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The Daily Brief: Archegos Financial Failure Triggers Billion Dollar Losses In Financial Markets

A Massive Margin Call Has Forced Archegos Capital Management To Unload $20 Billion of Shares Resulting In Huge Losses For Investors.

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Archegos Financial Failure Triggers Billion Dollar Losses In Financial Markets

Summary:

  • Defaults on margin calls by Archegos Capital management have caused highly significant losses for investment banks and brokers.
  • Margin calls are used in arrangements between investors and brokers when the value of an investor’s margin account falls below the broker’s minimum amount. If an investor is unable to meet the broker’s required minimum then the broker will sell the investor’s shares/securities, often at a discounted rate, to recover their losses.
  • Archegos held large bets and leverages in US and Chinese stocks including Viacom, Discovery, Baidu, GSX and Tencent Music, which began to lose value, causing brokers to exit the bets on behalf of Archegos.
  • Leverage is the act of using borrowed capital to fund investment and expand assets to generate high rates of return.
  • Brokers then demanded Archegos to deposit additional shares or securities into its margin account to make up for the loss in value caused by the failing bets, however Archegos was unable to meet the margin calls.
  • In order to recover their losses, brokers dumped the shares Archegos had pledged with them at an unprecedented rate.
  • The rapid selling of shares caused the value of associated stocks to nosedive resulting in huge losses for investors.
  • Banks/brokers that invested with Archegos are also facing losses due to Archegos defaulting on margin calls.
  • Major international investment banks including Goldman Sachs, Nomura, Credit Suisse, Morgan Stanley, and Deutsche Bank are reported to have been dealing with Archegos.
  • Bill Hwang, the founder of Archegos Capital Management, is a former manager for Julian Robert’s hedge fund Tiger Management. Julian Robert is a legendary hedge fund manager who has mentored many famous investors.
  • Hwang was blacklisted from investment banks after being charged with insider trading and market manipulation by the Securities Exchange Commission in 2012, however 1 year later he created Archegos Capital Management as a family office.
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Attack by French Air Forces Kills 19 Civilians at Mali Wedding

  • This Tuesday, a report by the U.N. Multidimensional Integrated Stabilization Mission in Mali (MINUSMA) concluded that a French Air Attack, initially aimed for alleged terrorists, hit a wedding in Mali and killed 19 civilians in the Western African country. 
  • The report raised concerns for the “respect for the principles of the conduct of hostilities” after the nation’s attack, as out of the 22 killed, only three were suspected to be a part of an extremist organization. 
  • The French defense ministry released a message stating they “[maintain] with consistency and reaffirms strongly” that it’s only point of attack was an “armed terrorist group,” denying claims made by the MINUSMA. 

“Impending Doom”: Rise of Coronavirus Hospitalizations and Death Cause Concern Worldwide

  • CDC director Dr. Rochelle Wallensky warns of “impending doom” as the coronavirus pandemic continues to show “concerning trends” in the rise of spread, hospitalizations, and death. 
  • President Joe Biden pushes for Americans to follow through with mask mandates as cases within the U.S. follow a similar trend to European countries such as France, Italy, and Germany, who have started to impose harsher lockdown measures amidst death spikes across the nations. 
  • A report released detailing the changes of Covid-19 warns that the current vaccines could potentially do little to fight against mutations. The People’s Vaccine Alliance believes that there is less than “a year… before the virus mutates to the extent that … new or modified vaccines are required.”

Soldiers from Myanmar seek refuge in India following deadly military coup

  • Hundreds of soldiers and citizens have fled from Myanmar after a military coup that has killed at least 180 protestors; many have crossed the border to seek refuge in northeastern India.
  • The escape to Mizoram, India comes as an outcry from some army soldiers and citizens in Myanmar that have witnessed the violence of Myanmar’s military.
  • India’s federal government initially allowed refugees to enter the country and provided both food and shelter, however now India has taken measures to prevent refugees from entering with the exception of those with humanitarian needs.
  • Myanmar has asked India to return police officers who fled the coup – approximately eight Myanmar nationals have been returned; if sent back, officials and citizens could the face death penalty.

Amazon Faces Claims of Worker Rights Violations

  • Amazon is under investigation for allegedly firing an employee who protested against workplace conditions.
  • Christian Smalls, an Amazon employee, participated in a demonstration about health and safety at Amazon workplaces; he was fired later that day.
  • Amazon claims the incidents are unrelated, and that the firing was due to Smalls’s continued non compliance in social distancing protocols.
  • The New York State Attorney General’s Office is considering multiple legal options against Amazon.

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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Credit Suisse Found Guilty for Involvement in Money Laundering Scheme

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800px Credit Suisse Zurich
  • Switzerland’s Federal Criminal Court found Credit Suisse, Switzerland’s second largest bank, guilty for its involvement in a money laundering scheme involving a Bulgarian drug trafficking gang.
  • The bank is being fined 21 million Swiss francs ($22 million) due to its poor monitoring and implementation of anti-money laundering rules. More than 12 million francs worth of assets are also being confiscated due to their connection with the criminal group.
  • Credit Suisse has denied any wrongdoings and stated that it has been “continuously testing its anti-money laundering framework and has been strengthening it over time, in accordance with evolving regulatory standards.”
  • This case originated from actions taken by a former employee in 2007 and 2008, and two other Bulgarian citizens’ actions in 2005 and 2009. Some of their sentences and fines were suspended due to the amount of time passed since the crimes took place.

