How to Play the Fed’s Bubble Mania Melt Up
As I noted yesterday, the Fed has made it clear that it wants stocks to go into a bubble.
We know this because:
- Fed Chair Jerome Powell stated that the Fed won’t raise rates again until it sees a “really significant move up in inflation that’s persistent.”
- The Fed stated it doesn’t see any “financial imbalances” AKA bubbles.
So the Fed is broadcasting that it won’t be raising rates again for a LOOONG time… at the same time that it’s claiming stocks are decidedly NOT in a bubble – despite one of the biggest bull markets in history.
And bear in mind, the Fed said this as stocks were hitting new all-time highs.
And all of this is happening while the Fed is engaged in a $60 billion per month QE program as well as an overnight repo program of $125 billion and a term repo program of $45 billion.
No rate hikes, no signs of a bubble, and a TSUNAMI of liquidity… this is as close as you can get to the Fed broadcasting that it wants stocks to enter a bubble.
The big question now is: How do we profit from this?
The Best Way to Play a Strong Stock Market
One way to play this with leverage is the Ultra S&P 500 ETF (SSO).
Reason being, the SSO returns 2X the return of the S&P 500.
So if the S&P 500 rises 5%… the SSO returns 10%.
And if the S&P 500 rises 20%… the SSO rises 40%.
That’s how it’s supposed to work anyway. But the reality is that investors tend to RUSH into the SSO whenever the market rises – resulting in the SSO DRAMATICALLY outperforming the S&P 500.
See for yourself on the chart below. Since the bull market began in early 2009, the S&P 500 (red line) has returned a little under 300%.
By way of contrast, the SSO (dark blue line) is up an INCREDIBLE 1,439% over the same time period. That’s MORE THAN FOUR TIMES the performance of the stock market.
If you’re looking for an easy way to play the Fed’s next bubble, this is a relatively easy one. And you can buy it through most discount brokers.
As always, be sure to do you own due diligence before buying anything!
Editor, Money & Crisis