Last Friday Goldman Sachs, Credit Suisse and Nomura found themselves in the unenviable position of having to dump some $20 billion worth of a handful of Chinese tech stocks and U.S. media firms as their hedge fund client Archegos Capital Management got way over its skis. And there's no way to know at this juncture if the mess is yet over...
Take a look at the latest action in Viacom:
"While other funds may be caught in the mess, we fail to see how this specific car crash of a trade ends up propagating across the financial system via counterparty default. Index volatility agrees: VIX closed at 52w lows Friday and is up less than 1.2 points as of this writing. Finally, these sorts of parabolic gains and waterfall selloffs appear to now be part of the investing landscape. Get used to the GMEs and Archegos of the world, because they seem to be happening with more frequency even if their fall-out is contained."
"In a nutshell, Annie Duke captures what I view to be probably the greatest, albeit hidden, danger that more than any other explains how too many folks ultimately fail at the game (the art) of investing.
It's the too-often destructive (eventually) -- at times devastating -- belief that short-term positive results always stem from quality decision-making:"...as I found out from my own experiences in poker, resulting is a routine thinking pattern that bedevils all of us. Drawing an overly tight relationship between results and decision quality affects our decisions every day, potentially with far-reaching, catastrophic consequences.""