Evaluating the fallout from the Archegos margin call
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- เผยแพร่เมื่อ 29 มี.ค. 2021
- Kate Kelly, New York Times Reporter, and CNBC Reporter Leslie Picker, join Worldwide Exchange to discuss the aftermath and broader impact of the fire sale from hedge fund Archegos. For access to live and exclusive video from CNBC subscribe to CNBC PRO: cnb.cx/2NGeIvi
The woes that arose from Archegos Capital Management at the end of last week bled into Monday as a slew of big banks saw their share prices decline.
Here’s how the $20 billion blowup unfolded.
U.S. media stocks ViacomCBS and Discovery experienced severe selling pressure on Friday, with each losing more than 27%.
A few Chinese internet ADRs including Baidu, Tencent and Vipshop also suffered sell-offs of a similar magnitude last week.
ADRs are American depositary receipts, essentially a certificate that represents a share of a foreign stock and is traded on American stock exchanges.
The culprit for the massive selling was a forced liquidation of positions held by the multibillion-dollar family office Archegos, CNBC reported.
Archegos, founded by former Tiger Management equity analyst Bill Hwang, had built massive positions in these stocks through swaps, a type of derivative that investors trade over the counter or among themselves without having to disclose the holdings publicly.
These swaps usually involve higher-than-usual leverage.
These large, leveraged bets came under pressure after ViacomCBS’ $3 billion stock offering through Morgan Stanley and JPMorgan earlier in the week fell apart, which triggered broad selling in the name.
The initial weakness in ViacomCBS triggered a chain of events where the prime brokers rushed to exit the positions on Archegos’ behalf and resulted in a massive margin call. The hedge fund was forced to inject more cash to cover the losses, amassing a forced liquidation of more than $20 billion.
The sell-off in these names continued on Monday with ViacomCBS down more than 8%. Discovery was off by more than 3%.
‘Significant losses’
A slew of big banks involved are warning of the fallout from the unwind of certain trades but are not specifically mentioning Archegos.
Nomura, headquartered in Tokyo, issued a trading update Monday citing a “significant loss” at one of its U.S. subsidiaries resulting from transactions with an unnamed U.S. client. Japan’s largest investment bank said it was evaluating the potential extent of the loss, estimated at $2 billion. Its shares fell nearly 14% on Monday.
Nomura did not immediately return a phone call from CNBC.
Credit Suisse said it and a number of other banks it didn’t mention were also affected and had begun exiting positions with the unnamed firm. The Zurich-based lender’s shares were down more than 15% following the announcement.
“While at this time it is premature to quantify the exact size of the loss resulting from this exit, it could be highly significant and material to our first quarter results, notwithstanding the positive trends announced in our trading statement earlier this month,” Credit Suisse said.
It added that it would provide a further update on the matter “in due course.“
Goldman Sachs, Morgan Stanley, and Deutsche Bank also facilitated Archegos’ liquidation of its holdings in many of the Chinese internet names through unregistered trades, CNBC reported.
Deutsche Bank said Monday that it significantly de-risked its exposure associated with Archegos without incurring any losses.
“We are managing down the immaterial remaining client positions, on which we do not expect to incur any loss,” the German lender said in a statement Monday.
Morgan Stanley also avoided significant losses from the Archegos trades, sources told CNBC’s Leslie Picker.
Goldman didn’t immediately reply to CNBC’s request for comments.
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Oh my gosh, signs of intelligence at CNBC!? This was a great segment, please do more in depth talks like this one!
it is a trick to appear useful
FINALLY. The truth of what actually goes on. Swaps are legalized ways to not disclose positions.
The guest, Kate Kelly, was truthful. Thank you.
The crazy thing is they tried to say wallstreet bets comes together to discuss trades. smh eveything is a lie so they can continue to change the rules of the game to make sure they win.
Korean
@Tee it only illegal because it's not the criminals running the hedge funds doing it.
@@viadiablo that's why everyone holding deep in the money contracts,they should be exercised in order to make these hedgies cover lol
@@viadiablo illegal pump and dumps? You are clueless in every sense of the word.
WSB DOES come together to discuss trades, they even have a pinned post with "DAILY MOVES" where millions of folks discuss their moves for the day. lol.
Isn't this out and out fraud? Shouldn't it be labelled as such and shouldn't the gamblers be prosecuted.
