When the Assets Get Crappier (Literally)
"The Big Short" Bad Guy Goes Vroom, Credit Suisse Commercializes "Risk Management", Speculators' Progression of Crappy Assets
If you thought the market was wylin’ before, meet PooCoin, the crypto “meme token” that recently surged over 100% to over $40M “market cap”…
The big question is, what is the next crappy asset speculators will move on to? Is there anything that can possibly get crappier than PooCoin? Stay tuned…
Bill Miller Goes Vroom
Bill Miller, the poor man’s value investor is hyping up names like Carvana ($CVNA), Vroom ($VRM), and Metromile ($MILE). He also was a $GME holder, having unloaded it in the $70s since. And yeah, he’s long Bitcoin, too.
"I don't think this is a bubble at all in bitcoin, This is the beginning of mainstreaming of it."
—Bill Miller (2021)
But let’s not forget this gem from another era:
In 2008, Mr. Miller continued to accumulate Bear Stearns. At a conference on Friday, March 14, he boasted that he had bought just that morning at a bargain price, north of $30 a share -- down from a recent high of $154.
Bear Stearns collapsed that weekend. In a takeover brokered by the Federal Reserve, J.P. Morgan Chase & Co. acquired the storied investment house in a deal that first valued it at $2 a share.'
JPM ended up bagging Bear in the high single digits/share. It seems caution is warranted when reading Mr. Millers words…
Credit Suisse: Commercialized Risk Management
Credit Suisse reportedly marketed Greensill to its clients, and the collapse of the fund could cost the Swiss Bank’s clients up to $3B per FT.
Unfortunately, just a few weeks after the Greensill implosion, Archegos collapsed and left CS on the hook for the largest of losses among Bill Hwang’s Prime Brokers—$4.7B (the bank had over $20B in total exposure it was forced to liquidate per WSJ).
How did it get so bad? FT reports a culture that grew to prioritize salesman over risk managers and true traders. Lara Warner, “chief risk and compliance officer” reportedly went past risk managers’ concerns in giving Greensill a bridge loan. She also lightened up the risk department by removing twenty senior managers—with an apparent ambition for the risk department to become more friendly to commercial interests in the bank.
Warner was dismissed on April 6th in the fallout of the Archegos fiasco.
What’s notable is that there were many indicators that all was not well with the bank’s risk and compliance performance for many years—CS took a $60M loss holding Canada Goose shares in 2018 and a stunning $200M hit when a NY hedge fund (another PB client) went down.
Such events (especially when happening during a bull market) would cause senior management to re-evaluate risk and compliance at most places, but CS maintained its stride. This begs the question: where was the C-Suite in all of this?
Bonus: Not-So-SafeMoon
Another day, another coin goes way up and then way down. It seems no moon anytime soon for SafeMoon…