This commodity stock is how to profit from the coming rally

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Inflation speculation dominates the news. And really, inflation is already there.

But Fed Chairman Jerome Powell has said the inflation we’re seeing is “transient” and once supply chain issues are resolved – and factories and producers get back on track – the supply will catch up with demand and inflation will disappear.

Don’t buy this bloated chimera.

Inflation will increase. And the Fed, despite what everyone is saying right now, won’t start using quick, steep brakes.

You know why?

Because he can not.

And if you listen to the media here, you’ll be missing out on a huge edge in the markets this summer.

Here’s what’s really going on – and how to make money in the market rally …

Inflation is here

There is no question; inflation is there. April’s shocking Consumer Price Index (CPI) marker was 4.2% higher than a year ago, causing the market to panic on multiple trading sessions. The May CPI was higher, registering a 5% year-over-year increase.

Oil, as measured by the US benchmark West Texas Intermediate (WTI), climbs to $ 75 a barrel. It was around $ 39 last July.

Housing prices are exploding. In March, the FHFA home price index jumped 13.9% year-on-year. Not cooling down for a second, even though home sales declined moderately, the median price of existing homes for May jumped a record 23.6%, according to the National Association of Realtors (NAR). It indicates that every region has seen an increase and that year-over-year prices have increased for 111 consecutive months.

If you want more evidence that inflation is here and accelerating, take a look at your grocery bills. Refuel your car, truck, boat or lawn mower. And good luck trying to buy a used car for a used car price.

But all of this is “transient,” says Fed Chairman Powell, even though I don’t believe it. Nor did the congressional representatives who interviewed Powell on the Hill last week.

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U.S. Representative Steve Scalise (R-LA) was very vocal when he confronted Powell at a House hearing last Tuesday. The fastest and most sustained price rise in a decade amounts to an “inflation crisis,” Scalise said, while pointing to a poster showing milk prices up 5%, bacon prices are up 13%, gas prices are up 56%, and used cars are up 30%.

Powell’s response was that prices are not rising rapidly due to the combination of loose monetary policy and loose fiscal policy – but rather because the economy is rebounding faster than expected. He said: “A fairly substantial part or perhaps all of the inflation overrun is coming from categories directly affected by the reopening of the economy, such as used cars and trucks in particular. a kind of perfect storm of very high demand and low supply due to the reopening of the economy. “

The Fed chairman also said of the prices of hotels and airline tickets: “These are things that should stop going up and eventually start going down as these situations resolve themselves. They’re not talking about a tight economy or the sort of thing that has led to high inflation over time. “

Now you can either believe the Fed chairman or your own shrinking wallets and purses. I do not see the inflation which is here as “transitory”. I consider it mainly structural, and it will get worse.

But that’s no reason to get out of the stock market.

Investors believe they need to balance their expectations of weak financial markets as inflation rises and the Fed is forced to cut and then raise rates, against their fear of missing out (FOMO) on the market may be on the rise as the economy continues to grow.

Forget it all …

Here is the deal

Forget what St. Louis Fed Chairman James Bullard and Dallas Fed Chairman Robert Kaplan are saying – essentially the Fed is going to have to hike rates sooner rather than later because they see the inflation through a more “hawkish” prism.

Forget that the infamous Fed dot plot chart shows that more than the 18 Fed members who place their dots on the short-term interest rate matrix plotted their dots higher and shifted them farther down the road. left, which means they’re more likely to see the federal funds rate go up sooner rather than later.

Some regional Fed bank chairmen like to see each other on TV and make waves, and the monthly points game is nothing more than a side view of the consensual views at the Fed, which are constantly changing from all sides. way.

The truth is that of the Fed not will decrease too much or increase the rates a lot – because that is not possible.

It doesn’t matter if inflation rises so much that bond investors start selling certain bonds and rates go up because of it. The Fed is not going to raise rates because it knows if it does, if it raises them too much or too quickly, it will do one of the following two things (or both) …

This will (1) kill the economic recovery or (2) cause the financial markets (both the bond market and the stock market) to collapse.

