Credit Suisse Takes $4.7B Hit on Archegos Meltdown

Credit Suisse Takes $4.7B Hit on Archegos Meltdown
wsj.com

On a serious note, this is funny to read after the initial reports that this had a small and contained impact. Let's hope no further cascading bankruptcies happen.

I see a lot of people calling this the "everything bubble", but to my mind, history may record this as the "leverage bubble". With such low interest rates and free money being shoveled out of the helicopter as fast as it can with more than a whiff of desperation about the whole exercise, there's leverage everywhere, and leverage stacked on that leverage, and leveraged assets being held up as collateral for levered leverage. It seems, at least for today, that this was not The Great Deleveraging, but at some point in the not-too-distant future one seems inevitable to me.

(Subject to the usual "the market can remain irrational longer than you can remain solvent" timing issues, in that I wouldn't dream of trying to call a date on this, but I can't help but think The Great Deleveraging is inevitably coming, when something somewhere pops like this, and the act of margin calling to make up for it pushes down other assets in value, which causes more margin calling and assets getting automatically sold, which pushes down other assets in value, which causes more margin calling and asset selloffs, and it just doesn't stop until there's hardly a speck of leverage left in the market and valuations are a smoking crater, along with every account that was based on leverage. A basic understanding of differential equations would suggest that it's likely the market will at some point experience a phase transition, where we don't gradually go from this being impossible, to kinda happening more and more as leverage increases, but instead we can go in very short time from this being essentially impossible to completely inevitable, and nobody actually knows when this threshold will be crossed.)