A Squeeze For the Ages

For the past few years, stocks with heavy short interest have, on average, performed better than stocks with average levels of short interest.

This year, the trend has gone into overdrive:

Turn Your Images On

Heavily shorted stocks continue to outperform the market. (Source: OnondaCapital via X)

Sophisticated investors “short” stocks because they make money when the price of the stock falls. Stocks with poor fundamentals and high valuations make good “short” targets. There are a lot of those in the market right now.

The squeeze: If you’ve shorted a stock but the price rises, instead of falling, you have to buy the stock at the higher price to close the position. It’s called a “short squeeze.” Investors in a short squeeze lose money even while the stock price rises.

If the squeeze is on across the market, companies with poor fundamentals can post huge price gains, driven by short-sellers closing out their positions.

Your eyes aren’t deceiving you. Right now, the worst stocks are the ones dragging the market higher. It’s another “feature” of the terrifying bull market underway today…

~ Addison

P.S. Our latest research with Ian King regarding Dollar 2.0, will appear later today in a special edition of Grey Swan Live!

The next regulatory environment for stablecoins favors three companies. We expect they will dominate the new monetary system as Trump guides digital assets into the mainstream.

Our estimate? $20 trillion will migrate to these platforms. That’s a positive Grey Swan event, if there ever was one.

Get ready – this latest research comes out this afternoon.

This is nearly your last chance. To receive our Dollar 2.0 research, please add your info here .

If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.com.

For the past few years, stocks with heavy short interest have, on average, performed better than stocks with average levels of short interest.

This year, the trend has gone into overdrive:

Turn Your Images On

Heavily shorted stocks continue to outperform the market. (Source: OnondaCapital via X)

If the squeeze is on across the market, companies with poor fundamentals can post huge price gains, driven by short-sellers closing out their positions.

Your eyes aren’t deceiving you. Right now, the worst stocks are the ones dragging the market higher. It’s another “feature” of the terrifying bull market underway today…

~ Addison

P.S. Our latest research with Ian King regarding Dollar 2.0, will appear later today in a special edition of Grey Swan Live!

The next regulatory environment for stablecoins favors three companies. We expect they will dominate the new monetary system as Trump guides digital assets into the mainstream.

Our estimate? $20 trillion will migrate to these platforms. That’s a positive Grey Swan event, if there ever was one.

Get ready – this latest research comes out this afternoon.

This is nearly your last chance. To receive our Dollar 2.0 research, please add your info here .

If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.com.

It’s been a year for Google. In July, Google avoided an antitrust breakup. Buffett’s successor at Berkshire Hathaway, Greg Abel, added the search ecosystem to its portfolio in Q3.

Last week, Google unveiled AI chip lines that are competitive with Nvidia.

All good for your 401(k), even if the historic level of market concentration in Mag 7 stocks got more pronounced.

CNBC analysts are debating it.

Twitter threads are dissecting it.

Portfolio managers are losing sleep over it.

One question is dominating financial news right now:

“Are we in a bubble?”

We noticed yesterday, Michael Burry, of Big Short fame, just set up a Substack page to help understand the proper depreciation values of the “Nvidia Model.”

The simple fact is that longevity estimates determine the entire profit picture for Mag 7 companies, whose earnings have been beating expectations.

The current numbers don’t reflect reality. Model sizes grow faster than chip cycles. Performance requirements leapfrog hardware before the ink dries on the purchase orders. Depreciation schedules assume years of usefulness that, in practice, last months.

If that mismatch becomes undeniable, or even a popular meme, the bubble doesn’t burst spectacularly — it simply deflates through balance sheets. Slowly. Silently. Just enough to take the glow off the entire narrative.

When the Fed began hiking rates to combat inflation, bond holdings tanked. Banks have been sweating it out, anticipating a rate cut cycle.

If the Fed cuts rates in December — odds now 80% — bond prices will continue to rise. Banks will be in better shape as unrealized losses decline. Hopefully, before a crisis breaks out.

But banks are not out of the woods, yet. And increased competition from digital assets (Dollar 2.0) will further squeeze the traditional banking business model.