Hey There Income Hunter,
I get it, the media is all about spin.
It reminds me of my younger brother who wins most family debates but never has the data to back up his arguments.
Well, in today’s markets, the media doesn’t just spin the story … they also spin the data because they want their sponsors to look good.
We are getting fed a lot of junk stories and data these days and if taken seriously it could cause your wealth to evaporate.
A perusal of headlines last week is a perfect example.
Today I’ll show you what the data actually indicates about the global economy.
It will blow you away …
China’s Reopening
Last week it became very apparent that real data is not supporting a meaningful boost from China’s reopening.
You’ll love this …
A Bloomberg headline read …
China’s Economy Shows Strong Recovery as Covid Zero Era Ends
The truth, as you can see in the graph below, is China’s manufacturing sector has been going sideways since 2018.
Plus look what was buried deep into the article …
Although there were “significant seasonal and event factors” influencing the PMI figures, the “overall trend still points to a solid recovery at the beginning of 2023.”
The bottom line is there is no global recovery coming.
The damage done to global growth with all the rate hikes, quantitative tightening (QT) and supply chain breakdowns is just beginning.
This article direct from the China press tells the real story:
Shipping container traffic is a most important indicator of global trade and hence global growth.
What’s the Trade?
This week, the US Treasury is issuing $90 billion in government debt. The prices of which have been getting crushed, meaning their interest rates have been rising.
The stories that have spurred on the selling are the January inflation and employment reports that all had major revisions and seasonal factors hiding the actual results.
Interest rates/bond prices are now back to very attractive levels, especially compared to stocks and I think this week is the right time to enter into a trade.
iShares 7-10 Year Treasury Bond ETF (IEF)
IEF tracks a market-value-weighted index of US government debt issued by the US Treasury with 7-10 years to maturity remaining.
The debt pays interest and that interest is distributed to IEF stock holders. The bonds are also considered risk free because no matter what happens holders will get paid.
Now, they have never been cheaper relative to stocks … I mean ever.
So now that the Fed, with the help of the media, has scared investors about how much more they may tighten, prices are more oversold.
Notice the IEF chart below, which highlights the gap below, which I believe may be filled next week providing an excellent entry point for a trade.
The trade I like right now is this:
Buy a JUN16 97 call and sell a MAR17 96 call for a capital investment of $.91 a contract.
The way to manage the trade is expiration of the short call approaches,reset the short to the next monthly expiry …
That allows three months to reset the short call at roughly $.30 x 3, which will pay for the long call.
Reset the call at a price equal to the current price at the time of reset plus the combined price of the put & call at the strike closest to the price of IEF.
I will be in the trade by Wednesday.
Drop comments and questions below!
Live and Trade With Passion My Friend,
Griff