If the market is made up of trading patterns, with history repeating itself with nuances, market events are also repeated, again with slight differences. After the financial crisis of 2008, with the already much talked about leverage, which almost resulted in an implosion of the market, if it were not for the muscular intervention of the FED, the noise these days was again about another fall of a manager due to the excessive leverage, which takes a few billion dollars of capital from a few important banks, because the players do not change, neither does the mentality. Once again allowed exposure to an entity with doubtful credibility, taking into account that its President, Bill Hwang, had already been convicted by the SEC for insider trading, having paid 44 million to file the complaint, which did not prevent him from being banned from managing other people’s money.
But if Hwang did not directly manage the capital of others, in reality the fact that the bank lends him money for a leverage of 8 times the $10 billion of his own assets, means that he indirectly managed money other than his own, which ended up resulting in yet another astronomical account for shareholders to pay, namely those of Nomura, MUFG and Credit Suisse, which may have losses of 2 billion and 300 million respectively for Japanese banks, while the Swiss giant is expected to lose $1 billion, in a “fire sale” that may reach losses between $5 billion to $10 billion in total, according to JP Morgan, in addition to causing a huge breach in the titles of companies where Archegos held positions, such as ViacomCBS, Discovery), Baidu and Tencent Music.
In other words, no matter how many rules are put in place, such as the Dodd-Frank Act, time ends up leading to the end of these restrictions, which inevitably leads to the occurrence of these types of events, powered by an ecosystem flooded with liquidity and very low interest rates.
