It never ceases to amaze me how quickly most investors forget what happens when counterparties fail.
But it’s also the reason why the 1% always takes advantage of the 99%.
Cue up the Hedge fund Archegos, who recently lost $30 Billion in the blink of an eye.
A virtually unknown hedge fund – until just over a week ago – Archegos lit a fuse similar to what happened in 2008-2009 when the boyz in the “Club” got caught in the crossfire of the derivatives market.
When Counterparties Fail
Archegos has shown that a small, unknown, hedge fund can get credit lines of over $30 Billion.
Ironically (or NOT) it also illustrates how quickly this can lead to contagion and uncontrollable losses.
But it doesn’t stop there.
The greedy banks who recklessly loaned them money will also lose an additional $10 Billion of their shareholders’ funds. (Cough! Margin Stanley, Cough! Goldman Sucks, Cough! JPMorgue, Cough! Credit Suisse, Cough!).
These are some of the familiar players from the 2008-2009 meltdown.
Back then the real estate market became the whipping post that the Whores-Of-Babble-On Presstitutes blamed.
But the real culprit was the estimated $1.5 QUADRILLION derivatives market that somehow still flies under the radar.
And if wasn’t for Goldman’s former CEO – Hank “Tanks in the Street, Mr. President!” Paulson, the above mentioned Banksters would’ve gone belly-up.
Hank’s $700 Billion TARP Bill – which was only three pages long – allowed him to bail out his boyz on Wall Street.
(We’ve written numerous articles about that fiasco HERE.)
When counterparties fail, their defenders – including all investment banks – will argue that the net derivative position is just a fraction of the $1.5 Quadrillion total.
Theoretically the “net derivative” amount is smaller.
But when the counterparties fail (can’t cover their losses) the gross number of derivatives is still gross. And to hell with the “net” amount.
Unfortunately, this is what we’ll likely see more of in the next few years.
Archegos is a glaring example of what can happen on a much bigger scale than 2008.
How are you prepared to deal with it?
Don’t bury your head in the sand.
Position yourself to profit AND thrive from the inevitable Turbulent Times we’re facing.
Become a member of our “Free-Thinkers Club” (HERE).
And share this with a friend who will thank YOU later.
And tell them: We’re Not Just About Finance.