November 10, 2021
The Fed DOESN’T Know
They DO change their minds…
The Fed is losing all credibility. Too easy for too long...and their policy since April of wishing and hoping that inflation will just "go away" has led to the highest inflation of my lifetime. Today’s number MUST be a wake up call for those guys and I’d say you’re close to braindead if you think that every one of the governors (doves and hawks alike) aren’t TOTALLY reconsidering this whole thing about inflation being “transitory.”
I can only imagine that their next move will HAVE to be AGGRESSIVE. I have seen this script before, where the Fed suddenly says, "We've revised our forecast," (been wrong) and now “see the need to move more rapidly,” which CAN lead to shockers like the Fed moving rates up in 1/2% increments instead of the 1/4% bumps that have been the standard for a while…Like I said, I have seen this script before and the Fed has no compunction about totally reversing course and SLAMMING on the brakes, as there does come a time when they simply have no other alternative.
Here’s a very recent blurb referencing Fed comments during the past few days…BEFORE today’s number came out.
“Chairman Jerome Powell and other senior Fed leaders say inflation should subside next year and return close to their 2% target, but they acknowledge price pressures have been much stronger than they anticipated. They say they are watching prices closely and are prepared to respond if high inflation persists.”
Eurodollar futures were sharply lower today and are now reflecting that a rapid rise in rates (outside of the Fed's boardroom) has ALREADY started.
I CONTINUE TO RECOMMEND BUYING PUTS
Here’s the option I would buy here…
Maybe I am wrong and this thing is just going to sit here sideways until next June…thereby maybe losing every dollar you put on the table…but I LOVE this trade. Big leverage and a ton of time.
It’s NOT too late guys…to get started…or to ADD…If you think this makes sense, stop watching and do something with it…
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