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Thats when Fed Chairman Greenspan will have his first Open Market Committee meeting since Hurricanes Katrina and Rita … and when he will have his first opportunity to do something about the recent surge in inflation. Its a foregone conclusion that he will raise rates. Hes done precisely that 11 times in a row. But those rate hikes were a mere quarter of a point each. Now, with inflation surging, hes going to have to jack up rates much more quickly. He has no choice. The cost of fuel and basic materials has gone through the roof. These surging costs are spreading rapidly through the economy. And the inflation is already out of control. Ill explain why in just a moment. But … First, Lets Talk About the Huge Most of the investments that I have recommended are designed for safety, protection and modest gains. With the right timing, they can double your money in a few years. But in this situation, Im inclined to be more aggressive. I can see using some leverage, taking some more risk, and doubling my money in 5 to 7 months, or even weeks. Right now, for example, for just $1,000 to $1,500, you can control $100,000 of investments that are tied directly to interest rates. Thats as much as 100-to-1 leverage. Moreover, since I’m talking about options, there’s no risk beyond your $1,000 to $1,500. No margin calls or forced liquidations are possible. You can lose money. But even if I’m totally wrong, your loss is limited to the amount you invest, plus any commissions you pay your broker. This is an investment that lets you sleep nights, yet can make you a genuine fortune. With any decent move in interest rates say, about one or two percentage points I calculate these options could be worth $4,800 to $5,400. And with a truly major interest-rate move, such as I see coming, options like these could be worth as much as $15,000 to $20,000. If you had three of them (your cost: approximately $4,500 ), suddenly youd have about $50,000. Why Interest Rates Are The inflation virus has been incubating in the United States for almost three years, starting when oil prices first turned sharply higher and other commodities did the same. But until recently, the virus was hidden or suppressed. The government refused to admit inflation was a problem. It even deceived the public by excluding housing inflation from its consumer price index. So, without an official recognition of inflation, many companies were either afraid or unable to pass along their higher costs to their customers. The cost of natural gas nearly doubled. The cost of lumber and construction materials went through the roof. But still, no one was taking inflation seriously.
Thats why, just yesterday, the government announced the worst consumer price inflation in a quarter-century. Thats why a survey from the Conference Board has revealed the biggest single-month jump in inflation expectations since 1990. And thats why, in the last few days, one Federal Reserve official after another, in speech after speech, has issued warning after warning about the danger of inflation. The Federal Reserve president in Kansas City warned about a combination of inflationary pressures coming together at the same time. The Philadelphia Fed president warned about the energy spike permanently disrupting the price environment. And the Dallas Fed president warned about the inflation rate near the upper end of the Fed’s tolerance zone. Its a hint. Its their way of telling us theyre getting ready to do something new and different in order to regain control over inflation or at least try to regain control. Its their way of giving us the heads up that the Fed is going to have to jack up interest rates more aggressively from this point forward. Why Treasury-Bond Yields Right now, even the governments own, distorted price indexes are surging. Producer prices, for example, are up by 5.1%, the highest since December 1990. But theres a big difference between today and December 1990. Today, the yield on Treasury bonds is 4.6%. Back then, it was at 8.2%, which was about normal for this level of inflation and inflationary expectations. So just to get back to that normal level, the yield on Treasury bonds would have to jump by a full 3.6 percentage points, to 8.2%! I think thats going to start happening on November 1 when the Fed shocks the market with a bigger-than-usual rate hike … and drives bond yields through the roof. The Day of Reckoning Has Arrived This is not a new crisis. The momentum for this crisis has been building up for years. Since the 1990s, investors all over the world have been buying U.S. Treasury bonds like never before in history. But American insurance companies and banks bought hundreds of billions in U.S. Treasuries. Central banks in Europe, Japan, China, South Korea and other cash-rich nations also loaded up. They all believed that inflation in the United States was well contained, that the dollar would be stable, and that theyd get paid back with money that was still worth something. Now, all of a sudden, theyre going to discover that they were duped. Theyre going to see the inflation in the United States going crazy and theyre going to see that the Fed is belatedly recognizing it by hastily jacking up its rates. This is huge. Foreign