Gamestop - MOASS
Updated
Idea for GME:
- The MOASS is here.
- There is a global shortage of both US dollars and high quality collateral for debt (10-year US Treasury bonds). Why would the dollar be rising despite the high CPI prints? It's simple. To borrow, one must have collateral.
- CS's Zoltan Pozsar explained in Nov. 19th Global Money Dispatch that currently, this demand is caused by Europe. "the ECB bough too much [debt], reducing net supply via QE, and it topped it up with TLTROs... This week, the collateral shortage in Europe spilled over into the FX swap market: on Tuesday it became cheaper for a euro deposit holder to pay a premium and swap euros for dollars and buy Treasury bills with those dollars than to buy German bills."
- While I won't go into it, it is speculated that Citadel has a great short exposure to 10-year US Treasury bonds, through their repo market arm, Palafox. May or may not be true, but it is evident that someone (probably every hedge fund) is short USTs and they are also short GME. GME by extension is a bond market volatility proxy. As long as the correlations hold, it can be traded.
- What is also true is that Large and Small speculators are record short 10 Year T Note futures, while commercials are record long. Bond market volatility is reached a level where VIX was trading at 50+ previously and is higher now than what it spiked to during GME's first squeeze to 500. Somebody is about to get to get blown up.
Bond Market Options Volatility (MOVE) leads GME by 15 days. Timing of MOASS, Dec.3:
GME losing correlation with IWM and gaining correlation with VIX and USTs (new regime):
You might get one more smash down (I expect a smash in bonds in a risk parity event before a squeeze), but I am confident this is about to happen. I'm not even going to give a price target, but it's over 4 digits for certain.
When I did analysis for my AMC trade, I correctly read the psychology of the large market participants, after reading into it more and connecting the dots, turns out they were BlackRock and Citadel:
If you are short GME, do you even know who is on the other side of your trade? Retail "apes"? No no no!
BlackRock, who manages the US assets of foreign sovereigns, and ICBC China, with a 100% correlation to GME. China is about to enter an easing phase:
GLHF
- DPT
Causation always produces a correlation. Liquidity takes time to flow through the economic machine.
- The MOASS is here.
- There is a global shortage of both US dollars and high quality collateral for debt (10-year US Treasury bonds). Why would the dollar be rising despite the high CPI prints? It's simple. To borrow, one must have collateral.
- CS's Zoltan Pozsar explained in Nov. 19th Global Money Dispatch that currently, this demand is caused by Europe. "the ECB bough too much [debt], reducing net supply via QE, and it topped it up with TLTROs... This week, the collateral shortage in Europe spilled over into the FX swap market: on Tuesday it became cheaper for a euro deposit holder to pay a premium and swap euros for dollars and buy Treasury bills with those dollars than to buy German bills."
- While I won't go into it, it is speculated that Citadel has a great short exposure to 10-year US Treasury bonds, through their repo market arm, Palafox. May or may not be true, but it is evident that someone (probably every hedge fund) is short USTs and they are also short GME. GME by extension is a bond market volatility proxy. As long as the correlations hold, it can be traded.
- What is also true is that Large and Small speculators are record short 10 Year T Note futures, while commercials are record long. Bond market volatility is reached a level where VIX was trading at 50+ previously and is higher now than what it spiked to during GME's first squeeze to 500. Somebody is about to get to get blown up.
Bond Market Options Volatility (MOVE) leads GME by 15 days. Timing of MOASS, Dec.3:
GME losing correlation with IWM and gaining correlation with VIX and USTs (new regime):
You might get one more smash down (I expect a smash in bonds in a risk parity event before a squeeze), but I am confident this is about to happen. I'm not even going to give a price target, but it's over 4 digits for certain.
When I did analysis for my AMC trade, I correctly read the psychology of the large market participants, after reading into it more and connecting the dots, turns out they were BlackRock and Citadel:
If you are short GME, do you even know who is on the other side of your trade? Retail "apes"? No no no!
BlackRock, who manages the US assets of foreign sovereigns, and ICBC China, with a 100% correlation to GME. China is about to enter an easing phase:
GLHF
- DPT
Causation always produces a correlation. Liquidity takes time to flow through the economic machine.
Comment
If you see UST repo rates go negative you know you've made it.Comment
Speculation:TGA and RRP:
TGA is where liquidity from the Fed comes from (and enters risk assets, they are negatively correlated). There is no more liquidity available from TGA. Why are institutions stuffing money into RRP at such a low rate, instead of yield? There's too much liquidity? No no no. That's what they want you to think, but the reality is there is a shortage of dollars. Why then?
Because the collateral for RRP is USTs. When RRP comes back down, USTs will be given back to the Fed, and this will squeeze the supply of bonds. There is over
1T in RRP. When RRP comes down, bonds, and consequently GME, will squeeze to unbelievable levels. This is a liquidity crisis in the making.This is will happen quicker than people think, as collateral and dollar shortages are showing now.
Fed has begun the taper of QE in November. By tapering $15 billion a month, it is creating $540 billion between now and the time it ends. However, TGA is going to be removing liquidity almost twice that amount by EOY!
"During the October – December 2021 quarter, Treasury expects to borrow $1,015 billion in privately-held net marketable debt, assuming an end-of-December cash balance of $650 billion. The borrowing estimate is $312 billion higher than announced in August 2021, primarily due to the lower beginning of quarter balance, somewhat offset by a lower end-of-quarter balance and higher receipts."
home.treasury.gov/news/press-releases/jy0452
This means that TGA will rise shortly, which affects stocks negatively, and volatility positively, volatility that GME is positively correlated with. There will be a rush for USD, so USTs MAY initially be sold off for USD, but as RRP falls as institutes rush for liquidity that they desperately need, UST supply will squeeze, and the shorts will indeed be liquidated. This will all occur between now and Q2 2022, but the squeeze begins by early December. So I am long now to then.
Comment
Let me just add that DXY is now at a level where the bond market saw turmoil last time:Things might start breaking very soon
Comment
GME may be a superior play than long bonds, because it has tailwinds from bond volatility + gamma squeeze, while bonds may first crash before mooning IMO.Trade closed: stop reached
Yep, this one was wrong
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