Casino
October 29, 2025
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–FOMC today, followed by earnings reports for MSFT, META, GOOGL with AAPL and AMZN Thursday. Stock index futures again pressed higher as NVDA announced deals all over the world. From @KobeissiLetter: BREAKING: Nvidia announces partnership with Palantir. This Nvidia event is crushing every possible expectation by a mile.
–NVDA market cap nears $5T. XOM and CVX combined are around $800b. Russell 2k total cap ~$3.4T.
–The Fed Effective rate ticked up to 4.12 on Monday. From there, a cut of 25 equates to 3.87 or 9613. However, FFX5 settled 9615.0. Perhaps the 4.12 print is an outlier and 4.11 should be EFFR. I suppose there’s a bit of premium just in case Miran gets his way for a 50 bp cut. Jan Fed Funds ended 9639 or 3.61. So another 25 is priced for the December meeting. QT will likely end today as bank reserves no longer appear to be ample. I would anticipate a negative market response if QT does NOT end.
–New lows once again in treasury curve measures. 2/10 edged to a new low 48.7 with 5/30 at a new recent low 93.3. Ten year yield eased another 1.6 bps to 3.979 (with TYZ5 113-150). SOFR strip slight flattening: SFRZ5 9636.0, -0.5, Z6 9700, -0.5, Z7 9690.5 +0.5 and Z8 9671.5 +1.0. As boring as it looks.
–What I was somewhat struck by yesterday is weakness in gambling stocks. Spillover from NBA betting scandal? Or just the realization that a large chunk of the financial architecture resembles a rigged casino? DraftKings (DKNG) tested April’s Liberation Day low. FLUT (parent of FanDuel) had its weakest close since May. Casino stocks also weak: WYNN, MGM, BYD all soft. Perhaps unsurprisingly CME and ICE also ended lower on an up day. This month Polymarket bought derivatives exchange QCX in order to regain access to the US market. Could it be that it’s now just the rats eating the rats?
OXI
October 28, 2025
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–Bloomberg headline: Goldman CEO Solomon Sees No ‘Systemic Crisis’ in Credit Markets.
–Remove the ‘no’ and put it to better use today.
–Jensen Huang to give address to GTC (GPU Tech Conference) today at noon EST. This is the biggest earnings week: MSFT, META, GOOGL on Wednesday. AAPL and AMZN Thursday.
–7 yr auction
–Trade mentioned over weekend bought for 0.5 another 20k: +0QZ5 9706.25c 9.5s vs SFRZ6 9700.5 / -2QZ5 9693.25c 9.25s vs SFRZ7 9690
–More buys SFRZ5 9650/9662.5cs 1.0. Z5 9650c now have 929k in open interest (+57k) vs Z5 futures 1.445m. Z5 settled 9636.5, down 1.5 on the day. Rates overall little changed with flatter bias as 2s and 5s were auctioned. 7s today. Ten year yield slipped back under 4% (3.995, -0.6 bp). 2/10 slight new low, at bottom end of range. Since start of August range has been tight 48 to 60. Since mid-April pretty much 45 to a little over 60. Treasury vol continues to compress to new lows. With 60 days until expiration TYF6 113.5^ settled 1’46, just 4.7 implied vol.
New highs for stocks (not inflationary)
October 27, 2025
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–Bessent names 5 who are still in running for Fed Chair: Waller, Bowman, Warsh, Hassett, Rieder. I would bet Warsh or Reider.
–Friday featured slightly higher rates and stocks at record highs. SOFR contracts -1.0 to -1.5 from SFRU6 to SFRU29. Ten year yield up 1.2 to 4.001% with TYZ5 113-140. The Fed is fully expected to cut 25 on Wednesday with another 25 likely in Dec. End of QT also on the table at this meeting. However, forward expectations of easing have become more muted. Peak SOFR contracts now SFRZ6 and SFRH7 at 9702.5, both were 9711 on 16-Oct.
–Inflation data not as bad as expected but CPI yoy still 3%. Which is exactly where peak SOFR contracts are. Moving towards a future of zero to negative real rates?
