The spike at Fri close was from covering the hedge on the long stocks. So he was long stock and short the indexes as a hedge. I wonder just how many more "Family offices" are out there structured like this, with insane leverage among a bunch of different brokers, who have no inkling as to the total size of a trade. Interesting read on it... https://www.thebeartrapsreport.com/blog/
lol dude. Yes, I gave it two days to rip your face off. Should I have responded before the market opened? I find it best to trade shit when it's actually trading. I specifically mentioned the BWIC and it's impact on BIDU bottoming and NDX. I am not going to respond to your BS. lol your quote above is all that I need. And unlike you, I can prove that I had a bullish position in BIDU from 1PM EST Friday. I was long index deltas as well. LVLD upside in SPX (4025 bull SPX calendar). You don't trade so I don't understand why you are here. Regardless, I am done with your silly fantasy shit. Dude buys yen (sic, sure you did) as the NDX and BIDU rips his face off. You shot your mouth off and got spanked. There is nothing left to say. Bya.
03/29/2021 A Shot Across the Bow Leverage Join our Larry McDonald (Colossal Failure of Common Sense, Author) and Andrew Ross Sorkin (Too Big to Fail, Author) on CNBC at 6:45AM to discuss. *CREDIT SUISSE FALLS 10% ON POTENTIAL LOSS FROM HEDGE FUND *NOMURA CLOSES DOWN 16.3%, MOST ON RECORD, AFTER LOSS WARNING Warren Buffett, often quoting partner Munger, says there are three ways to go broke: 'liquor, ladies and leverage' - The Great Deleveraging: If Nomura has dropped $2 billion on the mismatch between execution on margin call and/or remaining contractual risk then the knock-on effect is going to be every Prime Broker credit debt going loopy and tightening on margin requirements. Nomura Takes Rare Step of Pulling Bond Sale That Already Priced: It’s very rare for a borrower to wind up scrapping a bond deal once it’s priced. But that’s exactly what Nomura Holdings Inc. has done. The Japanese bank said in a statement Monday that it had canceled a sale of notes priced on March 23, as it warned of a “significant” potential loss from an unnamed U.S. client. People familiar with the matter say the warning is related to the unwinding of trades by Bill Hwang’s Archegos Capital Management. If you are making 1% and you are 10x levered that is 10% annualized, but 10% at 10x levered is 100%, intoxicating in every cycle. Andrew Ross Sorkin’s book, “Too Big to Fail” was focused on the money center banks. That is where the leverage was 2005-2008. Banks like Lehman would use things like Repo-105 to juice leverage, massively. Regulators were blind, light years behind the innovative games. Today, the leverage is now on the hedge fund side. Central banks, regulators are once again way behind. Oblivious to many of the latest leverage weaponry, 21st-century games. Why is this happening with equities at all-time highs?! Can you imagine the carnage if there was ever a shock to the system, unexpected event like 9-11 would cause an emended crash, too much leverage. CDS Friday was so Telling Our 21 Lehman Systemic Risk Indicators - While stocks were ripping HIGHER Friday, credit risk was oozing - No One Cared. What We Know 1. No one knows how big he was or how levered. 2. Have to assume Goldman went first and protected itself. MS not far behind.— but with bigger exposure could have a loss. Those that acted slower (Nomura, cs) probably left holding the bag. Just a $2B loss says Nomura, Clients Say it´s $4B! Memories of AIG. The report says pretty much what it is without naming the custy,. and Nomura is a small PB, CS is a big one, ms / Gs as well, cs must have the biggest hit to Nomura at $2B we have to assume $8B to $12B hit across them all? (GS and MS not as bad). " We are monitoring Greensill very closely and would make the following personal observations. SoftBank’s exposure as best one can tell is 1.4bn of equity exposure which is a drop in the bucket when compared to their tech exposure in general. Greensill is continuing to unfold as each week goes by . By definition, trade finance should run off in say 90 days so we should pretty quickly find out who has bathing costumes on . The theme of the press coverage this weekend is that the Greensill funds were borrowing short and lending longer than they should have done to projects that clearly were not payables and receivables. Hence the bid for the Fund units is sub 50 . I think the most yelling chart Larry posted in the live chat Friday was Cds for CS . I would expect it to blow right out." Trader in London, Long Time Friend, Client TOXIC TRS The key is that hedge funds (and family offices!) are using the banks' cost of capital via TRS. TRS: It appears that he transacted exclusively in Total Return Swaps. This enables him to avoid disclosure. Some of the positions were held at multiple banks. The banks may not have known this. How to turn $15B AUM into $80B? The most egregious holding is GSX Technidu. This is a Chinese education company. Muddy Waters and others have documented how this is almost certainly a fraud. It appears ARCHEGO had more than half the tradable shares in swap with multiple banks. This appears to