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Margin mayhem—finance stocks sink as Wall Street frets over billions in bad trades

March 29, 2021, 10:05 AM UTC

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Good morning.

The Ever Given is unstuck! But there’s a bigger story roiling the markets this morning. Remember the name Archegos Capital Management. It’s a tiny Wall Street firm that’s believed to be at the center of a massive unwinding of bad trades. The so-called block trade is worth more than $20 billion, and could grow from there. The fear is bigger banks are caught up in the margin mayhem. As such, financials are taking it on the chin this morning.

In today’s essay, I write about real assets—things like real estate, collectibles, art and wine.

But first, let’s see what’s moving markets.

Markets update


  • The major Asia indexes are mostly higher in afternoon trading, with the Shanghai Composite up 0.5%.
  • A massive block-trade sale rocked the global markets on Friday, hitting firms like U.S.-listed Chinese ADRs and ViacomCBS and Discovery. The culprit appears to be nearly $30 billion in margin calls executed by ex-Tiger Asia founder Bill Hwang who, you may recall, was busted a decade ago for insider trading. The banks caught up in the trade so far include Goldman Sachs, Nomura and Credit Suisse.
  • There’s good news coming from the Suez Canal overnight. The Ever Green has been partially re-floated, raising hopes that the vessel will sail again soon, and that global trade will unclog.


  • The European bourses were modestly higher out of the gates with the Stoxx Europe 600 up 0.3%, before slipping. Energy and finance were among the biggest losers.
  • France and Germany were ringing alarm bells as Europe’s third wave of COVID infections spiked over the weekend, a development that’s pushing the euro down further.
  • Shares in Credit Suisse were down nearly 13% in early trading with Nomura off by a further 16%. Both banks are caught up in the Archegos block trading meltdown.


  • U.S. futures have been trading lower all morning. That’s after the S&P 500 climbed 1.7% on Friday, closing at a new all-time high.
  • President Biden will hit the road this week to pitch the administration’s latest spending plan—this one on infrastructure. How big is it? It’s so big, the White House is thinking of splitting it into two, the second to focus on green-energy investment.
  • It’s a short trading week with the U.S. equities markets closed on Friday (as such Bull Sheet will publish Monday-Thursday this week). The BLS will, however, issue the non farm payrolls report that day.


  • Gold is down, trading around $1,725/ounce.
  • The dollar is up. Again.
  • Crude continues to falter. Brent is trading around $64/barrel.
  • Bitcoin has warped into Marina Abramović performance art. You paid good money for this ticket, and you can’t tell if the joke is on you. My advice: get a drink and discuss what you saw with your date. Something will reveal itself… Meanwhile, the price hovers around $57,000.


Keeping it real

Exactly 10 years ago this month, a journalist friend of mine, Eric (who writes for Fortune every now and then), sent me a note. He was in Benghazi, on assignment, and had just gotten wind of a too-good-to-pass-up offer on some Italian wine.

This wasn’t just any wine. It was the famed Brunello di Montalcino, a 2004 vintage. The producer: none other than Casanova di Neri, which has produced more than a few memorable bottles over the years, including a 2001 beauty that topped Wine Spectator‘s “Top 100” list years ago.

“Count me in,” I emailed Eric back.

Because he was out of the country, the goods arrived at my front door a few days later—our “Benghazi booty,” I called it.

Original photo: Bernhard Warner

(As you no doubt recall, a year later, U.S. Ambassador J. Christopher Stevens was killed in an attack on American diplomatic compound in the war-torn Libyan city, and Benghazi would forever be known in American politics as something else.)

We paid about €18 per bottle for the “Benghazi Brunellos”—a steal! Years after that purchase, the price of the wine spiked again and again and again.

The Benghazi booty is an example of a real asset. And, as BofA Securities chief investment strategist Michael Hartnett wrote in a recent investor note, real assets—think wine, real estate, art, etc.—are where savvy investors should put their money these days.

By historical standards, real assets are both cheap and “under-owned”—that is they’re both scarce and relatively affordable. And the relative value of real assets looks pretty enticing as investors continue to crowd into risk assets, including virtual assets. I’ll take a fine Brunello over Bitcoin any. day. of. the. week.