–Trump/Xi meeting expected to bring a positive framework, though the idea that rare earth supplies for US military applications start flowing freely is something I doubt, regardless of what any agreement says.
–From Nick Timiraos Friday:
The White House says the October CPI likely won’t be produced due to the government shutdown. If that holds, then Friday’s CPI for September will be the last one that Fed officials see until the morning of the second day of the December FOMC meeting.
As if it matters. When inflation was manifest through exploding financial assets no one cared. The Fed has access to many private forecasts, and the man in the street knows inflation is well above 2%.
–One notable trade Friday: buy of 25k US Monday Week1 Nov (3-Nov) 110.5p for 1. USZ5 settled 118-19. There have been a lot of 1 tick premium downside bond puts bought recently…
Esprit de l’escalier
October 26, 2025 – Weekly comment
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L’esprit de l’escalier refers to the idea of the perfect retort at a cocktail party conversation coming to mind too late, when one is already descending the staircase from the party.
I happen to be reading the book The Art Thief by Michael Finkel, just as the Louvre theft of Napoleonic jewels occurred. Certainly, the crime is outrageous, another blot on the increasingly tattered fabric of civilization. But somehow, I find the old school tactics refreshingly satisfying. Did they hack into the security system and disable all the cameras and lasers? Not that I read. The thieves went in through a second floor window. They used a ladder truck, grinders and fled on motorbikes. No one was hurt. In my mind, I see the thieves synchronizing their mechanical Swiss watches just before the crime is committed. Just like in the movies.
The Art Thief is a true-life book about Stephane Breitweiser, a lover of fine art who committed an astonishing 200 museum thefts in Europe and never sold a single piece. “Stealing art for money, he says, is disgraceful.” He kept all the paintings, small sculptures and artifacts on display in pristine condition in the cramped upstairs apartment he shared with his girlfriend in his mother’s house. He was drawn to the exquisite beauty of certain pieces. The total haul was estimated at an astonishing $2 billion! “Breitweiser’s notion is that stealing artwork should be a daytime affair of refined stealth in which no one so much as senses fear.” An excerpt from the dust jacket summary relates the story back to markets: “Yet these unusual talents bred a growing disregard for risk and an addict’s need to score, leading Breitweiser to ignore his girlfriend’s pleas to stop – until one final act of hubris brought everything crashing down.”
This reminds me of yet another related conversation: At a billionaire’s party the authors Kurt Vonnegut and Joseph Heller were in attendance, and Vonnegut says, “How does it feel to know that our host only yesterday may have made more money than Catch 22 will ever make for you?” Heller responds, “Yes. But I have something he will never have… enough.”
“Breitweiser does not react to every artwork, but when he is transported the response is instinctual and rapid, and often hypnotically strong. ‘Art is my drug’.” The sensation of being overwhelmed to the point of heart palpitations and near loss of consciousness when viewing art is known as Stendhal syndrome. Breitweiser spills into that category.
Every market needs a narrative to propel the price action. AI productivity gains. Inflationary impulses arising from China’s shutdown of rare earth supplies. Debasement of fiat currencies. In the early part of the year, the story was that budget deficits and related supply would contribute to price pressures, making bonds untouchable. Sponsors of that view included Druckenmiller and PTJ. (The 30y yield ended the week on Friday at 4.59%, down 50 bps from May’s high of 5.09%).
Often, a picture helps crystallize a story. I absolutely love the photo taken by Thibault Camus in the aftermath of the Louvre heist, and the description on X by Melissa Chen strikes me as viscerally true.
Actual shot (not AI!) of a French detective working the case of the French Crown Jewels that were stolen from the Louvre in a brazen daylight robbery. Somehow he looks like he’s smoking even without a cigarette in his hand, but surely everything you know about life is screaming at you: this case is officially screwed! To solve it, we need an unshaven, overweight, washed-out detective who’s in the middle of divorce. A functioning alcoholic who the rest of the department hates. Never gonna crack it with a detective who wears an actual fedora unironically.