be an attempt to corner the market and create a manipulative squeeze. Given that the stock went from $30 when Muddy Waters first published to $140, I’d say this WAS successful. Our complete lack of securities regulation allows for this kind of manipulation. We should not be calling Reddit posters to be in front of Congress. Instead, it should be Securities Regulators, who permit this manipulation. Three LRCM Like Events in 13 Months. A. March 2020: Relative Value hedge fund Blow-up.. B. January 2021: Melvin Capital Blow up C. March 2021: Archegos Blow up Three in 13, all Leverage In thirteen months, we've witnessed three Long Term Capital Management (LTCM) type meltdowns: 1) the March 2020 Relative Value hedge fund blow up; 2) January 2021, GME short squeeze Melvin Capital Management hit; 3) the March 2021 Archegos Capital Management total return swap unwind. LTCM blew up in 1998, losing $4.6 billion in less than three months caused by high leverage exposure to arbitrage bets across related but different securities - which fell under pressure once the Russia crisis hit. Niall Ferguson is right when he points out that LTCM's models only used five years of historical data, thereby not including the 1987 crash. The result? Mispriced risk parameters. So when a crisis hit, LTCM blew up. Thirteen months ago a once in a 100-year crisis hit in the form of the Covid-19 pandemic that Relative Value hedge funds hadn't modeled for. The result? Mispricing of risk parameters. So when lockdowns hit, Relative Value strategies were crushed. In January of this year, hedge funds such as Melvin Capital were short various small to medium-sized firms as a big percentage of the float on a highly levered basis. However, no one foresaw that fiscal stimulus checks would be used by twenty-something stock market neophytes to organize on social media short squeezes. The result? Those levered short plays blew up. And now we have Friday's Archipegos Capital's blow up, a hedge fund that was levered long names like Farfetch, Discovery, GSX, Teschedu, Baidu, Tencent, Music Entertainment, Viacom, Vipshop, iQiyi Inc. et al, all hedged with S&P and QQQ index shorts. What was the leverage mechanism? Total Return Swaps. The leverage caught up with Archegos. The result? Rolling liquidations of the fund's long line items during the day. Then at 3 pm the short index cover ramp up in SPX and QQQ, nearly 2% in a straight line into the close, in spite of month/quarter-end portfolio rebalancing going the other way. Bill Hwang who runs Archipegos took $200 million and turned it into $15 billion in seven years. He used big leverage. He hung on. And he hung on some more. And finally, he hung on too long. The leverage, and more importantly, the hubris, caught up with him. Time aged, classic tale. How did he create his leverage? Total Return Swaps (TRS). The second problem is that Archipegos had TRS with multiple institutions and, given the uncoordinated large-scale selling of the same line items, it looks like the banks weren't aware of the similarities of their cross exposures. That's the kind of thing that may lead to regulatory scrutiny. Not illegal. Just sloppy. A swap agreement is set up between a bank and a hedge fund. The hedge fund pays a low interest on the swap, say 2%, and the bank pays out any appreciation to the hedge fund. If there are any losses, payments are due from the hedge fund to the bank. It's a glorified margin loan. Equity put up by the hedge fund is usually around 25% to 30%. But it can be less. The reference asset can be an equity index, a basket of specific stocks, loans or bonds. If the hedge fund's strategy is long/short -- e.g. long specific names vs short an index -- the TRS is considered low risk and thus doesn't chew up the bank's balance sheet. The TRS means the hedge fund has risk exposure without actually owning the asset. The bank has more control in a portfolio liquidation scenario because it is the actual owner of the reference securities. Hedge funds love TRS because they get risk exposure without a large cash outlay. Essentially the funding cost comes at a slight premium to the bank's cost of capital but at a big discount to the hedge fund's normal cost of capital. It's like Greece getting close to Germany's cost of capital for being a member of the EU. The bank gives up on interest vig in exchange for transaction fees. The EU reduces Greece's cost of capital so Greece can buy more stuff from the EU. Same generic idea. Theoretically both win -- until both lose. But the hedge fund (like Greece) runs the greater risk if things don't work out. The TRS equity cushion is meant to protect the bank in the event of untoward price movements. Hence the wild Friday. The world survived this crisis, apparently. However, we expect in a prolonged bear market (yes, they exist), there will be more TRS disasters and eventually, they will become the focus of regulatory reforms. Many clients think the late Friday pump was archegos unwinding the short book (in addition to puking the long book as we saw in bidu, viac, disca, etc), apparently he was long china stuff, bidu vips and media companies, gsx, viac disca etc. vs. short generic u.s large cap and etfs. like xli xlf