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January 29 – Bloomberg (Alexandra Harris): “Hedge funds’ long Treasury positions and repo borrowing grew in 2024, exceeding the peak reached in 2019… Barclays strategist Joseph Abate wrote... As of September, hedge funds’ long Treasury positions reached a record $2.1 trillion. Positions have increased 44% since 2023 and are about $800 billion larger than their 2019 peak. Similarly, repo borrowing increased by $900 billion, or 53%, since 2023. Barclays assumes most of this is against Treasury collateral, but the breakdown is unclear. About 40% of transactions were overnight. Top 10 funds with repo borrowings accounted for 62% of total repo, or about $1.55 trillion…”

Definitely worth pondering: Ten hedge funds with $1.55 TN of repo borrowings, likely most used for levered “basis trade” positions in the Treasury market. Hedge fund “repo” borrowings expanding 53% - apparently over nine months. Sounds like conditions have been much too loose, with the makings to trample “a lot of resilience

 

Noland

 

Posted

"The trade narrative shifts dramatically when trade flows are decomposed into energy and non-energy components.
Last year, Canadian exports of energy products (oil, natural gas, power) to the U.S amounted to nearly $170 billion, or almost 1/3 of total shipments.  In contrast, energy accounted for only 6% of all U.S. imports. Put simply, Canadian sources are critical to U.S. energy security.   
Remove Canadian energy exports from the equation and the trade story flips. Ex-energy, the U.S. enjoys a trade surplus with Canada of around C$60 (US$45 billion). (Chart 7)
Canada’s trade advantage in energy has been rising steadily in recent years, most recently on the back of the Transmountain Pipeline Expansion (TMX) that, in turn, has sharply boosted Canadian oil exports to the U.S. west coast in addition to Asian markets.
Canadian crude is a key supplier to U.S. refining, predominantly in the mid-West, with a steadily growing share in the Gulf coast. Since many refineries are built to process Canadian sour, heavy crude, it’s difficult to shift away from that feedstock to alternative sources. This is true even from the U.S.’s Strategic Petroleum Reserve, which is largely comprised of conventional crude. Countries that could fill the gap are Mexico and Venezuela, but the latter would require lifting sanctions. Given Mexico already enjoys the second largest trade surplus with the U.S., this shift in demand would further widen that chasm, potentially allowing it to overtake China in the pole position.
If tariffs were extended to Canadian crude oil, it could lead to an immediate jump in U.S. gasoline prices of as much as $0.30-0.70 per gallon. One of the most price-transparent and inflation-sensitive areas for consumers is the movement in gasoline prices. "

 

Screenshot_2025-02-01-17-24-42-665-edit_org.mozilla.firefox.jpg

Posted

During a tariff trade war between countries like the U.S., Canada, and Mexico, certain asset classes and sectors tend to perform better while others suffer. Here are some investment strategies to consider:

Assets to Buy

1. Safe-Haven Assets

Gold & Precious Metals (e.g., Gold ETFs, Miners like Barrick Gold, Newmont Corporation) – Investors flock to gold as a hedge against uncertainty.

U.S. Treasuries & Bonds – Treasury bonds often gain value as investors seek stability.

Cash & Money Market Funds – Holding cash can provide flexibility during market volatility.


2. Domestic-Focused Companies

Companies that rely more on domestic sales than international trade are less affected by tariffs.

Consumer Staples (e.g., Procter & Gamble, Walmart, Costco) – Essential goods are always in demand.

Utilities (e.g., NextEra Energy, Duke Energy) – Regulated industries with steady income.

Healthcare & Pharma (e.g., Johnson & Johnson, Pfizer) – Less impacted by trade wars.


3. Companies That Benefit From Tariffs

U.S. Steel & Aluminum Producers (e.g., U.S. Steel, Alcoa, Cleveland-Cliffs) – Higher tariffs on foreign metals may boost domestic producers.

Defense & Aerospace (e.g., Lockheed Martin, Raytheon, Northrop Grumman) – Government contracts tend to continue despite trade disputes.

Agricultural Producers (e.g., Archer Daniels Midland, Mosaic Company) – Some food producers may benefit from government subsidies.


4. Alternative Investments

Commodities (e.g., Oil, Natural Gas, Agricultural Products) – Price fluctuations can create opportunities.

Cryptocurrencies (e.g., Bitcoin, Ethereum) – Some investors use crypto as a hedge against currency devaluation and geopolitical risks.


Assets to Avoid

Export-Dependent Companies (e.g., Automakers like Ford, GM, Tesla) – Companies relying on international sales may struggle.

Retailers Dependent on Imports (e.g., Nike, Apple, Walmart) – Higher import costs can reduce margins.

Emerging Market Stocks & Currencies – Countries dependent on trade with the U.S., Canada, and Mexico may face economic pressure.


Would you like a more tailored strategy based on specific industries or personal risk tolerance?

 

-

Chatgpt
 

Posted

Right, but what if the US is the country promulgating the tariffs. Then the US Government bond sector ceases to be the safe haven, especially for foreign investors. Ask it that. Be interesting to see the response. I find that when you push it, it digs deeper into its processes, rather than just skimming the top layer of conventional wisdom. 

Posted

So I asked it and this was the response:

 

Quote

You're absolutely right. If the U.S. is the country imposing tariffs aggressively, the dynamic shifts in a few important ways:

Revisiting Safe-Haven Assets

  1. Gold & Precious Metals – Likely still a strong hedge, especially if foreign investors lose confidence in U.S. treasuries.
  2. Cash & Money Market Funds – U.S. dollars may still be a safe place in the short term, but over time, if trade wars escalate and foreign demand for U.S. assets declines, the dollar could weaken.
  3. U.S. Treasuries? – Normally a safe haven, but if tariffs trigger retaliation and foreign investors (China, Japan, EU) dump U.S. bonds, yields could rise, and treasuries could lose their stability as a go-to asset.