It’s often said that we don’t let facts get in the way of a good story, but Melissa is apparently wrong about the dapper tourist being the detective. The photographer in the New York Times article says “…he was merely a passerby unconnected to the investigation.” I would note that Breitweiser was fashionably well-dressed, having acquired designer clothes from second-hand stores. In any case this single image and its imaginative description has, for me at least, brought the event completely to life. Others have obviously had similar reactions as noted by this FT opinion piece: ‘The lo-fi charm of the audacious Louvre heist.”
I like to think that in the picture, the closest policeman DOES hate the dapper detective. Fists clenched. Sullen look. Magnifique.
In the financial world we dress our narratives in fancy names. Portfolio Insurance. Relative Value Strategies. Debasement. The ‘final act of hubris which brings everything crashing down’ is often a series uncomfortable suspicions which become realizations. Typically, it’s taking a good idea and overdoing it, like AI or fiber optic cables. Or, what’s more likely to lead to the southbound exit ramp: heavily funding questionable enterprises with debt. If it’s all funded with cash, it simply evaporates, but gusts of bad debt have a way of blowing swirling embers across firebreaks into forests of fresh tinder.
Without the intention of irony, this is the first story I saw on my BBG Sunday morning: ‘Crypto Miner Evokes ‘Barbarians at the gate’ with Huge Junk Deal’. TeraWulf completed a $3.2b debt deal led by Morgan Stanley to expand a data center. From BBG: “investors were compelled by an untested structure: a so-called ‘backstop’ from Alphabet. [one might call it a ‘firebreak’] The company is set to guarantee the debt once the facility is up and running.” …Fellow crypto miner Cipher Mining is next…The company is expected to raise billions in junk bonds that will also be backed by Google and an undisclosed Nigerian Prince.” OK…I added the Nigerian Price part. But it almost fits, doesn’t it?
The Louvre theft and Breitweiser’s exploits are deceptively simple in hindsight. We SEE the guys on the ladder going to the second floor. Probably maintenance guys. If there was a picture with an AI caption, it would likely say: An image of two repairmen with tools climbing a ladder. It wouldn’t say: ‘suspected criminals attempting to plunder one of the world’s great art museums’.
The narrative on the Fed is that the goal is 2% inflation. We SEE that the Fed’s going to cut another 25 this week with CPI at 3.0%. Reports say that China/US talks went well and that the Trump/Xi meeting this week could result in a positive framework. But the suspicion is that China does NOT want to export rare earth magnets to the US that are critical to rebuilding US military systems. We SEE that the NY Fed’s Global Supply Chain Pressure Index is comfortingly at zero. But we KNOW that the Dutch have just taken over Chinese-owned chipmaker Nexperia. Tomshardware.com reports Japan’s Auto Manufacturers Assn has issued a statement that Nexperia may be unable to maintain chip supplies. VW may halt production of two models next week. If the supply of Nexperia chips is not resumed, the ripple effect will cause automakers to halt output. (Nexperia’s chips are essential for electronic control systems in cars).
I’m stumbling down the staircase now, drink still in hand. And it comes to me: “Your investments are going to dissolve like sugar in water because debt that has been layered on crypto and AI is unsustainable.” Pithy, delivered with just the right amount of panache. That, now THAT, would have quieted them down in awed respect.
Although, now that I think about it the next morning as I am rubbing my temples, maybe I DID actually say something like that. Oh, and I might have added a couple of other somewhat less pithy remarks. Maybe that’s why I was asked to leave.
OTHER THOUGHTS/ TRADES
One interesting trade that occurred Friday was +0QZ5 9706.25c vs -2QZ5 9693.75c pay 0.25 to 0.5. Settles: SFRZ6 9702.5, 9706.25c 11.25 (45d). SFRZ7 9691.5. 9693.25c 10.75 (47d). 12.5 bp difference between strikes, 47 dte.
