military contracts.

Additionally, RIDE will benefit from a $7,500 tax credit assigned to purchasers of new electric pickups …

Lastly, a recent correction in RIDE offers an excellent entry point …

Bring It Home …

Yesterday, I purchased a RIDE Jul 16 expiry, 17.5/25 call spread for $1.73 …

Risk/Reward is 4.3 to 1, which is reasonable for a $7.5 spread

I went out to the July expiry because that is the likely delivery on the infrastructure package. I have more to buy in the sector, but with the market so choppy I want to leave room to average in.

Two things the market needs is distribution of stimulus checks and the Fed to announce additional support for Treasuries … hopefully that comes sooner rather than too late.

Live and Trade With Passion My Friends,

Griff

THREE Killer Stocks to Buy This Week!

Hey There Income Hunters, 


There’s a reason the rearview mirror is so small and the windshield is so big …


Because if we look in the rearview, we’re going to miss where we’re going.


That’s one of my favorite expressions — and it’s more true now than ever …


There is so much ahead of us this month and it is going to be explosive.


Here is the March Madness Top 5:


  1. $1.9 stimulus package — with “stimmy” checks possibly hitting this week

  2. $800 billion burning a hole in Janet Yellen’s purse that must be spent by the end of this month

  3. Jerome Powell doing his best “Twist and Shout” rendition that will send 10-year rates heading back to 1.25%

  4. Congress pivoting to a $2-$3 trillion infrastructure spending bill

  5. The potential for a $316 billion quarter-end rebalancing out of stocks and into bonds

 

No. 5 is most important for us Income Hunters — because we want to load up on a few key Blue Wave specials that will rock-and-roll as we head towards the most powerful Build America program since FDR in 1933 …


I have THREE killer stocks that I’m buying this week… that you need to buy this week … 

No. 1, Fisker Inc. (Ticker: FSR)

Fisker describes itself as the designer and manufacturer of “the world’s most emotion-stirring, eco-friendly electric vehicles and advanced mobility solutions.”

  • FSR’s program is in high gear and remains on-track for a Q4 2022 production start.

  • The company says technology decisions will enable greater range, acceleration, advanced driving assistance and, overall, more content than initially planned.

  • Reservation’s were already at nearly 12,500 at the end of February.

  • Fisker has also announced an MOU with Hon Hai Technology Group (Foxconn) to jointly develop a new vehicle under the Fisker brand starting in Q4 2023. 

—–

No. 2, Blink Charging (Ticker: BLNK)

BLNK is a facilitator of a truly low-carbon economy….

The company’s charging network has expanded over the last few months. Its most recently announced deal is in San Antonio — to deploy up to 140 level-2 charging ports and three fast-charging stations throughout the city ..

The macro backdrop for electric vehicles is incredibly strong — some projections have sales rising 7x over the next five years.

All this hype had pushed BLNK’s stock price to nose bleed levels …

However, their price recently corrected 50% from its highs of $65 — and post-correction they completed a raise of $220 million at a public offering price of $41 per share …

BLNK is also an attractive acquisition candidate for oil and gas companies that seek to beef up their environmental, social and governance (ESG) credentials

Plus, Investors hold 25% short Interest in BLNK.


—–

No. 3 SunPower Corp (Ticker: SPWR)

SPWR is at the heart of the solar energy market, focusing on providing value-added services to the solar power system beyond the panels and converters, such as:

Design and market battery systems, software and user interfaces compatible with futuristic smart homes…

The company has restructured its business to focus purely on supply chain value-added service. Plus they have increased gross margins and decreased debt …

SPWR is profitable — and today offers good value after a 40+% correction … Plus they may get a boost in price if/when firms that have short 25.8% of shares outstanding are forced to buy them back …


Bring It Home

The size of the clean energy budget, cabinet appointments and reports from Washington indicate that a green transition is at the top of the president’s agenda…

The three companies above have positioned themselves nicely to capitalize on the growth opportunities ahead …

There is a lot of wind behind the sails of this trade — there is nearly $5 trillion likely to be spent in the next six months, with the last $3 trillion focused on green energy …

I am mostly interested in call spreads, which limit the capital outlay and maximize the risk/reward ratio …

Live and Trade With Passion My Friends,

Griff


The 10-Year Repo Squeeze That Wasn’t


Well the banks tried to pull a fast one — and it failed even harder than the 10-year Treasury debacle this week.


The banks also don’t seem to realize that Fed Chairman Jerome Powell is no longer calling the shots …


There’s a new sheriff in town and her name is Janet Yellen… 


Everyone was so distracted by this fake 10-year squeeze that the big news out of the WSJ Jobs Summit went relatively unnoticed…


This weekend’s whiteboard review will show you the inside scoop on the 10-year repo trade and why the “Fed Put” is officially dead — and it’s now a “Yellen Put.”


