Oct 11. Food crisis on horizon?

Oct 11.  Let’s face it, it’s not really “inflation” that the Fed wants, the true fear is a downward spiral of asset prices spurred by deleveraging. Like we’re seeing in real estate. Upward trajectory in asset prices will hopefully create confidence, help hiring, etc.  But a simple rise in the price of things isn’t going to do anything for the economy if wages and employment don’t go up.  The price of grains/commodities simply exploded Friday.  Just think of how that type of “inflation” works for the restaurant industry, for example.  The price of input goes up.  Can restaurants automatically raise the price of output on the menu?  Cash strapped consumers may just stop going out as much.  Net effect could be job LOSSES.   
–Near eurodollar calendar spreads continued to make new lows.  For example, red pack to green pack is only 60 bps. 
–Interestingly though, the back end of the curve was nearly unch’d.  The 30 yr bond yield was actually slightly higher on the day.  That’s a cautionary signal for those pinning hopes on QE… The weaker dollar and concurrent rise in commodity prices may be giving some pause to back end of curve.
–A lot of the job losses were those shed by local governments.  As I have mentioned before, in many ways federal stimulus is being cancelled at local/state levels.  Additionally, all sorts of fees for licenses, permits, etc are climbing, at least around here.

Posted on October 10, 2010 at 6:47 pm by alexmanzara · Permalink
In: Eurodollar Options

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