December 6, 2021 

Just 2 months ago, virtually 100% of the financial media was of the firm opinion, that at most, the Fed MIGHT be raising rates ONCE in late 2022…that it  would more or less be a year out in the future before they made any move at all. But today? Even though the Fed STILL has yet to do anything except begin to admit that have been wrong, with Eurodollars now having declined about 50 points since October 1^st, the FUTURES markets have already pushed rates up by 1/2% BY JUNE of 2022…And one more time, the Fed has YET to do anything. As I have noted for many months now, THE FUTURES MARKETS WILL MOVE BEFORE THE FED DOES…THAT THE MARKETS LEAD THE FED, NOT THE OTHER WAY AROUND.

I CONTINUE TO EXPECT SHORT RATES TO RISE, AND AT A MINIMUM, HIT 1.25% BEFORE WE GET TO LATE SUMMER OF NEXT YEAR…WHICH TRANSLATES INTO 98.75 IN EURODOLLAR FUTURES…AND I THEREFORE CONTINUE TO RECOMMEND BUYING PUTS IN THE JUNE AND SEPTEMBER CONTRACTS.

The Fed’s next meeting is Dec 14 & 15 (next week) and per the recent “test the waters” comments from Chairman Powell shown below, I would not be surprised if their post meeting announcement had some very Hawkish language…or…maybe even a rate increase then and there. And yeah, that would be a shock to the financial masses…but it would NOT be the first time in history that the Fed felt the need to take “drastic action” when nobody was really expecting it…I mean really, if things start getting out of hand…as DOES happen…they reach a point where they have to bite the bullet, admit to missing…and then get on with doing what they NEED to do.

Here is Jay Powell, Federal Chairman, speaking last week:

“Price increases have spread much more broadly in the recent few months across the economy, and the risk of higher inflation has increased.”

And then this…Powell has expressed his belief that supply-and-demand imbalances should fade as the pandemic eases, which would reduce inflation. But Wednesday, he said that while such an outcome is “likely, it is only a forecast. “The point is, we can’t act as if we’re sure of that. We’re not at all sure of that. Inflation has been more persistent and higher than we’ve expected.”

Here are the two gauges of inflation…at the Consumer and Raw Material levels…

I continue to believe that the move up in interest rates, and therefore down in Eurodollars, is JUST getting started…that from the standpoint of what needs to happen, the market has really gone nowhere…so far.

So, if you agree with me, I urge you NOT to think, “They have already moved. I have missed it.” NOT TRUE. So if you DO agree, please do get in touch with me and do something with this…

Here is one option I like at current levels…

Again…NOT too late to initiate…OR to add.

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: Eurodollars