If he does one of these things – or worse, both – his solution is, guess what? Lower rates.

So why would he risk this? This will not be the case. It can’t.

That’s why your FOMO instinct is perfect.

Stocks will go up because even if rates go up because bond vigilantes push them higher (which they haven’t been able to do since February, in fact; rates have fallen sharply and quickly), rates aren’t going skyrocket enough to kill the stock rally.

And a little inflation – even a lot of inflation – if companies have pricing power, which they do, and can raise prices, which improves their profit margins and profits, will drive the price up. of their actions.

Here’s how to play it.

This is where your opportunity lies

Commodities have increased dramatically recently. They were cheap and gained massive momentum on the upside as ETF investors jumped into every commodity fund they could find, leading to the purchase of futures contracts, which make up the most. underlying assets of these ETFs, which accentuated the contango curve of these futures contracts. , resulting in increased purchases, with inflation expected to increase over time.

In other words, this is a typical “turning point” in commodities where early stage investing is met with a short sale, as some large commodity investors do not believe commodities. are in fact heading for a “super cycle”.

But as rates fell, so did those products.

It is really only the weak “long” hands that are shaken, as newcomers to commodities, thanks to exposure to ETFs, future futures traders have been shaken after buying all the way to the top.

It was the first round. Round two is coming – it will be a rebound from recent selling lows, which commodities that have run too far too fast will appreciate.

It’s about to happen, so it’s time to reposition yourself.

The third round bell will ring when even a few of the commodities that have risen and fallen return to their February and spring highs. This red flag will attract hunters again, and a new “base” will have formed, on which hard and soft raw materials can consolidate and go further.

As soft and hard commodities recover, weather, in the form of rain, will dampen some of the heat from the rise in grains and agricultural commodities, which I like and hope to consolidate and increase. Ore and metals like iron and copper will simply rise higher, unhindered by “good” weather or changing table tastes, or synthetic meats, or alternatives to laboratory-grown grains.

This is when rates will start to rise, when the 10-year returns above 1.65%.

It is then that we will see the real inflation outlook and whether a true super-cycle is underway. At this point, if you are not careful with your FOMO instincts, you will curse inflation.

But I know you are careful which means you won’t have to worry about it.

My favorite game here is my favorite mining and commodity based stock, Rio Tinto Plc. ADR (NYSE: RIO). There is no need to be afraid here, just buy RIO and enjoy the ride – and the inflation.

I have another opportunity in mind for you, and it could offer you even greater profit potential …

Right now, I recommend five tech stocks that go into hyperdrive – and I think those stocks will cause a $ 353 billion ripple over the next 18 months.

It’s going to be so big that it’s going to change American life forever. For three reasons why each of these stocks is a total BUY, click here for full details.

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Join the conversation. Click here to access the comments …

About the Author

Shah Gilani has a financial pedigree like no other. He ran his first hedge fund in 1982 from his seat on the Chicago Board of Options Exchange. When options on the Standard & Poor’s 100 began trading on March 11, 1983, Shah worked in “the pit” as a market maker.

The work he did laid the foundation for what would later become the VIX – to this day one of the most widely used indicators in the world. After leaving Chicago to head the futures and options division of British banking giant Lloyd’s TSB, Shah joined Roosevelt & Cross Inc., an old-fashioned New York boutique company. There he established and managed a fixed income trading desk, and established the “listed” and over-the-counter trading desks of that firm.

Shah founded a second hedge fund in 1999, which he managed until 2003.

Shah’s extensive network of contacts includes the biggest players in Wall Street and international finance. These contacts give him the real story – when others only get what investment banks want them to see.

Today, as editor-in-chief of Hyperdrive wallet, Shah presents his legion of subscribers with enormous profit opportunities resulting from paradigm shifts in the way we work, play and live.

Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can see him weekly on Fox Business’s Varney & Cie.

… Read the full biography



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