So in this video i’m going to share with you guys these insights, this news and give you my thoughts on what we could possibly expect moving forward from the stock market as well, so make sure you do stick around because we’re starting right after this Music. So recently, some news has broken, which may explain some of the recent volatility in the stock market, and it has to do with this hedge fund archie ghost capital, which was forced to sell more than 20 billion dollars in stocks. Just on this past friday alone, now archer archegos capitol was pushed to liquidate recently and forced to sell more than 20 billion dollars of stocks, and this happened after they received margin. Calls so because of the margin calls on this fund and in not being able to answer that margin. Call banks such as goldman sachs, who lent money to this fund email clients late on friday, to inform them that they were one of the banks selling stocks. In order to reduce their risk and cut their losses caused by this margin, call on this fund now goldman sachs detailed, around 10.5 billion dollars in trades, but the wall street journal is reporting that between the different banks who lent money to this fund, they were selling Around 30 billion dollars of stocks that includes goldman sachs douche bank, which was also selling large blocks of stocks and morgan stanley and, as we’ll see later, credit suisse as well, have seemingly taken a big hit.
Now some of the main stocks affected were stocks such as viacom, cbs, discovery, baidu and gsx tecado. So these are some of the stocks that this fund was heavily concentrated in now. This problem has mainly occurred, not simply because this fund was in a concentrated amount of companies, but this fund was also highly leveraged, meaning that these banks had lent this fund a lot of money, and the fund was highly leveraged in a lot of these positions, and It seems a lot of this downturn was caused when viacom cbs tried to raise some capital and it caused the stock price to come down, and this fund, which was highly leveraged in that position, it seems, was unable to meet the margin call requirements when the lenders Called up because the stock was falling, asking for the margin call to be made, and this fund was unable to do so and that led to the liquidation of a lot of these stocks from these banks. Now, when 30 billion dollars worth of stocks gets sold in the market in a single day, that can definitely cause some volatility in the stock market, and this issue possibly also provides some insight into what’s been happening to the markets in the last week, or so because This one may well have already been selling to try and cover margin before the bank stepped in and started selling stocks for them. So when this amount of stock money is moving out of stocks, it can cause volatility, and once people start to see certain stocks falling heavily, then other stocks tend to follow suit.
If people get scared about the market falling now, this is probably not the only reason. The market is down. Of course we have issues with inflation, with the rising yields with worries about interest rates, but this may provide some explanation into what’s been happening recently as well. So, like i said you can see on friday, many banks chose to seize the stocks, that articles had posters at collateral and sell those stocks to cover possible losses, and they were trying to do this as quickly as possible. So, like i said, just imagine, 30 billion dollars worth of trading happening fast fast, fast stickers can obviously have a negative impact on the market. Now what’s happened today is that that issue has now led to bank stops dropping because these banks, which lend money to archigos, are now suffering because they’re not going to receive the money back because archer goes can’t meet its margin, call requirements, can’t pay those loans back. So credit suisse was down. 11 nomura was down 15 and goldman sachs douche bank. All of these banks were heavily down today. Credit suisse warned investors in the company that it was likely to see a significant loss because it was forced to exit positions. After a significant u.s base, hedge fund defaulted on margin calls. It was not only credit suisse nomura also said it may incur a significant loss arising from transactions with the us client, and that is still calculating its possible loss from the event.
It estimates that the claim against the client may be worth at least two billion dollars. So this issue has hit a lot of companies hard a lot of banks hard and could be a reason why we saw some volatility in the stock market alongside bond yields and interest rates, so it’s likely that this fund was already selling positions trying to raise money. Possibly to be able to answer the margin calls, but they obviously still weren’t able to because they were so highly leveraged. It seems, and now it’s also affecting the banks, because the banks are going to lose out because this company is likely to default on those margin. Calls so all in all not good for the stock market, and this does explain what’s happening today and may also explain some issues affecting the market before today, as well. Now, before i move on to talk about how this may continue to affect markets moving forward, i think this is a good learning lesson about margin and the difficulties that can arise with margin cause, so you might be invested in a stock. You believe in with margin, but that stock could drop randomly you know. Tesla can drop twenty percent any given day, neo lioto x ping. All of these companies are capable of dropping at any time, and if you’re invested with margin, you can be margin called and be forced to liquidate positions that you believe in and have to take the loss on them.
