Hey There Income Hunter,

 

I’ve noted previously that Jerome Powell has been stretching the truth with some of his statements about financial conditions, CPI and even payrolls data. (More on all that here.)

 

Well, I guess Janet Yellen felt left out, because she made a statement this week that was just 100% incorrect … 

 

What’s more, the timing was seriously suspect coming the day before Biden gave his State of the Union Address …

 

Read on for the details on Yellen and the lowdown on Powell’s big speech yesterday.

Yellen Wrong On The Link Between Recession and Unemployment

During Yellen’s interview on Good Morning America, she said this: 

 

“You don’t have a recession when you have 500,000 jobs and the lowest unemployment rate in more than 50 years.”

 

This may be the most ridiculous line I have ever heard from a financial market leader!

 

Take a look at the facts presented below, which were taken right from the Fed’s website …

 

The blue line is the unemployment rate and the gray areas are all recessions over the past 70 years:

 

 

Notice how it isn’t that a historically low unemployment rate precedes a recession some times – or even most of the time …

 

Low unemployment precedes recession EVERY TIME.

 

Oh, but she was not finished with that beauty …

 

“What I see is a path in which inflation is declining significantly, and the economy is remaining strong.”

 

Inflation was the force that boosted growth. Wait until she sees what deflation does to corporate profits.

 

These next few months with Powell and Yellen steering the ship will present the greatest trading opportunities in our lifetimes.

 

Powell’s Interview at the Economic Club 

Here are a few soundbites …

• THE UNITED STATES IS ONLY AT THE BEGINNING OF THE DEFLATIONARY PROCESS
• I STILL ANTICIPATE A LABOR MARKET SOFTENING
• HOUSING DISINFLATION HAS NOT YET OCCURRED, BUT I EXPECT IT TO OCCUR IN THE SECOND HALF OF THIS YEAR.

 

Not one mention of inflation or transitory. He is now on to disinflation and deflation. That is a man who is looking beyond the tightening cycle.

 

I am confident we will get the drop in inflation, even if it is driven by a change in the methodology for CPI.

 

Trade of The Day 

I anticipated Powell continuing down the bullish path, so right before he started speaking I put on a simple $1 SPY call spread …

 

Well, after the first time he said deflation, I was able to get out for a 84% gain within 20-minutes

 

Thanks for being you, Jay.

 

 

It’s unclear if anything can knock the market down in the near-term with financial conditions so loose and inflation coming down. 

 

I see a trading range of roughly 408 to 420 in SPY, but once we break 420 I think a ton of FOMO buying will enter and the melt-up begins … 

 

If you are not on board yet, come join the fun in Power Income Trader, where we have been making money in up markets and down markets – mostly because we don’t listen to the banks or the media.

 

Live and Trade With Passion My Friend,

 

Griff