In early March, South Korean retail investors were scrambling to do one thing in the air of the 100,000-strong coronavirus: grab Russian stocks.
This is not surprising, after all, South Koreans have not been idle since the beginning of 2022. As of Jan. 19, $1.138 billion had flowed into metacostal ETFs, 70 percent of which came from South Korean retail investors. After the outbreak of the Russian-Ukrainian conflict, excited South Korean retail investors showed a global vision of mature markets, buying a net of 74.6 billion won for Russian ETFs in 2 weeks.
During this period, the spring agitation of South Korean investors pushed the number of active stock accounts to a new high – a total of 60 million households or even 8 million more than the South Korean population, with an average of 4-5 stock accounts per investor[1].
As the sanctions went deeper into the financial sector, the NYSE halted VanEck and MSCI's Russian ETF and 2x long Direxion (RUSL) trades. When the risk is getting bigger and bigger, the South Korean exchange has also begun to protect small and medium-sized investors, directly "knocking the Russian ETF into the cold palace" that the Chinese people have robbed. South Korean retail investors with itchy hands can only turn around and frantically grab meta-universe ETFs.
Driven by social problems such as the cold wave of employment, soaring prices, and the new crown epidemic, young people in South Korea have begun to turn from real to virtual in the past two years: before 12-year-old teenagers speculated in stocks and earned 43% a year, after about 20% of South Korea's Internet cafes closed their doors to mine, Samsung employees speculated and earned 230 million yuan to resign. What is even more shocking is that in 2020, south Korea consulted more than 1,600 cases related to "stock poisoning", a double increase over 2019, and many young people sought medical treatment because of "too deep poisoning".
South Korean genius teenager Kwon Joon (Kwon Joon) copied the bottom of hyundai, Samsung
The development of the Korean entertainment industry is well known, but they do not want them to put this entertainment on the financial stage. If the "Koreans copy the bottom of the wild" is written into a serial novel, the protagonist who runs through the front and back is probably Bill Hwang - the fund manager who made the investment bank lose $10 billion in 2 days and turned the Chinese stock upside down.
It was also Bill Hwang's blowout that gave people their first taste of the fascinating dangers of Chinese stocks.
01
After a field of chicken feathers
Bill Hwang is a Christian, and in one of the few interviews, he bluntly said that his investment philosophy is to make God happy.[6]! From here, Bill Hwang started at $200 million and made more than $15 billion in 9 years.
Then, he lost everything in just 3 days. The drama of the fall, the amount of money, made Bill Hwang's blow-up once become the headline of wall Street's 7*24 broadcast.
Bill Hwang's bankruptcy stemmed from a "style drift" of his. In 2020, the Archegos family office he oversees shifted from FANNG's U.S. blue-chip technology stocks to U.S. media conglomerate ViacomCBS and Chinese stocks. Under the absolute confidence of stock selection, he secretly signed a total return swap (TRS) with six major investment banks with 5 times leverage; however, the plunge brought by ViacomCBS made these five times leverage strategy tend to collapse, causing investment banks to sell, and coincided with the introduction of various industry policies in China, and the Chinese stock market collapsed like a Waterfall for a while.
But after the storm swept in, the frustrated Korean tyrant's life was not as depressed as passers-by imagined. Or rather, because he has always maintained a low materialistic life, AUM seems to him to really be just a number in the account.
After the explosion, he lived an ordinary life and ate ordinary sandwiches. Unlike Wall Street's high-quality men who have bought property on Long Island, Bill Hwang's home is in the New Jersey suburb, 15 miles from downtown Manhattan. Owning a multimillion-dollar villa in a tree-lined neighborhood is not a difficult task for a fund manager who once had tens of billions of dollars. His car was a Mercedes-Benz that had been driving for seven or eight years, and later because of a problem with the Bluetooth speaker, he turned to supporting the Korean domestic product "Hyundai".
