August 15, 2017
Perhaps there are some emphatic statements here…These are my opinions.
For decades I have watched economic forecasts (some of my own included) routinely be miserably inaccurate regarding just about any measure you want to name; be it GDP, employment, inflation numbers, earnings, interest rates, market prices, etc…WHATEVER. Whether it’s the talking heads, analysts, economists, brokerage houses, or even Fed governors, while they don’t have it wrong all the time, economics is not known as “the dismal science” for no reason at all, which is why you so FREQUENTLY see surprising reports indicating something like, “The economy is far stronger (or weaker) than analysts had been expecting.”, which is EXACTLY what I think we are in the process of seeing now. I CONTINUE TO SAY THAT THE US ECONOMY IS ON AN EXPLOSIVE UPSURGE THAT IS/WILL BE FAR STRONGER THAN THE ANALYTIC MASSES ARE ANTICIPATING…AND WE ARE ABOUT TO SEE THE SHARP UPTICK IN RATES THAT VIRTUALLY NO ONE IS NOW EXPECTING. It may sound naïve, but just walk out your door and tell me that there is ANYTHING slow about the activity on the roads, or the construction sites, or factories, or at the airports…or ANYWHERE in this country.
Back on May 18th, with one of my many predictions that the Eurodollar market was then immediately ready to begin moving sharply lower again, I presented charts of this market that represented every interest rate increase campaign we’ve had since 1989, with the specific purpose of showing you how quickly rallies in Eurodollars DO reverse to the downside as interest rates climb higher…with my very definite expectation having been, and still being, that we were about to see precisely that once again.
Here are excerpts from that newsletter…
There have been 4 rising interest rate cycles going back to 1989…
meaning, 4 bear markets in Eurodollars…
What I want to show you here are:
How big the downswings were.
How long they took to develop.
How quickly rallies within those bear markets reversed (and why you need to act just as quickly when they do reverse, as I believe is exactly what we have had today).
From May 18, 2017
Check out the past four bear markets in Eurodollars for yourself…
You will find that no two markets are alike, but that there ARE similarities, one especially being how the rallies end, literally, from one day to the next, and almost immediately start falling…
And here is what Eurodollars look like today…
And here is some INCREDIBLE leverage…with 7 MONTHS OF TIME…and I swear, the next 7 months WON’T be like the last 7.
The switch WILL get flipped…if it already hasn’t…and any ideas of the US economy being too slow, WILL be replaced by ideas of “too fast”, and the interest rate markets WILL go back to more normal levels. And if history is any guide at all, it will be happening long before you can see it in the headlines.
A final note…
There is talk all over the media about how this or that billionaire is bearish the stock market...or that stocks are "overvalued"...or "due for a correction", or that “earnings will slow”, etc. etc. ETC! While the direction of the Dow is certainly tied to the economic health of the economy, how HIGH or low it ever goes is more a function of mob psychology than anything else. This IS a game and until virtually ALL the players go silent on the idea of a top, or a correction, I say this thing will keep going...I don't care how rich they are, or if they "called it right" before, when the stock market IS ready to stop, all you will be hearing is how FANTASTIC everything is, and “you gotta be in it!”, which is NOT what’s out there right now...And finally, I look at this next chart and think, "25,000 looks like it's no more than an eyelash away." And then I will keep telling you that THE STOCK MARKET IS SIGNALLING THAT SOME VERY STRONG ECONOMIC NUMBERS ARE COMING…AND ONE MORE TIME, IN MY DUMDUM OPINION, THERE IS NO WAY THAT RATES ARE GOING TO BE ANYTHING CLOSE TO TODAY’S LEVELS.
DO SOMETHING with this!
The fact that we have gone sideways to higher since mid-March does not mean I am wrong…The last 4 months have NOT been fun…And I don’t need any sympathy but you’d better believe that this has been 10 times tougher on me than any client I have…sickening really. But what will REALLY be sickening is to now see this thing GO…and NOT have been on it.
And here’s a PS, just for the hell of it…
When I was about 12, my father recited Rudyard Kipling’s “If” to me. I was so moved by the message that I immediately memorized it…and have kept a copy on the wall just about everywhere I’ve lived…And last year I had framed copies made for my two sons…I’m sure Kipling had no intention of having the poem serve as an inspiration to a two bit commodity broker…but there ARE lines in here that do apply. Being a lifelong jock, I would say that the highlights in red are my favorite lines…the whole idea of pushing yourself to the limit…and being able to tough it out.
f you can keep your head when all about you;
All option prices 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