Plus in this weekend’s video, I’ll show you what REALLY hurt the stocks and bonds this week …


Hey There Income Hunters,

^ Watch the video up top ^


Live and Trade With Passion My Friends,

Griff

Jerome Powell Told Us Everything We Need To Know …

Hey There Income Hunters,

 

I was shocked yesterday watching Fed chair Jerome Powell deliver his speech at the Wall Street Journal Jobs Summit.

 

Truly, I have never seen anything like it. His key message with this:

 

We will consider raising rates under the conditions of:

Maximum employment (defined as 3-4% unemployment), and

 

Inflation sustainably at 2% — and on track to run moderately above 2% for some time….

 

One of the most powerful men in the world tepidly repeating the same talking points over and over … 

 

It’s official: J-Pow has become Janet Yellen’s puppet.

 

I’m serious. Yellen has obviously taken total control of our monetary system …

 

And that has massive ramifications for trading — which will actually make it a lot easier to make money …

 

In today’s video I lay out exactly what’s going on and leave you with an awesome risk-reward trade. Watch above …

 

Live and Trade with Passion My Friends,

 

Griff 

TODAY: Turn the Key on Profits at the Open

Hey There Income Hunters,

Can you hear that?

I am REVVED up about Ford (Ticker: F).

I’ve been looking for a good consumer discretionary stock to buy that can capitalize on the massive growth spurt the economy will see when it reopens in the coming months …

Speaking of, can you BELIEVE Texas has been declared “100% open”!?!

They love Ford down there, too.

Have You Driven A Ford Lately?

Ford has  been rallying — but I believe it’s still undervalued in the sector …

So I checked the technicals on it and, lo and behold, one of my go-to technical indicators revealed a bearish signal …

So like any aggressive trader I thought, “Great! I’ll sell now and buy it later.”

You may want to ride with me on this one … If it opens weaker this morning, I’m hopping in.

Watch how to crank up profits with Ford …

Get Ready for $2.667 Trillion in Stimulus THIS MONTH

Hey There Income Hunters,

Janet Yellen would not be a good Texas hold’em poker player …

She just got appointed into the Treasury and she is already going ALL-IN.

On top of the Blue Wave $1.9 stimulus bill, JANYELL will have an extra $767 billion in the Treasury’s account by the end of this month to use as additional stimulus.

Check this out …

Now, the way this will be done is to lower Treasury borrowing of T-Bills and return maturing proceeds to the investors of those T-Bills …

The bulk of those investors are foreign-based and would deposit the money in US banks for safety via FDIC insurance and for portability through the markets …

The problem is, banks here don’t want to take on additional deposits because they are out of balance sheet capacity…


Deposits use up balance sheet bandwidth. After the financial crisis of 2008, the Dodd-Frank legislation forced banks to hold capital against their assets — so there is a limit to how much they can hold on balance sheets …

Now, we know that Yellen knows that. This means she would be forcing banks to negative rates …

I knew putting Yellen, the queen of the Helicopter drop, at the Treasury was a game changer.

However, I didn’t know she would move THIS fast …

These moves will have major ramifications in the markets — and WILL supercharge commodities …

A Rush to Sell Dollars

The interest of foreigners who hold investments in the US is to maintain operational liquidity in currencies other than their own …

However, they are very sensitive to avoiding exchange-related losses … and their dollar balances are the largest foreign exchange exposure they have.

With $5.29 trillion in bank deposits, there is significant room for the foreigners to reduce dollar investments …

If banks move to negative rates on deposits, it could trigger substantial selling of dollars … which would cause a rise for industrial raw materials and imported goods — with little exports to absorb the inflation.

Watch for a Dollar Breakdown

The sign to move big-time into gold and silver is when the dollar takes out the lows near 89-89.25 in DXY (see below) …

Foreign holders could be the sellers who cause the breakdown and that would be exactly what Yellen wants …

 

Bring It Home

As we move closer to dollar debasement, or in other words lowering the value of our currency, precious metals are the asset you want to own …

We are at an excellent level in GLD to put on a bullish trade (see below). The zone highlighted is a 30% correction from the top and buying here provides excellent risk reward parameters.

If the support zone is taken out, close the position. However, GLD could very likely begin a new move higher from here ..

 

The perfect storm of inflation and growth is near, friends.

Keep an eye out for new Power Income videos that will provide bite-sized insight on the Fed, Treasury and Wall Street and money flows …

I’ll make sure you have intel that gives you an edge in the market!

Live and Trade with Passion My Friends,

Griff

Are We Witnessing the Death of Bonds?

