July 28, 2016
Interest Rates have ALREADY started rising.
When Interest Rates go UP, Eurodollars go DOWN
I CONTINUE TO BUY EURODOLLAR PUTS.
Plain and simple, they are short term (3 month) interest rates on Dollars being lent or borrowed internationally. As noted above, when interest rates are going up, Eurodollars go DOWN (just like Treasury Bonds).
The Eurodollar Interest Rate actually follows LIBOR (London Interbank Offered Rate) which many of you are probably familiar with…In fact, a chart of the two is virtually identical…When LIBOR is going up (rising interest rates), so too does the Eurodollar Rate…
Various factors can push interest rates higher…one of them being, MORE DEMAND FOR BORROWED MONEY PUSHES THE PRICE OF MONEY (INTEREST RATES) HIGHER…And if you want to believe all the BS about how weak the world is economically, go right ahead…But as I have been writing here for months, all the hogwash about weak China, weak Europe, weak World, weak USA…and most recently Brexit…is ALL just that, a bunch of BS hogwash dreamed up by the forever backwards banks and brokerage houses…Cheap money, cheap energy, and a host of other factors are stimulating consumption AND inducing businesses worldwide to expand…REALLY!...And expansion(as in, for example, building new factories, or constructing new buildings) is generally done with borrowed money…I mean, take another look at the last activity on the chart…If there was nothing more than meager demand for borrowed capital, do you really think LOBOR would be making new highs? LET THE MEDIA AND TALKING HEAD NITWITS CHATTER ABOUT “RATES STAYING LOW” ALL THEY WANT…I AM TELLING YOU INTEREST RATES HAVE ALREADY STARTED THEIR MOVE HIGHER…
How much will rates go up? Check out what has happened in the past on the chart following…And do note that, typically, when rates start rising, they do so for at least a few years. Since 1984, there have been 5 of these rising rate cycles...the SMALLEST having been 2%...so, to me, to expect ANYTHING less than that just doesn’t make sense…
In recent newsletters I have been referencing 98.00 as a target…The truth is, I honestly expect to see something more like the 97 area before this rising rate cycle ends….
TO BE CLEAR, THESE OPTIONS HAVE ALMOST A YEAR OF TIME…
Again, I know that many of you are not familiar with this market, so if there is anything here you don’t understand, give me a call and I am sure I can set you set you straight…
In my mind, there is not an industry in this country that is actually “sliding” right now…Vehicles, construction, housing, airlines, technology, health care, retail…even energy…REALLY…Maybe you could say that agriculture is a little “soft”, but when you get down to it, $10.00 Soybeans are not exactly the end of the world…The point is, THERE IS NO NEED TO FOR RATES TO BE THIS LOW ANY LONGER…AND AS I KEEP REMINDING YOU…AND REMINDING YOU…THE MARKETS WILL MOVE RATES UP LONG BEFORE THE FED ACTUALLY MAKES IT OFFICIAL…If you want to sit there and watch analysts flap their gums about when, or how rapidly, the Fed will make their moves, I say you are once again allowing yourself to be sucked in to the idea that those guys actually understand ANYTHING about how the markets actually move…AGAIN, THE MARKETS MOVE BEFORE THE FED DOES.
CALL ME…RATES HAVE ALREADY STARTED RISING.
All option recommendations in this newsletter include all fees and commissions.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Eurodollars