The Dukes may again have their day in the sun.
The 1983 social satire classic, Trading Places opens with the commodity-king maker Duke Brothers making a bet.
Can they educate homeless grifter Billy Ray Valentine (Eddie Murphy) to swap places with Harvard educated Louis Winthorpe (Dan Akroyd) to run their commodities empire.
The Dukes were betting on Nature or Nurture.
We are betting that the Orange Juice Futures are back, and so is Beaks.
Why?
Trading Places was written 2 years after interest rates started their 40+ year descent, ushering in the multi-decade bull run for banks and financial assets.
With the benefit of history and time, we see that commodities had their day in the sun, and bonds were the new leader.
Today, the low growth-Japanese players appear to see a turn in the market, again favoring commodities.
The reversal of fortune for bonds and commodities was October 1st 1981, the effective date of the Salomon Brothers purchase by commodity house Phibro.
This was the day after the UST 10 Year peaked 15.84%, starting a 40 year, 1550 basis point descent that inflated all manner of asset prices along the way.
Salomon was a sleepy bond house with bold trading strategies ranging from innovative to illegal, famously chronicled by Michael Lewis in 'Liar's Poker'.
But Salomon has gone the way of Louis' watch, sold to Citi, stacked in a warehouse of pawned financial assets of declining and ultimately unrealized value.
Citibank was envisioned to be a financial supermarket by Travelers CEO Sandy Weill and his protégé Jaime Dimon, to catch the wave of opportunity that declining interest rates provided.
But that wave has crashed, leaving today's Citi CEO, Jane Fraser, with the job of dismantling Sandy and Jaime's experiment.
Where banks are unwinding from a multi-decade binge of mergers, leverage and capital misallocation, commodities are reversing course.
Our graph shows the stock prices of Citi and US Steel Corp.
Both have underperformed since the global financial crisis, leaving us to ask, why Nippon would pay a 149% premium for the company?
And why Gold has punched to an all time high?
Why did Warren Buffet visit and re-invest in each of his five Japanese banks that traffic in commodities, to affirm his interest in the asset class.
Why are the BoJ and Bank of China (BoC) buying gold?
Are we entering a new investment paradigm?
Are Japanese companies and banks best situated to see the turn given their sensitivity to growth?
We think the answer is yes. An investment paradigm that involves, both hard assets like steel and gold, as well as digital assets like Bitcoin and Ethereum.
Where Beaks had the wrong data on the orange juice crop reports, we see signal in an August 29th Federal Court decision that paves the way for a BTC spot ETF in the US and more.
For more, see our website, https://lnkd.in/e8KQ-YU9