Losses & profits. John Tuld, the film banker Margin Call (2011), of JC Chandor, has a very particular philosophy of business and the Stock Exchange. From 1637 to 2000, via 1929, 1989, 1997, he lists some fifteen stock market crises which have followed one another over the centuries. “We cannot control them, stop them, or even slow them down, he explains, you can just react and earn a lot of money if you’re right, or stay on the side of the road if you’re wrong. “ So, he does not hesitate to provoke a financial crisis to solve his problem of margin call. In real life, Bill Hwang’s margin calling problems are going to cost him dearly and we have come close to a stock market crash.
Its Archegos fund is behind the brutal sale of more than $ 20 billion (17 billion euros) in shares on Friday March 26, causing the stock prices of media stars like ViacomCBS (- 27%) and Discovery, or those of Chinese groups Tencent Music or Baidu. The banks that financed his adventures, as powerful as Credit Suisse, Morgan Stanley, Nomura or Goldman Sachs, will have to record several billion dollars in losses. Credit Suisse collapsed by 15% on Friday and Japan’s Nomura by 16%.
Adrenaline
Bill Hwang was in the school of financial acrobats, like Michael Milken, the fallen hero of the 1990s, who ended his career in prison. His master is Julian Robertson, creator of the Tiger Management hedge fund. Under his leadership, this son of a South Korean pastor set up Tiger Asia Global, which has accumulated investments, particularly in Asia.
Sentenced for insider trading, like Milken in his time, this fervent Christian paid a large amount of compensation and rebuilt a family group, Archegos. This one is betting on high-tech, the media, Asia, with, of course, the leverage effect that gets the adrenaline pumping: with 10 dollars, I bet 100 or more, thanks to contracts where the banks lend money and stocks. But he does not see the fall in technology stocks coming between February and March 2021, nor the sale of shares by Viacom, which causes the price to fall. The banks, worried, demand the repayment of the loaned funds, seize the collateral, its guarantee, and sell in urgency.
The next stock market crisis will happen like this, by an acrobat who will fall by the side of the net, once again exposing the flaws in the system.