Bill Hwang Was a $20 Billion Whale, Then Lost It All in Two Days

has been Bill Hwang and Archagos Capital. I mean, it just bursts onto the scenes a week ago, twenty billion dollar fund. Nobody had heard about it until we all heard about it at the same time. And I'll tell you Eric Shatsker and his team at Bloomberg News they were very very early on this story. They were absolutely and they've been on top of it ever since. Eric joins us now with the latest. Eric Schatsker, He's at her large at Bloomberg News. Eric, thanks so much for

joining us here. This is just an extraordinary story. The numbers are just amazing. Twenty billion dollars and then gone in two days. What's the latest, Paul? It is absolutely mind boggling. If you think about it. A guy who had been a hedge fund manager, so let's give him some credit. Bill Wong starts a family office in with you know, as we understand, it's something north of two million dollars, so he's already rich. And he builds this family office over time, making bets mostly in tech stocks,

Expedia LinkedIn. Some of those are kind of names from the past, because Lincoln was acquired by Microsoft, of course, but he also bet on Google, he bet on Amazon, and over the years he steadily took on more and more and more leverage. And as we all know, having watched and in your case, participated in Wall Street for many years, leverage is a double edged sword. When things are going your way, you can become fabulously successful. And in his case, yes, his fortune actually at one point

exceeded thirty billion dollars. But the times things started to go pear shaped. Right week of March twenty two, Viacom trades down, Mare Jean Carl alarm bell start ringing, and Bill Joan goes from twenty to zero effectively overnight. Yeah. The one thing I one thing I don't get is how did he go from so much to so little

just trading options? Because he not options these were swap agreem so so so, but he's trading derivatives that um no, no, no, no, he's he's he is entering into swap agreements just so that everybody understands it, because it is complicated derivative stuff. As you say, Mat, he enters into a swab agreement, it gives him exposure to the underlying stock. It's like owning the stock, except that you don't actually have it

in your possession. But because you're levered, because the swap agreement allows you to level up five times, you know what happens if you're five times levered, right, stock goes down, your equity is gone. And his portfolio cratered the week of March twenty two. That's how whatever margin he'd posted disappeared, and that's how his equity blue to smithering, so much so that the banks which ended up owning the risk

and having to sell it. And we've seen that, Credit Swiss, Golvin Sachs, Morgan Stanley selling shares of viacom g s x i Q, all of his positions. Some of those banks, Credit Swiss among them, ended up taking enormous losses four point seven billion dollars the head of the investment bank is gone, the head of risk is gone, another half half dozen executives gone. It's incredible how much damage one

guy running his own family office. Your story paints this incredible dichotomy because on one hand, he's by all accounts, a very nice guy. Um. You know, Julian Robertson loves him. Um, he's religious, he's got a big charity that he cares about. Charity and family are two of his three main things. Right. On the other hand, Um, he had a sixty million dollar settlement for insider trading, his hedge fund pled guilty

to wire fraud. Um. And he seems kind of like a traitor sociopath because he says he's not afraid of death or money, which you see how that ends up? Right, Yes, we we have. I would say, without using the words sociopath, that what you've just sketched out is the internal paradox of a Bill Wong. On the one hand, pillar of his church community. This guy helped thirteen hundred North Koreans escape the Hermit Kingdom to freedom. The guy is doing

good stuff. And on the other hand, he's got this addiction. Effectively, or what appears to be an addiction to casino like risk taking. He's a gambler. Most of the great gamblers in the world no one to take some chips off the table. This guy never took any chips off the table. The only chips he took off the table he put into his foundation. And thank goodness he did, because it's gone on to do good work and will continue to do good work because, so far as we understand it

wasn't exposed in this blow up. So Eric about thirty seconds left. This seems to be I guess the second life for Bill Huang? Is there a third? It's actually the Yeah, we're with the third act. Right, he was tiger than he had, his own hedge fund, had archaeos. Where does he go from here? If risk taking is in his blood and he just like you know, Michael Jordan, can't stop making legats, right, you'll see him back doing something. Is he going to be given the same kind of leverage? No?

