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Jim Bianco Profile picture
@biancoresearch
Jan 29, 2021 • 6 tweets • 2 min read • Read on X
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Thread to explain the mkt

Q: Why is GameStop still trading at $350 when everyone that understands "fundamentals" think this is a $5 dollar stocks?

A: The only "fundamental" that matters, 62M shs short with 50M share float. It is physical impossible to cover this short.

(1/6) Image
This squeeze does not stop until this short is covered

I would GUESS that is when it gets below 25M shares, or 50% of float, and probably much less than that.

Viewed this way, what happened this week it is not that irrational.

(2/6)
Q2: Why is this driving the entire stock market down?

A2: Because the "masters of the universe" are not surrendering their shorts/covering.

So the fear is these shorts will rise so much, leading to losses and inability to meet margin calls. Brokers at risk

(3/6)
Note this is a fear, the financial system is not impaired now.

But it was reckless and irresponsible for the "masters"/brokers/prime brokers/clearinghouses/regulators to allow this to happen. They are now paying the price.

bloomberg.com/news/articles/…

(4/6)
What's Next?

Will the "masters" cover shorts or think they have a giant pay-day ahead when these short stocks collapse? If wrong, margin calls put the financial industry at risk.

Viewed this way, we can see why the S&P is down 2% today and near the lows of 2021.

(5/6)
The "retail revolters" did not get lucky. They saw this vulnerability was allowed to happen and took advantage of it.

(6/6)

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More from @biancoresearch

Jim Bianco Profile picture
Jul 10
1/9
Eric asks a reasonable question: what should be done about a future stock market slump? Specifically, should the Fed buy stocks?

🧵

tl:dr

* The legal process for the Fed buying stocks means the Treasury actually owns them, the Fed finances it by extending loans to buy the stocks.

* Trump will love this idea, as he wants a Sovereign Wealth Fund, and now has the Government holding several US companies. We suspect he will probably want these stocks as permanent government holdings, up to 20% of the stock market ($16n trillion of stocks).

* This would balloon the Fed's balance sheet to $25 trillion (from $6.7 trillion now).

* What would be the reaction to the balance sheet ballooning to $25 trillion? Bullish as that means massive buying of stocks? Bearish as the market fears another inflation spurt, and accompanied interest rate rise? Remember, 2022 inflation hit 9%, interest rates soared and the S&P 500 fell 25%.

* We think the Fed buying of 2008 and 2020 worked to "save" markets as deflation was the bigger concern than inflation. But now with elevated inflation (as in the last 6 years), anything that looks inflationary would be received badly by financial markets.

All these bullet points are detailed below.
2/9
First, Eric is correct in his comment about the stock market:
--
The stock market increasingly functions as America’s de facto retirement system, with roughly 58% of Americans now owning stocks — a figure that could approach 70% as Trump Accounts add millions of investors. As equities become more central to household wealth, voter behavior, and financial stability, the political and economic cost of a prolonged bear market has rarely been higher.
---
He also goes on to say:
---
One could even argue it has become more important than Social Security, which is on track to exhaust its trust fund reserves within the next decade.
3/9
Global housing prices are similarly considered vital retirement assets. Government policies and programs are openly designed to manipulate prices higher, and then offer additional programs for first-time homebuyers to buy homes they otherwise could not afford.

Stocks mean more to households than housing.Image
Read 9 tweets
Jim Bianco Profile picture
May 30
1/5
Yesterday, AI-related stocks hit a high as a percentage of the S&P 500.

The AI influence on the stock market has never been larger.
🧵 Image
2/5
What are the AI-Stocks?

I use the list that J.P. Morgan's Michael Cemblast made last fall.

Here is a table with its details. Image
3/5
Note that the list above does NOT include SpaceX (which has Xai, or Grok), Anthropic, and OpenAI.  SpaceX's IPO is expected around June 12.

So, when will they be included in the S&P 500, allowing AI to account for over 50% of the S&P 500?

Last week, S&P proposed changing its rules so that mega-cap IPOs could become eligible for S&P 500 inclusion after six months, rather than the usual one-year seasoning period.

