Hey There Income Hunters,
Jerome Powell sold millions in stocks as they were plummeting.
Yes, new disclosures this week revealed that even the chairman personally traded stocks
And records show it was on my birthday Oct.1, 2020. He could have at least sent me some profits.
But, seriously, this is a disaster.
Meeting logs show that Powell had been in contact with Treasury Secretary Steven Mnuchin four times on Oct. 1.
Powell had been pressing the administration to support more fiscal stimulus, so that the sole responsibility for rescuing the economy would not be on the Fed and monetary policy.
Elizabeth Warren has come out against Powell’s reappointment as Fed chair when his term expires in January.
The Wall Street Journal reported last Friday that the trading scandal had “dented but not derailed” Powell’s path for a second term.
This was before Powell’s own trades were part of the story.
It would be a very big deal for the markets if Leal Brainard was appointed and the probability of that happening are increasing by the day ….
I have some other news that shows Powell’s chances of being retained are much lower now …
Watch the Chair
Via PredictIt.org
Gold and Silver rallied when Powell’s odds of reappointment tanked as the news of his trading made its way through the media. There has been a major narrowing between Brainard and Powell as to who runs the Fed next year and beyond …
Brainard is the most dovish Board member by far.
Treasuries started rallying on this, possibly because Brainard is in favor of doing much more bond buying to hold interest rates down.
She’s also expected to push more Fed regulation on banks and launch digital dollars.
The odds-on best trade — whether Powell is reelected or not — is this …
Buy Silver and Gold Miners
I have been accumulating silver and gold miners without consideration for a Powell replacement so this news would be icing on the cake for metals to soar.
And, either way, they will soar — it just depends on the timing …
If stocks turn up to higher highs, the Fed is likely to try to taper bond purchases with no rise in interest rates for a while. That tightening may not be on top of equity investors’ minds yet, but once they figure out that the punch bowl is being withdrawn from the party, we could expect a bigger correction that could be a repeat of the 20% drop in December 2018.
When that happens, the Fed will reverse course, as it always does — and Biden will fast track the $4-5 trillion in stimulus.
At that point, or even in anticipation of it, precious metals and miners will soar, and the dollar will collapse to new lows.
Inflation Expectations Nearing a Breakout
Brainard running the Fed would be a home run for inflation trades, as inflation expectations are already testing the highs.
Yellen Will Run the Show from Here On Out
Janet Yellen will now take charge whether Powell is reappointed or not. She will fast track bank regulations, higher taxes for the rich and wealth equality (which is needed).
However, these moves would trigger severe stagflation, which would be extremely bullish for gold, commodities, and energy stocks.
Gold miners have already rallied on good volume above the 50-day DMA, so the location is good to put on bullish spreads now.
VanEck Gold Miners ETF (Ticker: GDX)
And the best place that I know of is GDX.
The way the metals work is the senior miners lead the first wave up and then you can rotate down to junior miners and early cycle miners in the discovery stage.
Here is the GDX setup …
A very low-risk/high-reward trade here would be to purchase the $GDX Dec.17 33/34 call spread for $.40. You could put a $.25 stop loss to limit your risk even further.
This would give you a max profit of $100 versus the max loss of $25 for 300% return.
Here is the risk profile …
The trade offers a decent probability (31.5%) of the market moving above the 34 strike price and the stop-loss protects you on the downside.
Bring It Home
I have been killing it with these trades …
And I’m looking to score big this week with a bearish GLD put spread and a bearish TLT put spread. I have been playing GLD from both sides at least until it breaks above $1,840.
The beauty of the low risk/high reward option spread is it lowers the demand on a high success rate. Since I am always shooting for a minimum of risking $1 to make $3, I can be right less than 50% of the time and make a lot of money consistently — though that hasn’t been any sort of consideration over the past month-plus.
My success rate has been better than 50% and my takeout has been closer to $1 to make $7 …
Obviously the inflation trade has been hot, and I don’t see it subsiding any time soon …
Keep your eye on the prize and as always …
Live and Trade With passion My Friends,
Griff