Almost certainly not right. Uh, there's just too many black marks on his record now for any bank to want to give him. But will he be doing something you know that involves incredible risk taking. You'd have to expect that he would because it's as as we've learned the course of our reporting, it's in his nature. Well, yeah, I mean this is also a thing I was thinking about as I was reading your piece, Eric, Where does he go from here? Because you want to see him

come back again. You almost want to see him get back in right. Um, and maybe now that sports betting is becoming more acceptable in the US, he can figure out a way to do that. In any case, Eric Shasker writes the cover story for Bloomberg Business Week. Um, definitely check it out, if not on the newsstands, at least online or on the Bloomberg terminal. You're talking about the initial job claims number, and Um, it's interesting that we've seen these initial job jobs claims numbers still at

a very high level. I think, Um, I'm not sure, but I think we still haven't come down under the record high from the Great Financial Crisis. In any week, Let's bring in Lindsay Pieza to talk about this. She's chief economist at Steeple Financial out of Chicago. Lindsay, what's the problem with the labor market and that you know, we add nine sixteen thousand jobs and we have these incredible manufacturing figures I s M is off the charts,

p M I is off the charts. Everything looks like it's coming back full force, but we keep getting huge initial jobless claims weeks. Well, I think this recognizes the fact that the recovery is going to be somewhat uneven. It's not going to be this very simple flip the switch scenario everyone goes back to work. It's going to be this back and forth as ebbing and flowing of improvement. And yes, we have seen payrolls jumped, we've also seen

jobless claims remain elevated. So again, this really speaks to the notion that it's going to be some time before the US economy recovers to a sustainable upward trajectory. I think also when we see this on evenness in the labor market in it imparts reflects some of the policy

measures that we've seen out of Washington. Remember we're still talking about extremely generous unemployment benefits, and some businesses, particularly small businesses in the service sector, have reported that it's uh it's very difficult to reconnect with employees because of these very generous unemployed this benefits. So I think there's a number of moving pieces a number of different variables. But the take home is really it's not going to

be as simple as we're vaccinated. Let's reopen the economy back to pre pandemic activity levels. All right, So, lindsay, you know, right now we're taking a look at the President of Biden's latest fiscal stimulus plan at two point to five trillion dollar plan. What do you make of that? Is? That? Is it? Do you think that the focus and the strategies behind it our sound or what would you like

to see in fiscal stimulus? Well, at this point, with the economy showing signs of improvement, vast improvement in the labor market, in manufacturing and services and housing, I think we really need to take a pause in terms of any additional fiscal um spending at this point. Remember, the President just passed is near two trillion dollars spending package just a few weeks ago. So the impact of APT has not even filtered through the economy. We're not even

seeing that in the data yet. The March non farm payroll report more more likely reflected the December stimulus that we saw under President Trump. Excuse me, So I do think that at this point the government should be taking a breath. They should be looking at thinking maybe more of a longer term reopening plan and perhaps getting a second plan in place should we see a second route pandemic occur in our in our near terms. So I don't think additional spending is the answer at this point.

I am very concerned about the debt level. I'm very concerned about inflation longer term, and this this unsatiable appetite for federal spending I think really needs to be nipped in the bud. It's crazy if you're a journalist, though, I mean, what a story to cover? I mean, how many times in history have we spent you know, five trillion extra dollars in a twelve month period, and you know the Fed is stepped up with how much emergency uh you know balance sheets trillions more like like seven

trillion more. It's the numbers are mind bottling, As Adam Johnson used to say, But how how does that create inflation? Um? Is it? Does it just create transitory inflation? Or do we get some real inflation from that kind of spending? Well, so when we talk about the transitory concerns of inflation that the FETE has been mentioning, they're not referring to

the massive expansion of the money supply per se. What they're referencing is the fact that we do expect prices on an annual basis to take higher because those low loads of twenty twenty are actually falling out of the calculation. So just by the nature of the mathematical equation, we expect that headline index to take higher in the coming