Hey There Income Hunters,


“Fixed income” has a nice ring to it — but don’t get fooled by the phrase …


Bonds can be just as risky as stocks!


We are at the end of an 80-year debt cycle and the last 40 have been the most amazing bull market for bonds in history … 



Intended Consequences 


Risk is defined as the potential for permanently losing money … and inflation is the biggest long-term risk to our Investment returns. 


This is a really important issue for retirees and others who rely on fixed income to maintain their quality of life. 


I call inflation the silent killer of returns because you don’t even realize it’s happening…


Imagine


Your bond statement shows you making 5% a year…


However, inflation has risen to 10% … meaning your return is actually NEGATIVE 5%!


And that is just the start once inflation rears its ugly head!


Check out the history of 5- and 30-year bond returns during the last Bear market in the US. (I adjusted the returns for inflation.) …



Moving the Goalposts?

The worst part is, the Fed has manipulated their “official inflation indicator” — the Consumer Price Index (CPI).


In 1990, the Fed was in the middle of inflating bubbles, but also had to keep inflation low … they were obsessed with printing money — but they were bound by an inflation rate of 2% …


So, as they do so well, they changed the calculation to report a more depressed inflation …


With no oversight, they moved CPI away from being a measure of the cost of living needed to maintain a constant standard of living. 


Luckily, a Fed expert named John Williams published all this and how it was done — and  still, to this day, reports the original CPI to show the difference (see the chart below) … 


This was from Reuters on Thursday (emphasis added):


The Fed has said it will not raise interest rates until inflation has exceeded 2% and “we believe we can do it, we believe we will do it. It may take more than three years,” (Fed Chairman Jerome) Powell said.


The current inflation rate by the Fed’s “preferred measure” (meaning made up by them) is about 1.3%.


That’s the same “preferred measure,” that allows them to keep printing even though bond holders’ returns are negative because of the real inflation level.


Check out real inflation based on the original calculation the Fed chose …



Remember: Inflation erodes our bond returns in two ways …

  1. As inflation rates rise, bond rates follow to maintain a risk premium over inflation. This removes any opportunity for capital gains since bond prices move opposite to interest rates. 

  2. If average inflation is above your bond returns, investors’ wealth is reduced.


1970s Example 


In 1971, the link between the US and gold was removed so the Fed could increase money supply.


On top of that, oil price shocks pushed overall inflation higher …  


The 2020s could easily see a period at least as damaging as the 1970s since the Fed is creating significantly greater money supply today … 


As the graph below illustrates, inflation averaged 8% during the 70s. 


So, for example, let’s say you purchased 10-year bonds in 1971 and were paid 6% in annual interest …


Initially it looked like a smart decision with inflation under 5% — however, by the time the bonds were redeemed, you actually suffered through the period losing 2% of your wealth … Every year for 10-years!

That’s lost savings and wealth that you never get back …  


When We Know Bonds Are “Officially” in a Bear Market


First, here are few important things to remember…


  1. The #1 Power Income rule: Don’t Fight the Fed!

The Fed is currently buying $120 billion in bond a month and bond rates have traded higher recently on a consensus narrative of a “possibility of inflation.” … However the long-term bullish trend is not broken …


  1. Inflation, for the Fed, is CPI over 2% for an extended period of time, which I consider to be a year or more…


  1. Bonds are valued by their yield, however they are bought and sold on price … When we look at the bond yield chart, we sell rates/buy bond prices when yields are high and buy rates/sell bond prices when yields are low …


Just picture a see/saw … yields down/prices up and vice a versa:

So, in the short-term the Fed will not let rates rise much further than 1.5 to 2% because they must see an extended period of over 2% inflation before they let rates rise … and they will go to all lengths to make that happen, including:


  • Capping or putting a ceiling on rates by increasing bond purchases

  • Implementing an official yield curve control policy shift … where they announce a level they will not allow (i.e. mandating the 10-year to rise can’t rise past a certain point)

  • Changing their charter so they can buy bonds directly from the Treasury, which would eliminate supply … shifting rates lower


We must wait for the Fed’s next move, let bond yields move lower and test the up-trend line.

Their next meeting is March 16 and we’ll get some clues then. I’ll keep you updated.

  

Bring it Home

I worked for major banks on Wall Street for 20 years and I can tell you …


  • Traders and salesmen are paid bonuses based on how much profit they bring in to the bank … 

  • That is a recipe for moral hazard and you cannot trust that they are doing the right thing for their customers …

  • It’s time to take control of your finances because the years ahead are going to be very difficult for the average investors …

  • Inflation will destroy the rate of returns on any bond holdings you may have in your retirement fund … So, selling bonds can save your wealth AND shorting bonds can make you money …

Live and Trade With Passion My Friends,

Griff