Okay folks, I want to talk about something that honestly looks a bit scary heading into this week. Let's just say that it has to do with this particular chart that has been skyrocketing exponentially over the last few weeks. amidst the market slowdowns, it has now blown past not just 2020s highs, but also all-time highs. And to be quite frank with you, this doesn't even necessarily imply something bad for the market, but it implies a massive, massive, unprecedented test of our financial system's limits.

I will explain what this is and everything you need to know about that, and we will also be starting with an update on plays as well as what's going on. and the only thing that I ask in return is that you hit that ravishing like button and also don't forget to subscribe either. Okay, so let me go ahead and get started on updates heading into this week before we get to the main entree. So let's start with Crypto Miner.

Mara Lovely Mara Mara's been making its best attempt yet at breaking out towards previous highs at 58 thanks to Bitcoin's bounce. Will it make it? Well, you're going to have to watch Bitcoin for an indication of that, but with Bitcoin holding its strongest bull trend ever without margin, it does indicate that hey, if margin starts coming in, if we start getting massive, massive leverage in the market, we could see a lot more rallying. But what about Mar? Lovely Morrow? The company always get to know your gal before you take her on a date. Wait, no, that That could be a little creepy in some situations.

A short while ago, she reported their second quarter earnings at 220 increase from the first quarter of 2021 and a 10 174 increase year over year. How many coins have they mined in Q2? 653 in second quarter? At today's price, That would be equivalent to just under 32 million dollars in a quarter. And this chores up their total holdings at around 5 700 bitcoins. But what is very important with Crypto miners is their ability to scale.

And Mara Lovely Mara now has 19 395 total miners with more than double the hash rate almost actually triple from earlier this year, the first quarter this year, And that is not even including the 30 000 more pro miners that are due to be shipped next year. So basically, Mara in a nutshell, right now, has more miners than ever, is able to mine more coins per miner than ever, and is aligned with positive inflows from Bitcoin. The asset price. You have three different dynamics of what factors in tomorrow, all in Mars favor right now.

And as crypto miners are fleeing countries and regions that don't want them, existing miners that can take demand like Mara, Lovely Morrow will benefit. and what she really needs to take off is Bitcoin to take off. And we're patient little pandas. But we'll see what happens this week next expef.

So Xpev is enjoying some swell barcoding after it's doubled during its recovery bounce from early May this week we briefed on the fact that they announced expanded production capacity as demand heated up in China. According to the company, this will allow them to increase production capacity at this location from 100 000 units to 200 000 units per year, essentially allowing them to serve on customer demand that competitors like Neo have been falling surprisingly a bit behind on this year. I have been very, very surprised and impressed by Xpev, and I've only grown more conviction in it. But Charlie.

This is a Chinese play. What do you think you're trying to pull here? My take on any market, whether that be China or any situation where you have a lot of regulatory fund is focus on your highest Conviction plays in your highest Conviction industries and then sell any ones that don't fit that criteria At the same time. though I acknowledge that sometimes in the comment sections, I see things like Charlie: Are you a pawn of the Chinese Communist Party Out of your 80 high conviction place? four of them are based in China. That means you are a communist pawn and all I have to say to that is Go Jiji.

But all jokes aside, my take on any market, whether that be China or any situation where you have a lot of regulatory fund is focus on your Highest Conviction plays in your Highest Conviction industries. Even better if they're audited by third party Western auditing firms Accounting firms. Quite simply, a lot of these more volatile foreign markets provide a lot of rolling opportunities, which is why we love them. Okay, let's go ahead and move over to Pallent here.

So their big story this week is their decision to put a ton of their working cash into gold. They'll also be accepting gold from their customers. So why do you buy gold? Well, it is a safe haven asset. Maybe you're worried about some big tragedy looming, and because Palantir works with a lot of top secret agencies like U.s Defense Contractors, government agencies around the world, and many other areas where it's very close to power, people are thinking, hey, maybe they know something that we don't know.

And indeed, they said. And I'm partially paraphrasing that this reflects more of a worldview and you have to prepare for a future with more Black Swan events. Oh, a little ominous ombre. It also came out this week that the Ceo donated 180k to an ousted hermit to rebuild his cabin.

There's a general end of the world vibe that comes from Palantir directly from the top, but when you're a company that's constantly working in the middle of crises like the pandemic like the Afghanistan pull out other tension areas that we probably don't even know about. Well, it's like, hey, it makes sense to have a little bit more of a gloomy and doomy outlook. Okay, main entree. So what are you looking at here? Well, you're looking at the overnight reverse repo agreements exploding.

