February 1, 2024

Interest Rates

Yesterday’s Fed meeting, in which they left rates unchanged, stating that they were waiting on more inflation data and weren’t in any hurry to lower rates…was immediately characterized by the talking heads as disappointing…but the market’s own answer was for the three interest rates contracts we own here (Two Year Notes, Ten Year Notes, Treasury Bonds) to absolutely take off on the upside.

My conviction remains that pandemic induced SUPPLY DISRUPTIONS artificially created the high inflation we experienced (note PAST tense) during 2021…and NOT the low interest rates which we’d had for years, WITHOUT significant inflation. And now, as we get further and further beyond the pandemic, we are returning to normalcy, and possibly even sharply LOWER inflation levels than the Fed is even hoping for…which WILL, I think, lead to short term rates back down to at least the 3% area.

Put that together with the fact that Large Speculative Funds are still MASSIVELY, MASSIVELY SHORT Interest Rate Futures and it does argue that the bull moves here are just getting started…and may be on the verge of turning explosive.

This is the same chart (updated) that I sent out in mid-January…

I am still long and still recommend owning calls from the Two Year Notes out to the Treasuries…

And US Treasury Bonds are still THE safest and most desired piece of fixed income paper on the entire planet…And such, aside from improving inflation, ANY major geopolitical crisis can attract heavy Treasury buying…

With one day to go, BONDS HAVE TRADED UP ABOUT 5 POINTS THIS WEEK…AND I THINK WE COULD DO THE SAME, OR BIGGER, IN THE WEEKS TO COME. I’LL SAY IT AGAIN. THIS IS THE BEST, AND MOST GLOBALLY HELD, PIECE OF LONG TERM PAPER ON THE PLANET…AND WHEN YOU GET THE WHOLE WORLD (LITERALLY) IN A BUYING “MOOD,” THERE’S NO TELLING WHAT CAN HAPPEN.

New Highs Again in Cotton

And Cotton looks more and more like it is truly lifting off…Meanwhile, all I see from analysts is, “ DON’T buy it. There’s no demand,” and “China (big user) is going in the tank, so how can Cotton possibly be going higher?”, all of which is just absurd. The USA and World Economies are doing nothing but expanding from here…and Cotton is going with it…And not to forget, as I have noted several times recently , farmers, hearing all the dire warnings about prices going down, since January 1^st have been selling this year’s crop with both hands…meaning all that Cotton is now owned by the merchants, which is the classic formula for a bull market…When the farmers don’t have it is when the market takes off…

Old chart axiom is: Big Consolidations are usually followed by BIG non-stop moves…And after basically going sideways for all of 2023, this sure looks like it fits that bill.

Soybeans down 19 cents today

& looking ready to bust wide open

And oh yeah…Soybeans close down 19 cents today ($950 per futures contract) and look like…ANY day now…they ARE going to bust through and turn totally, totally NASTY on the downside…I might be dead wrong, but to see this market knock off some 50-60 cent down days, dead ahead from NOW, would not surprise me in the least.

My experience suggests, that at some point, this slow-go slide for the past 2 ½ months, literally from one day to the next, turns down with a vengeance…and DOES…yeah, as I keep saying…JUST GO STRAIGHT, STRAIGHT DOWN. Maybe I’m wrong, but it sure does look, and feel, like that’s what right in front of us.

I see these as 3 great trades with BIG dollar potential in all of them and encourage anyone who is interested to own all three.…While it certainly does not mean I will continue to have these markets right, and if I am wrong, you can lose every dollar you invest, but these markets DO appear to be on the move…and importantly…DO HAVE DIRECTION…which, after all, IS probably the single biggest factor in being on a successful trade.

I urge you to stop just watching these markets happen…and also will reiterate that is NOT too late to get on…

Pick up the phone guys…

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: all of them