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November 22, 2021

 No Economic news

&

Sharp new lows in Eurodollars today


You’d better believe that all those guys that make Fed policy ARE human. And that there is not a one of them who is oblivious to the louder and louder opinion among their economic and financial peers that their “transitory” call for inflation back in April was badly in error…and that they need to immediately (or months ago) begin lifting short term interest rates.
My guess is that every single one of them MUST be wondering, “maybe we’ve been wrong.”

To be sure, as I have written forever, the massive Eurodollar futures market (bigger by itself than all of the futures markets in the world combined) generally moves AHEAD of the Fed and that is precisely what has been happening…to the extent that the markets have already built in approximately three 1/4% increases in 2022…and the Fed has yet to even make its first move!

So it’s no longer a question of when rates will start higher…again, outside of the Fed’s boardroom, they already have started moving…but by how much they will need to go up…which I believe, especially with the Fed having already waited too long, at a bare minimum, will mean something like getting to the 2.5% level…and fairly quickly so…I mean, let’s face it, going from almost zero to 1/2 or 3/4 or even 1% won’t slow anything down…not when you’re experiencing the worst inflation in 30 years…which also implies perhaps having to play catch up, leading to a surprise Fed announcement of a “revised outlook” and the need for “faster, bigger increases than we originally anticipated.”

As defined by the charts here, the bottom line IS that RATES HAVE STARTED MOVING HIGHER…and I continue to emphasize that I BELIEVE THAT THIS MOVE IS JUST GETTING STARTED…and I THEREFORE CONTINUE TO RECOMMEND BUYING PUTS…

There is a TON of inflation and economic data coming out on Wednesday (packed together because of the holiday) and I think the odds are high that some, or all, of it will hammer it home…again…that THE FED NEEDS TO MOVE…Therefore, my feeling is that it just makes sense to be there, if you can, ahead of those reports that start coming out at 8:30 AM.

 

If you are interested, there are definitely other options, with more or less leverage…and in other months…but this my recommendation going into the reports on Wednesday…

Call me if you want to know more…

Thanks,

Bill

770-425-7241

866-578-1001

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

 

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