This is synthetic long Z6/Z7 which settled 11.0 and has been in a tight 8.5 to 12 range this month. On unexpectedly aggressive easing this spread should steepen. However, recent history isn’t too encouraging…high in first red/green in April was only 17. And we’re already expecting a 25 bp cut and possible end to QT this week. I would note however, that when they started to ease in late 2007 to early 2008, the first red/green spread went from 40 to 80 in a month.
[I am NOT recommending this trade, just noting that it occurred]
| 10/17/2025 | 10/24/2025 | chg | ||
| UST 2Y | 346.2 | 348.4 | 2.2 | wi 347.5 |
| UST 5Y | 359.2 | 360.4 | 1.2 | wi 360.7 |
| UST 10Y | 400.7 | 400.1 | -0.6 | |
| UST 30Y | 460.2 | 458.8 | -1.4 | |
| GERM 2Y | 190.6 | 196.6 | 6.0 | |
| GERM 10Y | 258.0 | 262.5 | 4.5 | |
| JPN 20Y | 262.9 | 259.4 | -3.5 | |
| CHINA 10Y | 182.3 | 184.5 | 2.2 | |
| SOFR Z5/Z6 | -68.0 | -64.5 | 3.5 | |
| SOFR Z6/Z7 | 12.0 | 11.0 | -1.0 | |
| SOFR Z7/Z8 | 20.0 | 20.0 | 0.0 | |
| EUR | 116.63 | 116.27 | -0.36 | |
| CRUDE (CLZ5) | 57.15 | 61.50 | 4.35 | |
| SPX | 6664.01 | 6791.69 | 127.68 | 1.9% |
| VIX | 20.78 | 16.37 | -4.41 | |
| MOVE | 78.62 | 68.94 | -9.68 | |
Maybe 1-day TREASURY options can be fun too!
October 24, 2025
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–Large trade yesterday was a buy of over 100k TYX5 113.0p (expiring today) for 2 and 3. Traded when TYZ5 was around 113-155. This strike traded 290k with open interest +118k. As of this writing TYZ5 is 113-12, but CPI is released this morning. My understanding is that the data is needed for COLA calculations. A nice big raise in public checks makes everyone happy. In any case, m/m CPI expected 0.4 with Core 0.3. YoY expected 3.1 from 2.9 with Core 3.1 from 3.1. The 2% target has been buried with the Epstein files.
–A bigger story is that (for now) the Trump/Xi meeting is scheduled for Thursday. Could that be negative for treasuries? This might be one of the more interesting treasury option expirations in some time. Remember, it’s not gambling if you have the information tilting the odds in your favor.
–Rates were up across the board, with 2s thru 30s up 3.5 to 4.5 bps in yield. Ten-yr ended 3.989%. On the SOFR strip, prices were weaker, with every contract from SFRM6 to SFRM9 down 5.5 to 6 bps. Peak contract SFRH7 settled 9704, down 5.5. However, there continues to be accumulation of upside: SFRU6 9750/9800cs 7.5 to 7.25 paid for 20k (settled 7.0). SFRH7 9750/9800cs also bought for 10.75, 18k, settled 10.25. They’re buying SOFR call spreads and buying TY puts. Why is 2/10 only 50 bps? I ask rhetorically, because there are plenty of trades both ways and a geopolitical/economic backdrop that allows for wildly different scenarios. I just think 2/10 is on the cheap side.
–On a previous note I highlighted the spread between FFX5 and SERX5 (1 month contracts) as an indicator for reserve tightness. Spread had been trading around -5 but was as low as -10/-9.5 yesterday morning. Then JPM and Goldman suggested that the Fed is going to end QT next week. A block of 43k traded -9.0 which appears to be an exit. Settled -9.0 (9605.0/9614.0). With EFFR 4.11, FFX5 at 9614 or 3.86 exactly reflects a 25 bp ease next week. But one -month SOFR is 3.95. In a way, I would think this type of pricing should put marginal pressure on SFRZ5, even with QT ending. (SFRZ5/H6 settled -24.5).