None of them found it weird that Hedge Funds are not normally required to report short positions. This is especially odd since there is an infinite loss potential involved with them that could ruin multiple companies.
nah its cool man you have to be an "experienced investor' to invest in them
They took long positions
Hedge funds are technically private investment clubs, their requirements are different based on a few things including size, very rarely listed and they do not provide banking services (deposits). They do have to report through Form PF, SEC, FCA and more but these forms are not well designed, often confusing and vague.
Stop saying synthetic. They are in fact blatantly Counterfeit shares. COUNTERFEIT
thats what i been thinking this whole time .. they are counterfeiting shares.. like something you cant do with money .. lets call it synthetic money
I watched The Big Short last month and a lot of documentaries about the 2008 crisis and Im amazed nothing has changed. Its horrible to say but some days I wish someone blows up Wall Street because they will never change and are never made accountable for their mistakes. Theyre a cancer for this planet, Credit Suisse is the same. Europe is not innocent either.
Everything should be public. Why do we have to show our positions but they don't.
You don't have to show your positions, what are you even talking about?
Vote Republican
@@ericzhu7707 robinhood and other accounts sell the data. Which gives all positions. Maybe not specifically. But buys sells and patterns. F off. Ur ok with the market manipulation. Its disgusting
@@nerdstrangler4804 they buy data. And manipulate markets banding together. But then try to cry foul with deepfucking value/ raoring kiddie. In gme stock. The hypocricy is ridiculous. Continue to be ok with the hedgefunds robbing the retqil investor. And closing down decent companies by overly shorting them. And unloading their dummy positions all at once
We dont just show our positions, they can see what position we want before it is even taken.
There’s 3 ways to make money in this business: be the first, be the smartest, or cheat. I believe Goldman did all three in this case
Did you just quote the margin call movie :)
@@Goztepe-uf6si yes I did!!!! It was a great movie and I think it was based on Goldman
so, Credit Suisse played by the rules, and got destroyed?
Gee thanks, I think I'm beginning to see the "invisible hand" at work here
So basically all these derivatives are designed to prevent markets from discovering efficient prices, leading more severe corrections whenever the secret gets out? So much for properly functioning free markets.
Sounds like 2008, they should ban anything "synthetic". Instead of fines, prison time.
Not a financial advisor is what we commonly hear from those advisors with good intentions without the necessary qualifications but Hedge Funds mostly gain media attention their negative impact , more like Rogue Funds. Regulators need to be held accountable.
Archegos isn’t a hedge fund, it’s a family office.
@@chrissi.enbyYT they had 4:1 leverage. I’m not here to defend Archegos, but let’s at least stick to facts.
@DNA agree. The regulators need to be taking a line of the regulator and not protecting cushy retirement into investment co’s. The crap that goes down where the regualators end up in high paid roles for going soft is astounding. There is an issue with disclosure, part of the market is about 1 over another, where transparent disclosure allows positions against that, which increases the volitility and leads to this stuff. What’s the answer, pass, but transparency creates it’s own issues too.
This is a prime example of how lack of transparency is detrimental to proper functioning of markets.
I love it! "Let me dumb this down for your audience". You're screwed and you don't even know it!
This lady knows her stuff
"I'm always thinking about losing money as opposed to making money, Don't focus on making money,focus on protecting what you have"-Paul Tudor Jones
The best way to save your money as a salary earner is by putting your money into certified business deals. Although I am originally into real estate I am now investing aggressively in the stock market.
Investing is one of the best ways to achieve financial freedom. For a beginner there are so many challenges you face. It's hard to know how to get started.
I understand the Facts that tomorrow isn't promised to anyone, but Investing today is a hard thing to do because i have no idea of how and what to invest in, I would appreciate any pointers or tips to help me maximize colossal profits.
@@brodiewardak9587 Stock market isn't like any other trading markets as you must learn the basics and then practice before engaging in real time. unfortunately you can't benefit handsomely from an investment adviser's and trading software while learning from your portfolio.
@@jeseeaviv2547 This is a great tip, I am considering investing in stocks but I have no idea about stocks to buy or what to assets would the highest yielding potential and so on, Do you have more clues that could help?
So 13Fs are garbage? SEC needs to sort this out. Hedgies need to be forced into full disclosure of all positions real and synthetic on a weekly basis.