The proposal would also relax some standard hurdles for these companies, including minimum public float and profitability requirements.

But S&P emphasized that eligibility does not mean automatic inclusion—the Index Committee would still make the final decision.
Read 5 tweets
Jim Bianco Profile picture
Mar 22
1/4
Yesterday I posted the thread below arguing that the market is repricing an inflation shock, not a recession scare.

10-year yields are rising, bond volatility is exploding, inflation expectations are jumping, and Fed pricing has swung from cuts toward hikes.

Follow up 🧵
2/4
The immediate pushback is familiar: this “supply shock” will hurt real growth, so the Fed should cut rates.

This well-known economist has been making exactly that argument. Image
3/4
That is only half the equation. A supply shock hurts growth, but it also raises inflation, so the real question is which side dominates.

In 2022, inflation rose more than real growth fell: the blue CPI line and arrow moved sharply higher while the green real-GDP bars and arrow moved modestly lower. The bottom panel shows the Fed’s answer: hikes, not cuts, as the federal funds rate moved from near zero in early 2022 to above 4% by year-end 2022.

Why? When inflation rises faster than growth falls, nominal growth (real GDP plus inflation) rises. If today’s oil shock does the same thing as 2022, the correct takeaway is not automatic cuts. It is possible that the Fed may have to stand pat or even consider hiking.Image
Read 4 tweets
Jim Bianco Profile picture
Mar 11
1/6
Ten seafarers have now been killed in 13 attacks on merchant vessels since the Iran conflict erupted on February 28 — more than the 7 U.S. servicemen killed in the war.

The focal point is shifting: can the Strait of Hormuz be reopened? Is the Administration pivoting to that mission?

Every day without a visible path to reopening, the market will price in more risk.

x.com/MikeSchuler/st…

@johnkonrad @mercoglianos
2/6
The problem: the Administration APPEARS to not be taking the Strait threat seriously. The contradiction is stark:

- Trump to tanker captains: "These ships should go through the Strait of Hormuz and show some guts, there's nothing to be afraid of..."

- The U.S. Navy, citing risk of attacks as "too high," says it is unable to provide escorts — despite near-daily requests from the shipping industry.

WTF!

x.com/foxandfriends/…
x.com/FreightWaves/s…
3/6
Yesterday, Joint Chiefs Chairman Gen. Dan Caine was asked about naval escorts in the Strait. His answer:

"If tasked to escort, we'll look at the range of options to set military conditions to be able to do that..."

Did he just admit they don't have a plan — and haven't started one?

Read 6 tweets
Jim Bianco Profile picture
Mar 9
1/5
A 10% increase in energy prices that persists for a year would push global inflation up by 40 basis points and slow economic growth by 0.1-0.2%, International Monetary Fund Managing Director Kristalina Georgieva said.

So, what price measures "persists for a year?"

🧵
2/5
As the table below shows, crude oil futures prices for delivery into 2027 are trading in extreme backwardation. Image
3/5
Below is the calendar spread between the first contract (now April) and the 6th contract (now September).

As the bottom panel shows, this spread is -25%, a record since the mid-1990s when the contract specifications were last changed. Image
Read 5 tweets
Jim Bianco Profile picture
Feb 7
1/4
I fear this is spot on.

@CryptoNobler's thread unpacks $BTC's "synthetic supply" problem. ETFs, structured notes (@CryptoHayes), futures, options, swaps, lending—all flood the system with "paper" BTC.

When it swamps real demand, price crashes.

x.com/CryptoNobler/s… x.com/coinbureau/sta…
2/4
@CryptoHayes: structured notes on $IBIT flooded $BTC with synthetic supply → forced liquidations turbocharged the dump.

Next rally? TradFi piles into ETFs → Wall Street "prints" more synthetics.

Price discovery decoupled from on-chain.

Volatility on steroids
3/4
Wall Street's entry turned BTC into a pseudo-fractional reserve system.

21M cap? On-chain only—price discovery swims in synthetic street "printing."

Fractional is inherently unstable. That's why banks need heavy regs (Fed/Treasury/OCC/FDIC).

On-chain BTC only needs code.
Read 4 tweets

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