"One week after the biggest, and most spectacular hedge fund collapse since LTCM, we now have an (almost) clear picture of how Bill Hwang’s Archegos family office managed to single-handedly make a boring media stock the best performing company of 2021, but then when its luck suddenly ended it was margin called into extinction, leading to billions in losses for the banks that enabled what Bloomberg has dubbed its "leveraged blowout."
Thanks to detailed reports by the Financial Times and Bloomberg, we now have the missing pieces to complete the picture of the biggest hedge fund implosion of the 21st century.
...Instead, the stock that Archegos was long would be "owned" by its prime broker, the same entity that allowed it to enter into TRS in the first place. As such Archegos also never had any disclosure requirements, allowing it to transact completely in the dark while being fully compliant with SEC disclosure requirements - since it didn't own the underlying stock, Archegos did not have to disclose it.
Simple and brilliant.
...Call it a side effect of building castles on crooked foundations in an artificial, fake, Fed-supported market.
Is another market panic what the Fed wants? Or what the Biden admin wants? Of course not.
Which is why we will get a token Congressional hearing where politicians care more to hear themselves talk than listen to the answers, the banks will slap a few hands, one or two small sacrificial hedge funds will be shut down, and the world will move on, especially once Archegos is no longer on the front page of the financial media.
It's also why when the next major hedge fund implosion does happen, it will be far more catastrophic..Read all.
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