Nomi’s note: I recently sat down with colleague Chris Lowe from Legacy Research Group.
We spent some time talking about the Federal Reserve’s interest rate hikes, global supply chain problems, inflation, and market volatility. And how all of these things are the result of the Fed’s reckless monetary policy.
Usually, this interview would only be shared with members of Chris’ members-only Legacy Inner Circle service. But with everything that’s going on in the markets right now, Chris agreed to let me share part of our conversation with you. Read on…
Chris Lowe: Last week, the Federal Reserve announced an interest rate hike of 0.75%. The raise brings the key lending rate to a range of 1.5% to 1.75%.
Folks are wondering if interest rates might get to the double-digit levels we saw in the 1980s. Do you think that’s in the cards?
Nomi: I don’t think so. The Fed and other global central banks have fabricated too much money to take it all away.
In the past two decades, global central banks have conjured trillions of dollars out of thin air.
America’s central bank, the Federal Reserve, has been one of the main culprits. Since 2008, it alone has created $8 trillion.
Markets are no longer attached to fundamentals. Instead, they’re floating on this multi trillion-dollar cushion of central bank money.
See, the banking system and markets suck up all this cheap money and use it to buy financial assets. As a result, they have become permanently disconnected from the real economy.
That disconnect is the driving force behind what I call The Great Distortion.
Chris: In other words, The Great Distortion will continue. And the Fed’s rate hike doesn’t signal the end of the cheap money era.
Nomi: Right. Because a rate increase of 0.75% hardly makes a difference to the size of that massive book of assets.
Let’s say the Federal Reserve keeps raising rates… say, three or four 50-basis-point hikes this year. That would bring the federal funds rate to about 3.5% by the end of this year.
That’s a minor adjustment in the scheme of global money.
Even if it does that, global money controllers aren’t ready to raise rates by anything like that.
Big players like the European Central Bank and the Bank of Japan won’t do that. In fact, the Bank of Japan signaled it’ll do more quantitative easing (bond-buying) after it bought $22 billion worth of Japanese bonds last week.
Earlier this year, the People’s Bank of China reduced the cost of money.
From a global standpoint, the Fed’s rate hike isn’t that much of a change.
The markets are panicking about change that’s coming, as opposed to what that change will actually entail.
The Fed inflated markets when it manufactured all this money.
That’s a fact that’s not going away.
And there are companies that are way overvalued relative to their fundamental metrics. Others are way undervalued.
It’s because of this distortion from so much money coming into the markets. Investors don’t care about fundamentals anymore. That’s because, in the long run, the Fed will keep pumping money into the market anyway. That’s also not going away.
The markets aren’t a perfect reflection of the real economy today. And they won’t be unless they correct to real values again.
They’re a reflection of so many other things: cheap money, the expectation of cheap money, and the knowledge that if things go more haywire, cheap money will come back more abundantly.
We’ve seen that repeatedly. It’s all a matter of timing.
Chris: Can you walk us through how the Fed’s decision ties into inflation and the global squeeze on supply chains?
Nomi: Sure. Economies worldwide are weakening.
As prices rise, we’re seeing another pullback in general growth.
Just this month, the World Bank revised its expectations for global growth in 2022. It lowered them from 4.1% to 2.9%. And it expects growth to hover around 3% for 2023 and 2024.
On the supply chain side, some supply chains will stay stressed. Others will recover.
But as much as people believe it can, the Fed can’t affect supply chain strain with its monetary policy.
The negatives in the economy will come onto the Fed’s radar. There will be inflation in prices where supply chain weakness is apparent – for example, where there’s instability or famine. We’ve already seen it with wheat in Ukraine.
A lot of this market chop won’t go away. But because markets hate uncertainty, the volatility will calm down once the markets understand that the Fed has done what it said it would do… or if it hikes rates by less than what it has projected… or if it just pretends it’s done what it has to do.
I think that’s what will happen in the next year or so.
Whatever the case, we’ll see choppiness because of it. But we’ll also see calmer periods with consolidation.
Uptrends will continue – particularly in the sectors that have taken the worst beating… and in the names with the most potential to rise in share prices.
Chris: You and your team have spent two years crafting a system that identifies distortion signals in the markets so your subscribers can profit.
It’s based on the same type of strategy that you developed during your 15 years on Wall Street. Can you tell us more about that?
Nomi: We designed the strategy to help readers get ahead of big market moves… and make up to 10x their money, sometimes in just a few weeks.
I get emails all the time from readers who are worried about volatility.
That’s understandable. The markets have been ugly this year.
But my strategy works even in down markets.
I tested it with a small group of readers in 2020, in the middle of the Covid-induced crash. That was the fastest crash in history and produced a ton of volatility along the way.
While most people were losing their shirts… those readers had the chance to make more than eight times their money on a play I recommended.
That’s more than a 700% gain – while U.S. markets were plummeting more than 30%.
And that’s just one example… During the Covid-19 crash, readers also had a shot at gains of 181%, 200%, and 468%, sometimes in just a few weeks.
Chris: You’ve identified five sectors set to boom because of the distortion in the economy.
At an event last week, you introduced your new advisory, Distortion Money Matrix. In it, you’ll dig deeper into those five areas. And you’ll recommend short-term trades rather than longer-term investments. Is that right?
Nomi: Exactly. With shorter-term trades, we pinpoint moments of volatility.
My strategy allows us to take optimal advantage of the timing of those major swings in the market. It lets us hedge against certain positions because of those swings… and profit in the middle of the volatility.
Chris: Thanks, Nomi.
Nomi’s Note: At my special briefing last week, I revealed all the details of my new Distortion Money Matrix strategy. You can use it to play whatever market volatility comes as a result of the Fed’s actions to your advantage.
You could make up to 10x your money… in less than a month… even if markets are volatile, like they are right now. If you missed my event, you can catch the replay here.
Like what you’re reading? Send your thoughts to [email protected].