No gov’t data, but plenty of gov’t edicts
October 23, 2025
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–Here was one headline yesterday: (RTRS) US considering curbs on exports to China made with US software, sources say. Contributed to equity weakness. And here’s one from this morning causing crude oil to jump: (RTRS) Trump sanctions Russian oil majors, prompting oil price rise and India jitters. This morning CLZ5 is $61.40, +2.90, up nearly 5%.
–The big trade yesterday was a buy of 100k SFRH6 9637.5/9631.25ps covered with 6 delta from 9662.5 to 64. Settled 1.5 vs 9664.5. To give a sense of how this might move: SFRZ5 settled right at the top strike, 9637.5. The same put spread in Z5 settled 2.5. Not quite like crypto futures.
–Despite weakness in some single name stocks, ESZ5 was only down 0.5%. Rates barely changed with both 2 and 10y notes down around 1 bp in yield (3.442 and 3.949). It’s worth noting that the 2y yield is down nearly 100 bps since the high in January just over 4.40. SOFR contracts +1 to -1 out four years. Peak contract SFRH7 settled 9709.5 (+1.0), or 2.905% vs current Fed Effective 4.11%, a spread of nearly 125 bps. More interest in upside, for example +15k SFRU6 9750/9800cs for 7.75, settled there vs 9703.0. [NFLX -10%, MSTR -7%]
–November treasury options expire tomorrow. CPI being released in the morning. TYX5 113.75^ settled 25 vs 113-255. TYZ5 114^ settled 1’21.
–Supreme Court begins to hear oral arguments on the legality of Trump’s tariffs on Nov 5. Not sure how long it takes to play out.
Sell gold and buy Argentine pesos. BRILLIANT
October 22, 2025
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–Precious metals crushed Tuesday with GCZ5 -244 late to 4115.0 (-5.6%) and SIZ5 -3.64 to 47.74.(-7.0%). Staggering moves. Stocks nearly unch’d and rates edged a little lower.
–Ten year yield down 2.5 bps to 3.956%. 2/10 treasury spread has been in a long sideways range, but edged to a recent new low of 50.6 (3.453 / 3.959). Range since the start of September is 61.7 to 50.6. SOFR contracts had slight flattening bias as well. New recent low SFRZ5/Z6 at -70.5. Z5 -0.5 at 9637.5, Z6 +1.5 at 9708, Z7 +2.5 at 9698.5, Z8 +2.5 at 9679.5.
–The spread between SERX5 and FFX5 was -9.5/-9.0 late, a new low. (One-month SOFR to Fed Funds). Settles 9605.0 and 9614.0. I think this spread is indicative of tight reserves. I would note the spread is moving down as TGA (Treasury General Account) is replenished. Since July the TGA has steadily risen from $300b to $800b. QT likely ends at the October FOMC. (charts below)
–Settles of first 4 SOFR contracts: Z5 9637.5, H6 9664.5, M6 9687.5 and U6 9702.0…first three pegged to the eighth strikes, 25 apart.
–One new trade caught my attention: +6k 0QU6 9800c for 8.0 covered 9710, 5d. Settled 7.5 vs 9703.0. It’s not that this trade is large, but it’s perhaps notable that the 9800 strikes in red midcurves (2%) have attracted consistent buying interest even though red futures have been capped around 9725. These are peak open interest (OI) strikes.
SFRZ6 9708.0s 0QZ6 9800c 1.0s OI 183k (peak, next closest is 9700c with 127k open)
SFRH7 9708.5s 0QH7 9800c 3.5s OI 92k (this isn’t peak, the 9750c has 124k open)
SFRM7 9706.5s 0QM8 9800c 5.5s OI 55k (peak)
SFRU7 9703.0s 0QU7 9800c 7.5s OI 41k (peak)
Illiquidity is the tipping point
October 21, 2025
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–Quote by Ben Hunt on podcast Excess Returns, talking about recent bankruptcies and the private credit landscape: “You can be insolvent forever, but you can’t be illiquid for a second.” Somehow, the payments have to be made (of course, he didn’t address how PIK fits into that model). The overarching question is, how much hidden leverage is in the system. No definitive answer until it starts to really unravel. The interesting part is that Hunt tracks narratives thru his system Persient, an AI tool that scrapes all news services to identify thematic language links signaling strengthening areas of concern, ideally prior to the ‘common knowledge’ tipping point.
