« Everything looks like a nail. »
Everyone knows the old adage “To a hammer everything looks like a nail”, especially Central Banks.
Since New Zealand pioneered the Inflation Targeting monetary policy in 1990, shortly after adopted by Canada in 1991 and by the United Kingdom in 1992, hammers and nails are everywhere. The United States joined the party in January 2012. It’s never too late.
By definition “Inflation targeting is a central banking policy that revolves around meeting preset, publicly displayed targets for the annual rate of
Guess what’s the main tool Central Banks use for Inflation Targeting? Yes, interest rates. To them, everything looks like a nail and they have the perfect elixir.
Slow growth? Lower interest rates.
Stagnation? Lower interest rates.
Crisis of any type? Lower interest rates.
Market crashes? Lower interest rates.
Credit issues? Lower interest rates.
Any other problem such as athlete’s foot, conjunctivitis or failed marriage? Lower interest rates.
As a result, interest rates have been dropping like a bomb—or a bubble— all around the world. For us, humble traders and investors, the Central Banks’ creativity when it comes to interest rates policy is mind-boggling. Think about it for a second:
If the interest rates approach the 1% level, you think “There’s not much room left for any further cut.”
You are wrong. They cut.
“Ok, now it’s at zero levels. There’s not much room left for any further cut.”
You are wrong. They cut it into negative territory. Now that they discovered this deep underground mine, they will continue digging until the zero level looks profitable.
Let me give you 3 tips on how to survive what’s coming:
1. Invest in financial education.
2. Buy a vault.
3. Buy Gold.
Chart of the Day
Global Central Banks Interest Rates
“Moria… You fear to go into those mines. The dwarves delved too greedily and too deep. You know what they awoke in the darkness of Khazad-dum… shadow and flame.”Lord of the Rings (2001) —
Video of the day
What is a commodity
Physical goods like oil, energy, grains, food, metals and materials. Tradable commodities are very popular products and are most used through the Futures market or Exchange Traded Funds (ETF’s).
Today’s line up
Traders Lounge 11 PM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
The Coaches Show Replay
If you missed last night’s episode where Coaches Noah Davidson and Tyler Craig talked about the Call Ratio Backspread from the new Tackle Trading Playbook or would like to watch it again, check it out here.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.
Trading Justice Episode 346: Anatomy of the Bullish Breakout
In episode 346 of the Trading Justice Podcast, we discuss how to trade breakouts of resistance levels. The markets are hot right now setting all-time highs and recently broke out of a clear resistance level. How do traders tackle this situation and how do they trade it? Listen to this episode in the player below:
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