Hey There Income Hunter,

 

The Bears have come out of hibernation.

 

Powell’s dot plots must have shaken them out of their slumber … NOT!

 

It was hilarious to watch Powell defend future interest rate projections by his quants and suits at the Fed. 

 

They mean absolutely nothing.

 

The Treasury interest rate curve tells you all you need to know about where interest will be heading by the end of next year. 

 

Today we’ll take a closer look and I’ll show exactly what to buy and where to buy it to make more money next year than ever before.

 

Recession This Way

First, let’s take a look at the sign post that has called a recession 100% of the time when 

this key signal was triggered …

 

The chart below shows the Wilshire 5000 price index in red and the US Treasury three-month-to-10-year yield spread in blue. Recession is illustrated by the shaded areas.  

 

 

Notice that each time the 10-year minus the 3-month interest went negative, a recession followed within a year. 

 

This signal has never failed, so my question is why does every investor and trader hang on to every word that Powell says? 

 

When short-term interest rates are higher than long-term rates, the capital creation dries up and economic activity comes to a standstill. 

 

That is what the above illustration is signaling along with the fact that long-term interest rates will be plummeting in the months ahead. 

 

What’s the Trade?

 

The trade is to buy the iShares US Treasury 25+ Maturity Bond ETF (Ticker:TLT) on a short-term correction to $104. 

 

 

Once TLT trades down to the 104-105 area, traders can consider buying a longer-term 108 call to the Feb. 17 expiry and selling a shorter-term 108 call to Jan. 06 expiry. 

 

Known as a calendar spread it allows to keep rolling the short call forward to collect income that eventually could pay for the original cost of the longer term call.

 

Remember, when the yield curve slope turns this negative a major rally in bonds is not far behind. 

 

Bring It Home

This market will be wild in 2023.

 

When interest rates rise this high and this fast, sectors of the financial system break.

 

When the financial system breaks and you are ready for it, you will be primed to stack huge profits.

 

The key is to:

 

– Be patient
– Wait for the right trades at the right time

– Then execute

 

And I’ll be here with you!

 

Live and Trade With Passion My Friend,

Griff