Things about Archegos, Suez Canal unlocked

There was only talk about the scandal related to the hedge fund Archegos Capital Management on Monday on the world stock markets. The closure of fund's margin call positions triggered a chain reaction that affected more than eminent players: Goldman (-3% premarket), Credit Suisse (-11%), Nomura (-14%).

What happened? By and large, there was nothing fundamentally unknown to science. We have already written several times about the so-called “Minsky moment”. We can say that this was its visual demonstration: the hedge fund Archegos Capital Management (founded by former Tiger Management stock analyst Bill Hwang) played too long with borrowed funds. For which it paid off, since it was forced to liquidate positions due to lack of their security.

The reason for the margin call was the events of last week: the SEC dealt a powerful blow to the shares of Chinese companies with double listing. Those, apparently, were quite a few on the balance sheet of Archegos. And then the fund had to close other positions such as purchases of ViacomCBS and Discovery shares, which fell by more than 27% on Friday. At the same time Viacom sank more than 50% in a week, while Discovery fell 45%.

Why is this event important, in general, even though it concerns a separate hedge fund, and some collateral damage to a number of banks? By and large, this is a reminder of how volatile price bubbles are. Their design can collapse literally at any moment, and without any particular reason.

And now a couple of positive words. The Suez Canal is unblocked. So you can sleep peacefully - there is enough toilet paper for everyone.