Hey There Traders,
Changes in the market narrative come at you fast.
Last week, it was all about Treasury bond yields surging and gold trading down …
Now, higher inflation and money flowing into inflation hedges are the thing.
It’s market whiplash at its best …
I stuck it out last week. It wasn’t easy, but I focused on money flow …
I mean, you have to trust it.
Stimulus is relentless and will be for the foreseeable future …
The Power Income Reflation Indicator tracks three key areas of stimulus (M1 Money Supply, Quantitative Easing and Government Spending) …
And all cylinders continue to fire:
Supercycle
All this reflation is driving a commodity supercycle:
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- Monetary policy (QE) has grown bank reserves that end up being used to purchase stocks and bonds
- This has created a foundation built on inflation not seen since the 1960s.
- Investors are just realizing this fact and are light on inflation hedges …
- The chart below shows commodities prices are historically low compared to the broader market, which is helping to drive a stock selloff.
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- This will fuel a rally in commodities to hedge against inflation …
The perfect storm of increasing demand and limiting supply is upon us.
There is a combination of global stimulus, capital scarcity in many commodity sectors, and 50 years of underperformance compared to financial assets that make commodities a great asset class to invest in…
This doesn’t mean inflation will be here to stay tomorrow … necessarily.
But it does mean any short-term rise in inflation could turn into something significant and long lasting …
Remember, the nature of inflation is that it arrives abruptly and with little warning …
And in this case, we actually do have signs that it’s approaching.
The Power Income Portfolio (PiP):
So I’m going to give you a rare glimpse of my full Power Income Portfolio (PiP).
Take the opportunity to check it out and get a better sense of how we’re building income for life as the pieces fall into place for inflation.
It’s a mix of call spreads, outright longs and covered calls …
And you’ll see silver and gold miners, energy mid-streamers and an electric utility I bought just yesterday …
A New Addition
As of Monday, the Power Income Portfolio has a new addition that’s included in the chart above …
Consolidated Edison (Ticker: ED): ConEd operates multiple subsidiaries in the Eastern US. The crown jewel is the Consolidated Edison company of New York, which is a regulated utility providing electricity and gas service in New York City and Westchester …
ConEd carries an A-rated credit from S&P, and as of 2020 still has liquidity over $1B in terms of cash/equivalents, and a $2.25B credit facility.
They come with a 14% discount according to the Power Income Valuation Model (PiVM). Take a look …
ConEd also comes with 46 YEARS of Dividend Growth…
That is an incredible number. Check it out …
ConEd is such a stable, regulated entity you can take advantage of a covered call strategy, meaning selling a call option just above the market to capture down side protection and upside gain, as well…
I purchased 100 shares of ED at $67.40 and sold a 68-call expiring in 2-weeks at $.84…
If the stock is called, it’s a two-week return of $144 on $2,000 of capital … 7.2% or 187% annualized.
Bring it Home
A Power Income Portfolio will provide generational wealth — while also giving you some bullets for speculating on high fliers.
For once, you can have it both ways.
Live and Trade With Passion My Friends ….
Griff