THE BEST WAY TO PROFIT FROM RISING INTEREST RATES AND INFLATION

By Nigam Arora & Dr. Natasha Arora

Signal(s) to enter, add, reduce, exit, hold or change.

 is an inverse leveraged bond ETF. When interest rates rise, bonds fall. When bonds fall, inverse ETF  goes up.

Under several scenarios,  may turn out to be the best way for many investors to profit from rising interest rates and inflation.

The Chart

Please click here for a chart of TBT.

Note the following:

  • We have been receiving a large number of communications from subscribers who recently bought TBT in response to our posts and now want to take profits.
  • The chart shows that TBT has risen as interest rates have risen.
  • The chart shows that TBT is near a resistance zone.
  • RSI on the chart shows that TBT has been overbought and now RSI is turning down.
  • The foregoing two points indicate that there is merit to taking profits right here for those who are very short term oriented.
  • Long term is a different story – there is merit to holding for the long term.

Inflation

Here is a summary of what has happened:

  • Unless you have been living under a rock, you know that prices have been rapidly rising. Wages are rapidly rising. House prices are setting records in some locations. Rents are beginning to escalate.  Food prices have gone up substantially.
  • We have been sharing with you over a period of time that the way the government measures inflation is flawed.
  • We have also been sharing with you the inflation numbers the government publishes.
  • You already know our analysis that the real inflation has been higher than the government numbers.
  • Please read today’s Morning Capsule regarding inflation rising further due to shortages of fuels around the world.  In China, they are rationing electricity.

The Fed

Here are the key points:

  • Before the intransigence resulting from the Fed burying its head in the sand, the Fed had a history of fighting inflation.
  • The main tool the Fed has for fighting inflation is to raise interest rates.
  • First, the Fed told us there was no inflation.
  • In the face of repeated government data showing that inflation was rising, it became impossible for the Fed to maintain that there was no inflation.
  • The Fed made a call and repeated often that inflation would be transitory.
  • The Fed defined transitory as three to four months.
  • Now that inflation has been rising for over a year, the Fed has admitted that they have been wrong.
  • The Fed still maintains that inflation is transitory.
  • The Fed is admitting that there is a risk that their call about inflation is wrong going forward.
  • Rising wages are an important part of rising inflation. The wage component of inflation is very sticky.  Can you imagine a company asking their workers to take a pay cut because they say inflation is transitory?

Manipulation

The United States is supposed to be a free capitalist economy.  If this was true, interest rates now would be 100 – 200% higher compared to where they stand.

The Fed has totally subverted the free economy into severe manipulation to keep interest rates low.

The Risk

The risk in holding TBT is that the Fed would further manipulate interest rates and that will result in losses in TBT. The chart already shows the fall in TBT when the Fed’s actions caused a temporary drop in interest rates.

Zone

For those following the Good Way, the Buy Now rating is being changed to🔒 (To see the locked content, please take a 30 day free trial).

For those following the Best Way, the new buy zone for TBT is 🔒.  TBT is trading at $18.97 as of this writing.

To learn about the Good Way and the Best Way, please see your Getting A Running Start Guide.

The first very long term target zone is 🔒.  The second very long term target zone can be much higher but will be given at the appropriate time.

The mental stop zone is 🔒.

The maximum recommended position size is🔒50% of full core position size

What To Do Now

For those not in TBT, consider following the parameters given above.

For those who are short term oriented and recently entered TBT as a short term trade there is merit to booking profits.  Keep in mind that the probability is better than 50% of TBT reaching 🔒 over the next few months.

For those who have entered the position for the very long term in the context of a properly diversified portfolio, there is merit to holding.

To learn about the zones and the recommended quantity see Trade Management Guidelines.

More Depth

For those desiring more depth, we have prepared an hour-long podcast for Arora Ambassador members.

To take a free 30-day trial to paid services to gain access to more opportunities, please click here.

This post was just published on ZYX Buy Change Alert.

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Nigam Arora

Nigam Arora

Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.

Dr. Natasha Arora

Dr. Natasha Arora

Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.

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