Hey There Income Hunters,
Where can we get one of those self-paying budgets?
I mean the Biden & Yellen Show never stops entertaining …
Treasury Secretary Janet Yellen had a laugh-out-loud line in front of the House Appropriations subcommittee this week while defending President Biden’s $6 trillion budget.
“I believe it’s a fiscally responsible program,” she said.
Fact Check Time
Every politician loves to say their budget plan will pay for itself.
But if that were true, we wouldn't have a 130% debt-to-GDP ratio to worry about…
The graph below highlights the fact that just five years ago, the U.S. went into a decent economic growth period — and guess what? The deficit widened. It didn’t narrow, and it certainly didn’t pay for itself.
Now the dollar is ready for its third major bear market in the past 25-years …
And here’s a secret: when the dollar goes down, commodities go up!
Get ready for a renewal of the commodities bull run.
My Commodities Trades
I put a bullish vertical option spread on Southern Copper Corporation (Ticker: SCCO) yesterday. A couple of supporting fundamentals to consider:
- In 2020, supply of most industrial metals tripled while copper only doubled.
- Global inventories continue to decrease. London Mercantile Exchange (LME) reported inventories were down 20% mid-year last year.
- Recently, many mines in Chile, which accounts for 28% of global copper supply, were forced to cut back on production due to political issues.
SCCO, which owns the largest copper reserves in the world, will continue to benefit immensely from the trend in lower supply/greater demand. In Q1 they only realized a price of $3.85 per pound, so with prices at $4.50 per pound now, their top-line number is much higher.
SCCO also captures by-product credits of $.74 per pound.
SCCO has had a healthy correction since completing a double-top a couple of weeks back.
The company is down 20% from the high at $83.5 and is now rebounding from the bottom of a well defined $66-to-$84 trading range.
For SCCO I purchased a Sept. 17 70/80 call spread…
- I paid $3.40 for the spread and my net delta is 22.
- I would stop myself out of the trade if SCCO closes below the $66.75 low.
- So, my max profit would be $660 per contract, while my max loss would be $66 per contract — for a 10-to-1 risk/reward ratio.
Bring It Home
A complete game plan is incredibly important if you want to be consistently profitable.
I was never a big fan of using stop loss orders… However, they can really save you from throwing money and, more importantly, they keep your head in the game
Unforeseen losses can set you back by distracting you from your next winning trade.
Take your lumps, ride your profits and move on to the next one.
Have a great long weekend and God bless the hard-fighting men and women who sacrificed it all for our freedom.
Live and Trade With Passion My Friends,