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| Perhaps the One Call You'd Prefer Not to Get |
You’ve probably read how Archegos “blew” up the market.
It sounds like the result of a deliberate decision by Archegos.
What it seems happened is that A couldn’t make a margin call, prompting creditors to sell off the pledged shares. Billions of USD worth. No small beer here.
Also there has been a lot of talk about Archegos' responsibility, but not so much about those who provided the explosives.
Some additional observations.
Sophisticated Investors
No so long ago, I read an article in the financial press, either the FT or WSJ, discussing the “big boys’ market”.
That’s the market for supposed sophisticated investors.
It is generally a tenet of free market economic dogma that regulation and protections aren’t required in this market, because unlike retail investors, the “big boys” know enough to look out for themselves.
As near as I can tell, two of the big boys apparently managed to do just that. Others not so well.
Risk Management and Profit
It’s also a story about the dynamic tension in firms between those two elements.
As sadly is the case, the lure of profit overcomes the hard cold facts of risk management.
No surprises here.
We’ve seen this in Gamestock where the short positions were multiples of the free float, setting up a “classic” illiquidiity trap for the shorts to name just one of many such occurrences.
LTCM.
Greensill.
Mr. Hwang was encumbered by some past regulatory enforcement baggage.
But redemption is possible in the market when accompanied by the right level of profit to wash “sins” away.
The Sermon at the Bourse
Reuters had an interesting article under the title “Comeback quashed for faith-driven investor Bill Hwang.”
In it he is quoted as saying:
When we create good companies through the capitalism that God has allowed, it enhances people’s lives….God delights in those things.
I’ve searched my copy of both the so-called Old Testament and New Testament and cannot find the Sermon at the Bourse. Perhaps I missed it.
Perhaps, this teaching is based on more skillful exegesis than I am capable of. A not unthinkable possibility.
Analyst Disclosure: I don’t hold much with anthropopathism given my categorical rejection of anthropotheism. (See Xenophanes.)
But for argument’s sake let’s take Bill at his word.
Or perhaps I should say the Lord’s word?
A host of theological questions come from his statement.
Here are but a few.
If God is delighted at times, it seems that logically at other times He must be (a) sad or (b) neither glad nor sad.
Given the size of the reported losses at Archegos, Nomura, Credit Suisse might God be severely depressed today?
Besides the emotions of delight and sadness, does God have other emotions?
Does God feel hot or cold depending on the season of the year?
If God allowed capitalism, did He also allow socialism?
Assuming the translation of Bill’s remarks is accurate, “allowed” doesn’t seem to be much of an endorsement of capitalism by God.
God has apparently “allowed” all sorts of things.
Not all of which are good: Brexit, Disco, Spam, supply side economics, lost matches and missed trophies by Arsenal, Not to mention more serious events.
If all the above questions sound absurd to you, you've gotten my point about the absurdity of the assumption that got us here as well of the validity of the two "a's" above.
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