Hedge fund implosion: Banks’ Archegos Hit May Be Up to $10 Billion

[Brian4Liberty]

JPMorgan Says Banks’ Archegos Hit May Be Up to $10 Billion

Banks roiled by the Archegos Capital fallout may see total losses in the range of $5 billion to $10 billion, according to JPMorgan.

Losses from trades unwinding related to Archegos will be “very material” in relation to lending exposure for a business that is mark-to-market and holds liquid collateral, analysts led by Kian Abouhossein wrote in a note. They added that Nomura Holdings Inc.’s indication of potentially losing $2 billion and press speculation of a $3 billion to $4 billion loss at Credit Suisse AG is “not an unlikely outcome.”

Analysts and investors are trying to figure out the final losses to banks exposed to the Archegos implosion, with the task made harder by the opaque nature of the leveraged trading involved. JPMorgan had previously estimated losses in the range of $2 billion to $5 billion.

“We are still puzzled why Credit Suisse and Nomura have been unable to unwind all their positions at this point,” the analysts wrote, adding that they expect to see full disclosures from lenders by the end of this week.

Credit Suisse Girds for Billions in Losses From Archegos Hit
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More: https://ca.finance.yahoo.com/news/jp...152552080.html

[Brian4Liberty]

• Archegos Capital, the family office run by Bill Hwang that was pushed to liquidate, was forced to sell more than $20b of stocks on Friday after margin calls, Bloomberg reported, citing two people familiar.
• Goldman Sachs emailed clients late Friday to inform them it was one of the banks selling, detailing a total of $10.5b in trades, though it didn't identify Archegos or Hwang, according to Bloomberg.
• The Wall Street Journal is reporting $30b in stock sales and is adding that Deutsche Bank was also selling large blocks of stock. Goldman Sachs and Morgan Stanley have also been reported as offering the block trades.
• Hwang, a Tiger cub who pleaded guilty to insider trading in 2012 when he worked for Tiger Asia Management, was deemed such a risk that Goldman, as recently as 2018, refused to do business with him, Bloomberg reported.
• The Archegos fund was highly levered and had very concentrated positions in companies and held some via swaps, according to the WSJ. The fund was estimated to have had exposure to the economics of more than 10% of multiple companies’ shares.

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https://seekingalpha.com/news/367702...ocks-on-friday

Bear Stearns Part Deux? Will the dominos start falling? How many losses will result in insurance payments? Will any insurance companies fail?

Isn't it nice that the hedge funds can still create systemic risk with massive leveraging?

[Brian4Liberty]

“We are still puzzled why Credit Suisse and Nomura have been unable to unwind all their positions at this point,” the analysts wrote, adding that they expect to see full disclosures from lenders by the end of this week.

Will Credit Suisse be next to fail?

[devil21]

I'd usually roll my eyes and post something to the effect of "Who cares? BRRRRRRRRRR fixes all, these days" but I'm not so sure now. It's always the first one that breaks that starts collapsing the crap ton of linked derivatives, a la 2008/09.

[oyarde]

ya it is disturbing that they didnt get out front and say it is minimal , instead of putting it off totally as long as they can like they are hiding it .

[Krugminator2]

Will Credit Suisse be next to fail?

My understanding is the banks are all much better capitalized than 2008 but who knows.

Viacom is trading like a Pink Sheet stock. I stepped in front of a freight train on Friday and am sitting on a monster loss that I pared back today. It is amazing these haven't had a real bounce. Zerohedge (not a reliable source) seems to think Credit Suisse and Nomura still have more to sell. This really has been relentless selling.

[devil21]

My understanding is the banks are all much better capitalized than 2008 but who knows.

So was Lehman, according to the CEO....

Stress tests are starting soon, if not already started. There seems to be some substantial "plumbing" issues ongoing that are being glossed over by mainstream financial news.

Viacom is trading like a Pink Sheet stock. I stepped in front of a freight train on Friday and am sitting on a monster loss that I pared back today. It is amazing these haven't had a real bounce. Zerohedge (not a reliable source) seems to think Credit Suisse and Nomura still have more to sell. This really has been relentless selling.

A couple of the sold off stocks had decent bounces today, off of "buyback announcement" news but it looks like a dead cat bounce, not because anyone thinks those names are on discount. "Markets" overall look pretty broken these days with only the PPT stepping in and Citadel wash trading the indexes away from sell-offs when things look like they want to break. It's pretty easy to see when they turn on the "buy" computers.

Also of note, the DTC is rewriting their SHTF rules right now on how to handle a major chain failure that threatens the DTC's solvency, similar to what GME almost started. Could be just prudent action or could be because they know something is about the break in a major way. I still think GME is a going concern for them. Why else would CNBC continue to flash GME's price all day long like it's an index? They want people to continue to pay attention to it for some reason.

[Brian4Liberty]

Goldman Sachs emailed clients late Friday to inform them it was one of the banks selling, detailing a total of $10.5b in trades, though it didn't identify Archegos or Hwang, according to Bloomberg.
...
Hwang, a Tiger cub who pleaded guilty to insider trading in 2012 when he worked for Tiger Asia Management, was deemed such a risk that Goldman, as recently as 2018, refused to do business with him, Bloomberg reported.

If true, some heads should roll at Goldman. They are essentially loan sharks making risky loans to known criminals and gambling addicts. But when they lose, it is shareholders, insurance companies and tax payers who pay the cost.

[Krugminator2]

If true, some heads should roll at Goldman. They are essentially loan sharks making risky loans to known criminals and gambling addicts. But when they lose, it is shareholders, insurance companies and tax payers who pay the cost.

In fairness to Goldman Sachs, they apparently kept the guy on a tighter leash than the other banks. They were the first ones out and reportedly shorted the market with puts so they made money on all of this. But the other places obviously managed risk horribly

As far as the insider trading stuff, that means nothing to me. It is a crime like jaywalking is a crime. Insider trading isn't a real crime. I also have no problem with lending money to people who want to gamble recklessly. People should be able to make their own choices. I do have a problem like with these over the counter trades that cause systemic risk because no one has any idea of the size of the bets. I also think regulating leverage and capital requirements are one of the only regulations that make sense because of the systemic risk of one of these places failing.