A Long Squeeze…The Story of the Bernanke-Goldman Sachs-Trump Market Squeeze

The Buildup

As market players debate how high is high and how sweet the blow-off this year will be, maybe we should be looking at the underlying scenario.

And before we get into this deeper it should be first said that we believe Bull Markets built on solid well distributed Growth are good for everyone.

On the other hand orchestrated phenomena built on artificial building blocks have the potential to leave the unwary (like your pension fund manager) and the Consumer Confidence Reading in a vulnerable place.

I have seen my share of Long Squeezes after years as a trader on the Chicago Mercantile Exchange back in the 70’s and 80’s.  Pork bellies,  Soybeans, and the infamous Bunker Hunt Silver squeeze stand out.

Definitions

So first according to Wikipedia a Long Squeeze is: ” a situation in which investors who hold long positions feel the need to sell into a falling market to cut their losses.  This pressure to sell usually leads to a further decline in market prices. This situation is less common than the opposite short squeeze because in a short squeeze, the traders who have taken the short contracts have a legal obligation to settle with the promised shares. A trader who is long in a long squeeze may well have no such obligation , but may well sell out of fear.  Other investors may see the rapid decline in price as irrational and a buying opportunity (more often than a rapid rise in price seen as a shorting opportunity). However, given recent significant market turmoil, long squeeze has become of interest rather than merely a theoretical possibility. In 2008 Bear Stearns was wiped out after market rumors that the company had cash concerns.  Investors started selling the scrip, resulting in a long squeeze, which triggered many other stop order losses and accelerated the decline of the company’s stock.

Squeeze of Squeezes

Coming back to the current situation.  We have a market built on a foundation of Bernanke QE funny money, then Goldman Sachs piling on and running the Macro Portfolio at Treasury, and then the icing on the cake, the Trump Hope pile.  This is the Squeeze of Squeezes.