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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Chlorine Gas Leak in Jordan Port City Kills Thirteen People

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Port Of Aqaba City
  • A gas leak in Aqaba, Jordan killed at least thirteen people and injured more than 250. A storage container carrying between 25 and 30 tonnes of chlorine gas fell as it was being exported to Djibouti, releasing the gas.
  • A video of the incident on state TV shows the container being dropped onto the deck of the ship and a yellow colored gas spreading through the air as people try to evacuate. The accident seems to be a result of the crane malfunctioning.
  • If chlorine is inhaled at high levels, it can cause life-threatening damage. A nearby beach in Aqaba was evacuated as a safety precaution, and residents who live in the nearest residential area, about 25 kilometers (15 miles) away, were advised to stay inside and close windows.
  • Jordan’s Prime Minister Bisher al-Khasawneh traveled to Aqaba and visited some of the injured at the hospital. He also formed a team led by the interior minister to investigate the incident.

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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Russian Missile Sets Ukraine Shopping Center on Fire

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781px Nevsky Centre Shopping Mall in Russia
  • A busy shopping center in Ukraine was set on fire by Russian missiles on Monday, killing at least thirteen people and injuring dozens. The total number of casualties is still unknown.
  • Ukrainian President Volodymyr Zelensky stated that “The number of victims is impossible to imagine” and that there could have been up to 1,000 people in the mall.
  • The attack came during the G7 summit, where world leaders condemned recent atrocities and promised to support Ukraine “for as long as it takes” in a joint statement. President Zelensky spoke to the leaders at the summit and stated that he wants the war to end before winter.
  • NATO has decided to increase the number of troops in its rapid reaction force from 40,000 to 300,000, more than eightfold. NATO Secretary-General Jens Stoltenberg stated this move is part of the “biggest overhaul of collective defense and deterrence since the Cold War.”
  • The United States has announced that it will provide Ukraine with advanced medium and long-range air defense capabilities.

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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World Watches as the United States Supreme Court Abolishes a Woman’s Right to an Abortion

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Defend Roe v Wade 0035 52061678896
  • The United States’ top justices voted to eliminate the constitutional right to an abortion, a law that had been in place for over 50 years.
  • The closely watched decision was heralded by some and derided by others, depending on their position on the controversial concept of a woman’s right to choose for her own body.
  • With the abolition of the constitutional right, it is expected that many states in the U.S. will implement near total bans of abortion rights, while other states such as California, Oregon and Washington have reaffirmed their commitment to preserve the right to an abortion.
  • Planned Parenthood, the advocacy face for abortion rights, is mobilizing around the country to bolster and increase services in those states that will preserve the right, and engage voters in those states that plan to abolish the right.

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All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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The EU Approves Ukraine for Candidacy

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Munster Stadtweinhaus Beflaggung Ukraine und EU 2022 0219 scaled
  • The EU has finally approved the application of Ukraine to become a candidate country for admission to the 27- country organization. Ukraine will now join the official candidate list, which already includes Albania, the Republic of North Macedonia, Montenegro, Serbia, and Turkey. 
  • The US is expected to provide an additional $450m in security assistance to Ukraine. Which includes four more High Mobility Artillery Rocket Systems. 
  • The EU and Norway have agreed to cooperate and provide the EU’s 27 countries with gas from Western Europe’s biggest provider. The EU imports roughly ⅕ of its gas from Norway compared to the 40% it was receiving from Russia. Currently, Russia has been cutting gas supplies to countries refusing to pay for it in roubles. 
  • Melbourne is considering utilizing its largely vacant $200m Center for National Resilience building to house hundreds of refugees fleeing war-torn Ukraine and Afghanistan. The center will only be able to temporarily house about 500 refugees from Afghanistan and about 200 from Ukraine. 
  • Ukrainian Defense Minister Oleksii Reznikov thanked US Defense Secretary Lloyd Austin after receiving and welcoming the High Mobility Artillery Rocket Systems (HIMARS) from the United States. 
  • Nike joined other leading Western brands by formally making a full exit from Russia, three months after suspending its operations. Telecoms equipment maker Cisco is also planning to wind down business in Russia and Belarus as well.

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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US Supreme Court Expands Gun Carrying Rights Causing National Outrage 

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Open Carry of a 9mm Browning Hi Power in Eagle Colorado scaled
  • The US Supreme Court expanded gun carrying rights after a New York law denied the plaintiffs Robert Nash and Brandon Koch from carrying a concealed weapon in public, despite them having licenses for recreational gun ownership. 
  • The US court ruled that the New York law requiring residents to prove “proper cause” to carry a concealed weapon is unconstitutional. Justice Clarence Thomas, who represented the 6 justices who ruled in favor of the decision, stated that Americans have the right to carry “commonly used” firearms in public for personal defense. 
  • This decision comes amid an intense national debate over gun violence, and could possibly challenge the  outcome of similar regulations in other states, such as California and New Jersey, and affect a quarter of Americans by allowing more people to carry guns legally. 
  • Three liberal justices, Elena Kahan, Sonia Sotomayor, and Stephen Breyer, were against the majority decision, and Justice Breyer noted that “since the start of this year alone (2022), there have already been 277 reported mass shootings – an average of more than one per day.”
  • While the National Rifle Association (NRA) celebrated the judgment, President Biden stated that he was “deeply disappointed” by the court’s decision and that the ruling “contradicts both common sense and the Constitution, and should trouble us all.” 
  • New York Mayor Eric Adams also agreed with Biden and stated that he would review other ways to restrict gun access by restricting the application process for buying guns and looking into bans of firearms at specific locations. 

All views expressed in this editorial are solely that of the author, and are not expressed on behalf of The Analyst, its affiliates, or staff.

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