month as we move further into the summer. But from their standpoint, they're saying this, this calculation is falling out of reature prices is going to be temporary, and they expected inflation to remain nearer that to FIR set level

by the end of one going forward. However, when we talk about this massive expansion of the federal the federal government balance sheet, all of these dollars flooding into the marketplace, chasing after goods, chasing after production, that's where we see that that increase in inflation, and that's where the market is concerned will drive the Fed's hand, or force the Fed's hand to raise race sooner than they're telling us they will. Lindsay, thank you so much for joining us

yet again. Lindsay PEGSA, Chief Economists for Stephle joining us on the phone from Chicago, talking to us about fiscal stimulus. Here again, we've haven't really felt the full benefits, arguably of the most recent two trillion dollars, while more is

being exactly in Berlin, Germany. I guess not, Matt. You know, we're so fortunate here am Radio to be able to tap into the expertise of leading physicians and scientists from around the world UH during these past fourteen months to really get a sense of and and really learn more about the virus UH therapeutics and now about vaccines. And our next guest certainly is on that list. Dr Stephen Corwin. He's a president and chief executive officer of New York

Presbyterian Hospital. He joined us on the phone from New York City. UH. Dr Corwyn, thanks so much for joining us here. I guess where we're at right now is you know people are they absolutely feel like we're just on the precipice of getting to the other side of this. The vaccinations are ramping up, yet we're seeing cases surge in certain parts of the country like Michigan and others. How do you think people should be I guess conducting

themselves these days here as we're right on the edge. Well, I think we're at the beginning of the end, but we're not at the end. And for for people who are football fans, you don't want to spike the ball at the five yard line. I think that. I think the reality is we still have to be careful. We still have the variant floating around. We still haven't vaccinated

it everybody. We haven't gotten to hurt immunity. So if we can hold on a little bit longer, uh, let's try not to have people at a Texas Rangers game. We'll get there, um, but it's a race between the variants and how much we open versus getting people vaccinated. And you know, I'm really hopeful that by summertime we'll be in in terrific shape. But we've just got to hang in there. And look, I know it's daunting. Kids home from school, people want to get back to the

way things were, um, et cetera. But we still have to be cautious. How do you think the vaccine rollout is going. I mean, I know it's going quickly in the US. I think more than sixty five million people have received at least one shot, But is it um. Is it being distributed uh equally across all different classes, races, creeds. I don't know what to say exactly. You get my point, right? Is there? Of course? Of course there are a problem that we've I think there's been a great deal of emphasis.

Certainly we've placed a great deal of emphasis on equitability and giving people access to this. I would say two things to preface my following remarks. The first is, I think that the Trump administration got a lot of things wrong with with COVID, but they got the vaccine development program right, and the Biden administration has capitalized on that in terms of getting this rolled out as quickly as possible.

And you know, we now have Fiser Maderna and Jay and Ja that were now giving and we have to evaluate Astra Zeneca in light of uh, some concerns about data safety monitoring. That being said, I think that you have to educate everybody to sort overcome vaccine hesitancy and so truly get population hurt immunity. We're gonna have to start vaccinating kids, which is probably not going to really happen until we get into the fall and the winter,

meaning children under the age of twelve. So we still have a ways to go in terms of children getting hurt immunity. I think we can get the hurt immunity by in the September time frame for the adult population. And I think we're making a lot of strides on equitability of distribution. Uh. Dr Cormyn. I'd love to get a sense of how the frontline workers at New York

Presbyterian are doing. I mean, you know, hospitals across the country, but I really think about New York City a year ago from today and and how incredibly taxed they were. How are the frontline folks doing at New York Presbyterian. Well, you know, look, uh running towards danger on this one, right. I think we have just absolutely terrific people. I think they've done an amazing job, but they're getting tired. Uh and we still have a lot of COVID in the environment.

