Similarities 2007 and now
April 22, 2025
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–On April 14, it was announced that RJ O’Brien would be acquired by StoneX (SNEX). It’s not the first time RJO was sold.
In 2007, Spectrum Equity Investors and Technology Crossover Ventures bought a majority stake in RJ O’Brien & Associates. I found an old article which notes the deal from May 28, 2007
A press release from Dec 13, 2010 (prnewswire.com) reported that the family bought back majority control in late 2010, about 3.5 years later.
In mid-2007 the FF target was 5.25%. Within 1.5 years, by the end of 2008, the target was zero. Clearing firms make a lot of money on positive carry of client funds, and the fall in interest revenue was a factor in the diminished the value of the company. Last week StoneX announced the acquisition. The current midpoint of the FF target range is 4.375%; the high was 5.375% just prior to the first ease in September of last year. It’s also worth mentioning where CPI was during these periods.
In 2006, the high CPI print was 4.5%. But by October 2006 it was down to 1.3%, when it again began to climb. Similar to recent action. By mid-2007, CPI was 2.4 to 2.5%, but in October it printed 2%. The first Fed cut of the GFC was in September 2008 (just as the first ease of this cycle was Sept). As the Fed was easing, CPI shot higher. By July 2008 it printed a high of 5.6%.
Those among us who think the Fed CAN’T EASE because of high inflation prints would do well to recall this period.
–Wild steepening yesterday, with 2/10 up 12.5 bps to 65.9 and 5/30 up 8 bps to 95.0. I’ve included a chart of 5/30. On the SOFR strip the red pack (2nd year forward) was +7.0 to an avg price of 9688.375 while golds (5th yr forward) were -7.625 to avg price of 9607.5. Even deferred 3 month calendar spreads are at surprising levels. For example, SFRM9 settled 9617.5 and the next contract, U9, settled 9610.5. A spread of 7 that far forward is elevated. I am NOT suggesting it’s a sale, just noting that the steepener trade is a bulldozer. As every headline blares, gold is also making new highs with a sizzling gain ytd of ~ 30%. The new world order will likely embrace monetization of gov’t debts. Gold and the curve reflect that.
–TSLA reports today. 2y auction. Philly Fed Services (-32.5 last).
–Here’s an article that helps explain the difference between average and median:
From the comments: ‘The average American is a millionaire. The median American is holding up a “please help” sign at a stoplight’.
