The New Titanic
In March, the hedge fund Archegos struck an iceberg. In just two days, the highly leveraged fund went from “business as usual” to total collapse. Performance rapidly degenerated; the fund was unable to meet margin calls; its bankers seized its collateral; the fund was out of business. Archegos lost everything.
Although Archegos was held only by founder Bill Hwang’s family, its saga offers broad investment lessons.
The Perils of Investment Courage
Victories can be hazardous. They present temptation enough for retail investors, who frequently, as the saying goes, confuse brains with a bull market. After making a couple of winning trades, it’s natural to assume that the trend will continue. The first two times I bought a stock, I doubled my money within 12 months. I had enough experience to know that some of that gain owed to luck, but not enough to know that all of it did. Never since then have I repeated that feat.
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