Of billions of dollars in interest rate. Swaps and total return swaps are currently being being liquidated today. I want to talk about what kind of impact. This is going have on the wider market stay tuned.

And let's make some money and i want to dive straight. In with the key information. So peter handweek is saying that higher rates will impact the financing of short positions. And he referenced this article from zero hedge.

That says that borrowers face tens of billions in margin calls on swap positions as rates rise. The article starts by saying. While most financial pundits. Have been keeping an eye on stocks and commodities as potential catalysts of market crisis.

A far less exotic source of contagion has quietly emerged as rates have soared to levels not seen in over a decade and this year's steep rise in financial costs is causing a once in a generation cash crunch for borrowers in capital markets. That have used derivatives to hedge their debt issuance. And this is currently forcing. Many to scramble to find additional funds to meet margin calls they face on their swap positions okay these short sellers that have used derivatives to take out short positions or to take out hidden short positions and now experiencing this once in a generation cash crunch.

It says that borrowers are currently left vulnerable to a liquidity squeeze if rates suddenly jerk higher that's because many have agreed to post collateral or variation margin to their swap dealers when the value of their positions move against them. And it says and boy have most swap positions moved against their issuers. It says. These moves have triggered tens of billions of dollars in margin calls for companies that had swapped to floating rates at lower levels.

Forcing them to cast around for more cash at what remains a challenging time for many as rates go up those issuers may have to post meaningful amounts of variation margin or collateral on their swaps to cover any mark to market moves on those positions. It says. The largest swap dealers held 286 billion dollars of initial margin on unclear. Derivatives transactions at the end of 2021.

According to isda more than double that level at the end of 2017 and as a result. Most financial firms. Must now post margin or face. Those liquidations and face.

Those marching calls and a trader said that margin calls have gone up a lot. He said. It increases pressure on repo funding markets. Where people can raise cash for margin calls.

We've seen that for a while with collateral scarcity in europe. We know these hedge funds have been abusing the reverse repo market. Obviously in order to prevent market squeezes. This is by allowing the borrowing of securities.

Repos and reverse repos help to prevent individual institutions. Squeezing the market in a particular security by cornering supply and thereby. Creating or exacerbating. Temporary imbalances between supply and demand and rafi has also tweeted this screenshot on total return swaps that says if you read this carefully you'll see how they use swaps to manipulate price action keywords being to replicate and simulate.

So this article here from thompson router says that total return swaps are also called a total rate of return swap. They say it's a derivative contract that replicates the cash flows of an investment in an asset usually debt or an equity security aka. An individual stock or even a basket of securities index. Or other financial instrument.

In addition a trs or total return swap also requires the parties to make payments to each other based on the performance of the underlying asset and as i've just spoken about as a result of the increase in rates. These payments have now increased a total return swap permits party a to simulate investment in the underlying asset without incurring the burden of ownership of that asset or vice versa it allows one party to short a stock without actually shorting. The stock and without having to report that short position it says the absence of a transferring ownership in the underlying asset allows greater flexibility and requires reduced upfront capital to execute a trade and that also means a party to a total return swap can be more highly leveraged aka. They can take on more excessive risk and have more exposure.

Which obviously in the past has benefited these highly over leveraged hedge funds. But is now their downfall speaking of downfall gold telegraph have just tweeted saying that deutsche bank credit suisse and ubs all report earnings this week and guys if you haven't already be sure to sign up to moomoo right now using the link in the description. Below you can currently get 10. Free stocks worth up to a total of a whopping 25 000.

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Which does also not benefit from your order. Flow or sell your odd flow. Therefore moon was brilliant for buying those amc shares they've said in may the european central bank told banks to buckle up and prepare for a bumpy road ahead. They've said credit suite has already warned of another quarterly loss and he said.

It is going to be an interesting week. I expect many of these banks to release their earnings. Which are likely going to be disappointing. And i expect many of these major banks have again taken on massive massive losses again these banks taking on heavy losses.

Just shows actually how close the recession. Is and just how close the market is to fully crashing again. I expect rates to raise even higher as the market continues to crash. And these hedge funds that are exposed on these total return swaps and interest rate.

Swaps are going to be losing more and more money on top of this blackrock has also tweeted. Saying the federal reserve is set to raise rates by at least 075. This week. The fed believes it can curb inflation without causing more than a mild slowdown and blackrock say that's unlikely in our view.

Clearly. Blackrock are also expecting a market crash and also expecting a recession or a hard landing and not soft landing on top of this. A major economist has actually came out and said that he also thinks the market will crash. He said.

There's many reasons. Why we are going to have a severe recession and a severe debt and financial crisis. The idea that it's going to be short and shallow is totally delusional. We're going to see parts of the corporate sector.

Going past. You'll see the parts of the shadow banking system going past. You'll see the household sector. That is partly fragile going in trouble you'll see some sovereign going trouble.

Yeah. The trigger for the financial distress is going to be a recession and recession is not mild shallow. But it's going to be severe and protracted and there'll be a vicious cycle between the real side and the financial side of the economy. So right there.

He's expecting massive massive contagion not just on wall street. But also in the corporate sector in real estate sector and in sovereign debt. As well you may have also seen the sec. Just charged a politician with insider trading.

The nancy pelosi stock tracker tweeted saying the sec just charged former gop congressman stephen beyer of insider trading by profiting 350 000 illegally on buying sprint when t mobile and sprint were about to go through a merger. So the sec tweeted saying today we fold inside of trading charges against nine individuals in. Connection with three separate alleged schemes that together yielded more than 68. Million dollars in ill gotten gains.

They've said those charges included a former chief information security officer. An investment banker and a former fbi trainee. Now. I do think.

This is a step in the right direction. This shows. The sec aren't afraid of going after a politician. They're not afraid of going.

After investment bankers and they're even not afraid of going after fbi trainees. But what it does also show is actually how easy it is to manipulate the market even when the fbi caught on to what was going on they sent an fbi trainee to investigate. But the fbi trainee ended up being corrupted as well it's so easy for these illegally acting criminals to bribe even the highest of investment officers even in the fbi. I do think it's a step in the right direction.

But i also do believe the sec are indeed complicit in these crimes and have likely been corrupted and bribed by wall street. That's why the sec sometimes go after the small guys. But completely ignore the major crimes going on and that's because the sec has paid off at every single direction. When it comes to these big guys and these big crimes.

It seems like the sec acts more like a poster boy that doesn't actually do anything they're just there to pretend they do something clearly these billionaires that are committing illegal crimes have bribed everyone at almost every single corner. That's why they do continue to get away with these crimes. But while it's also being made more and more public every single day and even though. The sec currently aren't doing anything about it.

I do think the wider market is still crashing and these heavily overexposed hedge funds are suffering more and more losses on a daily basis and as i said earlier as a result of this rate rise. Many of these hedge funds are now being liquidated on their swap positions. But guys be sure to let me know what you think down in the comments below and as always guys be sure to ding that notification bell. Because that way you'll be alerted when i upload a new video cheers.