Hey There Income Hunters,
I am, at times, highly critical of the Federal Reserve chair, but I don’t have anything personally against Jerome “J-Pow” Powell.
Away from the Fed he is an interesting and very bright man. He is a lawyer and spent enough time in the private equity world to earn the title “wealthiest Fed chair.”
And here is another big plus for J-Pow …
In his early days during the financial crisis of 2008, he was very critical of quantitative easing and announced that it would cause havoc on the economy and markets.
Very insightful, although I am sure it did not please Ben Bernanke and Janet Yellen at the time.
However, Powell’s new job will be very different from his last.
You might even say he may tap into his inner Paul Volker, who successfully defeated inflation in the 1970s.
Today, I’ll share the real possibility that Powell breaks the back of the housing and the stock market with the blessing of the administration.
Reduce Inflation and Inequality
The fact that Jay Powell was given a second chance tells us there is a new agenda that was agreed upon before finalizing his reappointment.
I believe that agenda includes breaking the back of the markets with a plunge protection team standing by at much lower levels than previously assumed.
Think about it for a second, Janet Yellen has been fairly quiet for a while but she is close with President Biden and was brought to the White House to increase jobs, especially for the lower and middle classes.
Well, they have failed on that front as millions of people are rethinking how they work and live.
Labeled the Great Resignation, U.S. workers are quitting their jobs in record numbers — more than 24 million did so from April to September this year — and many are staying out of the labor force.
Incomes have stagnated, job security is not what it used to be, and the costs of housing and education have soared, leaving fewer young people able to build wealth.
Transfer of Wealth IS the New Agenda
Now, let’s remember the only “real” goal of the administration: transferring wealth from the top 1% to the bottom 99%.
Forget holding both chambers of Congress, the only way the Democrats win in 2024 is if they prove they can improve the quality of life for their voters.
Changes that can make a difference for the Dems:
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- Break the back of the housing market to provide less expensive housing for the lower income Americans.
- More heavily tax the rich and use the proceeds to launch training and new job programs.
- Break the back of the stock market to reduce inflation and thus the high cost burden on the lower income classes.
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This second year is critical for Biden, Yellen and Powel,l and they must coordinate efforts to transfer wealth and burst the bubble of the markets.
If they can burst the bubbles, while passing legislation to transfer wealth and increase jobs, they can recapture the faith of their constituents and regain hope of holding the white house for another term.
Big Blue’s Blueprint
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- Prove you will fight inflation at the expense of the rich by having Powell announce next week that the Fed will double down on QE and begin raising rates in June.
- Within days of Powells announcement at the FOMC meeting on Dec. 15, Biden will announce progress on getting the votes for reconciliation, followed by passage of the legislation.
- Begin discussion, in the new year on a new package of training for skilled labor and new job programs.
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The alternative is to ignore the plight of lower-income Americans and stay on the money printing path until inflation crushes the economy and markets on its own.
This will guarantee a long drawn out depression that will take a decade to repair.
Pretty easy decision.
J-Pow was famous for the Powell Pivot, when on Jan. 4, 2019, he completely reversed his hawkish tightening cycle and then was hit with the Covid pandemic.
Now, it is time to re-pivot from a dovish, easing cycle and do what is necessary to restructure the financial system so America can get back to work and become a productive nation once again.
Bring It Home
As always, I appreciate your thoughts and feedback. 2022 will be a “pivotal” year in many ways.
There are only two paths: hyperinflation or coordinated monetary tightening along with fiscal spending.
Either way, the stock market will need to go through a meaningful correction. It could happen sooner if Powell forces the issue by breaking the back of the markets.
That is my call because it is the politically acceptable one for the Democrats and I don’t see them going down without a fight.
The Power Income Trader system views trading from the top down because if you get the policy, inflation and growth picture right, massive trading profits follow.
Consider bearish strategies on the major indexes prior to the FOMC meeting on Dec. 14-15, and as always …
Live and Trade with Passion My Friends,
Griff