–We’re a little over a week away from the FOMC, with CPI on Friday. FFX5, which prices the October FOMC has settled 9614 to 9615.5 every trading day of October. i.e. around 3.85 with current EFFR 4.11. Ten year yield fell back below 4% to 3.984%, down 2.3 bps, now about 1/8% below the Fed Effective rate. Oil (CLZ5) is hanging around $57/bbl, and lower prices at the pump are obvious, at least in the Chicagoland area A 25 bp ease is in the bag.
–TY vol Is low, around 5.0. TYX5 113.5^, which expires Friday, settled 30/64 ref 113-19. Doesn’t feel like a big CPI surprise is coming. My personal bias though, is that a larger negative crypto washout is near.
–Just a couple of other notes: there’s an article on ZH about the possibility of the US food stamp program (SNAP) running out of funds in November if the shutdown persists. Will NOT happen, but I was surprised by the stat of $100b per year spent on this program. Second, a friend was describing a model pertaining to equity option flows and how prices might react due to this framework. I think the acronym was Click…(close-to-close). These things are on opposite ends of the spectrum. Systematic flows may spark minor market waves, but from generally overvalued levels, if the BIG system loses jobs and benefits, i.e. ‘real economy’ flows reverse quickly, then the market can only go one way.
Trending
October 20, 2025
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–Nikkei at new high this morning, +1600 at 49185. Since the low close in April it’s up 58%. Perhaps partially due to new PM Takaichi, but other markets also strong. KOSPI, new high and up 67% since the April low. Gold and Silver futures (GCZ5 and SIZ5) had key reversals Friday: new contract highs, outside day ranges, good volume, lower settles. I used to consider these formations as actual reversals, now I simply wait for the high to be taken out before buying more.
–China’s Fourth Plenum started today. Probably won’t yield solid news until the end of the week.
–France downgraded by S&P, though German to French 10y spread, while wider, is still only about 79 bps vs high of 86 earlier in the month. Guys that robbed the Louvre were probably creditors of the French gov’t that wanted some collateral. Hard assets. “We already got one.”
–Luke Gromen sees China’s rare earth directives as being squarely aimed at the US defense industry. Oh, so now it’s the Dept of War and not Defense? Good luck making high tech weaponry without rare earth magnets. That’s likely to be the next big US push. Anduril’s Palmer Luckey recently said the company has completely sidestepped all inputs from China.
–Friday featured higher US yields with 10s up 3.2 bps; back above 4% to 4.007. SOFR contracts from SFRH’26 to SFRH’29 were all -3.5 to -4.5. Interesting roll in TY call options out to FEB expiry:
TYG 116c paper pays 28 on 30k vs
TYZ 115c paper sells 17,250 at 16 while selling 1300 tyz futs at 113-17
Feb treasury options expire Jan 23, the week before the FOMC. There is now more open interest in Feb TY calls than Jan: 209k vs 119k with TYG 116c the peak at 58k. By comparison there are 1.46m TYZ calls open with peak strike TYZ 114c, 291k open, 0.39d.
–Here’s sort of a fun ‘not-AI’ manufacturing process for cool cars:
Risk Management
October 19, 2025 – Weekly Comment
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I have to start this one with a disclaimer: What follows are ONLY my personal views. Nothing below should be attributed to RJ O’Brien or StoneX in any way.
“When a manager with a reputation for brilliance tackles a business with a reputation for bad economics, it’s the reputation of the business that remains intact.” -Warren Buffet
In 1983, when they filmed Trading Places, the CME floor was supposed to be the venue. However, the exchange was concerned the movie would besmirch its reputation and denied access. Ultimately it was filmed in NY.
On the trading floor, members wore badges with identifying acronyms (like VAL for Billy Ray Valentine). In the old bond room was a tom-boyish girl, who had an Ivy League education but was a bit ditzy, sandy blond hair, plain clothes, Converse gym shoes. Her badge was AFS. Her nickname: Awfully F-cking Stupid.
