If you want to explain the price of something, a good place to start is supply and demand.

What was in demand post-election across markets? Equities upside, and specifically US equities upside.

You could see that everywhere. Steeper call skew, $90 billion of inflows to US equity-focused ETFs and mutual funds over just two weeks and on and on. I’ve been over it and over it.

By appearances anyway, a lot of folks went into the election over-hedged (on the downside) and under-exposed (to the upside), so when the event risk cleared in a stock-friendly way, some market participants found themselves trying to jump aboard a moving train in order to avoid under-capturing the rally. The higher stocks went, the more acute the “FOMO” and the more demand for upside exposure.

On the supply side, that exposure has be financed, and dealer balance sheets are finite. What happens when insatiable demand meets finite supply? The cost of whatever it is — in this case long equity exposure funding — goes up. This isn’t especially complicated at the conceptual level and as I emphasize from time to time, understanding things at the conceptual level is more than sufficient for the vast majority of market participants.

I mention this because equity financing costs are grabbing a few headlines and garnering some attention from people whose analysis I think’s worth reading (and if I think your analysis is worth reading, that’s high praise). One of those people is Cameron Crise who, despite a disposition I couldn’t suffer for any longer than a few minutes in person, is a very, very smart guy. The figure below, from Crise’s Tuesday missive, shows the record dealer short in S&P futures plotted with Cameron’s proxy for equity financing costs. (Note: The dealer short — plotted in blue on the inverted left-hand scale — is obviously the mirror image of investor longs.)

If you have a terminal, that probably puts you in a class of people for whom this sort of thing may actually be relevant beyond the conceptual level. If that’s you, and you missed Crise’s November 19 “Macro Man” column, you should go grab it. It’s titled “Something Nasty Is Going On With Stock-Market Funding.”

For everybody else, this quote from Cameron is all you need: “There is a lot of end-user demand for long equity exposure, and it kind of looks like dealers are running out of room to provide financing for it.” There you go. Supply and demand. When the latter outstrips the former, the price goes up.

Is this bad or dangerous? Well, again, I think that depends on who you are. If you’re the type of person who’s going to spend Christmas week fretting about funding squeezes around the year-end turn when banks pull back, then maybe. For everybody else, probably not, although Crise employed some ominous language on Tuesday.

Nomura’s Charlie McElligott weighed in. “Ravenous demand for leveraged ETF products from retail investors into the equities rally and post-election optimism is creating a further source of incremental competition for bank balance-sheet, and into what is already certain to be a stressed year-end,” he wrote, adding that “at the most basic of interpretations, this cost of leverage input and hypothetical funding squeeze read-through may further amplify the standard year-end illiquidity dynamics into cross-asset moves in all directions, as dealers pull back on risk-taking and capital deployment during the holiday- shortened end-of-year amid regulatory capital window dressing.”

The risk, he wrote, is “enhanced gap potentials.”