Terminal Tuesday – Ending the Quarter by Unwinding Meaningless Monday’s Gains

The markets are so silly!  

I don’t even know why we bother opening trading on Mondays – it’s nothing but low-volume, manipulated BS. Look how everything was pumped up and up from Friday’s close and, since yesterday’s open, all those unrealized gains were converted to CASH!!! thanks to the retail bag-holders, who fall for this nonsense EVERY TIME! Don’t blame me – I’ve been pointing out this crap for 20 years but it still goes on…

Anyway, it is what it is and we’ll see what happens today, on the last day of Q3 and it’s been a great quarter as we started at 6,250 on July 1st and here we are at 6,700 so up 450 is 7.2% is very nice for 3 months. It’s a $60Tn market so 7.2% is $4.32 TRILLION so the US markets, in a single quarter – have gained the ENTIRE GDP of any COUNTRY on Earth other than China ($9-14Tn, no one can really tell). 

That might make you wonder where all this money came from but it’s best not to think of it, because the $4.32Tn didn’t actually “come from” anywhere – it’s pure accounting fiction that exists only on paper and will vanish the moment people try to convert it back to real cash.

Here’s the dirty secret Wall Street doesn’t want you to understand: that $4.32Tn in “gains” represents maybe $200-300Bn in actual money that flowed into markets this quarter. The rest is mathematical multiplication – when Apple’s stock goes up $1, the “market cap” increases by $14.8 BILLION (their share count), but no actual $14.8 billion changed hands. In fact, if the last person to buy a share of Apple at the close pays $278 instead of $253, APPL would close up $148.Bn, based on $25 spent. THAT is how you manipulate the markets!

No investigations, no arrests, no regulations are passed – Cramer is just discussing typical Hedge Fund practices in their daily manipulation of the markets…

Think of it like a small-town auction where 10 people bid on 100 identical antique vases. If the first vase sells for $100, suddenly all 100 vases are “worth” $10,000 on paper. But what happens when all 10 buyers suddenly want to sell their vases at the same time? The 9th vase might sell for $50, the 10th for $25, and by the time forced sellers emerge, they’re getting $10 each. The “market cap” collapsed from $10,000 to $1,000 but only $200 in actual money changed hands during the crash.

A modest 5% market correction would theoretically require $3 TRILLION in “selling” but that money doesn’t exist. What actually happens is forced liquidation creates a bidding vacuum. When Pension Funds, Insurance Companies, and Leveraged Investors hit redemption pressure or margin calls, they become price takers, NOT price makers.

Markets go up slowly on low volume because buyers can wait – they purchase gradually when prices look attractive. But markets crash quickly on high volume because sellers can’t wait – they must liquidate immediately regardless of price. A $60Tn market cap built on maybe $5-10Tn in actual flow-through money becomes a house of cards when that dynamic reverses.

With consumer sentiment at 55.1, Recession warnings flashing red and, with institutional concentration at 1920s levels, we’re one systemic shock away from discovering that most of this $60 trillion “wealth” is just shared hallucination backed by accounting tricks and Fed liquidity that evaporates the moment everyone heads for the exits simultaneously.

As a rule of thumb: The bigger the bubble, the less actual money it takes to pop it because forced selling creates mathematical deflation that has nothing to do with real economic value. If 5% of the market ($3Tn) attempted to liquidate, it would require $3Tn worth of cash buyers to take the shares off their hands. In reality

The ENTIRE U.S. stock market trades only about $400-500Bn per day across all exchanges. The NYSE averages $18.9Bn daily in closing auction volume alone, while total NASDAQ dollar volume runs $420-450Bn. Even on heavy volume days, you’re looking at maybe $600-700Bn in total daily turnover.

The Math is Terrifying: To liquidate $3Tn at normal daily volumes of $500Bn would take 6 full trading days – and that’s assuming 100% of market volume goes to buying the liquidated shares (impossible). In reality, you’d need 20-30 trading days to absorb that much selling, which means prices would collapse long before the liquidation completed.

The real danger comes from cascading forced liquidations:

• • Margin Calls: When accounts hit maintenance requirements (typically 25-30% equity), brokers force immediate selling regardless of price
  • Pension Fund Rebalancing: Many funds have automatic triggers to reduce equity exposure when losses exceed 5-10%
  • Insurance Company Rules: Regulatory requirements force asset sales when risk-weighted positions exceed limits
  • ETF Redemptions: When passive funds face massive outflows, they must sell underlying holdings proportionally – ETFs dominate the market like never before

Warning Signs to Watch:

• • VIX spiking above 25 (fear index showing institutional stress – now 18)
  • Credit spreads widening (corporate bond yields vs Treasuries)
  • Margin debt levels approaching 2000/2007 peaks (currently near the all-time highs)
  • Fund outflows accelerating (we saw $17.37 billion in long-term fund outflows last week alone)
  • Treasury yields inverting (yield curve predicting recession)

The Beautiful Irony 

Markets that took months to build $4.32Tn in “value” can lose it in days because selling is urgent while buying is optional. When everyone needs to sell and no one wants to buy, mathematical deflation takes over – prices fall until forced sellers find willing buyers, often 20-30% lower than peak valuations.

That’s why bubble mechanics are so dangerous: the bigger the illusion, the faster it pops – when reality intrudes.