So it’s, just a little bit of a warning that even when hedge funds like these can suffer massively due to margin is something to be very, very, very wary of. But that quick note aside, how do i expect this to potentially affect the market moving forward? Will it affect the market moving forward? Will it have no effect? What might happen moving forward from here now? I think that one possibility, which is slightly concerning possibly for markets moving forward, is that this collapse of multi billion articles, their losses, could prompt banks to check more of their hedge fund exposure. So it could be a warning sign to banks that their risk control. So far, hasn’t been very good that they’ve allowed themselves to end up in this position and they could be making more earlier margin calls on hedge funds that might seem to be heavily leveraged, which at this moment in time it seems like leverage is pretty much at A very very high peak, so banks may start to now really look into these hedge funds. Look into whether they’re good for that leverage. Look into the positions that they’re leveraged on and decide to make some decisions to make margins called on a lot more hedge funds and a lot more investors. So you can see the question here: are there more artichokes capital management out there? So what they’re saying is: are there more obscure investment firms, making highly concentrated bets using vast quantities of borrowed money, and i think it’s probably safe, to say that there are a lot of individual investors and possibly institutional investors that fall into this description? Our bank’s gon na be worried that there’s many more of these kind of people that can fail suddenly and inflict multi billion dollar losses on some of the world’s biggest banks.
This issue alone has queued a 20 billion dollar fire sale when archigas couldn’t meet calls to put up more capital, and, from this credit, suisse has confessed to a highly significant and material impact on the first quarter numbers. This is another humiliation to them, as described here and it’s likely that banks are going to be paying attention now to make sure that this doesn’t happen to them with any other funds. So the article here states that, as things stands today, the wax to credit, suisse and nomura is mainly a concern to just their investors. Hedge funds do collapse occasionally, but the worry here is that this example of what is described in this article, a stupid risk taking on behalf of the fund, but also the people lending them the money to engage in this investing activity is a sign of the kind Of thinking that is present in the markets today, viacom, for example, had troubled in three months. They had gone up three times in the last three months and this specific issue only began when the company tried to raise fresh capital at the higher level, as you probably would expect them to do. But what that suggests is that maybe nobody really believed in the rally and people were just pumping money in hoping that the price was going to go up. They didn’t necessarily believe in the company, hence upon the capital, raise there was such a big sell off led to this margin, call and led to this huge sale of stock.
So for now it does seem that this theory that this company is a one off is intact, but as this article warns, we need to see in the next few weeks what the next few weeks bring and every big investment bank in the world will be checking Its hedge fund exposures, so are we going to see more of these margin, calls and hedge funds from these banks in the next few weeks, or is this going to be a kind of one off situations? So if, as it seems, was the case with this situation, if it seems and it’s found that more banks risk control departments were basically asleep and now, when they’re going to double check, all of the people that they’ve lent money to and what’s happening with that money That they may find a lot of issues because they didn’t do the risk control jobs properly. Then, as the article states, there is potential for trouble and i’m gon na state that, in this video, like i can’t predict what’s gon na happen in the next couple weeks, and i can’t predict how many more hedge funds might be found to be liabilities for these Banks but it’s very, very possible that more hedge funds and more institutions may be in the same situation that this company was in so it’s possible, there’s a risk that this could lead to further trouble for the markets moving forward. I think you’ll need to pay attention in the next couple of weeks to what these banks find as they do more investigations i’ll be paying attention to whether there’s more news about this, whether more funds are being found to be at risk of being too highly leveraged.
Too much in debt and unable to pay that debt and answer those margin calls. So nobody knows what’s going to happen i’m, not going to say the mark is going to fall because more hedge funds are going to collapse. I just don’t know, but i think the archos could be the beginning of something bigger or it could literally be just a one off, so we don’t know, but this is something to definitely keep an eye on and something that could really have an impact on markets. Moving forward, even if we don’t come out with banks saying that they found this or they found that we might find more hedge funds, potentially selling off to avoid being left cashless when margin calls do come, so it all remains to be seen. I think it’s possible that more hedge funds are extremely leveraged and it’s possible that more hedge funds are in a similar situation to this one, but let’s wait and see what happens. I don’t know none of us know, but i guess we’ll find out when we find out, but the best advice i can give you to take away from all this, because i can’t tell you what’s going to happen is to make the most of it while companies You believe in come in at bargain basement prices. So if there’s companies, you believe in and they’re down, 20 15 simply for no other reason other than the markets going through. Some stuff then take advantage of those times and do buy those companies, while they’re cheaper than what you might normally be able to get them for, but only buy stocks.
You have high conviction in and that’s the best way, you’ll avoid any issues, because when stocks come down, you’ll be happy all my stocks eventually go up, you’ll be happy as well, so it’s a win win situation so, like i said always, do your research be highly Convicted in the stocks you invest in and take advantage when those stocks are down, so you can enjoy them more when they go back up, but anyway guys. I hope you enjoyed this quick sound bite just wanted to give you this quick update on my thoughts on what’s happening in the market. If you enjoyed it, if you appreciated it, please do smash that, like button it’s, all i asked you guys for, but it helps the youtube algorithm. It helps me out and, most importantly, it helps the channel grow and if you want to learn more about how to invest, i want to keep up to date with my analyses on the markets and the companies that i cover on this channel as well as see The videos that i make on how to do things such as valuing companies how to analyze companies then make sure you do subscribe.