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It would be hard to find someone who lost as much money as quickly as Bill Hwang did in March 2021.
— Businessweek (@BW) August 9, 2021
The previously unknown Wall Street whale and his family firm, Archegos Capital, triggered losses of more than $20 billion in just two days. https://t.co/Bvh3s1DeT6 pic.twitter.com/27zyIjjsRF
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It's the weekend!
— Tar ⚡ (@itsTarH) August 14, 2021
Grab a cup of coffee, in this thread we will explore
1. What is risk management?
2. What is position sizing?
3. How to apply both these concepts to reduce volatility and drawdowns in your portfolio?
Lets dive right in. pic.twitter.com/4lnZzvrq53
Through this thread we will explore 2 stories – Stories that will teach us the importance of risk management and position sizing in a portfolio.
— Tar ⚡ (@itsTarH) August 14, 2021
Bill Hwang was a somewhat a prodigy in finance and one of the wealthiest individual in US with a net worth of $20 Billion. pic.twitter.com/FKw6vknQgy
— Tar ⚡ (@itsTarH) August 14, 2021
From these modest roots, Bill Hwang climbed up the ladder of finance and became one the most revered fund managers at Tiger Management started by the legendary hedge fund manager Julian Robertson. pic.twitter.com/xxxGV9iLIf
— Tar ⚡ (@itsTarH) August 14, 2021
At Archegos, Bill Hwang turned $200 Million of his own money into $20 Billion in under 7 years.
— Tar ⚡ (@itsTarH) August 14, 2021
March 22, 2021
— Tar ⚡ (@itsTarH) August 14, 2021
Viacom CBS announces a stock and convertible bond sale after market closes for that day.
Viacom wanted to raise money and for what so ever reason, market didn't like this new stock and bond sale from Viacom.
And Bill Hwang would lose $20 Billion.
— Tar ⚡ (@itsTarH) August 14, 2021
A simple 10% fall in any of his stocks was enough to trigger a margin call. pic.twitter.com/SygEAsBO0B
— Tar ⚡ (@itsTarH) August 14, 2021
But, see as soon as the street realized that Archegos wasn't immediately able to pay for the margin call on Viacom shares, his other positions started to tank as well. pic.twitter.com/izA1X6h225
— Tar ⚡ (@itsTarH) August 14, 2021
As these holdings were very large, the first bank to liquidate would be hurt the least.
— Tar ⚡ (@itsTarH) August 14, 2021
As for Bill Hwang he lost it all, in matter of 24 hours.
— Tar ⚡ (@itsTarH) August 14, 2021
$20 Billion, his life's earnings, all gone, poof, zero, zlich, nada!
Lesson #1
— Tar ⚡ (@itsTarH) August 14, 2021
Never take on leverage and never invest with borrowed money
Borrowed money is like the grim reaper that is waiting to kill your portfolio at the first instance
If a prodigy like Bill Hwang wasn't able to survive with leverage, why would you? pic.twitter.com/c6JmvnxSQZ
Bill was actually given the option by his banks to liquidate half his holdings and pay for the margin call. ~$10 Billion
— Tar ⚡ (@itsTarH) August 14, 2021
After paying for the call, he would still be left with ~$10 Billion and live to survive another day.
Lesson #2
— Tar ⚡ (@itsTarH) August 14, 2021
Be willing to take a loss.
No investment is without risk and knowing the risks in an investment will help you minimize losses if things go south. pic.twitter.com/d6yd8ls6ZX
Barings Bank was one of the oldest bank in UK. At its prime, the Queen of England had an account there.
— Tar ⚡ (@itsTarH) August 14, 2021
It was founded in 1762 and almost 233 years later in 1995, the Bank would be bought by ING for less than $1. pic.twitter.com/lc1wx4sZ4t
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weehingthong 