In 1993, I had been at a CME members meeting, before the exchange went public, and the Chairman at the time, Jack Sandner, a trim, fiery former amateur boxer was making a speech, “The CME is not in the TRADING business” he shouted. “It’s in the RISK MANAGEMENT business.” That line always stuck with me. We’re not a bunch of gamblers. We’re a critical block in the financial architecture that allows prudent risk transfer from hedgers to speculators.
It’s now obvious to everyone that lines have blurred. But I hadn’t even realized this: The CME partnered with FanDuel to provide a platform for betting markets. For the last couple of days, I have struggled with whether I should say this or not. That’s AFS.
Here’s the CME press release from August:
https://www.cmegroup.com/media-room/press-releases/2025/8/20/cme_group_and_fanduelpartnertodevelopinnovativeeventcontractspla.html
CME Group, the world’s leading derivatives marketplace, and FanDuel, America’s premier online gaming company, part of Flutter Entertainment, today announced a groundbreaking alliance that will launch new products and expand access to financial markets for millions of FanDuel customers in the United States.
This innovative partnership will build on CME Group’s long track record of developing regulated, transparent markets, and FanDuel’s vast customer reach. Together, the companies will develop new fully funded, event-based contracts with defined risk. Customers will be able to express their views multiple times a day on a wide range of markets with simple “yes” or “no” positions for as little as $1. [CME will create a new non-clearing FCM]
Things change. Quickly. Few will likely recall “socks and stocks”. That’s when Sears Roebuck (oh, you don’t remember that?) bought Dean Witter and put kiosks in department stores to sell financial services. From a 1984 article in ‘The Oklahoman’ “Some in the financial industry joke about customers buying stocks and socks and real estate from the same store where they buy underwear and tools.” But the results of a recent survey reveal what may be their true feelings. According to a survey from March in the American Banker, CEOs of big banks said they think Sears will be their major competitor in 1990.”
https://www.oklahoman.com/story/news/1984/05/26/socks-and-stocks-sears-financial-services-catch-on/62802189007/
This is from a BBG story about Robinhood
https://blinks.bloomberg.com/news/stories/T4A708GPQQLX
Like a lot of things Robinhood has done, this latest move [into gambling markets] has been widely derided for what seems like pretty obvious reasons. “The key is to help people understand the difference between gambling, trading and investing—some companies try to blur the lines,” says Andy Reed, head of investing behavior research at Vanguard. “We’re not trying to present investing as something that’s fun or gives you instant gratification. It’s not about dopamine, it’s about serotonin.”
Tenev sees it differently: There’s no reason for the brokerage app—like a grocery store that sells both carrots and Ding Dongs, ground beef and Impossible burgers—not to offer memecoins alongside individual retirement accounts, or to promote both sports bets and financial planning services.
Speaking of risk management, Zion’s and Western Alliance Bank apparently made loans where they thought they would be paid off first from borrower MOM CA Investco, LLC (a CA real estate firm). They weren’t. They discovered they were much lower down in the jenga credit tower (made famous in The Big Short). Is the whole thing about to collapse? I have no idea, but probably not, after all these institutions are overseen by the Fed, with its sophisticated risk management tools. Which, after running the numbers through the model, always ends up with “Hey Jamie, you’re going to have to buy another bank.” The worry isn’t banks. From the IMF, “…nonbanks now hold around half of the world’s financial assets. In the United States and the euro area, many banks now have nonbank exposures that exceed their Tier 1 capital—a crucial cushion that allows a bank to absorb losses and remain stable in times of crisis.”
Staff at the Fed and Treasury are obviously well aware of risks. They are already working on what to do if there IS a collapse. Me? I’m trying to figure out if I should bet a couple of dollars on the Bears game. Not that it’s going to make me rich. It’s not as if I’m the Governor of IL JB Pritzker, who reported $10 million in income of which $1.4m was gambling winnings. Hey JB, ever see that Twilight Zone episode where the low level mobster dies and finds himself in a beautifully appointed casino surrounded by beautiful women, where he can gamble all day? He NEVER loses. Finally he is getting so bored that he says to his jovial and attentive guide, this is awful, I never lose, no matter what. This isn’t heaven!