Wolfs in Wall Street still running the game
Sounds like the rich eating the rich.
Ya but when they screw up we pay for it just like in 2010
No way it's just this firm! It's all a house of cards, these people are scu!
Excellent reporting by all.
Who’s thinking of amc gains?
Lol nice
TH-cam's algo is spooky... I had this recommended to me after watching a clip of that exact scene in Margin Call.
Give it a couple months and there’ll be some scandal at GS - those other banks will not forget GS jumped first
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Some actual good insight coming from CNBC for once. Sounds more like Goldman Sachs dumped the market and the smaller participants got swamped. Archegos being one of the smallest got hit hard, and it's bad risk management made it worse.
TRS, Total Return Swaps need to be disclosed.
Margin call so they have to cover amc
When the bets go wrong, the big boys collude to dump it on unsuspecting investors. Risk Managers? Market reporting? Insider trading? And this is all legal
Andy Mills is chairman of Archegos Capital and Peter Philbrick is director of business development. Why would family owned fund need director of business development to attract more fund. There are lot of illegal stuff going on around this company thus SEC should investigate by confiscate their materials before they destroy all the evidence. Since all of people worked at Archegos Capital was heavily involved with church, it's very likely that they had rich pastor families assets under their management and not declared at SEC. Victims will unlikely come out in public due to embarrassment being head of church. There are tax fraud and SEC fraud all over this company. Bill Hwang also likes to brag about his church involvement during meetings which I hate selling God to raise fund for his gambling habit. US SEC and S Korean SPO should work together for this investigation. Since 2010, both law enforcement can share data without going thru embassy.
Pump and dump.
Explain, and for which stock
Kate with the comeback nice
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This story just keeps bringing spaghetti western film titles to mind -Goldman -"The Quick and the Dead" these derivative contracts "For a few dollars more" we can hide transactions from regulators.
I thought someone was manipulating Discovery in March. The stock unreasonably climbed one day after hours but immediately pulled back I think about 30% and I couldn’t find any info.
we are just now learning what CFDs are
XPTUSD?! what's that!?
Whoa finally. I hope they don’t lose their airtime and/or jobs.
But but retail traders are dangerous to the market!!
GS smoking others again, absolutely ruthless. There's no syndication here, GS is free to do this.
What is the maturity dates on the next TRS?
Yet another example of how “sophisticated investors” are no less prone to mistakes than the average retail investor. Can we please get rid of the PDT rule already, so that I can actually sell out of losing positions?????
Nobody with under 25k knows how to trade or evaluate stocks. Just asking for people to go broke.
Stock markets are legal casinos but even worse. Shorting, buying on margin, and every other side bet is like the craps table with all the crap bets on the side that bet against the dice and the players at large, Ie the retail investor while the house cleans up no matter which way it goes.
I thought retail traders were supposed to get margin called.
I'm curious how prime brokers hedge against these type of risks.
They buy on the other side too
I’ve watched this one a few times tonight.
so the question is, just how big is the knockon affect with all the swaps in place going to be? Overpriced nonsense market with banks taking huge losses, they cannot get bailouts/bailins unless there is a much bigger catastrophe and they can't sit with these giant losses on their balance sheets. Going to be interesting how this house of cards plays out over the coming months.
good video the ladys did a great job. looking good like thay should. big plus no kelly turkey neck evens
Shorts should be announced the same as significant holdings! No if's or buts! Absurd that they can swap derivatives on the sly...
For each winner on Wall Street there are a thousand losers
one year later and nothing has been done to address these abuses
She starts by saying, let me dumb it down for you
we like the stonk just cover bro it will be less painful
Exercise deep itm contracts. Force them to cover
Reminds me of politicians... say one thing but actually doing the opposite
Ok ... the only thing I don't get is why did all the stocks Archegos was betting on absolutely plummet?
The Archegos saga is worthy of a screenplay. A lot of investors most likely suffered severe losses by the sudden dumps of huge share positions by the investment banks involved. The market trading rules in the U.S. should be more transparent as to highly leveraged stock positions. It's a gambler's paradise on the one hand, but like "the Martindale system" in blackjack, the stock market has probably cost more people their fortunes than any other form of gambling. Bill Hwang's charitable projects were amazing but anyone who believes God is going to protect their stock investments is not living in reality and, sadly, being highly charitable doesn't change that.
