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Jim Bianco Profile picture
@biancoresearch
Jan 29, 2021 • 6 tweets • 2 min read • Read on X
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
Jan 3
1/5
*US DEC. ISM MANUFACTURING INDEX RISES TO 49.3; EST. 48.2

ISM beat

And as the chart shows, this is the second-highest reading since October 2022 (26 months).

(best sure to see the last post in this thread)Image
2/5
Prices Paid 52.5 versus the estimate of 51.8

It is staying "sticky" above 50 (meaning more rising than falling prices)

Remind me again ... why is the Fed cutting rates? Image
3/5
New Orders is in the Index of Leading Economic Indicators. Economists think it is that important.

It jumped to 52.5, equaling its highest reading since June 2022 (the month YoY CPI hit 9%).

Remind me again: why is the Fed cutting rates? Image
Read 5 tweets
Jim Bianco Profile picture
Dec 29, 2024
1/3
The repost below expresses a common belief that risk assets are effective inflation hedges.

History suggests they are not.

This chart shows that the inflation of the 1960s and 1970s wiped out 64% of the after-inflation stock gains by 1982 (meaning inflation beat stocks by 64%). And all inflation-adjusted gains of the previous 27+ years (back to 1954) were gone (meaning inflation beat stocks over the previous 27 years).

It took until 1992, 28 years later, for stocks to finally start beating cumulative inflation since 1966.Image
2/3
Too many vastly underestimate the devastating impact of inflation.

Since the 2021 peak, when the Fed called inflation"transitory," stocks have only beaten inflation by just 15% (with dividends).

So a 10% to 12% correct and a little bit more inflation and four years of relative purchasing power is gone (meaning you are no better off than four years ago).Image
3/3
As I argue here, the crypto crowd also forgets inflation when they make their long-term forecasts.

Read 4 tweets
Jim Bianco Profile picture
Dec 28, 2024
1/6
🧵on yields and yield curve
---
The 30-year yield made a new 2024 close high yesterday.

Now, the highest yield since November 2023. Image
2/6
The 10-year yield is just eight basis points away from a new 2024 high.

Two trading days left this year. Image
3/6
The 2-year funds spread is the narrowest since March 2023 (bottom panel).

The massive reversal to negative in March 2023 was driven by the string of bank failures highlighted by Silicon Valley Bank. These failures were driven by fear of unrealized bond losses. So, while the Fed subsequently hiked three more times through July 2023, this spread inverting signaled the "end is near" for the rate-hiking cycle.

Now, at just -5 bps, this spread is the narrowest it has been in ~20 months and close to signaling "the end is near," if not already done, on the rate-cutting cycle.Image
Read 7 tweets
Jim Bianco Profile picture
Dec 25, 2024
1/3
What is TLT Signaling?

TLT is the iShares 20-Treasury ETF, one of today's largest and most influential bond ETFs.

I've been arguing that the bond market rise in yields as the Fed cutting rates has been a rejection of the easing cycle. The bond market is saying the Fed has the wrong policy.

Monetary easing is not necessary given the strength of the US economy (See Atlanta Fed GDPnow) and the coming "Trump Stimulus. Fed easing is raising inflation expectations and driving yields higher.

Here is a chart of TLT's price (black) and cumulative flows (red).

From the day the Fed started hiking (March 16, 2022) to the November 7, 2024, FOMC meeting (labeled), cumulative inflows were steady, totaling over $55 billion.

A reasonable interpretation is that bond investors agreed with the Fed's policy from March 2022 to November 2024, even if it was hiking, as it was fighting inflation.

However, since the Fed cut again in November, bond investors have reversed and fled the bond market. Almost $10 billion has left TLT.Image
2/3
The bottom panel is a rolling 30-day flow into TLT. The last 30 days have seen a cumulative outflow of $8.69B, easily the largest 30-day outflow in TLT's history.

Again, this outflow started with the November 7 Fed cut, which I interpret as the market screaming "no" at the Fed about its move.Image
3/3
The chart below shows TLT's volume since 2023. The blue bars label the six highest-volume days in TLT's history. No volume day was over 80 million before 2023.

Thursday, December 19, was the record volume day at 99 million. This was the day after the Fed cut. The previous record was November 6, the day before the Fed cut on November 7.

The market is focused on the Fed meeting, not payroll or CPI days. Investors believe the Fed is making a mistake by cutting rates when it is not needed.Image
Read 4 tweets
Jim Bianco Profile picture
Dec 20, 2024
1/6
Good Q, I will answer why.

The market is signaling the Fed is not serious about inflation.

10-year yields during rate cut cycles since 1981 (the 100-year inflation and yield high).

2024 (black) is the biggest yield rise in a cutting cycle in at least 40 years. Image
2/6
However, the 2024 yield move (black) looks similar to the yield moves during pre-1981 rate-cutting cycles.

In the 1960s and 1970s, the market worried about inflation.

When the Fed cut, the market screamed "no," and long-term yields rose—like 2024 (black). Image
3/6
The dotted vertical line is the first-rate cut in September.

Look at what inflation expectations have done! Image
Read 6 tweets
Jim Bianco Profile picture
Dec 15, 2024
1/7
The study below says the 60/40 portfolio is dead. Everyone should now be 100% invested in stocks.

However, they recommend 33% in U.S. stocks and 66% in int'l stocks.

Quick 🧵

tl:dr The U.S. has the most momentum and is also the world's most expensive stock market.
2/7
About a 66% Int'l allocation.

The U.S. (upper blue) has outperformed the rest of the world, while everyone else is underperforming the world average (black).

Momentum is a potent drug for investing, and the U.S. has it. It works great—until it doesn't—and it often doesn't without warning.Image
3/7
However, another consideration that often gets ignored when chasing momentum is valuation.

Wall Street's favorite valuation measure is the forward P/E ratio (the estimate of the next 12 months' EPS divided by price).

So, while the US has big-time momentum, it is also the most expensive stock market in the world (upper purple line), recently exceeding India (brown).Image
Read 7 tweets

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