Bill Hwang bought a 594-square-meter house in New Jersey for $3.5 million in 2008
Neither did Bill Hwang's friends leave him. According to media reports, on a mildly hot summer morning in August last year, a phone call from a retired U.S. general would give Bill Hwang some life advice. He also remained faithful, often holding a Christian pamphlet at hand—"Arm yourself with God so that you can show your position against the devil's machinations." The biggest difference in his life was that he never mentioned the collapse of Archegos.
Bill Hwang has at least maintained the quiet years of his life on the surface, but there is always someone who carries the weight for him after a piece of chicken feathers.
Archegos' blowout not only created Bill Hwang's personal history of losses, but also reminded wall Street as a whole of the fear that had been dominated by the lehman collapse liquidation. Credit Suisse's $5.5 billion and Nomura's $2.85 billion losses plunged Credit Suisse by 11.5 percent, the biggest one-day drop in the past year, and Nomura plunged 16.3 percent, the largest one-day drop in history.
At that time, Credit Suisse was suffering from the enemy, and the front foot had just fallen into the quagmire of Greensill Capital's bankruptcy debt collection, the king of supply chain finance, whose valuation had fallen from $70 to worthless, and investors' losses of more than $3 billion could be compensated by Credit Suisse out of his own pocket. Credit Suisse CEO Gergottstein, who was already in a bad mood, was even more furious after the incident of colliding with Archegos:
"I didn't even know our company had $20 billion in exposure to Archegos, and I had no idea that Archegos existed... The company obviously has some people who are inexperienced in the first and second lines of defense of risk control... Next year I'm going to poach Goldman Sachs' chief risk officer as my immediate subordinate.[2] ”
The confused Nomura and Credit Suisse, Forexlive
Since then, Credit Suisse's chief risk and compliance officer, investment banking business director and other seven people have resigned, while Nomura has reduced the bulk economic business, strengthened risk control management, and increased the number of non-Japanese directors of the US subsidiary. Dragged down by Bill Hwang, Nomura CEO Kentaro Okuda's salary shrank sharply, and he only received an annual salary of $2.9 million.
It wasn't just investment banks that were dragged down by Bill Hwang, but also former Archegos employees, whose downfall was also overflowing.
The losses they faced included not only the money forced into archegos funds, but also the $500 million prize money owed by Bill Hwang. Bill Hwang promised to pay his employees from personal accounts, but according to FT, several former employees did not receive money until five months after the incident.
Why? Because there are too many creditors queuing up to get the money, the restructuring consultants are too busy to get busy. The customer first has not yet been settled, and even if the employee ranks second, he has to lean back.
"The money is gone, we're in a difficult situation and want to stick it." The powerless employee could only swallow his broken teeth into his stomach. In their view, not only was he fired, but his wealth was difficult to recover, while Bill Hwang still had private investment and other holdings other than Archegos, and the culprit was probably a billionaire.
Archegos means leader in the ancient Greek language, and it is used in the New Testament to refer to Jesus. After Bill Hwang's defeat, his apprentices, Jensen Ko and Sterling Clay, rose to prominence at Archegos, and they will continue to follow Bill Hwang's highly leveraged investment style. Although nothing was mentioned in the interview about the association with Bill Hwang himself, the office of their new fund is located just two blocks from Archegos.
And the name of the new fund also looks ingenious - Arise N Partners, which translates to resurrection.
888 Seventh Avenue, the building where Archegos' office is located, Bloomberg
02
A life of abandonment
In fact, bill Hwang also experienced a life of institutional abandonment before dragging the Wall Street institutions into the quagmire.
After earning his bachelor's and master's degrees from the top 30 universities in the United States, UCLA and Carnegie Mellon University, Bill Hwang briefly spent several years in the securities firm diligently selling until he was valued by Julian Robertson, jumped ship to tiger funds, and was even authorized to manage the $5 billion Tiger Asia investment fund.
However, just as he became a "tiger cub" and gradually had a smooth career as a fund manager, the SEC gave him a blow: suspected of using insider information to trade and profit from it for $16.2 million, resulting in the Tiger Fund having to pay $44 million to settle with the SEC.
Speaking of which, this seems to be the beginning of Bill Hwang's "bond" with Chinese stocks.
