The Archegos implosion teaches the same lessons that need to be taught repeatedly.

  1. High leverage eventually brings margin calls.
  2. Margin calls equal disaster.
  3. Margin calls come when too much leverage is attached to securities linked to market volatility.
  4. All securities are linked to market volatility.

There is no such thing as uncorrelated assets anymore. Investment strategies founded on the belief that the securities held are somehow immune from previously “uncorrelated” volatility are anachronistic. Combine these investments with substantial leverage intended to enhance returns, and this strategy ends in disaster.

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