Good morning, a few beautiful people, today's naked shorts, coming in from freaking shark baby, because it's shark week every single week, you know what it is. What is up, everybody want to trade straight three freaking talk fast and don't skip class baby. I can preface by saying that i'm not a financial advisor expert so take me, say the greatest self, let's get into the video, so i kind of want to touch on uh, reverse, repost and repos again, because i put out a video here yesterday and the underlying Message was great, like the the end state being the exact same. This is exactly what you want to see right, but i think i can do a better job of explaining what's really happening here.

So if you weren't able to check this out as the feds are done with hedgie games, i talked about reverse repos, where i think you're about to see a huge influx of cash getting moved around a different spot, but i just wanted to take a couple minutes. This morning, to to really walk everybody through this a little bit easier, so we're just gon na walk through, essentially what a repo is where reverse repo is and how this affects the economy, the u.s stock market, specifically shorted stocks, because i really do think it's going To play a factor in the overall amc game: stop all these heavily sorted stocks, uh just based on, what's been used with this capital, so without further ado, let's just get into this video, so repo versus a reverse repo right. What does this actually mean? So repo reverse repo, both transactions that take place between the federal reserve, aka, the feds and big banks or firms right. So what happens here well in repo? It's very simple: you've got a buyer and you've got a seller, just as you would have in any sort of transaction in a repo.

The feds are the buyers and the banks and firms are the sellers and what are they? What are they transacting so essentially, when this sort of thing happens, you've got a repo, the feds have an end goal in mind, right and typically in this sort of situation, it means the economy needs stimulated right. So what would that mean? It would mean that banks and firms don't have a lot of money to help stimulate the economy. So if, if the feds, for example, were to buy something, give cash to the banks or firms in you know essentially transaction for treasury bills or securities that can help stimulate the economy. So how does that happen right? It actually lowers interest rates.

You can think about it very simply: you've got a higher amount of supply. You've got more money that can be lends, which gives you less overall demand right. So higher demand is going to raise prices for things. Lower demand is going to lower prices for things.

So typically, the feds are giving out money to big banks and firms. What this is going to do is lower interest rates for mortgages for loans. It can help stimulate the economy. It can just loosen things up right, and why did this happen? Well, if you look back in march, for example, right the economy wasn't doing very well everything shut down, something was actually in stated called the supplemental leveraging ratio which, which gave big banks money from the federal reserve when all the stimulus is getting passed around a lot Of money was getting printed right and this set up the economy to sort of survive and weather the down days and the bad stuff that was happening right.

So this is a repo. The feds are the buyers they're, giving money to the big banks and firms in exchange for treasury bills and or other securities. The banks and firms are the sellers right now at some point in time. The influx happens right, it's a call, the repurchase agreement and then a reverse repurchase agreement because they are guaranteeing each other that at some point in time, they're going to transact that same thing.

Back right, the feds are going to get back what they need. The banks are going to get back what they need right, so reverse repo, which is what we're going to be talking about here. As i mentioned in yesterday's video, the reverse repo market is extremely high. Right now, the overnight reverse repurchase agreements all the way up to, as of june 9th, what appears to be 502 billion dollars.

June 11th, we got 547 billion dollars and in yesterday's video i talked about 720 billion dollars getting agreed upon by the federal reserve on june. 9Th, which is going to be received within 15 days, this is going to come from big banks and firms, so reverse repo. It flips you've got defense who are actually the buyers and the banks who are or act as i was. The feds are the sellers and the banks are the buyers right, so the feds are selling treasury bills and securities to these banks in order to get their cash back now in this sort of situation.

What would be the reasoning for this? So you know think: back in march the supplemental leveraging ratio comes out, they're, trying to stimulate the economy they're trying to get big banks enough money to essentially lend out extra cash. Lower interest rates on loans give more money to big institutions and investors who are trying to essentially stimulate the us economy in the us stock market. Of course, we all know we all know what they did with that cash instead aka shorting stocks and trying to bank on the economy crashing right, which is kind of ass backwards, if you think about it, but nonetheless, that's what happened and what happens essentially is the Economy tightens right so you're taking money away from these big banks and firms which is going to end up raising interest rates now. What's the reasoning for this is because when you decrease supply, demand goes up right, so maybe your mortgage interest rate will go from.

I don't know two three percent up to seven: eight 10: 11 12. Who knows how high it'll go right because lower money equals lower money to lend which increases demand, and this works with more than just mortgage rates. This works with institutions and investors right because we know that big institutions and investors are leveraging cash that they do not have, and this can easily easily come from these big banks and firms. So this is why the reverse repurchase agreement is very freaking.

I think important for what is actually happening here in the u.s stock market, so now that we have a basic understanding right, a repo, the feds are the buyers. The banks are the sellers, the banks are selling these treasury bills and their securities. The feds are giving the banks money, reverse repurchase agreement right, that's the exact opposite thing: the feds are the ones that are selling and the banks are buying right, so they are giving over cash to the feds in exchange for these treasury bills and securities right feds Are buying banks, get these treasury bills and securities feds give the treasury bills and securities back. Banks are buying right, that's how this works.

So now, let's move into the meaning of this right. How does this affect the economy and how does that affect the u.s stock market, so the economy? What this means is you're gon na have higher overall interest rates. This could be on loans. This could be on mortgages.

