Hey There Income Hunters,
Trading against this inflation surge has been fun. From the last week in September until now, the markets have played to the blueprint of what works during inflation to a tee …
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- Sell bonds
- Buy energy stocks
- Buy commodities
- Sell the dollar
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Now, the real fun starts because seasonal factors kick in big time and should set the scene for an explosion into the end of the year.
Today, I’m going to show you what to expect and where the most money will be made …
Keep Selling TLT Heading Into US Treasury Issuance of Bonds
October and November are historically the worst months of the year for bonds. Much of that has to do with the debt ceiling being hit and Congress toying with a default on debt.
When Congress delays passage like they are now, the US Treasury can’t issue any new supply, so it gets a backlog of issuance that must come all at once, usually in November …
That may be the case again this year and would happen at a time when investors do not want to own bonds.
Checkout the seasonal yield chart …
So … buying bonds when you have accelerating inflation destroys your wealth because the bonds return less than the rising cost of the essential goods and services.
Luckily we are traders and we can go both ways with our trades. In this environment look for places to buy puts or put spreads on iShares 20 Plus Year Treasury Bond ETF (Ticker: TLT).
The trade I closed yesterday was a long $TLT Nov. 19 expiry 144/143 put spread. I bought it at $.34 and closed it Wednesday at $.51 for a 50% return …
I have done these trades over and over. Now here is the upcoming period for large Treasury bond issuance …
From the auction announcement to the auction date, you want to buy puts or put spreads and build a position. I start even earlier if I can get good entry points on rallies in TLT …
The other advantage you have going into these auctions is we will get another CPI number on Nov. 10 …
I think November CPI will carry a 6% handle and that will not be good for bonds on top of all the supply.
Buy Gold and Silver
We are on the verge of a major breakout in gold and silver, and I have been waiting months for this opportunity. I do think silver will lead the way here …
This global discussion on building infrastructure to enable all countries to reach net-zero carbon emissions is insane! However, all we can do is make a ton of money on it because the demand for natural resources to build it all out will be overwhelming.
Silver has yet to participate in the commodities rally because it gets caught in the “real money” discussion with gold and it is in the best interest of the paper trading silver and gold dealers in London to hold their prices down …
But that ends at the end of 2021, so the dealers may be forced to cover their short positions or suffer heavy penalties at the same time as seasonals for both turn explosively higher.
Check out the seasonal for both metals …
Silver seasonals are twice as powerful as Golds. I use the iShares Silver Trust ETF (Ticker: SLV) to get exposure to silver and it is very liquid.
I am currently long $SLV Dec. 17 24/24.5 call spreads for $.08. There are pretty incredible returns you can grab by searching for the optimal risk/reward part of the curve …
I also own a lot of silver and gold miners, but the easiest way to gain exposure is through the ETFs … Check out ETFMG Junior Silver Miners ETF (Ticker: SILJ) and the VanEck Gold Miners ETF (Ticker: GDX) ….
They are both in the early stage of a strong rally, so you can get good entry points. And always use a stop loss to protect your capital. I never want to lose more than 25% on any single trade.
Bring It Home
This Fed insider trading scandal is building momentum. This is the greatest inflation wild card ahead of us.
The Democrats have no choice but to keep spending and they have an opportunity to take control of the Fed and who is appointed to the board seats/
They may make a move to the left by bringing in Leal Brainard who favors modern monetary theory (MMT) and yield curve control, digital currency, etc. These moves would mean even higher inflation for a longer period of time.
Use this period to put on these inflationary trades because they will either work out nicely or be a home run.
Live and Trade EWith Passion My Friends,
Griff
