The markets are dealing with a new virus I call Hwang Flu.
It starts with a raccoon and is spread by the banks.
Retail investors get stuck with the medical bills.
My friend Ben Hunt has an incredible MUST read piece on the ‘hedge fund’ Archegos Capital. It will take you a few minutes but do take the time.
The scary reveal is that there is a monster amount of hedge fund and shadow banking leverage to be undone.
This bull market has been going on so long people forget that the markets are rigged and financial scammers like Bill Hwang are roaming wild with the help of the banks. In Ben Hunt speak, a raccoon is a financial scammer, a fraud.
What is Hwang Flu? Ben explains:
What do you get when you give a raccoon like Bill Hwang tens of billions of dollars AND invisibility from regulators so that he can run his collusion and insider trading schemes to his heart’s content? You get a rolling series of squeezes and corners. You get a market that is completely disconnected from reality. You get ridiculous Chinese companies pumped and dumped through US listings. You get a Tesla that’s valued at a trillion dollars. You get Gamestop.
Who is Bill Hwang?
Over the past few days you’ve probably seen an article or two about Bill Hwang and the collapse of Archegos Capital, Hwang’s hedge fund with an estimated $10-15 billion in assets that was levered up more than 5x across multiple prime brokers, and came tumbling down in a “margin call” last Friday. And yes, I’ll explain in a minute why I put that in air quotes.
Almost certainly, the article you saw about Bill Hwang described him as a Tiger Cub and not a raccoon, which is too bad. I’m trying to change that animal association with this note.
Hwang is called a Tiger Cub because, like many other hedge fund luminaries (Chase Coleman, Lee Ainslie, Steve Mandel, Andreas Halvorsen, John Griffin, etc. etc.), he used to work for Julian Robertson’s OG hedge fund, Tiger Management. As the story goes, Hwang was an equity sales guy for Hyundai Securities, where he won an annual cash prize “for charity” that Robertson used to give to the “person outside the firm who contributed the most to the firm’s success”, which led to a job … LOL. This, of course, was in the heady pre-Reg FD days for golden age hedge funds like Tiger and SAC (Stevie Cohen) and Quantum (George Soros), when the line between legal and illegal inside information was, shall we say, a bit more blurry than it is today, and guys like Hwang thrived.
The banks can’t help themselves. If you have read this blog over the years you know how I feel about them.
I doubt Congress, Davey Barstool and Fucker Tarlson spend as much time on the ‘suits’ involved in these crimes as they did on Robinhood’s Gamestop moment or payment for order flow, but I hope people now have a better understanding of why Robinhood had to raise $3.5 billion on a weekend to manage the leverage in the system.
Know your suits and raccoons everyone and it might be a good time to reduce your exposure to Hwang Flu. It is OK to panic if you panic first.
Also published on Medium.