It turned out that Bill Hwang was insider trading by shorting three Chinese regional banks and then buying private equity stocks at a price below the market price of the stock to fill the short position, trying to manipulate the stock prices of Bank of China and China Construction Bank in the Hong Kong stock market [8]. The move also allowed Tiger Asia To charge investors higher management fees, from which it made tens of millions of dollars in illegal profits. This has also attracted the attention of Hong Kong regulators, and after years of litigation, the Hong Kong Market Misconduct Tribunal also ordered in 2014 that he be banned from trading any securities in Hong Kong for 4 years.[4]
This series of encounters became the opportunity for him to start Archegos, but it was also the speculative trading style that made him suffer another market beating ten years later.
In 2017, after Bill Hwang's net worth doubled by 20 times, investment bankers came to the door to establish contact with the Korean stock god and wanted to earn a huge service fee on him. Bill Hwang also needs to use investment banks to get more leverage for more violent gains. At that time, everything on Wall Street seemed to be the cordial appearance of the capitalists who intersected with each other.
Archegos has established large long positions in Goldman Sachs, Damo, Deutsche Bank, Credit Suisse, UBS and Nomura through over-the-counter derivatives such as CFDs and Total Return Swaps (TRS). The advantage of these derivative positions is that they can obtain leverage of 5 times or more with less margin, and they do not have to actually hold these stocks or announce their positions to the SEC, hiding their trading movements. Until the explosion came, the wonderful story went to a place of chicken feathers.
In the face of interests, Wall Street will never think of a trace of feelings, even the hundreds of billions of giant crocodiles will be ruthlessly abandoned, not to mention the scale of the water (gang) points (gan).
Deutsche Bank has suffered a bit more trouble than sell-offs with other investment banks. Because of their past intimacy, rumors of "personal relations" between them and Bill Hwang were rife: Don't you Deutsche Bank people already know that Archegos can't withstand such a big leverage, so you ran away in advance[5]? But in fact, no matter how much Bill Hwang had been in frequent dealings with Deutsche Bank executives, or held a 2% stake in Deutsche Bank, or even hired his former debt director Hakan Wohlin as a senior adviser, he could not undo the anger of Deutsche Bank in the face of great trouble.
One second, I was still the "famous long-term value investor" in your mind[7], and the next second, it was nothing. Bill Hwang has been on Deutsche Bank's blacklist forever.
Bill Hwang and Deutsche Bank are inextricably linked, FT
The Financial Times also commented on Bill Hwang mercilessly after the explosion, "just like the short-term trader on Reddit, after getting the credit from Goldman Sachs, he floated [9]. ”
This is equivalent to putting a professional private equity fund manager into a T0 netizen on the stock bar. It is indispensable that it is not hurtful and insulting.
03
End
In the face of human greed, Bill Hwang is not a special case for Koreans, nor is It a special case for global investors. Bill Hwang's management of assets, the large leverage multiples, and the fact that he is in the wall-pushing Wall Street have made him the one who sensationalizes the world.
However, a storm of blowouts, for Bill Hwang, is not so earth-shattering.
He could still return to New Jersey to live a comfortable life, or he could hold on to his assets that were far above the average person, hoping to return to Wall Street by buying Cathie Wood's seed fund, supporting new companies for protégés, and occasionally going to the Hudson River for dinner. Perhaps fortunately, a Chinese stock explosion in 2021 has become a "top escape" in 2022.
In contrast, ordinary retail investors, who are not comparable in absolute number to Bill Hwang, are more likely to be swallowed up in a bubble of rapidly bursting greed, taking away the down payment of a new home, the school fees of their children, or the cost of a pension.
The favorite story of the capital market is always the rise of the grassroots, or the end of the tyrant. It's just that everyone who rushes into the market with great enthusiasm feels that they can succeed, and everyone else is the price. Isn't this the case for South Korean retail investors who went all the way north to russia and rushed to seize the meta-universe?
And in the illusion of speculative wealth, why not only Koreans?
End of full text. Thank you for your patience in reading.