capexus @capexus

@isssa0x Three picture deals only protect you while the studio still needs you.

@kobaHUB Repaying $3,900 of a $12 million order is the real ending here.

Credit Suisse lost $214 million on one client in March 2020. That client, Malachite, had paid just $6.9 million in its whole life. It was a warning in plain numbers. Small fees for years, then one loss that erased them many times over. A year later the same arithmetic came back with Archegos. About $16 million of revenue in 2020. About $5.5 billion lost in March 2021. The bank's own report later said these risks were not hidden. One test after any client loss. What changed for the next client of the same shape?

capexus @capexus

5 days ago

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Credit Suisse capped its Archegos stress loss at $250 million. On July 22, 2020 the scenario showed $828 million. That was 330% of the limit. It had been broken before, in June 2018 and February 2020. In August risk asked to switch to a gentler Bad Week scenario. Credit Risk said it was comfortable with that. On the softer test Archegos still stayed in breach. September 209%, December 166%, February 2021 238%. Change the position and the risk goes down. Change the scenario and only the report does.

capexus @capexus

5 days ago

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@kobaHUB How much of that came from QVC distribution rather than the sponge?

@isssa0x Book value lost meaning once most investment moved onto the income statement.

Credit Suisse set a $20 million limit on its Archegos exposure. In August 2020 the exposure stood at $528 million. The limit had been raised from $8 million in November 2019. By April 10, 2020 the estimate was already $202.92 million. A credit risk email on August 25 called it more than 25 times. The breach was flagged as an excess for 169 days. It stayed open until early March 2021. Within weeks the client defaulted and cost $5.5 billion. A limit is a number on a screen. Enforcing it is a decision somebody signs.

capexus @capexus

5 days ago

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@Hardov__ His $800 bought freedom from unlimited liability, which was the real price.

@Hardov__ At 53% accuracy, position sizing decides whether the edge ever compounds.

Credit Suisse priced the full fix for Archegos at $3 billion. It settled for $500 million. On February 10, 2021 the bank ran the numbers. Prime Brokerage rules meant $3 billion more margin, $4 billion in all. Credit Risk floated $1 billion. Prime Services Risk asked for $750 million. Archegos agreed to $500 million. A bespoke plan was sized to what the client might accept. Not to what would protect the bank. Full breakdown below. One test for any negotiated margin. Who set the number, the risk or the client?

capexus @capexus

5 days ago

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Dexter Shoe made over 7.5 million pairs a year in 1993. Berkshire paid $433 million for it in its own stock. The plants and 77 outlets were the asset on paper. The real cost was 25,203 Berkshire shares. In 2000 Berkshire wrote off the rest of the goodwill. In 2001 the shoe group lost $46.2 million before tax. The shares kept compounding for the sellers. A business can go to zero while its price keeps growing. That happens when you pay in your own stock.

Hardov @Hardov__

6 days ago

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@isssa0x An allowance with no end date compounds like debt, the deadline caps it.

Credit Suisse cut the margin on Archegos's swaps in May 2019. The average fell from 20% to 7.5% to keep the business. Before 2019 they typically ran from 15% to 25%. Archegos had asked for materially lower margins. The bank's stated reason was a competitive rate. Both risk teams approved it. At 7.5%, one dollar of collateral carried about $13 of exposure. Less than two years later the client cost the bank $5.5 billion. A margin cut looks like a discount. It is the bank lending more against the same dollar.

capexus @capexus

5 days ago

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Credit Suisse had two ways to margin a hedge fund in 2020. Archegos sat in the one that charged less than half. In the Prime Brokerage book, margin moved with the risk. That book averaged 15% in September 2020. Archegos's swaps averaged 5.9% the same month. Some short index swaps sat at 4% to 5%. Swap margin was set when the trade was booked. It did not rise as positions grew larger or more concentrated. By December the gap was 6.9% against 17.7%. One test for any margin number. Does it move when the position grows?

capexus @capexus

5 days ago

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Credit Suisse earned about $16 million from Archegos in 2020. In March 2021 the same client cost it about $5.5 billion. The relationship had run at that scale for years. Revenue was $14 million in 2017 and $15.6 million in 2018. At the 2020 rate, the loss equals roughly 340 years of it. A committee packet in September 2020 had the math already. Revenue so far that year was 1% of the bank's worst scenario loss. The business still expected $40 million in 2021. Fees arrive one year at a time. A loss on the same client arrives in one week.

capexus @capexus

5 days ago

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@Hardov__ Paying in your own stock means the real price keeps moving for decades.

@Hardov__ Airlines spent decades proving it: passengers kept the savings, shareholders kept the bill.

@Hardov__ Paying in stock turned a $433 million mistake into $5.7 billion of dilution.

Buffett bought Dexter Shoe in 1993 for $433 million. He paid in Berkshire stock. The price kept rising for 21 years. 1993. 25,203 Berkshire shares go to the sellers. 2007. Dexter is worthless. The shares, $3.5 billion. 2014. The same shares, about $5.7 billion. Cash is paid once and ends there. Stock hands the seller a slice of every future gain. Buffett gave away 1.6% of Berkshire for a shoe company. A cash price is fixed the day you sign. A stock price is set by everything you build afterward.

Hardov @Hardov__

6 days ago

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