This could be on a lot of different stuff. Anything that you can think of, essentially these big banks controlling lending of cash, massive amounts of liquidity right. It decreases availability for lending which also directly ties into the stock market because, as we know, adele there's a lot of cash getting thrown around the stock market. That does not exist right.

It's it's leveraged money now we're going to get into this here in a second, but this also increases inflation rates right. So that's something i fully expect to happen, but how does this apply to amc? How does this apply to a bunch of different heavily sorted stocks in the market right? Those higher interest rates also upload the shares that are on loan right, because what happens here? What happens if big banks are lending cash to big institutions like citadel blackrock, vanguard, melvin capital, whoever this may be, and all of a sudden they have to tighten down on how much actual free capital they've got. What this does is it decreases the overall supply, which means that, if there's lending of capital ending of cash taking place essentially margin debt by the way, it's very high right now historic numbers near 800 billion dollars right now, 200 billion of that coming the last six Months right, what happens is if a lot of that cash is getting put back into the federal reserve? That's going to raise interest rates on all of these margins right all the margins. All the cash people are playing with that they don't actually have interest rates.

Go up that puts pressure down on people because what ends up happening is you have less overall leverage the bank's gon na say? Look, you can keep that leverage if you want we're gon na double triple quadruple, whatever the actual interest rate is right, i can't say the exact number i don't know, but nonetheless you get the point. This gets it's gon na lead to margin costs because it tightens down the overall economy right, there's less cash going around, so you can't be as loose with your money. It tightens things up, and this actually basically winds down that supplemental leveraging ratio, which was instated back in february march, in order to stimulate the economy, get banks extra capital extra liquidity so that they can essentially loan out money and get things moving right. They're trying to stimulate the economy and make it so you know everything doesn't just shut down.

We go into another recession right loosen, the economy is getting tightened up, which means that this reverse repurchase agreement is the tightening effect. So with that being said, right touching back on the 720 billion dollars, which is coming from this latest june, 9th maturity, distribution of securities loans and selected other assets and liabilities right. What does this mean tightens down these banks? The banks have to get back money to the feds, so if there's any sort of lending going on, you know whether it be with these these uh. You know treasury bills, maybe they're using this as collateral for different loans from different banks, maybe they're just using this to you know it could be a variety of different things: the cash that the federal reserve gave them.

They could have been lending out to other institutions. Other firms right and you've seen this in the stock market, the influx of cash in the stock market - and you know, frankly how many stocks are being shorted right now is absurd. It's a huge, astronomical amount of shorting amc, gamestop cops, blackberry, bed, bath and beyond nokia. Freaking space, uh virgin galactic there's so many different stocks out there that you can just watch and see what they've been trying to do with their cash they're trying to use cash.

They do not have to bankrupt you to bankrupt companies and that tightens it down right. Lower overall cash equals a lower supply which make an increase in demand right increase in demand raises interest rates; it raises interest rates and costs to borrow on loans, and higher interest rates means a higher lending pressure now. What do i mean by that right? This is how we're gon na wrap up the video, but just to make it all run home. You've got big banks here right which have huge amounts of cash and have for quite some time, because the federal reserve has given them a lot of freaking money.

Now, what do they decide to do with this money right? They're, not just going to sit on it. That's not in their best interest right. They want to make money with their money, so they lend it out right. They lend it out to blackrock.

Maybe they lend it out to another bank, they lend it out to citadel. I don't know why i put a c there. I shoot it out. They limited out to people right, that's essentially what ends up happening, so they need to get that money back if it's out on loan and if they can't get it back right.

That hikes up interest rates like let's just say, hypothetically speaking, they continue to lend money out. They don't recall this cash right. What ends up happening instead is higher interest rates right if they have the capital on hand to get back to the federal reserve, then so be it right, that's the they they do that we do we right, but this is the end story right. It doesn't take.

Uh, you can definitely put two and two together to get four here right: lower overall cash. Just think of it, like this lower overall cash supply equals higher interest rates for lending, and if people can't afford to pay interest rates, if they can't afford to keep up with the loans that they've got out, you know what happens next. It is freaking margin calls. So that's kind of the whole moral story behind what's happening here with the repos and the reverse repo market.

It's insane just think of it like this. If i was to put this into uh into some sort of analogy, let's say that you had. You know your your mom, who borrowed you 100 bucks and in its place you decided to give her uh. I don't know your gamecube right.

That's that's your! That's! Your repurchase agreement at some point in time, you're gon na buy back that gamecube from your mom right. You're gon na give back that cash she's gon na give you back your gamecube during that period of time. Let's say that you decide to take that hundred bucks and go super heavy in the stock market on a short stock right. You decide that you want to go and bet against the us economy, because by her giving you that hundred dollars she's trying to loosen you up right, she's saying look like i understand things are tight right now you do what you got to do you go make That money you do this, what you want to help kind of stimulate your your paycheck to stimulate your bank account you decide to go.

Take that and gamble you just had to go. Take that bet against yourself, the u.s economy. You decide to go bet against all the little guys right. It makes no sense, that's what's happening in the u.s economy right now, and i'm telling you these guys are pissing on the electric fence so, like i said, i wanted to make some clarification points for my video yesterday talking about repurchase agreements.

The underlying message is the same, but i definitely could have done a better job kind of walking through that whole process, and hopefully that gives you some good answers, and you understand what's happening here now. If that's what i've got for this video, so blah blah blah, i know those people drop a like consider, subscribing everyone. Do my friends catch you on the next one gon na tap my chest lightly, much love and peace.