Bill Hwang |
Keith Snyder emails:
Dear Sir,
I am confident you have heard of this hedge fund meltdown. I have not looked into it but did catch a radio show (ric Edelman for the record) who did a cursory explanation. He did not make any judgements or ideological observations; just gave some basic information that I trust was somewhere near the truth haha.
Perhaps an in-depth look at this through the free market lens would be a teachable moment. Obviously gov regulation failed here? Or perhaps this exact scenario is exactly how a free market solves the problem?
Here is my issue and it is admittedly narrow. This hedgie Hwang the head of Archegos essentially runs a casino set up floating all this on loans from large banks who then call his margin and he is caught out. People lose lots of money. This guy was previously sanctioned as recently as 2014 or something. Why am I pretty confident that this guy is not going to be living in a one room apartment and wondering how he is going to pay the rent next month anytime soon?
Yeah, I understand that concern is not constructive but it is a factor in the disconnect that causes those to see the legitimacy of government control, regulation, etc.
So far this meltdown hasn’t had a ripple effect even if it is supposedly the largest hedge default since Long Term 1998. That point I took on trust. Not sure if that is 100% true.
Peace,
Keith Snyder
Salvator Dali's “The Temptation of St.Anthony“ |
I reported last night at EPJ that Archegos, the family office of former TigerManagement trader Bill Hwang, was forced by its banks to sell more than $20billion worth of shares after some positions moved against it. It was amassive margin call-related liquidation.
Bank stocks that brokered for Archegos are getting hit hard today on the news.Indeed, financial stocks led stock market declines on the fear that global banksthat dealt with the firm could face sharp losses.
Credit Suisse Group and Nomura Holdings said Monday they could incursubstantial losses...
Nomura plunged 16%. In Europe, Credit Suisse plummeted 15% and Deutsche Bank dropped 3%.
It is not clear to me that this is anything other than a one-time hit to somebanks. In this environment of massive money printing, it won't mean much.If you are a short-term risk-oriented trader, the banks look like buys to me.Trade the bank index or a US bank from the long side.
Shares of companies that were liquidated by the margin call have also been hithard.
ViacomCBS and Discovery, which were among the stocks subject to big blocksales last week, continue falling as well today. ViacomCBS fell 6.4%, and Discoverydropped 1%, among others.
None of these are current EPJ recommendations but if you own any of the half dozen or so stocks (also including Tencent Music Entertainment Group, Baiduand IQIYI) hit hard by the liquidations and you like the stocks, BUYaggressively.
I have seen a number of times throughout my career these types of liquidationsthat aren't related to the fundamentals of a corporation. If the fundamentals arestrong, the stocks rebound very quickly.
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