Who Benefits From a U.S.-Led Tariff War?

  1. U.S. Domestic Producers

    • Industrials & Manufacturing (Caterpillar, Deere, domestic auto suppliers) – If tariffs shield them from foreign competition.
    • Steel & Aluminum Producers (U.S. Steel, Cleveland-Cliffs, Alcoa) – Higher domestic demand if imports are taxed heavily.
    • Defense & Aerospace (Lockheed, Northrop, General Dynamics) – Tariffs don’t typically affect government contracts.
  2. Reshoring & Infrastructure Plays

    • If tariffs drive a wave of onshoring production, look at companies providing logistics, automation, and real estate for new U.S. manufacturing sites (Prologis, Caterpillar, ABB Robotics).
  3. Inflation Hedges

    • Commodities (Oil, Copper, Agricultural goods) – Prices could spike due to supply chain distortions.
    • Cryptocurrencies – A loss of faith in U.S. fiscal stability could drive capital toward Bitcoin and alternative stores of value.

Who Loses?

  1. Treasuries & Foreign Investment

    • If major U.S. debt holders (China, Japan, Saudi Arabia) respond to tariffs by reducing their purchases (or selling off) U.S. government bonds, yields would rise, putting pressure on U.S. debt markets and interest-rate-sensitive sectors like housing.
  2. Export-Driven U.S. Companies

    • Tech Giants (Apple, Microsoft, Nvidia) – Tariffs on U.S. goods from retaliation could crush international sales.
    • Agricultural Exports (Soybeans, Corn, Wheat) – If China or the EU retaliates, U.S. farmers get hit hard.
    • Automakers (Ford, GM, Tesla) – Higher costs for imported components could squeeze profits, while retaliation hurts global sales.
  3. Consumers & Inflation-Sensitive Sectors

    • Retailers (Walmart, Target, Costco) – If tariffs drive up costs for imported goods, margins shrink.
    • Housing – Higher inflation and rising bond yields could push mortgage rates up, cooling the housing market.

Key Takeaways

  • If foreign investors pull out of U.S. treasuries, the U.S. bond market could become unstable, leading to higher yields, a weaker dollar, and inflationary pressures.
  • Winners: Domestic-focused companies, inflation hedges (commodities, crypto), and industrial reshoring plays.
  • Losers: U.S. exporters, tech, autos, retail, and potentially the broader stock market if credit conditions tighten.

So, instead of the classic "flight to safety" in U.S. bonds, a U.S.-led tariff war might cause capital flight from the U.S. – creating opportunities in commodities, alternative assets, and select domestic industries that can benefit from protectionist policies.

Great pushback on the conventional wisdom—it forces a deeper look at the structural shifts. What do you think?

 

Posted

" Likely still a strong hedge, especially if foreign investors lose confidence in U.S. treasuries. "

It's confidence in the US Treasury itself. Whose IT system is now under control of Elon Musk and his people, with the approval of the brand new Treasury Secretary.  A decision so weak as to destroy his legitimacy before he had any. Among other things Musk rampaging through the government is the biggest counterintelligence disaster in history and that's before you consider Musk is a hostile foreign agent.

 

 

Posted

Musk is the ultimate cinematic megalomaniac villain whose goal is to rule the world. The only thing is that this is no longer fantasy. It's reality. 

He who controls the payments, controls. Period. The entire US government, all 3 branches, are now in his thrall. 

Lawsuits? Unconstitutional? Court Orders? Make me laugh. The enforcement arm of the courts is the US Marshals Service, which is a division of the Justice Department, controlled by you know who. They are moving with lightning speed to root out internal resistance. 

This is the internal Blitzkrieg against Constitutional government. It's 1933 all over again. 

We are witnessing the death of democracy in the US. Resistance is futile. It is, instead, an intensely personal choice, a matter of personal honor and dignity. It's not a matter of "if" we are going to die. It's a matter of how we choose to live. 

Bon courage, mes amis. We are going to need it. 

Posted
4 hours ago, DrStool said:

Musk is the ultimate cinematic megalomaniac villain whose goal is to rule the world. The only thing is that this is no longer fantasy. It's reality. 

He who controls the payments, controls. Period. The entire US government, all 3 branches, are now in his thrall. 

Lawsuits? Unconstitutional? Court Orders? Make me laugh. The enforcement arm of the courts is the US Marshals Service, which is a division of the Justice Department, controlled by you know who. They are moving with lightning speed to root out internal resistance. 

This is the internal Blitzkrieg against Constitutional government. It's 1933 all over again. 

We are witnessing the death of democracy in the US. Resistance is futile. It is, instead, an intensely personal choice, a matter of personal honor and dignity. It's not a matter of "if" we are going to die. It's a matter of how we choose to live. 

Bon courage, mes amis. We are going to need it. 

Well sure but can assets continue to inflate? If yes then onward we go. If not............ you don't want to know.

Posted

SEC STAFF WILL NEED COMMISSION APPROVAL TO FORMALLY LAUNCH PROBES

Lawyers at the U.S. Securities Exchange Commission (SEC) have been told they need to seek permission from the politically appointed leadership before formally launching probes, two sources briefed on the matter said, in a marked change in procedure that could slow down investigations.

Posted
26 minutes ago, Jorma said:

Musk and other whales could easily launch a melt up overnight. They would be idiots not to.

Not so sure about that. Soros broke the Bank of England. The market will do what it will do. 

Anyway, they have the Plunge Protection Team. 

 

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