What the hell does that mean? Well, we've talked about it before, but just in case you don't remember, in a repo, the Fed injects money into banks by essentially buying their treasury bills, repo in their treasury bills. You could say this in effect gives them massive, massive liquidity into something that the Fed did during the beginning of the pandemic in order to strengthen the credit markets. Now, in a reverse repo, the opposite happens. Banks give the money back to the Fed, the Fed gives them back their treasury bills, and the system is an overnight repo because it happens overnight.

So when you look at this chart, this is happening every single night. Banks and institutions are coming back to the Fed and giving them parking their money in reverse repos. So let's go ahead and focus on the bigger picture here. So what does this do in effect? Well, it basically is a natural taper because it takes money out of the institutions, out of the economy, out of the market overnight and it parks it in the Fed.

This allows the Fed to soak up mop up if you will a lot of the excess cash that banks aren't lending out anyways. So basically in a nutshell, this chart shows the voluntary draining of liquidity from banks. Okay, so this begs the question: Why would banks voluntarily give their liquidity back to the Fed without the Fed requiring it? Well, there's three major reasons, and the first reason is, well, if you have excess liquidity, you have more money than you want to lend out, or you want to invest, then it makes sense. Instead of just parking it in cash and dealing with deflationary pressures, it makes sense to just put it and park it in the Fed overnight into a fixed income security asset.

Banks have excess liquidity. If they feel like there is less return to lending out their money or invest in it in an asset class, than there is to dealing with very very poultry returns that they can get by putting it into overnight repos. So when you're looking at this, this is an indication that there's an explosion of institutions that think that there's nowhere better to put their money right now. The second reason for this explosion is that the U.s debt ceiling is rapidly approaching, and because that's happening, there's less treasury bills available.

And the third reason is that the Fed has actually made it more lucrative and expanded the number of eligible parties that can use the reverse repo system. so that is a lot. A lot of institutions that weren't able to use it before to now go and use it, which of course has also increased the amount of growth. Now stepping back for a second.

If I lost you in the explanation, think about what this means. We have more reverse repos now than at any time in American history, and that makes sense because we injected more money into the economy than ever before in American history in the last two years. So it's not surprising that all that liquidity would eventually end up as excess liquidity in the reverse repo market. And while the specific system structure has only been around since like 2013, similar mechanisms with the repo market named by different names have been around throughout most of modern monetary policy.

But the higher this goes, the bigger problem this causes for the Fed. Why? Well, because these banks that are in this reverse repo market are driving up demand for treasury bills. Remember, banks put money into the Fed and in return they get treasury bills. But as we approach the U.s debt ceiling, treasury bills are in shorter and shorter supply.

All this demand, which is being rapidly accelerated by this reverse repo market, is hurting the profitability of bonds, lowering yields, and destabilizing parts of the financial system. And it's very, very possible that as we start talking about tapering on a more permanent scale in the upcoming months, the Fed may have to make a bigger preemptive strike to curtail the use of the overnight reverse repos. Taking more aggressive action to reduce liquidity in this market because there's so much excess liquidity everywhere, the Fed can't just ban reverse repos because if they did, all this excess liquidity would just be thrown everywhere in the economy and interest rates would probably go below zero. But I think that bigger picture.

You look at this chart and you see two different things: Number one is obviously the systematic limits that we're pressing and the speculation in terms of what the Fed's going to do to rein this in if this continues to go up exponentially. And then the second thing is, hey, well, there's a lot of banks, investors, institutions that don't know where to put their capital, so they're just putting it into these stable fixed income securities that pay almost nothing. Maybe they're trying to sideline their cash for a little while while they wait to see exactly how this Delta variant situation goes. They wait to see exactly how this inflation report situation goes, and where the Fed is going to give guidance on for the 2022-year calendar year, exactly where we're heading with this recovery before they start pouring back into these asset classes.

And towards the beginning of last summer, we did see reverse repos increase and that didn't lead to a huge market sell-off. In fact, it just kept continuing Its bull run and reverse repos don't necessarily imply that we're going to have a massive, massive market crash, but what it does imply is that we're testing the limits of our financial system, and there's a massive amount of uncertainty around that. So anyways, just my thought process as we head into this week let me know what you think down below. Anyways, folks that caps off this video.

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