investors alone hold over $2 trillion in U.S. bonds, and theyve repeatedly hinted that they would dump them if they have to. Earlier this year, for example, Chinas central bank was the first to hint at reducing their purchases of U.S. bonds. That alone was enough to trigger a mini-panic in our bond market. Two weeks later, it was South Koreas central bank that caused another mini-panic when they said they might begin moving away from the dollar bonds. Then, it happened again this time with one of Americas closest allies, Japan. Just the hint by Japans central bankers that they were thinking about a minor shift away from U.S. dollar bonds sent our bond market into a tailspin. And for good reason: These three countries alone hold a huge chunk of the two trillion in U.S. dollars and bonds held by foreigners. Even if they hold on to every penny of their current U.S. investments, the mere fact that theyre slowing down their purchases will be an instant calamity to our bond markets. So imagine what can happen when they actually start selling our bonds! Thats when bond prices collapse, automatically driving their yields through the roof. Greenspan Is Between a Rock and a Hard Place The only way Fed Chairman Greenspan can convince investors to continue buying U.S. bonds is by paying them more much more in interest. Until now, he has dragged his feet. He didnt want to raise rates sharply because he was afraid it would set off a mini-panic in the bond markets. But now inflation is getting out of hand, and hes running out of time. So, if, by some chance, he chickens out at the last minute, foreign investors are ready to stop buying U.S. bonds or even start selling. And then, you wont just see a mini-panic in U.S. bonds youll see an all-out uncontrollable panic in U.S. bonds. Either way, I see no other alternative: Interest rates are going to skyrocket. Heres What I Want You to Do … Recommendation #1. Get out of the way of falling bond prices and rising interest rates. If you own any long-term bonds, get rid of them immediately. Bonds are already beginning to fall in value. After the next Fed rate hike no matter how small or large theyre going to fall a lot more. Recommendation #2. If you must borrow, then gosh darn it, youd better make sure you lock down a fixed rate. Avoid adjustable-rate loans like the plague. Recommendation #3. Thanks in large measure to the inflation dangers Ive been telling you about, the investments weve recommended in my Safe Money Report have gone through the roof. If youre a subscriber, follow the instructions I sent out last week to take partial profits. Then, stick with the rest. Recommendation #4. Keep most of your money safe or invested conservatively. No matter what the future will bring, the fact remains that predicting it with precision is impossible. So you must always be ready for the unexpected. Plus, if you have money you can afford to risk, I have a fifth recommendation … Use Those Powerful Interest-Rate Inflation is now spreading so quickly and interest rates are now about to rise so suddenly, I decided its time for me to tell you about my special service to take advantage of these trends. If Im wrong and Mr. Greenspan decides not to raise interest rates more sharply, foreign central banks are going to start selling their dollars and dollar bonds. And when they do that, I believe theres going to be a panic in the market of such dramatic proportions that, over time, youd have a chance to build a $4,500 initial investment into six figures. But I dont think Greenspan is going to be that stubborn. He sees the handwriting on the wall. In recent days, he himself has been warning more loudly about inflation. And he knows how close to pulling the trigger foreign investors must be. So I believe the more likely scenario is for Greenspan to finally step up to the plate and start raising interest rates more aggressively to help prevent an all-out panic. If thats what he does, Im confident the options Im recommending will still do great. But in the absence of an all-out bond market panic, you cant count on the same windfall. I figure the opportunity in that scenario will be to build the $4,500 into about $50,000, which I dont think youd mind too much. Only 1,000 Slots Available Ive restricting this service to a maximum of 1,000 subscribers. This is absolutely essential because of the liquidity of the market. I want to make sure you get good fills on your buys and sells. The regular price is $5,000 per year. However, since I want to encourage subscribers to get on board before the Feds next meeting on November first, I am offering two years for the price of one. Subscribe at the regular rate of $5,000 for the first year, and you will get the second year free. That cuts your cost in HALF. And no guarantees, but I expect the first recommendations to pay several times the cost of the service. What You Will Get as a Subscriber First, I will send you a detailed explanation of those remarkable interest-sensitive options that you can use to build $4,500 into $50,000 as long-term rates go up. For optimum profits, I generally recommend a variety of closely related but different options with varying expiration dates and strike prices. Ill explain what they are, how to buy them, and how much to pay for them. (In case