Here’s the chart Hartnett includes in his analysis, showing how the value of cheap real assets compares to financial assets, dating back to 1925:

Real assets, Hartnett says, are a hedge against inflation (and stagflation, too), and infrastructure spending. If we are truly on the cusp of a bigger government/smaller world age, you want to hang on to assets that have real intrinsic value. You also want to be long real assets if you’re concerned about stock market- and crypto bubbles.

There is a downside to real assets, I can report. Or at least that drinkable real asset.

Over the years, I polished off (with some help) those lovely 2004 Brunellos. They age well, but they hit their peak a good dozen or so years after bottling.

And, I made that Brunello investment with one objective in mind: to drink them—not to watch their value appreciate before selling to the highest bidder.

Still, I have no regrets.


Warning: If you don’t care for pizza, you may want to skip today’s Postscript.

Okay, for those who are still with me, here we go.

With lockdown back in force here in Rome, we’ve returned to old habits, which means that Saturday night pizza at Casa Warner is back.

Pizza is a serious dish in Italy. In a county full of rules-benders, you cannot mess with the ABCs of pizza-making. At least you cannot in our house.

As I wrote in a Postscript a year ago: “my wife is an exacting cook. She works the dough, and lays down the law on which ingredients are permitted together: si! to mozzarella and basil, no! to mozzarella and oregano; prosciutto should be added at a late stage, etc.”

We opt for pizza alla romana, the thin-crust variety. The perfect pizza romana should crunch as you munch—that is, as you work your way towards the crust, the cracker-thin bottom should crackle with every bite. Getting that perfect crunch from a kitchen oven is no small feat. We use a pizza stone—something like this—that we let sit in a piping-hot oven for a good hour before we start plopping the raw pizzas on it.

We got a lot of practice making pizza in lockdown last year. And, by the time we got the all-clear to move around the country again, we were feeling pretty good about our pizza-making prowess.

And then Stanley Tucci happened.

In the first episode of Searching for Italy, Tucci got Enzo Coccia, the famed pizzaiolo, to reveal what goes into his famed pizza Margherita. In addition to the trinity—mozzarella-pomodoro-basilico—Coccia adds, wait for it, pecorino.

When I heard this, I looked at my wife. She looked at me. We both mouthed in unison, pecorino?

If Coccia’s doing it, we concluded, we have to bend the rules. And so this weekend we set ourselves the the task of making a half-dozen Roman pizze using Coccia’s recipe. (Hailing from Campania, down South, Coccia makes the thick-crust pizza napolitana, but you get the idea.)

The verdict?

Original photo: Bernhard Warner

It was a revelation. Pecorino gives the Margherita real bite. That subtle collision of tastes—the sharp sheep’s cheese mixing with the salty-sweet pomodoro-mozzarella topping—gives every crunch a tiny bit more zing.

I was at a bit of a loss after the first glorious bite, as was my wife. “Corposa,” was the first word out of my mouth, an adjective (“full-bodied”) you might use to describe a fine Brunello.

As real assets go, a good pizza is always good value.


Bernhard Warner

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Today's reads

Influencers revolt. You can add Hugo Boss to the growing list of companies caught up in the human rights uproar involving China's Muslim-minority Uyghurs. Chinese actor-singer-influencer Li Yifeng is cutting all ties to the fashion brand. The matter of Uyghurs and cotton sourced from their region is also embroiling the likes of Nike and Inditex's Zara. Here's how the firms involved are responding

A not so subtle poke. There's further pressure on AstraZeneca to deliver its next batch of COVID jabs to the EU on time, and at the volume promised. If not, the EU will block AZ shipments abroad. Help is on the way, however, after the EU gave the all-clear on Friday for more production facilities to crank out much needed vaccines.

The know-nothings. On Reddit investor boards and in TikTok trading videos, you're likely to come across comments such as “I can’t read” and “I have no idea what I’m doing.” Welcome to a new generation of retail investors who are quick to point out they're more or less flying blind.

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Market candy


Commodities are crushing it this year, particularly this rare metal. But over the past decade, they've been a massive loss-making trade (as measured by the commodity-tracking ETF, DBC). In fact, they make up the lone asset in the red over a span of 2011-2021, down 4.5% over that time, as Charlie Bilello, of Compound Capital Advisors, notes in a tweet over the weekend.