Stocktake: Archegos woes suggest God doesn’t like leverage

The huge personal losses suffered by Bill Hwang would surely test anyone’s faith

Stocktake has warned of the dangers of a concentrated stock portfolio a few times in recent weeks. Alas, it seems multibillionaire Bill Hwang of Archegos Capital Management isn't a reader.x

Or should I say, former multibillionaire. Hwang suffered what Wall Street veteran Michael Novogratz described as "one of the single greatest losses of personal wealth in history" after being hit by margin calls that triggered the forced selling of enormous stock bets.

Worth an estimated $10 billion, Wall Street is still trying to figure out the extent of Archegos's positions, with estimates ranging from $20 billion to north of $100 billion. Most of the firm's money was invested in a handful of stocks like ViacomCBS, Discovery, Tencent and Baidu.

As if that wasn’t bad enough, Archegos was also leveraged to the hilt. If you invest $10 billion and lose 20 per cent, you’re still left with $8 billion. But if you use that $10 billion to invest $50 billion, then a 20 per cent loss is enough to cost you everything.

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A devout Christian, Hwang once said God “loves” when he backs good companies and that he would not retire “until he pulls me back”.

Well, he has been pulled back. God may love investing, but it seems he’s not too keen on leverage.