“Heaven? Whatever gave you the idea you were in Heaven, Mr. Valentine? This is the other place!“
It’s almost like Hillary’s ‘no-lose’ cattle trading in 1978/79. Um, did it ever occur to you that they were letting you win? No, of course not, you studied cattle statistics.
By the time she closed her trading account ten months later, she had racked up $99,541 in profits, a spectacular 10,000 per cent return on her initial investment of $1,000. [She actually opened the account with $25k]
https://www.nationalreview.com/2016/06/hillary-clinton-cattle-futures-windfall/
Look, I might be all wrong about this whole thing. Maybe AFS really was smart.
OTHER THOUGHTS/ TRADES
Powell had previously said the Fed should move from a regime of ‘abundant’ reserves to ‘ample’. Last week he suggested the Fed would stop balance sheet run-off in a couple of months. The spread between one-month Fed Fund contracts and one-month SOFR is an indication of liquidity tightening at the margin, the risk is that reserves fall below ‘ample’. FFV5 settled 9591.25, SERV5 9583.25, spread of -8. FFX5 9615.0, SERX5 9607.5, spread of -7.5. (spread in lower panel)
On Thursday, the ten year yield fell below 4% to end at 3.975 vs TYZ5 113-24. However, rates popped back up slightly on Friday to 4.007 vs TYZ5 113-15. 4% has been the lower yield bound this year, but I think we’re going to see 3.79 to 3.80 this week. In 2024 the low was 3.62. Current DV01 on TY contract is $67.90, so a move to 3.79 would imply ~114-30 to 115-00 given a parallel shift.
In ten year options, long call strikes TYZ5 113, 113.5 and 114 have been rolled to higher strikes, TYZ5 115 and 115.5 and on Friday, partially into Feb (TYG) 116c. From Friday, +30k TYG6 116c 28, vs -17250 TYZ5 115c at 16 and -1300 TYZ 113-17. TYH6 settled 113-12 and TYG 116c 27 (22d). TYG options expire on 23-Jan. The FOMC is 28-Jan; I would note that TY pushed to a new high just prior to the Sept FOMC.
CPI is released on Friday, expected 0.4% with Core 0.3. YOY 3.1 from 2.9 with Core 3.1 from 3.1. Crude oil is near the low of the year with CLZ5 57.15 settle. The 10y breakeven, treasury minus tip, is at a new recent low 227.6, having been as high as 244 in August. Excluding Liberation Day turmoil, where the low was 205 bps, the range since 2023 has been 215 to 248. The market is not concerned about inflation even though the consumer is. Perhaps Friday’s data will change that.
| 10/10/2025 | 10/17/2025 | chg | ||
| UST 2Y | 351.8 | 346.2 | -5.6 | |
| UST 5Y | 364.2 | 359.2 | -5.0 | |
| UST 10Y | 404.8 | 400.7 | -4.1 | |
| UST 30Y | 463.0 | 460.2 | -2.8 | |
| GERM 2Y | 195.7 | 190.6 | -5.1 | |
| GERM 10Y | 264.3 | 258.0 | -6.3 | |
| JPN 20Y | 270.8 | 262.9 | -7.9 | |
| CHINA 10Y | 184.7 | 182.3 | -2.4 | |
| SOFR Z5/Z6 | -64.0 | -68.0 | -4.0 | |
| SOFR Z6/Z7 | 11.0 | 12.0 | 1.0 | |
| SOFR Z7/Z8 | 18.5 | 20.0 | 1.5 | |
| EUR | 116.06 | 116.63 | 0.57 | |
| CRUDE (CLZ5) | 58.48 | 57.15 | -1.33 | |
| SPX | 6552.51 | 6664.01 | 111.50 | 1.7% |
| VIX | 21.66 | 20.78 | -0.88 | |
| MOVE | 81.65 | 78.62 | -3.03 |
