Exactly why I've been saying there will be fuckery during the settlement process, but also an historic opportunity if you do your homework. Even though the price may be notionally in excess of $1M per share, we won't see $1M in cash per share.
All shorts must cover, and during a liquidation, that means all short positions must close. While there may be a very small percentage of shares that will be multimillions, that would represent the peak and only a few shares would be sold at that.
I think quite a few will get out, at least partially, in the thousands / tens of thousands range- which DTCC is prepared to cover in cash and securities pledged to the facility by banks and other hedge funds. Last I checked, DTCC was fully prepared to cover an average price of $15K a share.
Post that, the Fed covers, and I understand they can handle another $4T before needing to go to the well. They will most likely use this opportunity to isolate apes with lowball offers that are still eye-popping for your average office drone or minimum wage worker- and I bet most take the offer. With the proposed 50% short-term capital gains tax, HODLers could see half, while the IRS hands half to the Treasury to back new T-Bills, recycling a large portion of the payout.
Larger investors / institutional investors won't want the cash and would prefer security swaps- they will instead take MBS, CMBS, and other equities including T-Bills, putting the Treasury on the hook to pay out over time. The longs will eat the shorts and absorb all their assets.
I also stand by the theory that MOASS will occur as the market bubble pops- it's the decrease in value of the underlying securities the SHFs are using for collateral that's gonna kick this off. That means a lot of banks, HFs and institutional investors are going to be hit as well- leaving pools of assets that can either be sold off (to Black Rock et. al.?) for cash or directly swapped in settlement.
Let's not overlook the 2009-esque mortgage defaults about to hit once forbearance ends, with a lot of real estate up for grabs- banks will repeat what they did back then, but we can be in a position to own those subprimes rather than a Black Rock or Chinese billionaire. Land will always be more valuable than fiat, and a savvy investor can turn a package of MBS into a healthy monthly dividend check. (BTW, this is not just a crazy idea, either- two of my three retail brokerages have a private MBS offering that allows an individual investor to do just this.)
Honestly, I think we are going to end up with lots of multi-millionaires- on paper. I don't think any individual investor is gonna see a bank account with 50 or 100M just sitting in there. Hell, I'm guessing better than half are doing most of their trading out of an IRA or Roth, meaning the piper doesn't have to be paid for a decade or more, and the gains on paper will end up immediately recycled into the economy.
Edit.. BTW, I gave you an upvote. It's a valid question, valid concern, and the math is correct. No reason to downvote pure logic.
Exactly why I've been saying there will be fuckery during the settlement process, but also an historic opportunity if you do your homework. Even though the price may be notionally in excess of $1M per share, we won't see $1M in cash per share.
All shorts must cover, and during a liquidation, that means all short positions must close. While there may be a very small percentage of shares that will be multimillions, that would represent the peak and only a few shares would be sold at that.
I think quite a few will get out, at least partially, in the thousands / tens of thousands range- which DTCC is prepared to cover in cash and securities pledged to the facility by banks and other hedge funds. Last I checked, DTCC was fully prepared to cover an average price of $15K a share.
Post that, the Fed covers, and I understand they can handle another $4T before needing to go to the well. They will most likely use this opportunity to isolate apes with lowball offers that are still eye-popping for your average office drone or minimum wage worker- and I bet most take the offer. With the proposed 50% short-term capital gains tax, HODLers could see half, while the IRS hands half to the Treasury to back new T-Bills, recycling a large portion of the payout.
Larger investors / institutional investors won't want the cash and would prefer security swaps- they will instead take MBS, CMBS, and other equities including T-Bills, putting the Treasury on the hook to pay out over time. The longs will eat the shorts and absorb all their assets.
I also stand by the theory that MOASS will occur as the market bubble pops- it's the decrease in value of the underlying securities the SHFs are using for collateral that's gonna kick this off. That means a lot of banks, HFs and institutional investors are going to be hit as well- leaving pools of assets that can either be sold off (to Black Rock et. al.?) for cash or directly swapped in settlement.
Let's not overlook the 2009-esque mortgage defaults about to hit once forbearance ends, with a lot of real estate up for grabs- banks will repeat what they did back then, but we can be in a position to own those subprimes rather than a Black Rock or Chinese billionaire. Land will always be more valuable than fiat, and a savvy investor can turn a package of MBS into a healthy monthly dividend check. (BTW, this is not just a crazy idea, either- two of my three retail brokerages have a private MBS offering that allows an individual investor to do just this.)
Honestly, I think we are going to end up with lots of multi-millionaires- on paper. I don't think any individual investor is gonna see a bank account with 50 or 100M just sitting in there. Hell, I'm guessing better than half are doing most of their trading out of an IRA or Roth, meaning the piper doesn't have to be paid for a decade or more, and the gains on paper will end up immediately recycled into the economy.