xle etc and qqq spy and some fangs. so qqq and spy +2% from 3-4pm straight line despite month/quarter end rebal to sell stocks. "Huang- of course - but damn ballsy, turned 200mm to 15bn AND DIDNT TAKE PRFIT. That’s always the psychology that it’s up in the hole, they give it all back. He was the guy pumpiung GSX and causing the big short squeeze last year, he also basically daily vwaped VIAC from 30 to 100, buy, buy more, buy more higher.. The gsx block for sale was like 15% of float! Bill Hwang is legendary, $200mm to $15bn in 7 years... (1.5bn to 5bn in 2020 and 5bn to 15bn in first 3 months of 2021) - However, did he not see what happens when you run 3-5x leverage and 6-10x gross during the GME and Melvin Fiasco? Some L/S guys just have no common sense.. Asia clients still respect him so much though, very few Asian investors with this much skill AND BALLS to swing it. Think about it, he ran 15bn of his own money at one point (from 200mm), that's more that Steve Cohen - He will come back, money doesn't mean anything except scores to him. “i knew bill hwang well, back in the day, google him uber uber aggressive, money making genius but Zero fear.. id guess w the crazy price action its isolated to his positions being blown out and Not systemic.” Isn’t it amazing that however many of these market blowups a car whether it’s in stocks commodities or whatever, it’s always the leverage. Amazing it’s been that way for 300 years since the south see bubble. People have short memories and never learn." Color from our Live Chat on Bloomberg Here is our latest Week in Review, Turning Point. Please Click Here. DoubleLine and the Bear Traps Report Here is the link - Our Larry McDonald joins Jeffrey Sherman and Samuel Lau on the latest Sherman Show, DoubleLine. Jeffrey Sherman is the Deputy Chief Investment Officer at DoubleLine Capital Week in Review - Saturday, March 27, 2021 As we walk across the surface of markets in search of alpha, our awareness must be high. Sights and sounds approach us every day, but each carries a far different weight and value in the calculation of future decisions. This is what macro-investing is all about. On Friday, from 2:48 PM to near the closing bell, the S&P 500 surged from 3902 to 3964, a brisk 1.6% pop. The tectonic plates are shifting beneath our feet, there is a lot more going on than meets the eye. Once we calculate the losses across SPACs and Software, ARK names to Asia Big Tech - Solar to Media players; there is a LOT of carnage for a market on the doorstep back to all-time highs. With stocks near all-time highs - Dow Transports through them - we are starring down the barrel of an ARKK Ark Innovation ETF 30% drawdown, Asia Big Tech pain, and media darlings Viacom-Discovery in high capitulation selling (a 50% plunge in less than 48 hours). The different pockets of equities in flames are piling up with instant 40-60% drawdowns in less than 2 weeks, most in a few days. The classic canary in the coal mine, the U.S. convertible bond market was 1999 piping hot 3-4 weeks ago. Now, she’s getting frosty, and with wounded players littering the field. We believe the SoftBank-CSAM (Credit Suisse Asset Management) connectivity to risk/losses is high, recent CS equity divergence does NOT give us comfort. Friday, everyone was talking up Bill Hwang as the large (leveraged $60B) seller of Baidu and company. A family office largely in Asia, we are told Goldman carted him out. There were MONSTER blocks of equities for sale Friday, the largest collection of equity BWICs (bids wanted in competition) in at least ten years. Over 50m shares of BIDU, 25m shares of GSX. The tremors before the quake continue to build. Losses are piling up. This pain will tighten FCIs (financial conditions) in the weeks ahead and fuel the rotation out of big tech. “When you practice at a career in trading for over 25 years, sometimes the market speaks to you in an ethereal way. Friday’s price action in Viacom VIAC just felt so wrong, psychologically damaging to many players - it just left a stain. Now perhaps that damage is a specific clearing point (buying when they’re crying) but from my seat and lens, for goodness sakes, the lateral implications are yet to be seen. A friend at a large shop unexpectedly “retired” this week. He had to have been carted out by VIAC. With the carnage across SPACs, ARK names, and China Tech; the follow on side effects will be felt for months. There is a March 2000 like sting in the air in some spots. Don’t ignore it.” Veteran Trader, Decade-Long Bear Traps Client Here is our latest Week in Review, Turning Point. Please Click Here. Thank you, The Bear Traps Team
Rip my face off? Lol, you need to get off your meds, pal. You constantly doctored your pnl and posts in your shitty options threads and now you try to piss in my cart because I was needlessly vigilant? I risked 30bps and covered before Monday US open. Never touched a stock (I don't generally trade equities). I clear more notional per month than you tweaker probably in a year. In the same post you claim you trade shit when it trades and at the same time claim you prepositioned on Friday. You are contradictory as fuck, and get triggered like someone who doesn't get his meth.