So um, I think that people see that we were turning the corner. But it's been a it's been a tough fifteen months for the country and as certainly a tough fifteen months for the front line workers. But everybody in the country should be proud of the effort that all the front line workers across the country put into this because we wouldn't be where we are as a country without it. And I can't thank every one of

our employees enough for everything that they did. And many of them lost family members during the course of this pandemic, and I'm sure you guys know people that were lost. It really has been pretty horrific. But it also I think shines a spotlight on how hard health care professionals work. I mean, just in terms of sheer hours. It's pretty shocking to people from any other industry. Do you think there's some kind of progress that can be made in

either paying them better or getting them safer working conditions? Well, look, I think that, uh, we collectively made a mistake as a country in terms of the amount of ppe we had in stock. The supply chain was very fragile. So yeah, we have to really solidify our supply chains, make sure that we have more onture manufacturing, make sure that the supply chains are more robusts so we don't have a repeat of that that was really quite tenuous. As as

as you will remember in terms of paying people more. Look, I'm a firm believer, uh that you have to pay people uh for for what they do. The minimum wage that we pay is nineteen dollars an hour. I know people are talking about what should the minimum wage in the country be, but we people deserve to be able to make a fair living, and if they're in healthcare, they should be paid appropriately. In my opinion, Dr Stephen Corowen,

thanks so much for your time. Really appreciated, Dr Stephen Corowin the CEO and presidency of New York Presbyteria in which did so much to help a city under siege. Really and I think um, at least in the US or worldwide, everyone's appreciative of healthcare professionals. This is Bloomberg. It is time for Bloomberg Opinion. We're joined today by Jared Dillion. He's a columnist for Bloomberg Opinion. He's also editor and publisher of the Daily Dirt Map and investment

stratagist at Malden Economics. He's based in Myrtle Beach, South Carolina. Is that with a fascinating column here arguing that quote SPACs aren't the only examples of late capitalism. Needs suggests that excess is throughout the financial system, raised the odds that the next recession could be our last as a free market economy. Jared, thanks so much for joining us here. Tell us about why you think the next recession might

be the last one in this economy. You know what's funny because when I started to write this article, I was, um, I have a I have a cat that is overweight, and we were buying her a food puzzle. I don't know if you know what the food puzzle is, but it makes it difficult for a cat to get the food. And you know, I looked this up on Amazon and I ordered it in two seconds and I had it

delivered to my house in two days. And it kind of reminded me of two thousand seventeen, when you know, if you're on if you spend any time on Twitter, there was all this discussion on weight capitalism and all this excesses of capitalism, and that got me thinking about SPACs and a lot of the stuff that's going on today. But but but but what so it's going to be the end? I mean, what does that mean if if there's another big recession, we're going to have the state

really take over. I think there was I think what's happening is that from a sentiment standpoint, the bull market has gone on for so far, and we're starting to see a lot of excesses of capitalism. Money has gotten easy. And yes, I do think that we'll see more state interference in the economy if we have another downturn. And you know, we're trying very hard to prevent a downturn, but that has taken the position that it's actually trying to prevent recessions. It's a very different feed than what

we had twenty years ago. All right, So, Jared, I mean, we we step back here and we take a look at the marketplace and just over the last yeah called six or twelve months, you know, during this pandemic, we've had some of the Reddit trades, the game stops of the world, We've had this explosion in SPACs. I mean, you know, one of the lot of folks are saying, boy, this is a lot of froth in this market. There's a lot of excess in this market. There's a lot

of speculation in this market. Do you see that as well? Yeah, I do see that. And you know, the SPACs in particularly. The interesting thing about SPACs is, you know, I actually think SPACs player play an important role. I mean, the I P O process is kind of broken. It's kind of compresome, and there's been some actually really great companies that have gone public as SPACs, but there's also been a lot of stuff that is terrible and uh is

a joke. So you know this is there's a lot of excesses in this ball market, and if it continues, we're going to get more excesses. So I wonder, though, what um society looks like after the end of free market capitalism. Have you ever seen the movie, the animated film Wally, because I love I love the dystopian future of me getting amazingly fat, sitting in a chair that moves around a cruise ship, just drinking slurpees all day

