To The Moon

Short seller Michael Burry is on a new mission, after making (significant) bearish bets against NVDA and PLTR, (which included purchasing put options with a notional value of roughly $187 million on NVDA and a staggering $912 million on PLTR according to Q3 13F filings,) and actively criticized the companies and the broader AI market.

I believe there is “some” truth in what he has found and shared.

As much as I hate to admit, I believe analysts and investors have taken to his explanations and reacted accordingly too.

Since his short bets started making its round in the news media (from 03 Nov 2025), both NVDA and PLTR have fallen by -15.40% & -11.40%, respectively, to date. (see below)

03 Nov 2025 - 12 Dec 2025

On Wed, 10 Dec 2025 short seller Michael Burry “new” warning that US Fed Reserve’s move to restart Treasury bill purchases is:

• Less about stability.

• More about a financial system growing dependent on Fed support.

Burry took to X and cited a Financial Times blog “RIP QT; long live ‘reserve management purchases” saying that the Fed's plan to begin "reserve management purchases" (RMPs), signals growing fragility in US banking system.

He pointed to the central bank's decision to stop shrinking its balance sheet and prepare to buy roughly $35 billion - $45 billion in Treasury bills each month, a move analysts expect to begin in January 2026.

Analysts from BAC, further project that the Fed could absorb as much as $560 billion in total liquidity via RMPs and MBS reinvestments throughout the 2026 calendar year.

Burry’s X post comments:

• To keep US financial system running smoothly, in 2007 its just $45 billion.

• Before 2023 banking turmoil, it requiies only about $2.2 trillion.

• Now, US Banking system cannot function without $3+ trillion in reserves / life support from the Fed.

• Indeed, Fed’s data from mid-October 2025 showed total reserves dipping to $2.99 trillion, the first time they have slipped below the critical $3 trillion threshold since the current cycle began.

• That is not a sign of strength but a sign of fragility.

• In 2 years or less, US banking systems requirement has increased by easily $800 billion.

• "So I'd say US Banks are getting weaker way too fast" he added.

Fed–Treasury Alignment Concerns ?

At the same time, Burry also noted that US Treasury has been issuing more short-term bills to avoid pushing 10-year yields higher.

Market data suggests US Treasury is projected to increase short-term bill issuance by approximately $500 billion in 2026 while simultaneously reducing longer-dated coupon issuance by $600 billion.)

He suggested that the Fed's decision to focus its buying on those same bills looked awfully convenient, questioning the Fed’s timing.

He further argued that the Fed (now) appears to expand its balance sheet after every crisis to avoid funding stress in the banking system, a dynamic he claimed, helps explain US stock market's strength.

Sarcastically, the Fed might eventually buy all $40 trillion of the US debt, effectively taking over the bond market.

As of late 2025, US national debt has already surpassed the $38 trillion mark, lending weight to his concerns about the scale of future interventions.

So, spending will likely continue.

Fed Ends QT As Money Markets Show Strain

On 02 Dec 2025, it was reported that US Fed formally ended quantitative tightening (QT) after shedding about $2.4 trillion in assets since 2022. (see below)

Total Fed assets now sit at approximately $6.54 trillion, down from the peak of nearly $9 trillion in early 2022.

The move comes as funding markets, particularly the $13.5 trillion repo market, show increasing volatility.

Daily average repo exposures hit $12.6 trillion in Q3 2025, with rates frequently spiking above the Fed’s target range during month-end settlement periods.)

Short-term repo rates have repeatedly broken above the Fed's target range, raising concerns about liquidity.

Economists at Evercore ISI, Bank of America and Goldman Sachs believed US Fed will likely roll out RMPs to rebuild a reserve buffer and stabilize overnight rates.

Fed Rate Cut Lifts Market Sentiment

Meanwhile, US Fed's 3rd consecutive interest-rate cut boosted market sentiment on Wed, 10 Dec 2025, bringing Fed funds rate down to a range of 3.75%-4.00%, driving strong gains in several high-beta stocks linked to (a) clean energy, (b) crypto mining and (c) space technology.

All market indexes were up that day :

• Dow Jones rose by +1.05%.

• S&P 500 added +0.67%.

• Nasdaq 100 advanced by +0.42%.

• Russell 2000 gained +1.36%.

My viewpoints: (mine only)

Again, I believe Burry has rightly pointed out that US financial system depends too much on the central bank.

• It certainly looks like the Fed’s QT (since 2022), has brought US banking system to an operational breaking point, a dependency that can accurately be labeled as fragility.

• RMPs commencement is direct evidence that US banking system’s plumbing needs significant & immediate liquidity injection to prevent functional stress.

• The need for a technical fix to inject tens of billions in liquidity every month simply to keep money markets stable is, by definition, a demonstration of underlying weakness and reliance.

Despite this milestone, experts note that visible impact could take time.

Balance sheet expansion may be delayed until early 2026 due to treasury settlement lags, mirroring past cycles.

History has shown that when the Fed starts adding money back into the system, asset prices, especially riskier ones often respond, even if it takes time.

Time To Exit US Banks ?

For this post, the sampled banks will be $JPMorgan Chase(JPM)$ and $Bank of America(BAC)$ - 2 of a handful of Systemically Important Financial Institutions (SIFIs), inherently intertwined with the Fed and US financial system.

Despite the truth, I think it is still too early to think that US banks will be “affected” by Burry’s truth.

Reasons being:

• The 2 US banks remain well-capitalized, with high Common Equity Tier 1 (CET1) ratios.

• As of Q3 2025, JPMorgan reported a strong CET1 ratio of 14.8%, while the industry average for large SIFIs remains comfortably above the regulatory minimums.

• This means the big boys have a solid buffer to absorb losses before becoming insolvent.

• Outlook for them remains cautiously positive to mixed, and with a high risk of volatility, due to intertwined relationship to the US economy, that unfortunately is still slowing down gradually.

• With US interest rates expected to fall further in 2026, this will take pressure off businesses and hopefully spur growth & expansion.

• If US interest rate falls ‘enough’ to spur a turnaround in US real estate, dampening systemic risk to banks as many have significant exposure, especially to distressed commercial real estate (CRE) loans, particularly office space.

• The urgency is high, as US office vacancy rates hit a record 19.6% in early 2025, and nearly $950 billion in CRE debt is scheduled to mature through 2026.

So far, Burry's post has minimal impact on JPM and BAC stock prices, as markets prioritize (a) Fed rate cut and (b)economic data over a short-seller's commentary.

No reports show direct volatility dips tied to his Wednesday post. Instead, bank stocks rallied alongside broader indices recently. (see above)

Like me, if you are a holder of US bank stocks, will need to keep up-to-date on US banks because every US Fed purchase signals continual liquidity needs, exposing banks to funding stress or balance sheet strains, that in turn may limit banks’ earnings & profits.

Last but not least, I also believe Trump-era deregulation may offset this, making systemic fragility less likely without a new “damning” trigger.

It is during times of US market swinging volatility that a portfolio of well cap stocks will be put to the test and come out relatively unscathed. Agree ?

Due to creative differences and bias, I will scale back my posting.

My 2,430 ‘timeless’ posts remain available (for now) for those who value fundamentals as Mr Buffett had pointed — invest in businesses, not pick stocks.

To new subscribers, no flashy screens to entice blind investing. I aim to share on how to fish, not fish for you.

I’m grateful to share what I know. In the alternate moo moo universe, where I am valued & appreciated, I will still be sharing. Good luck on your i-journey.

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