Here We Go Again With the Fed This Wednesday

There is an 81% chance of an additional 75 basis point rate hike this Wednesday. The current discount rate that the US Federal Reserve charges big banks is currently 3.00-3.25%; this would raise that rate to 3.75 – 4.00%.

Unfortunately this leaves the consumer on the bottom end of the food chain once again, as passbook savings rates are still around 3%:

Yet inflation continues to widen the gap between what you earn and what you pay; the most recent Personal Income report shows that we’re still paying about 6.2% more for goods and services than last year: 

Got a 3% raise at your job this year? Congratulations! You just lost 3% more of your purchasing power. And if you want to buy a house, here are the current mortgage rates: 

If it seems to you like it’s hard to get ahead in today’s inflationary environment, you’d be correct.  This is where everyone’s at, yet few have an answer as to what you should do. Fortunately, you’re part of the solution by being here. 

Why Risk Asset Yield May Be More Important Than Ever

So if you’re earning 3% more than last year (which most are not…wages have been flat for decades) and your costs are going up 6% vs. last year, how do you survive? This is where the notion of “Stagflation” comes in play. This is where we have high inflation, slow growth, and high unemployment. We have the first two of those already, and the job market is hanging by a thread. Some say that the “decent” employment figures of today are being caused by “over-employment,” which is where people have to maintain more than one job to survive. 

“Game over man, What are we gonna do? “

There are few problems that “excess yield” cannot solve. How about we make 20%+/year on our capital? 

Making Excess Yield

How do we make more than “our fair share” in this environment? We can do this via crypto trading if we keep our wits, have a sound plan, and execute with ruthless precision. 

Here are three things that will help get you started:

Focus on a small subset of assets – don’t try to be a jack of all trades and try to trade everything; you’ll end up chasing assets higher in price like a dog chasing cars down the street, and we know how both of those scenarios end. Select a small subset of assets that you will follow exclusively. If those assets perform, then continue to add to them. If they do not perform, then fire them and look for a replacement. Ruthlessly scrub this asset list.

Pick one Strategy – again, your goal is to simplify. A good strategy for this type of market is to use the Trend Trading strategy, as it’s simple. Sell asset that do not perform, or pull back into a base. Continue to add to assets that are continually rising in price. Never enter a position without defining an exit first.

Buy Assets that are Increasing in Price – unless you have a super-long time horizon, then Dollar Cost Averaging might take years to show a profit if the assets continue to decline in price, especially if you started when the markets were at a relative high. I prefer to let markets bottom out and build an extended base, and then look for them to begin the Accumulation phase.

All the pieces are there for you to build an effective trading plan and create “excess yield!” Check out our trading masterclass selection in the course archive, and let me know how we can help.