Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Welcome back, everyone. A quick video today on the blow up of Arkego's capital. Let's talk about

who Bill Huang is, the role of prime brokers and the issues of leverage

and the total return swaps that he traded.

Let's see if we can learn something useful from the situation.

Now the reason I didn't rush to make a video on this topic is that there's nothing I find

more annoying than the type of person who steps in after a disaster like this to kick a guy while he's down. It's a bit like when you're watching a sporting event with a friend and an athlete fumbles the ball and your friend says, what an idiot, I wouldn't have made that mistake. And you think, well, of course you wouldn't have made that mistake. You're sitting on a couch eating Cheetos. The biggest mistake you're going to make

today is to spill beer on my couch. You know, it's a different thing. So while I could make a

video where I make all sorts of jokes about the losses, let's see instead if there are any

useful lessons that we could take away from this story. This loss that happened over a day or two

has to be one of the greatest losses of personal wealth in history. So first up, who is Bill

Wong and is he a dummy? Well, he started out his career working for Julian Robertson, who's one of

the most legendary fund managers. Julian Robertson ran Tiger Management,

which was one of the best performing hedge funds in history and he's up there with people

like Soros, Buffett and Simons. He's one of the greats. I think he turned $8.8 million

into $22 billion over a 20-year period. And Robertson used to cede the funds of his top traders

when they left his firm. And those funds went on to have great returns and they were known

as Tiger Cubs. They often had the word tiger in their name. And Bill Huang is one of the

people seated by Julian Robertson. So it's probably reasonable to say that he's

not a dummy. So Bill started up a fund that was called Tiger Asia Management in 2001, which

went on to be one of the biggest Asia-focused hedge funds managing more than $5 billion at its peak.

He took a beating in 2008 during the Volkswagen short squeeze, but overall

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