October 19, 2016
The Stage is Set…
Stocks are ready to GO…
And Eurodollars are too…
Do you think Facebook, Amazon, Netflix, Google, Microsoft, Home Depot, General Electric, Exxon and a host of other giants are going to be shrinking in their revenues and economic influence on the world as we go forward into 2017? I certainly don’t…As I have steadfastly maintained for some time, ALL of the blather about “weak” USA and World economies is just the usual backward thinking, gobbledygook DOUBT we have heard from analysts during virtually the entirety of the TRIPLING of the Dow since 2009.
I CONTINUE TO TELL YOU THAT THE NEXT NEWS IN THE STOCK MARKET WILL BE ITS, “SURPRISING STRENGTH, CONTRARY TO ANALYSTS EXPECTATIONS!”
I CONTINUE TO BELIEVE THAT WE ARE IN THE INITIAL STAGES OF A MASSIVE UPSIDE BREAKOUT…AND TRULY DO WALK MY OFFICE EVERY WEEK EXPECTING TO SEE BULLISH FIREWORKS…THEN AND THERE.
AND I CONTINUE TO BELIEVE THAT THE HEIGHT OF MEDIA/MARKET STUPIDITY IS PRESENT IN EURODOLLARS (SHORT TERM INTEREST RATES) IN THAT THIS MARKET STILL IS ANTICIPATING NOTHING MORE THAN A 1/8% INCREASE IN RATES BETWEEN NOW AND JUNE, 2017.
STOCKS ARE GOING HIGHER. THE ECONOMY IS GOING TO DO NOTHING BUT CONTINUE TO STRENGTHEN…AND RAPIDLY FROM HERE, I THINK, AS WE HEAD TOWARDS 2017… AND INTEREST RATES ARE GOING HIGHER…IN FACT, AS I HAVE REPEATEDLY NOTED, THEY HAVE ALREADY BEGUN TO DO SO.
Stocks are moving…and Wall Street is yawning…
And so…then there is this…that as Stocks do take off, I see NO REASON to expect anything but the opposite in Eurodollars…
I REITERATE: IN MY OPINION, THERE IS NO REASON WHATSOEVER FOR RATES TO STILL BE AT THESE CURRENT ABNORMALLY LOW LEVELS…AND THE MARKETS WILL MOVE RATES HIGHER LONG BEFORE THE FED MAKES IT OFFICIAL…AND NOT TO BEAT THIS TO DEATH, BUT I WILL REPEAT: RATES ALREADY HAVE STARTED MOVING UP.
I have also recently been making the point that the markets do get STUPID at times, particularly when they have reached extremes…more often than not, driven by the yakheads to absurd levels, spurred on by sheep herd mentalities that ultimately, ALWAYS, seem to end with disastrous consequences…
Here are a few examples from recent years of what I’m referring to; cases in which prices…and the talking head “logic” really did get stupid…Some of them you should easily recognize…and will hopefully remember how UNANIMOUSLY bullish (and wrong) all the genius Wall Street and internet boobs actually were…
AS STATED BEFORE, I THINK THESE ARE ALL PERFECT DUPLICATE EXAMPLES OF HOW THE MARKETS CAN ROUTINELY BE “STUPID”…AND THEY ARE JUST A FEW OUT OF HUNDREDS I HAVE SEEN…
So now ask yourself…Were ANY of these markets “fairly priced” when they were on their highs? Did those prices make any sense at all? And was ANYBODY in the analytic masses….where ALL of the information the public acts on is generated…in their wildest dreams (eventual nightmares to them) even close to suggesting the types of down moves that followed?...I think not. I know they weren’t. They NEVER are..
The point is, you DO have to make bets in this mob psychology game when NOBODY else is making them…, You HAVE to do what nobody else is doing. You HAVE to be able to ignore mountains of Wall Street “logic” that argue against what YOU think is “logical.” You HAVE to decide for yourself…and then do what is the hard thing…and that is, ACT on what your own common sense tells you…and put your money on the table.
And so, where does that leave us when it comes to Eurodollars? Here’s the long term…And do note that the smallest upward move in rates during the past 35 years was a 2 % increase.
So…What is the difference here from all those examples?...I say NONE…here is “logic” all over the place arguing that “rates will be staying low”, or that, even “if they do go up. It will only be a little…or it will happen very slowly”, all of which I think is EXACTLY THE SAME FLAWED BUNK I HAVE SEEN TOO MANY TIMES TO COUNT (REALLY).
I might be dead wrong but I swear that this market…this chart…WILL look like all of those previous examples WITHIN THE NEXT 9-12 MONTHS. The economy is expanding. The economy is growing. Stocks are going higher. An absolute boom is cranking up…AND I SAY INTEREST RATES ARE GOING UP…WHICH MEANS EURODOLLARS ARE GOING DOWN.
Here’s the June 9887 put I am still buying…
Maybe I am the one being STUPID, but I think anyone who doesn't think rates will move up at least 1/2 % in the next 9 months needs their head examined…or better yet, needs to go hire on as one of those brilliant Wall Street analysts who have been “cautious” about stocks for the past 7 years.
A final note…and an important one: There are already several Fed governors pointing out that the markets are “underestimating the speed at which rates may rise”. This, I believe, is EXTREMELY meaningful…And that is EXACTLY WHAT I THINK AS WELL.
These options have gotten incredibly, almost unbelievably, cheap in the past six days as MORE of the “rates not going up soon” sentiment hit the markets…to the extent that all I can say is, “NOBODY WANTS THE PUTS I AM BUYING”. AND BELIEVE ME, AS LONELY AS THAT MAY SEEM, THIS IS PRECISELY THE WAY I WANT IT TO BE.
Get some. Get more. I may be dead wrong, but more so than ever, I think this is the biggest trade I have ever seen…I SEE 2017 AS NOTHING BUT UP FOR STOCKS AND THE ECONOMY…AND SEE NO WHERE TO GO FOR RATES BUT HIGHER…AND MAYBE A LOT HIGHER…BIZ IS ALREADY STRONG EVERYWHERE….ASK ANYBODY WHO IS IN BUSINESS, ANY BUSINESS…AND I AM CONVINCED THAT NEXT YEAR CAN ONLY BE EVEN BETTER.
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