More Disaster | Reverse Repo Limit JUST Doubled - Explained.

hey everyone me kevin here the federal

reserve just doubled its capacity for

accepting reverse repo operations from

individual counterparties in case you

have no idea what the heck i just said

in this last sentence this video is for

you so i can explain to you why the dead

cat bounce we were expecting to be a

reality on tuesday turned into a dead

zombie that basically got up got on a

rocket ship and the market just kept

chugging along because apparently we

cannot dip the s p 500 more than three

percent without people buying the crap

out of it and buying the dip like crazy

to the point where the market just does

not want to fall

so

let's explain this

doubling

of the acceptance of reverse repos at

the federal reserve's overnight

operations

and then maybe we can understand why the

market refuses to dip or even crash

all right folks

we've seen this line before

see the blue line it goes up it means

banks and money market funds and

businesses have more cash than ever

before i'm giving you a big bottom line

i'm skipping the bs okay in fact take a

look at this

see right here march 31st kind of uh

during the coveted recession here right

march 31st of 2020 why'd the line go up

then

well because businesses panicked they

cut spending they drew credit lines they

laid people off and that way they had

more cash to insulate themselves

from the potential disaster that was to

come

but thanks to trillions upon trillions

of dollars of money printing and

stimulus

which have now started to flow into the

markets

we have this blue line going up over

here specifically after the slr uh the

supplemental statutory reserves uh

liquidity reserve requirements were

changed on march 31st again the little

specific details of this don't matter so

much basically now banks and money

market funds have so much money because

businesses have so much money on deposit

that

we see this blue line go up

this blue line is in effect

banks

taking treasury bonds in exchange for

giving the federal reserve bank cash

and the short-term effect of banks

taking treasury to bond bonds is taking

treasury bonds out of the potential for

the fed to maybe sell these bonds which

increases the price because there's less

available supply of these bonds so

increases the price of treasury bonds

which lowers rates so in other words

this is sort of a backdoor way for the

federal reserve to keep rates low which

is interesting because the federal

reserve is already buying up 80 billion

dollars a month of treasury bonds

so in other words

the federal reserve

is printing money like crazy we're

buying 80 billion dollars a month of

treasury bonds increasing

the prices of bonds but lowering the

yields on bonds to support the economy

lowering interest rates on things like

credit cards and houses and so on and so

forth mortgages right

car loans whatever

but on top of that we're also working

with giving banks the opportunity to

capture some of these treasury bonds

with their overnight deposits taking

them away from the market for a

potential sale and now also supporting

interest rates staying lower interest

rates staying lower is very

accommodative which props up this market

with a lot of funny money in other words

we got so much cash we're now using that

cash

to make it easier to borrow more cash

but the problem is we're not really

borrowing more cash in fact commercial

lending is falling substantially

commercial lending and lending in

general is falling so much that banks

are basically begging people to borrow

money look at joe biden announcing a

couple weeks ago that the sba is willing

to take on way more loans than ever

before if you're a small business you

want a really big eidl loan hit them up

they'll take care of you

because

essentially what we're trying to do is

make this fugazi economy a little bit

stronger if we can encourage businesses

to actually borrow money spend the money

hiring people and building

infrastructure or building new machinery

or building out warehouses or factories

or whatever and hiring people to do that

then maybe our employment rate our

unemployment rate will finally go down

more

we'll have better job reports we'll

finally deal with this chip and supply

crisis we'll finally lower that

inflationary impact ironically by

finally having more workers employed

businesses need maybe potentially some

more money to employ people but

businesses aren't taking the money

because businesses already have enough

money and so what's happening is

businesses and corporations and people

and individuals with high savings rates

that we've seen recently

have been buying every single dip this

is why monday

when we thought that's it buckle up

everybody this is the perfect storm to

buy the dip

sign up for that stocks and psychology

money course because we got a lot of buy

and sell alerts coming up

buckle up

we didn't really get an entertaining

ride

still bought and sold stuff but we

didn't really get an entertaining ride

because come tuesday everybody had

started buying the dip within the last

30 minutes of monday which led into a

rally on tuesday and all of a sudden

that dead cat bounce just turned into a

zombie riding a rocket ship to the moon

and here we go everything's taken off

again spacks are taking off high risk

plays are taking off again crypto slowly

creeping back up

it's crazy we're just in this crazy

world

of all of this extra money

and when you see the headlines that the

federal reserve

is doubling

the uh

amount of money that they're willing to

accept from counterparties

is just a sign that there is some fat

cat bank that literally has so much

money they hit the 80 billion limit

because the limit used to be 30 bill now

it's 80 bill now it's 160 billion or it

was 80 bill now it's 160 billion there

are 77 counterparties or mostly banks

participating in this we've got almost

1.3 trillion dollars going into this

which if i have to divide the the amount

that we have going into the reverse

repos by 77 counterparties uh oops uh

just disconnected my screen there but no

problem that's about 16.6 billion

dollars per bank

which the if the limit was 80 billion

why is it a problem what's the problem

because there's some fat cat bank that

literally has so much money

that they needed a little bit of an

extension in terms of how much money

they can prop into the reverse repos and

the fed's like sure we'll take some more

stimulus in other words we'll help we'll

let you help us lower interest rates for

the time being before we begin our taper

and we'll just accommodate the market

even more because we do still want that

unemployment rate to go down hopefully

we don't create more

inflation but since we think inflation's

going to be transitory we're not so

worried about it

so may as well just keep accommodating

this crazy market now on one side you've

got a lot of people that are like this

market's going to crash man like this

there's no way this is sustainable but

on the other side the catalyst for a

crash aren't really here and even though

people on the other side are like yeah

there's probably going to be a crash one

day

we don't actually think it's going to be

soon because we're the catalysts we

thought the best catalyst was

potentially this week ever grant crisis

budget crisis debt ceiling crisis uh

crisis with uh with with um

the infrastructure negotiation jerome

powell talking about a potential taper

like we had the perfect

pot of crap

to make this market crash and it just it

just three percent on the s p 500

and these catalysts go away over the

next three weeks so it's like we're

going to be going into the end of the

year with no negative catalyst at least

that i see at this point i mean maybe

there'll be some black swan to give us

that correction we've all been looking

for but this could be a full year here

without a five percent correction in the

s p 500 it's nuts

it's absolutely nuts

uh so if you're wondering what those

headlines are about the counterparty uh

deposits for reverse repos being doubled

it's basically saying there's some fat

cat bank that has so much more cash and

the fed's willing to let them help

accommodate the market a little bit more

by keeping rates low

that's basically all you need to know

businesses corporations got too much

money

people aren't borrowing enough money if

you too have too much money well call

lee use that coupon code linked down

below on the programs for building your

wealth and let's make your money make

some money

use that coupon code before friday

because

all this inflation we've got the pricing

is going to be going up but otherwise

this whole repo thing

it's just a fat sign that we are so

flush with funny money right now

and there's no catalyst for crash

at least that i see at the moment again

could be a black swan

but in the meantime you know people are

going to be going by on the dip every

single freaking day

if you want to buy the dip with me

link down below

see everyone thanks so much for watching

see you next time

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