and watching TV. Like, I'm not opposed to that. If the robots take over and we just get paychecks, is that how it's gonna work? Uh? You know what, it's it's actually funny. I mean it's bringing up the uh you know, getting paychecks. Uh here a myrtle b This is uh, you know, changing the subject a little bit. You know, this is a hospitality town. I mean it's

a vacation town. So it's it's hotels and restaurants. That's basically what we have here and the Myrtle Beach is in right because they cannot attract any talent to help out at these businesses as housekeepers and as stubbs or as cooks, because we are paying people to stay home, and it's it's you can't get you can't get meals, you can't get dinner reservations, you check into your hotel at midnight. This isn't really extreme situation here on Myrtle Beach.

I don't think this the story has really gotten out yet. That is fascinating. I mean, you know, I we we get these jobs claims numbers that we got uh this morning, Jared, and yet I walked down main street of any town in New Jersey and almost every store has a help wanted not rant it it's uh, it's I'm assuming it's a it's a low wage kind of clerk tie type of role, but every business is looking for people. Lindsay

just told us Pault. We just interviewed this DEFHIL economist Lindsay Giggs, and she said, well, one of the reasons you get these huge initial jobless claims numbers is that people get paid so much to be jobless. Right now, I don't want to sound like a jerk when I say that, because you know, there are a lot of people that I'm sure would rather have a job than than not, and I mean I mean millions of people.

But the point is, um, you know, paychecks that maybe maybe we're maybe we're already getting into that kind of dystopian future. I don't even know if it's dystopian. But um, where do you think this all started? Well, I mean, the one thing that's going on is that this is going to result in inflation. And what's happening is is that private businesses have to bid against the government for workers.

So even though we haven't passed a fifteen dollar minimum ways, what we have is could be facto seventeen dollar mimum wage because businesses have to bid against the government for workers. And you know, back when I was on Wall Street fifteen twenty years ago and commodity prices were going up and people were wondering if we would have inflation, and the economists at the time we're saying, you need wage inflation to have inflation, and this is the beginning of

wage inflation, you know. And if you go back to the nineties seventies, we had this term called the wage price spiral, where people's wages are going up and they spend more on stuff and you get this inflationary spiral. Like this is how this begins. So Jared, we have more fiscal sinness coming down the pike here. How do you view that? Only a couple of trillion? Though a

trillion I view it, I do very negatively. I mean, a lot of this stuff that we're doing on the fiscal side and also on the monetary side, was intended to be an emergency measure. You know, all the SAIDs liquidity programs, the corporate bomb liquity, the programs, municipal bonds, stuff like that that was supposed to happen during the pandemic, and then it was supposed to go away. But it

has it gone away. And you know, we've done three studio checks right now, and we can't seem to be able to stop even though you know, the pandemic isn't really over, but it's kind of mostly over. So I think it's time to stop pulling back these emergency measures

and let the economy get back to normal. One of the cool things that we have seen, and I don't know if this would be an example of The kind of excess you're talking about is people are now gonna have now been paying like serious amounts of money for newsletters, and you know, this is something that hasn't happened since I think, you know, back in the eighteen hundreds. Um, it's a great way for journalists to make money. And I was just thinking because I've been a long time

subscribe to the Daily Dirt napp. You can make a lot of money that way. Um, you know, it's pretty popular and people are starting to pay like, you know, like uh, like five bucks, ten bucks, twenty bucks a month for these newsletters anyway, Jared Dillion, great to get your take. Um, fantastic column. You can check out that piece and all of the opinion pieces by typing O P I N go on your Bloomberg terminal or Bloomberg dot com slash opinion. This is Bloomberg. Thanks for listening

to the Bloomberg Markets podcast. You can subscribe and listen to interviews of Apple podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three. Put on false Sweeney. I'm on Twitter at pt sweeney. Before the podcast, you can always catch US worldwide at Bloomberg Radio,