RRP Window Dressing
We decided to make today’s post a freebie for all to read. So with the US markets closed for tomorrows observance of Good Friday its no surprise that the Reverse Repo Program jumped to nearly $600Bn today, here is the data from the NY Fed:
This was the highest level since January:
There have been many that have called for this program to be wound down to zero but it seems a few players have other ideas. Maybe its just quarter end window dressing or maybe some folks have heavy cash needs and are being proactive here in addressing those needs. Whatever the case a nice $76Bn jump here today.
For us this also may be a tell tale sign that some risk is coming out of the market and seeking safer havens. Now we know the high flying Nasdaq has started to slow its ascent especially vs the broader markets and this trend has continued here into month end. Good evidence of this is also confirmed by the MEGA8s tracker which we hedged with the 445 QQQ calls this week and they worked out perfect. The MEGA8s have been led by Berkshire lately and this also is a sort of safe haven sign perhaps. While we are on the MEGA8s let’s take a look at the data:
If the market is indeed diversifying or becoming a bit more defensive in nature, then we will expect our hedged P+L for this basket of longs to outperform. It has obviously underperformed the long only basket, but it actually is still posting a decent return thus far. We love to keep an eye on the markets in this fashion and the use of options to teach others and to perhaps open new outlets for some novice investors to explore more of these types of hedges, is always a goal of ours. Now all of this is to educate our readers and listeners to generate ideas that you may eventually decide to employ. We also want to demonstrate how you can create a synthetic long only basket of stocks but still protect yourself on the downside if markets fall.
Here is the MEGA8s market cap chart we have shown before and its been turning over here into month end:
As far as the MEGA8s chart, well let’s just say we may be getting a bit long in the tooth on this MEGA8 higher highs regime:
We have also seen some profit taking hit the US yield curve as the 2s were the worst performer on the curve today:
As far as the other settlements for today:
Gold continues to shine and our Futures Model Tracker will go flat Gold here next week on a break of 2250 on the weekly closing basis. The Tracker data is here with no changes right now into month end:
Finally we thought it was interesting this chart on Zerohedge about the jobs data. We know the jobs data by the BLS is heavily distorted, we know it counts 2 jobs even if its held by 1 person so we believe this chart does capture the discrepancy in fantasy land vs actual data pretty well:
Ok guys that is it, we thank you for all of you who have graciously followed us here on Substack, who have supported our work and continue to do so and if you can't do any of those, well please share our work so that others can benefit from the knowledge that we provide, the insight and most importantly the mindset we try to create. We hope everyone has a wonderful Easter Holiday weekend and we will be back with more next week. Till next time, cheers!