Posted on 01/17/2015 8:18:02 PM PST by tcrlaf
Yesterday, when we got the first news of huge P&L losses at various publicly-traded banks not to mention the collapse of several retail brokers culminating with the bailout of FXCM by Jefferies, we reminded that seconds after the SNB shocker, we tweeted what was quite obvious to anyone who realized that speculators were most short the CHF since the summer of 2013.
We also added that "We have yet to find out just which hedge funds were blown up yesterday", for the simple reason that unlike public banks who have an obligation to reveal news, especially bad, to their shareholders, hedge funds PMs hope to avoid the LP firing squad until the last second. Alas, there is only so long that the day of reckoning can be delayed.
One such fund is the Everest Capital Global macro fund, which went from just shy of a billion to zero in milliseconds as a result of a near wipe out due to a massive CHF-short position. Bloomberg reports:
Marko Dimitrijevic, the hedge fund manager who survived at least five emerging market debt crises, is closing his largest hedge fund after losing virtually all its money this week when the Swiss National Bank unexpectedly let the franc trade freely against the euro, according to a person familiar with the firm.
Everest Capital’s Global Fund had about $830 million in assets as of the end of December, according to a client report.
(Excerpt) Read more at zerohedge.com ...
The big hedge funds and FX traders were betting BILLIONS AND BILLIONS (of borrowed QE dollars) that the Swiss would print Francs like crazy to maintain the peg to the Euro, driving the franc's value down, after this weeks Euro QE announcement.
This just wasn't supposed to happen. I've even seen it said, in print, that the Swiss move "Just wasn't fair!". OOPS...
6th or 7th very large hedge fund to go under in the last 48 hours.
A massive short position. I think I see the problem. The risk is unlimited in such a position.
Kind of funny that hedge funds, where the “hedge” should mean to mitigate financial risk, are the first to explode during any unexpected market move.
The House of Cards is finally beginning to crumble. And I’m thrilled. Maybe we can start over with the financil mistakes of the last 20 years or so uppermost in our minds.
If the amount of effort that has been expended to keep the kludge afloat had been instead directed towards growing economies, think how much better off the world would be.
“A massive short position. I think I see the problem. The risk is unlimited in such a position.”
And we are only just beginning to hear who was exposed. Citi has already admitted to an at least $150 million loss.
What about Goldman, or JP Morgan, the huge currency players? Nothing yet. Monday morning, the margin calls will hit, but not in the US until Tuesday.
Will Yellen save the “too-Big-to-fails” if they caught the knife?
Is this why a few days ago, the US Congress passed some legislation that protects US banks from derivative losses?
If Citi had a $150mm loss that equates to something like $0.0005 per share. That doesn’t require a bailout of any kind.
I think it would be more interesting to learn who scored big on this move.
Oh, and derivatives are good things that our economy can really use, despite the ranting of Marxist idiots who cannot understand them.
This ought to give all the muckity mucks at Davos something to talk about. The World Economic Forum is next week.
Swiss pensioners, and also investors who believed that Switzerland would stop giving free money to the EU even as France and Germany went after Swiss bank secrecy.
I agree derivatives are a good way to manage risk.
I just don’t want to see someone gain when events go in his or her favor, but then the government subsidizes or finances the loss when events don’t go in his or her favor.
Right. When I saw the 30% move, I thought, “Everyone with a position in Franc options just made or lost billions of dollars each.”
Massive currency contract leverage x massive options leverage x 3000 basis point move (instead of a few dozen points) x number of contracts = billions.
I wonder what the George Soros position was.
Which side George Soros was on would be interesting to know...
Guess it wasn’t a true hedge fund. Supposed to bet on both sides not take a massive position on one side. Some of the smart money crowd never learns.
George Soros is known as the “man who broke the Bank of England.”
Every hedge fund operator dreams of such a legendary payoff, and apparently some have taken outsized risks trying.
But, it’s the way of life—sometimes you get the bank, sometimes the bank gets you.
“What about Goldman, or JP Morgan, the huge currency players?”
Speaking of JP, it’s my understanding that JP has a massive short position in silver ETFs. Do you think that will blow up in JP’s face this week?
WE ALL know which side old Georgey was on shouldn’t even have to ask!!!!!!!!
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