youre not experienced with options, Ill include an explanation that begins with the basics and covers everything youll need to make this really work for you.) Most analysts give a recommendation but dont do the necessary homework to make sure you can really act on it. I will tell you when to get in, when to get out, and when to roll over your positions to give you more time if you need it. On each and every investment, Ill tell you, ahead of time, the reasons I think this is a great opportunity for you, what the risk is, and what your profit potential is. Then Ill keep you posted on any changes so youll always have specific instructions. This is an elite service that has no ambiguity, ifs, buts, wherefores or other weasel phrases so many analysts use to protect their you-know-whats. It always goes out by e-mail because instantaneous communication is essential for good fills in these fast-moving markets. When its time to buy or take profits I cant have you waiting around for the U.S. mail to reach you. Second, Ill send new recommendations as soon as I spot new opportunities. Youll get a minimum of 15 recommendations per year, probably more. Right now, interest-rate options are my main focus because Im convinced major fortunes are going to be made here relatively soon, and I think its going to start happening within days. But interest rates reach directly into other markets, such as interest-sensitive stocks. So one of my next recommendations may be put options on a major bank thats about to get clobbered by rising rates. For example, I believe the shares in J.P. Morgan are on the brink of collapse. This bank is loaded with bonds and mortgages that are already falling in value. Its also got the largest portfolio in the world of high-risk investments called derivatives. And many of these are going to take a beating if the Fed shocks the market with a larger-than-normal rate hike. Our subscribers have already seen a long string of nice, hefty profits with put options on smaller banks and lenders that have taken hits in recent weeks due to rising short-term rates. Now, as the interest-rate spreads to the long-term side of the market, impacting home lending rates as well, I figure its going to be the big banks turn to see their shares clobbered. Another major opportunity is coming in options on currencies. This is one of the markets thats most directly impacted by changes in interest rates, especially changes of this magnitude. So for occasional diversification and some other great profit opportunities, my service also covers this area. Our goal: To use our knowledge of interest rates every way we can to help you make money. Third, timing. You get my recommendations precisely when and only when I see a major, first-rate opportunity for you. I believe that when the opportunity pops, you have to grab it then and there. Thats why my recommendations do not conform to a regular publication schedule. You will get a wrap-up issue every week no matter what. But the recommendations can come out at any time on any day of the week. The recommendations will be sent to you by e-mail, complete with a detailed explanation of why Im recommending it, how to buy it, how much to pay for it, what special warnings if any are necessary and, of course, when to take profits and sell. Interest Rates Are Not The Fed meeting is on Tuesday, November first. And as we approach the meeting, Greenspan and his cohorts have been increasingly blunt in their warnings. One way or the other, interest rates are going to start moving up. Either Greenspan starts raising them at a faster rate or bond investors in the U.S. and abroad, disgusted with the inflation, are going to start selling. In 1980, in a previous situation like this, it took less than seven months for the Treasury-bill rate to surge from 6% to 16%. I dont think rates will go up that quickly this time around. But even if they go up only half as fast, the opportunities in interest-rate options are tremendous. With the upward pressure on interest rates now so powerful, moves that normally take years could be over in a matter of months. So to take advantage of the situation, I feel you must have your options in place, sitting there before the market starts to move more rapidly. Once The 1,000 Slots Are Gone, Thats It! We already have 399 subscribers to my interest rate trading service. And now, Im sending this notice out to 250,000 readers. So I fully expect the remaining slots will be sold out very soon. Once these are gone, thats it. Unless you want to be placed on a waiting list, any additional checks will be sent back. I dont want to disappoint you. If you want to become a subscriber, its critical that you send in your subscription fee now, before we run out of the available slots. To make sure, I suggest you pick up the phone right now and call Hedda at 800-815-2917. Or you can order online on our secure site. Good luck and God bless! Martin About MONEY AND MARKETS MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Marie Albin, John Burke, Michael Burnick, Beth Cain, Amber Dakar, Scot Galvin, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others. 2005 by Weiss Research, Inc. All rights reserved. |
Greenspan Rate Shock In Two Weeks!
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