Hey There Income Hunter,

Jerome Powell hit the market yesterday like the wrecking ball that only he can be …

FED CHAIR POWELL SAYS RATES MAY NEED TO GO HIGHER & FASTER

I don’t even think HE believed some of the statements he made …

But he was hell-bent on walking back Raphael Bostic’s “pause” reference from last week, and he certainly did that. 

Yesterday it was the US dollar up … and everything else down.

That is exactly what you would expect as Powell continues to hike rates into a building recession.

Today, I’ll share his other statement that was absurdly false and what it means for the markets.

Finally Someone Asked the RIGHT Question

I have been waiting for months for someone to ask Powell:

ARE WE ON A PATH WHERE DEBT IS GROWING FASTER THAN THE ECONOMY, MAKING IT UNSUSTAINABLE IN THE LONG RUN.

US debt is exploding! 

By hiking interest rates when the current debt burden is $32 trillion dollars versus income of $25 trillion, the US is already broke.

What is worse, however, is as the Fed raises rates the interest on the debt also rises.

Today, the US debt burden is $31.6trn and interest of ~4% must be paid annually. 

So when you run the math, it shows the current debt levels are unsustainable … 

Expenses

   $1.3 trillion in interest payments a year.

+ $3.7 trillion in defense & entitlements

= $5 trn Expenses

Versus …

Income

   $3.2 trillion in taxes paid 

= $1.8 trillion in losses

$1.8 trillion in losses that will rise rapidly if/when the economy goes into recession. 

This is what you are not hearing from the Fed, the banks, the government or the media. 

However the fact that congress is now bringing it up and we are heading to a debt ceiling crisis tells you it will make its way through the markets.

Until then as higher rates make their way through the economy, inflation will crash and the Fed will officially pause. 

The dollar will resume its downtrend, fueling a major rally in commodities, gold and gold miners. 

What’s the Trade?

Notice the very tight opposite relationship between the VanEck Junior Gold Miners (Ticker: GDXJ) and the US Dollar index (Ticker: DXY):

The chart below shows when DXY goes up, GDXJ goes down … and when DXY goes down, GDXJ goes up. 

The only relief valve for a US economy buried in debt is a cheaper dollar. The lower the value of the dollar goes, the less the debt is a burden on growth. 

I executed a GDXJ May 19 36/38 call spread for $.43 per contract. 

May 19 will be plenty of time for the pause to go into effect, giving you a chance to maximize your gains. That means an over 350% gain if GDXJ settles above $38 on May 19. 

The timing is right, the trade is right and the risk/reward is awesome … 

Plan the trade, trade the plant, and as always …

Live and Trade With Passion My Friend,

Griff