Hey There Income Hunter,
On June 7, Treasury Secretary Janet Yellen warned of a consumer price index (CPI) print that would remain elevated.
Apparently economists weren’t listening because their forecasts for yesterday’s CPI were blown out of the water.
How is this for a miss: year-over-year CPI was forecast to be 8.2% but came in at 8.6% …
Now a miss of 4/10ths of a percent for CPI is like missing a field goal by 50 feet!
Wiiiiide right.
See how I’ve stayed ahead of the Fed – and made a lot of money doing it.
Investors were caught off guard, judging by the immediate collapse of the S&P 500.
SPX closed on the absolute low, barely above 3,900.
So, what will the Fed do next week and how will the market trade with a large VIX expiration on Wednesday and a massive quarterly option expiration on Friday?
Here’s a hint: don’t trust them.
Feed Off the Fed
As regular Power Income readers know, my Power Income Trader (PIT) system gauges the impact of Fed and government policy on inflation and economic growth.
The reason the PIT system works is because when traders get the policy right, they can get out in front of the Fed and stack consistent trading profits. For instance, I’ve closed 10 of my last 14 trades for wins, with a cumulative gain of 241%. The S&P, meanwhile, is down about 500 points during that time.
But well before that, back in 2021, I called the Fed’s bluff on “transitory” inflation.
I was certain the US was headed for high inflation. I mean, come on, we added $6 trillion to the money supply in two years, and I called out Jerome Powell every time he spoke on the issue.
And I gave out high conviction bullish strategies on commodities – especially energy and selling bonds – which I wrote in detail about my 3-step process to massive profits.
Now Powell is lying about how the Fed will do what it takes to stop inflation, and I am again calling BS.
Pulse, how about Janet Yellen’s comment that Reuters published last week? She said the US is dealing with “unacceptable levels of inflation,” but that she “hoped” price hikes would soon begin to subside.
So, we have a Fed that has no clue and just talks tough to make Americans think it is in control … and the head of the US Treasury whose solution is to hope that prices come down.
They Can’t Handle the Truth
Truth is the Fed is out of bullets.
They will never put the inflation genie back in the bottle …
Fed chair Volker was able to do it in the 1970s because the US had little debt at the time so he hiked rates to near 20% to crush the economy and inflation. After that, with very little debt on the balance sheet they were able to cut rates and print money to reignite growth …
However, today the Fed is handcuffed by the debt it facilitated and is now left with two bad outcomes …
- Elevated inflation for years to come: This is the political choice because inflation slowly wipes away debt. How? Here’s an example: You have a fixed cost – say, a mortgage – and your wages rise due to inflation, you’re able to pay off your fixed debt more quickly.
- A long. drawn out depression: This would be political suiside because Americans and companies would be forced to default on their debt and the government would take on the bad assets, a la Japan.
Know this …
The Fed will choose inflation while also blaming all the problems they have caused on inflation. Do not get sucked into the Fed bs. Economic conditions will get much worse before they get better.
Powell will eventually admit inflation is out of control and will blame it on Russia and supply chains and blah, blah, blah …
That is when the dollar will puke just like the Yen and Euro are now. Then investors will rush to assets that have real value, like industrial commodities and precious medals.
Just look at the two paths Gold and SPX took yesterday …
On a day when the news was higher inflation and a Fed that the market is finally realizing will never rein it in …
Now look at the potential in the years ahead …
Bring It Home
A new global monetary system is being created. It is driven by the countries who have suffered due to the US sanctions put on them that hurt their economies.
This new system will ultimately be great for the world and America, but the transition will drive a massive trend out of the US dollar and into real assets.
I write about these global macro events that drive money flow in and out of real and financial assets every day in Power Income.
If you are interested in going a step further, subscribing to Power Income Trader offers access to …
- Every trade I put on via real-time alerts.
- Live sessions where we take a deeper dive into the critical macro events driving money flow
- A watchlist of stocks and simple low-risk/high-reward trades you can do to capitalize on them
- My exclusive Fed policy barometer that keeps you ahead of the central bank’s next move
Join me in the fun – and profits!
Live and Trade With Passion My Friend,
Griff