Replies to post #1231 on Mining Sector Ideas

[gfp927z]

Bigworld, Yes, the debt bomb is entering the later innings, but I figure the finance magicians can likely hold things together for a number of years. I figure the US debt hitting 40 trillion could be a key turning point, and then sometime prior to it reaching 50 trillion the debt / dollar crisis will arrive. But just a guess.

Fwiw, I used this morning's bounce to reduce the stock allocation a little more, down to 12.5%. So that should do it (hopefully). I sold off the liquid S+P 500 index portion, and kept the individual stocks and sector ETFs. 200 plus individual stocks are too cumbersome to sell, so the idea is to keep them (12.5%) as long term buy / hold. Anyway, that was the original plan, so I'll try to stick to it. I figure the cash proceeds will earn ~5% with no risk, and can be re-deployed later. Buying a 1X short ETF (SH) to hedge the remaining stock exposure is an option at some point, but I figure that earning 5% in cash is good enough. The permanent 12.5% in stocks will benefit as the stock market eventually recovers. Anyway, I figure it's best to have all bases covered, and never go to zero in any asset class.

Anyway, still a work in progress, but it turned out that 28% in stocks was clearly too high for an aging nervous nellie like me. Buffett and Bogle both said that the key is finding the right allocation you can live with (without insomnia or daily Tagamet). I thought the old rule of subtracting your age from 100 might work, but 31% in stocks is clearly too high on the 'Tagamet scale'.



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[gfp927z]

>>> Fed's reverse repo facility plummets to lowest level in nearly three years

Reuters

Apr 15, 2024

By Michael S. Derby


https://finance.yahoo.com/news/feds-reverse-repo-facility-shrinks-174128320.html


NEW YORK (Reuters) - A key Federal Reserve facility that takes in cash from money market funds and others saw inflows drop sharply on Monday.

The U.S. central bank's reverse repo facility took in $327.1 billion, down $80.2 billion from Friday, marking the lowest level of inflows since the facility took in $293 billion on May 19, 2021.

The Fed's reverse repo facility exists to put a floor underneath short-term rates, taking in cash from eligible firms in loans collateralized with Treasuries held by the central bank. Inflows have been contracting for some time as the Fed withdraws liquidity from the financial system by allowing its holdings of bonds to shrink.

Monday is the deadline for most U.S. tax returns and a key settlement date for Treasury debt auctions, which can influence activity at the reverse repo facility. Scott Skyrm, executive vice president at money market trading firm Curvature Securities, says money is coming out of reverse repos to deal with financing the Treasury's debt issuance.

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[gfp927z]

Bigworld, Concerning that repo market news (previous post), the Fed will soon be easing back on the current QT policy, with the monthly QT being reduced from $60 bil to 30 bil (see below). So even if there are no % cuts until later in the year, the reduction of QT provides some added liquidity to the system.

But since the longer term Treasury auctions have not been going well, they are reportedly "shifting to financing America’s deficit mostly with short-term debt". Not being able to sell longer term bonds does sound ominous. With my own Treasury bond allocation, I only went out 2.5 years (to Dec 2026), in part because the US debt monster is growing so fast, and might conceivably reach 40 trillion by late 2026. Fwiw, I figure that is the debt level (40 trillion) where the growing debt bomb could really become a problem, so my tentative strategy is to have the bond allocation much reduced by 2027. I figure the major problems start as the US debt moves from 40 ---> 50 trillion. But what to use instead of bonds? Hard assets, real estate, commodities would be the logical place, as you have already done.



>>> “We’ve been losing liquidity as people and companies pull out money to pay taxes,” said Thomas Tzitzouris, head of fixed-income research at Strategas. “We’re in a bit of an air pocket that’s letting the bond market float more freely and yields rise.”

One line of support is likely to come from the Fed. Minutes from the Fed’s March meeting, released last week, showed that policymakers are looking to slow the pace of running down the central bank’s large holdings of bonds accumulated to prop up the economy. They would likely reduce the rate at which they let Treasurys mature to $30 billion a month, half of the current $60 billion pace.

Balance-sheet runoff, known as quantitative tightening, is meant to drain the banking system of reserves and increase the market’s share of the sovereign-debt pile. With the Fed paring back that program, and prepping to stop it sometime in the future, investors will have to absorb a smaller net share of Treasury securities. That could support bond prices and remove some upward pressure on yields. <<<

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=174235707




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[gfp927z]

Chart-wise, the main stock indices are nearing oversold, based on the RSI (under 30 is oversold) -

DJIA ------ 31
S+P 500 - 39
Nasdaq -- 42
Russell --- 37


Wall Street is waiting to see Israel's response to the Iranian bombing, but if nothing happens soon then the near term bottom in stocks might be in (?)




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