Today I Want to talk about how Charles Payne Just confirmed we're in short Squak Season I Literally made a video on this last week but was called a shi but it seems like even the big guys know exactly where we are. I Also want to talk about the new way in which banks are desperately trying to unload their risk. so stay tuned and let's make some money. And now I Live straight in with the key information.

So as Charles Payne tweeted, he said, it's the most wonderful time of the year it short squeeze season. We've seen many of these small C heavily shorted stocks like Carana Upstart, Affirm, Coinbase and others running massively. Over the last week, we saw the S&P 500 also go on an absolute tear and both of those combined puts short hedge funds in a very stressed position. When these shorts are stressed, they first close out of their large Blue Chip shorts, then they close out of shorts on heavily shorted names until finally saving the biggest for last, their AMC GameStop and mem stock shorts.

And it seems the banks are desperately worried about how much risk they're holding and they're trying to sell off that risk to hedge funds and private Equity firms. As Finance Lelot tweeted, he said breaking news: Banks are selling risk to hedge funds and private Equity firms through so-called synthetic risk transfers. So the Wall Street Journal article says that big banks have cooked up a new way to unload risk. It says JP Morgan Chase Morgan Stanley US Bank and others are selling complex debt instruments to private fund managers as a way to reduce regulatory Capital charges on the loans they make.

These so-called synthetic risk transfers are expensive for banks, but less costly than taking the full Capital charges on the underlying assets and also saying they are lucrative for the investor who can typically get returns of around 15% or more. Now, this is really, really fascinating. These Banks like JP Morgan Morgan Stanley and US Bank are paying money to reduce their margin exposure. These Banks obviously can't take on the full Capital charges because they're too close to their margin limits and therefore they're paying money to have somebody else take over some of that margin so they don't breach their margin limits and they're paying 15% of the entire loan or 15% returns.

That's crazy that these Banks just aren't taking the full Capital charge as it' be free to them and they wouldn't have to pay 15% returns. but obviously these banks are too close to their margin limits. which suggests to me that any change in the market that's somewhat dramatic could cause many of these Banks like even JP Morgan and Morgan Stanley to breach their margin requirements. Jamie Diamond The chief executive JP Morgan said Regulators have been rising Capital requirements for years and they proposed even tougher measures after the banking Panic that began in March.

He also added saying higher interest rates are eroding the value of banks investment portfolios, which can also eat into regulatory Capital levels. So basically, these banks are already close to their margin limits. and because their investment portfolios are decreasing, they're getting closer and closer to breaching those margin requirements. So close, in fact, they're having to pay other people to take on some of that margin risk and not just pay them one or two or 3% paying them upwards of 15% Also, with M, you can currently get up to 15 free shares worth up to $2,000 each and any uninvested cash gains interest at 5.1% To sign up for Mimu.

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Trading platform: Saying the deals functions somewhat like an insurance policy, but with the banks paying interest instead of premiums. Now that's really interesting because it's pretty much exactly what Michael Bur was doing back in 2008. He was shorting the housing market and paying interest on those credit default swaps. So these banks have basically taken out credit default swaps on their own loans that they're giving out.

and obviously they're paying the interest so that if those loans go bad, they don't have to suffer the losses. Somebody else will. That to me, sounds absolutely nuts. that major Banks like JP Morgan Chase are buying credit default swaps on their own loans That they're giving out to customers.

But perhaps the best part of all of this is that hedge funds that are buying these complex derivatives. if those loans do go bad, is those hedge funds that are going to take on billions of dollars in losses? And if these loans do go bad, hedge funds are going to lose billions more, banks are likely going to collapse, and the entire system will be a giant giant mess. We've already got Aries Management, Magnetar Capital and De Shaw buying these risky complex derivatives I Wonder if Citadel will buy up tons of these dodgy loans and hopefully those loans go bad causing Citadel billions of dollars in losses. And speaking of Citadel Check out this really cool due diligence.

It says investors in Citadel's hedge fund are literally propping up Citadel's Clearing House It says after disclosures from Citadel Advisers LLC It looks like Citadel Advisors fully disclosed how investors in their hedge fund basically support Citadel clearing, including during periods of Market turmoil AK the mother of all short squeeze even at risk to their own Investments So if Cadel Clearing experiences a period of Market turmoil, Citadel Advisers LLC and their customers will bear the losses. So for investors in Citadel's hedge fund, those Investments are funneled to Citadel clearing or C Citadel the market maker in exchange for ownership in Citadel clearing itself. This entwines the success and failure of Citadel the market maker with Citadel the hedge fund together such that the failure of one effectively guarantees the failure of the other. So if those risky loans these hedge funds are taking on from these Banks do end up going bad.

it could not only bring down Citadel the hedge fund, but also bring down Citadel the market maker. And it also says to the extent that Citadel Clearing aka the market maker requires additional Capital AKA Rescuing the advisors or the hedge funds may require the Citadel clearing funds AK some of those individual hedge funds to contribute additional capital or increase the size of their loan to Citadel clearing AKA Citadel Clearing will demand that Citadel the hedge fund bails out or rescues Citadel Clearing to the best of its extent AKA Likely bankrupting all of the investors in in said's hedge fund, taking all of their money and likely losing that too. And as just Dario tweeted, it seemed to Dtcc is already preparing for just how much risk is in the market by increasing margin requirements. Even more, he tweeted saying the Dtcc has just doubled the margin requirements for mortgage backed.

Securities So that's why these banks are desperately trying to shift their risk because they likely won't meet these new margin requirements. And that's why they desperately trying to get other hedge funds and other private Equity firms to assume that risk and those margin requirements so they don't have to I'm personally very interested to see what happens over the next few weeks, as by the way, Banks only have two weeks to prepare for these changes and also interested to see what happens over the next few months will more Banks end up collapsing Will Banks fail their margin requirements and will these hedge funds take on too much risk loans or too many risky loans and end up defaulting and going bankrupt themselves? Because don't forget, these hedge funds don't have the same stringent margin requirements that banks have. so if they take on too much risk and that risk blows up in their face, it's game over for those hedge funds. And finally, I wanted to quickly cover how these shorts are desperately running out of liquidity and how the squeezes just around the corner.

This post says at a certain point one of these hedgies doesn't have enough liquidity to increase their margins or to avoid margin calls anymore, resulting in them getting forced to cover at market price or shifting even more risk onto another hedge fund. Ultimately, that will eventually result in a price spike resulting in more hedge funds not being able to meet margin requirements, resulting in them being forced to close short positions, resulting in further price spikes and the spiral will continue. And to see how much liquidity these hedge funds, these shorts, and these banks are losing. Check out this tweet from Bams focusing on the Reverse Repo facility, he tweeted saying down and down it goes Banks don't have as much to park overnight, neither the hedge funds and notice the participants are slowly dropping.

Also, at one point this reverse repo facility built its way all the way up to $2 trillion and is now about to drop under just a trillion. These banks are losing liquidity day by day by day and the system is slowly being draged. And obviously when these funds run out of liquidity The Squeeze will happen. But guys, be sure to let me know what you think down in the comments below.

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