Profiting from the Hidden Force Driving the Markets
Yesterday, I explained that the Fed is now forced to intervene in the markets on a daily basis.
In case you missed it, the outline of that article is as follows:
- The Fed maintained loose monetary policy for way too long (seven years).
- Because of this, the entire financial system now ASSUMES the Fed will always bail out/intervene to maintain the bull market.
- Based on this assumption, hedge funds and other financial firms are using tremendous amounts of borrowed money/leverage.
- As a result, there is now so much leverage in the financial system that the Fed HAS TO intervene or risk a crisis.
As I write this, the Fed is now intervening in the form of:
- Lowering interest rates (the Fed has done this three times in 2019).
- A $60 billion per month QE program through which the Fed prints $60 billion in new money every month and uses it to buy assets from Wall Street.
- A $120 billion overnight repo facility through which banks “park” some of their less liquid assets with the Fed in exchange for cash, thereby increasing their liquidity.
- A $45 billion term repo facility through which banks “park” their cash with the Fed for set periods of time in exchange for increases liquidity.
However, I’ve recently uncovered something even more staggering…
I believe the Fed is actually intervening DIRECTLY in stocks… by buying stocks at critical points.
Clear Signs the Fed Intervenes in the Markets
Technically, the Federal Reserve (or “the Fed”) is not supposed to buy stocks or stock futures. And they certainly do not include those assets on their balance sheet listings, which are published every week.
However, we know from Fed meeting minutes that the Fed does indeed own positions in the markets that it does not publish.
Case in point: Back in October 2012, then-Fed Governor Jerome Powell (now-Fed Chair), explained what happens when the Fed decides to sell its investment positions during a discussion:
“So when it is time for us to sell, or even to stop buying, the response could be quite strong; there is every reason to expect a strong response. So there are a couple of ways to look at it. It is about $1.2 trillion in sales; you take 60 months, you get about $20 billion a month. That is a very doable thing, it sounds like, in a market where the norm by the middle of next year is $80 billion a month. Another way to look at it, though, is that it’s not so much the sale, the duration; it’s also unloading our short volatility position.” [Emphasis my own.]
Source: Federal Reserve
Here, Powell is stating that the Fed has a “short volatility” position ― meaning the Fed is either shorting the Volatility Index (VIX) via futures, or options.
Clearly, the Fed has positions that are not listed on its balance sheet… which means it buys and sells securities that are not publicly stated.
I can also attest that the Fed directly intervenes in the stock market on a regular basis.
Whether it’s a direct intervention or done via a proxy, I don’t know. But I have personally watched the market react in ways that indicate a clear intervention by the Fed.
But now let’s get to the best part: How do we profit from this?
The Single Best Trading Strategy of My Career
I’ve developed a REAL TIME trading strategy that can identify when the Fed is about to intervene in the markets.
The kind of money you can generate if you can successfully “front run” a Fed intervention is the stuff of dreams.
Already, this system has produced gains of:
- 22% in 35 minutes
- 56% in 100 minutes
- 70% in 130 minutes
- 85% in 90 minutes
- 123% in 65 minutes
- And even 367% in one day.
I’ll detail this trading strategy in the coming days. But for now, know this…
This is the single most incredible discovery of my career. Stay tuned.
Editor, Money & Crisis