Odd Lots John Hempton on Greensill, Archegos and What It's Like To Short Right Now
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Apr 19, 2021 In this insightful discussion, John Hempton, CIO and co-founder of Bronte Capital, shares his expertise in short selling amidst a volatile market landscape. He unpacks the high-profile collapses of Greensill and Archegos, revealing the disconnect between soaring stock indices and underlying financial risks. Hempton highlights reckless lending practices, dubious financing strategies, and the challenges posed by increased retail investor participation. With a sharp focus on modern investment trends, he emphasizes the need for savvy risk management in today’s trading environment.
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A Bizarre Market
- The current market is bizarre: indices are high, yet major blow-ups like Archegos and Greensill are occurring.
- Retail mania drove up nonsense stocks, attracting big money, but now these stocks are falling, creating a strange dichotomy.
Greensill's Rise and Fall
- Trade finance, once a huge industry, has shrunk due to modern tech.
- Greensill entered this shrinking market, expanded rapidly with obscure counterparties, and ultimately became a Ponzi scheme.
Desperate Borrowers and Lenders
- Those desperate for money often find those desperate to lend it, creating risky situations.
- Greensill attracted SoftBank, a degenerate gambler, and disguised unsecured loans as trade finance.