🚨Old post about SoftBank -

⚠️ THE RISK OF A $VIX TURKEY BURSTING OUT FROM THE (SOFTBANK) OVEN ⚠️

Something happened yesterday that has been broadly ignored: the Bank Of Japan printed ~10bn $USD equivalent in $JPY and delivered an adrenaline shot of liquidity to the market. Hold on a second, why the need to inject liquidity through the back door without any apparent need? The answer is straightforward: Softbank is imploding, and they are trying to contain the fallout. 🚨

What would you think a big trader with gazillions of dollars in leverage would do if is in desperate need to achieve 2 goals:

1 - Raise cash

2 - Re-Inflate its portfolio value

The big trader will start shorting options and receiver swaps in the market, regardless of whether it makes economic sense or not. Part of the premium collected will be used to fend off margin calls. Another part will be used to squeeze up stocks and re-inflate the value of the portfolio pledged as collateral to the creditors in the hope they will back off. 👀

What do you think will happen if very large options volumes are traded in that way in a market that is becoming increasingly illiquid the more we move towards year-end? Volatility collapses. What happens when a #stocks pump, as a result of a volatile squeeze, exhausts itself and there are no real buyers left in the market? #stocks liquidity collapses. 🥲

This already happened since last Friday in Europe (x.com/dariocpx/statu…).

In the Japanese #stockmarket, where the #BOJ owns already 70%+ of all #stocks ETFs and as a consequence is the major shareholder in 55 of the companies included in the #Nikkei, liquidity has been evaporating to a trickle with the consequence that the BOJ needs to step in to prop up #stocks every time there is a slight pick up in selling volumes.

The $VIX spot in the US closed the last session at 12.85, crushed by an overwhelming options activity. Things became so absurd as of late that 80% OTM strike put options are the cheapest IN MODERN TIME HISTORY! x.com/themarketear/s…

Alright, now that I have presented how cash is being siphoned from the market (by Softbank), let’s move to the second part. 😉

$ARM is the biggest and most valuable holding in the Softbank portfolio. Now, what value do you think the market is giving to all the other assets in Softbank's balance sheet when their 90% stake in $ARM is valued now at ~57bn$ and Softbank Group market cap is ~60bn$? 3bn$ 🤭

As I flagged in this post, Softbank is so highly leveraged that they are even borrowing billions against their own stock as collateral (x.com/dariocpx/statu…). Furthermore, Masa Son already pledged 35% of his own shares as collateral to the personal loans he got from banks.

Do you understand now why $ARM is being squeezed up as much as possible? If $ARM goes down, then Softbank stock goes down, and that puts Softbank stocks posted as collateral in danger of being liquidated, accelerating the death spiral of the company. Since the company Q3 results disappointed and $ARM stock opened gapping down that day, the squeeze has been so powerful that it is now up 23% since then (chart 1). $ARM results have been reported on November 8, while on November 9, Softbank reported results, posting such a big loss that many brokers skipped a heartbeat! (x.com/dariocpx/statu…). However, Softbank stock didn't lose any value since reporting results! Chart 2.

Softbank has a problem though, they cannot sell any $ARM stock till next year because of the IPO lock-up, and their brokers know it. This means that, in the same course of events we saw with Archegos a while back, it might be not far from running out of cash and collateral to keep running all its schemes.

The $VIX turkey isn't dead inside the Softbank oven, as many do believe, and rest assured it will escape if Masa Son doesn't manage to keep the door shut. How far are we from a volmageddon? In the post below my last update, feel free to make your own considerations 🤷🏻‍♂️


https://x.com/dariocpx/status/1731479086030340326?s=46

💥“Japan's wage hikes create game-changing inflation dynamic as #BOJ meets” - #Nikkei

As discussed last week (below), #Japan fell into a bad situation and is now facing a wage-prices spiral with real wages stuck since almost 2 years (even using the ridiculously underreported political adjusted official #CPI figures) increasing the pressure on #BOJ to do something 🤷🏻‍♂️

Will they have the guts to do so this is the real question for the #BOJ because they know it will hit global #stocks badly 🙄💥

https://x.com/dariocpx/status/1769506921583948275?s=46