It should be called "The Federal Reserve Call".
Oh man I wish I bought puts on some of those companies
Aha... Bingo. One got the same thought as mine. HAHAHA
I thought CFD's are illegal in USA?
gme will be next player that takes down hf
"Let's not overcomplicate things"
The basic concept is pretty trivial but it's not explained. So you're basically left to speculation if this whole thing is right or wrong. And if you understand it you're probably watching something that actually explains what's going on instead
Who needs risk management when the central bank will always bail you out?
0:16 lol burn
poor people likes when rich people go bankruptcy, look at them how they are happy to announce that news
wouldnt you be too?
they need to get rid of that stupid PDT rule and put more marker makers back in
Information asymmetry generates alpha, hence anonymity is desirable. The bigger the position or the higher the leverage, the greater the desire to remain anonymous.
Caveat emptor.
Wall Street "Greed is Good" philosophy of business on display.
I’m still confused… Can someone explain in baby terms what happened
Banks risking it all giving loans to a guy who plead guilty to insider trading in 2012. So this guy could invest in speculative gambling.
Why did they brought boring stock ( ????? We must ask)
Expect more chaos because of free money from the fed. Lol
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God the lady on the right is gorgeous! Beautiful smile and beautiful eyes 😍
All this "betting" talk is making me think this is a casino
What a mess and yellen is worried about bitcoin? Wtf? And the SEC is worried about Elon tweets.
GTFOH.
This crap is gambling disguised as investing.
XrP Ripple lmao..SEC is getting owned in that Crypto ruling
Arch egos.
There millions of shorts still out there.
It requires money to make money. this is the best secret I have ever discovered we don't make money, we EARn and MULTIPLY money
I've worked with 4 traders in the past but none of them is as efficient as he is, he trading strategies are awesome!
Meow.
Maybe we should not allow ANONYMOUS positions?
Look at how irresponsible activities affected our whole nation after 2008 with Credit default swaps.
Who protects the public from these irresponsible players?
More transparency and HARSH accountability should be a top priority.
I don't know why CS will be impacted so much. For a broker, they just collect commission and force to sell the position when it hits margin call.
it's a lot harder when everyone is selling
Since the position is synthetic it is CS who has to buy and hold assets (stock). Because of bad risk management they allowed the borrower (Archegos) to go into deep losses and had to sell the assets much lower. They take all the borrower has but since they are last in the order it covers a tiny fraction of their real losses. That’s how i understand it.
@Tee because they are the lender, not the hedge fund.
@Tee No, stop reading wallstreetbets.
Colddddd world 🥶
Well, Leslie Picker is a looker isn’t she.
why was archegos margin called?
R u serious 😳
@@fee_ic4981 i later researched and learned that answer :D
What @2:45
JP Morgan are also full of it. Watch the callopse in two month
Accidentally thumbs upped but then realized its CNBC and reversed that position. I need a Contract for Difference on MSM. Bill Hwang protege Cathie Woods enters the chat.
Short answer: there is no real transparency on Wall Street.
53% loss so far 😕 thanks
That's what naked short seems 🤨 they have to be responsible
Why would I watch CNBC when they haven't been right about anything in the past 10 years?
We need more women in Finance
Well if they dumped the stonk and shorted it also ofcourse they made money
Prime brokers going as a team with Goldman to unwind a position ?
Teaming up with the Teamsters.
Next Lehman Brother ?
tea house rigging.
Its called ponzi schemes
Looks like big flaw...Systemic problem...
At one time people should realise that money making is just a stupid mythos and all these people waste precious time to actually do something meaningful. I met people who earned riches and were still greedy as if they had no home and nothing to eat. That's because they had nothing else to look forward too.
Why is she laughing
Short selling stock should be illegal
Comment section full of conspiracy theorists...😥
At some point when your client is buying a stock up 50% in a few weeks without any good reason you should increase the collateral. Simple backtest. But those brokerage are managed by ill people who believe in momentum. Momentum or Value are how they call insider trading. They probably believe the guy knew something they don't and we're very existed to see him making huge money this year until they realized he was a crook
Supply, demand, and manipulation.
Daaam Kate Kelly is hot 🔥
Big Swining hWang