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February 10, 2022

Even though the Fed has YET to make a move, the Eurodollar FUTURES have already done it for them…to the extent that with today’s fairly large 39 point down day ( a full 3/8% rate increase in ONE DAY), the September 2022 Eurodollar now has almost built in approximately 1.50% in raises between March and September. Whether they move that much…or more…remains to be seen but with our having put options on the books trading at 5 to 10 times what we paid for them, today’s action led me to take profits on 20-30% of our positions.

My guess is the market will keep sliding until the Fed’s March 15-16 meeting, by which time I expect to be out of 100% of what we own. As I am forever repeating, these ARE futures contracts and they DO lead the Fed, not the other way around, and by the time the Fed actually does get around to moving, it is highly likely that the Eurodollar Futures contract will have already built in raises going out for at least the next 12-18 months.

 

 And on the commodities front…Soybeans & Corn

Dry weather in Brazil and Argentina has made me just as wrong in Corn and Soybeans as I have been right in Eurodollars…But I DO think that is about to change…and in the typical “hurry” that is quite common for these two markets…that is, straight up turning into even straighter, and faster, and bigger, DOWN.

For one thing, when weather hits row crops, it produces an overnight change in the supply-demand equation and can result in an immediately bullish move…BUT…By the time all the damage reports have been widely reported in the media, more often than not, the futures market, with its higher prices, has ALREADY accounted for the damage…and the next thing you get, over and over and over (see my recent 50 year studies of Corn and Soybean tops), is a STRAIGHT DOWN COLLAPSE…

Also consider this…

THE specific reason that interest rates are going up is to break the current inflation cycle…And with what we’ve been seeing in rates for the past three months, followed today by this gigantic one day increase, you’d better believe that every computer program on the planet that has been in the NOW POPULAR “Buy Commodities” mode has alarm bells going off today, in that rising rates is NOT conducive to higher commodity prices…And my guess is there is not an algo trading machine anywhere that doesn’t have interest rates built in as one of its significant variables.


And with that being said, I suspect that there is some big international money that is thinking that the free money game is over…And that this speculative theme about being long commodities, that is touted everywhere, is about to get blown out of the water…THAT IT IS TIME TO SELL…which may be the reason that we saw something of a GIANT reversal in Soybeans today…And Corn.

 

I HAVE BEEN WRONG BUT I FIRMLY BELIEVE WE ARE DEAD ON TOP OF THE END OF THE CORN AND SOYBEAN BULL MOVES….I STRONGLY RECOMMEND GETTING SHORT SOYBEANS, SOYBEAN OIL, AND CORN…RIGHT HERE. RIGHT NOW…AND I STILL MIGHT BE WRONG BUT I SEE THESE SHORTS AS MUCH BIGGER AND FASTER THAN THE EURODOLLAR TRADE HAS BEEN.

Here are the options I like here…And I absolutely recommend being in both Corn AND the Soybean Complex.

 

 

Call me if you want to get on…I don’t think you’ll get a chance to be short these markets at these prices for YEARS…So if you EVER short anything, I encourage you to not just sit there and WATCH this unfold.

And PLEASE! PLEASE understand that all of the talk that was present at just about every top in the history of grain trading was just as bullish as it is now. You really do have to realize that ALL of the bullish weather talk, and the statistics about what percentage of the crops is “Gone! Just gone!”, IS probably ALREADY PRICED INTO THE MARKET…And furthermore, do not forget that there is an avalanche of harvest not yet sold here in the USA (that DOES have to be sold), not to mentions the harvests that are just starting to come out of South America…all of which does mean there IS a LOT of selling that’s laying around out there.

I might be dead wrong, and if I am, you can lose every dollar you put on the table…but I DO THINK THIS IS A GIANT TRADE.

Thanks,

Bill

 

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All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.

The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Eurodollars, Corn, Soybeans, Soybean Oil

 

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