(not) Out of Reach
April 22, 2021
–New all-time low 3 month libor at 0.17288. EDM1 settled 9981.5 or 18.5. The rest of the eurodollar curve was modestly lower, down 0.5 to -1.5. Treasuries also nearly unchanged.
–While lumber pulled back from stratospheric heights on Tuesday, other commodities had upside runs yesterday. For example, June Palladium made a new all-time high closing over 2875. Platinum is still well below the ath made in 2008 just above 2300 (now at 1212) but that’s not to say that your catalytic converter won’t be sawn off. Gold is well off the ath made earlier this year at 2075 (now 1795) but it’s perking up. Grains are on fire, with May beans near 1500…which compares to a high in 2008 of 1663 and in 2012 of 1795. May Corn is at a new high 625 vs 765 in 2008 and 845 in 2012. I will bet we eclipse those highs this year. C Z1 700c settled 16 ½ and 800c settled 8,ref 536 1/2, so it’s not crazy cheap to express that view. In my younger days I might have suggested buying that 1×2 for 0. Now, if my younger self suggested that to my older self, I’d slap him. A friend of mine says he’s heard reports that farmers have sold a significant percentage of new crop already to lock these prices; beware when the sellers have exhausted their supply into a rising market.
–Bank of Canada announced a taper which was as expected, but they also expressed confidence in the economy, with the market moving up timing on actual hikes. For example June 22 vs June 23 BA calendar rose 4 bps on the day to 70.5, with the former down 2.5 at 9935.5 and the latter down 6.5 at 9865. By comparison, June 23 eurodollar is 9936 as Powell sleepwalks the market into an inevitable inflationary disaster. Or, maybe not. After all, we can still buy Steven Seagal’s Scottsdale home for just $3.4 million. That’s not out of reach; a fully financed jumbo mortgage at 2.5% is just $13.5k a month. Can probably get that for a long weekend as an AirBnB. And if you find that you’re Under Siege, it has bulletproof glass.
