Another Lehman Moment? Signs Are Pointing To Bigger, Systemic Rot In Global Finance

Wednesday marked the second straight session in which stocks were subdued. The indices were split, with the Dow and S&P up, the NASDAQ and NYSE Composite down, ever so slightly.

Tuesday's trading was dull. On Wednesday, watching paint dry might have led to more productive outcomes than what happened in so-called equity markets. The NASDAQ traded in a narrow band of fewer than 80 points. The S&P 500 moved 15 points from low to high, finishing with a six point gain.

It was almost as if the market was anticipating another shoe to drop, and, like magic, JP Morgan suppled the loafer, putting up a block of 9 million shares of Academy Sports & Outdoors after hours, in a move that is eerily similar to the wholesale unloading of stocks a few weeks ago when family office, Archegos, blew up over leveraged bets and the subsequent margin call which Money Daily featured yesterday.

In that post, a "Bretton Woods moment" was mentioned. Today, the urge to reference the fall of Lehman Brothers in 2008 as the kickoff to the Great Financial Crisis (GFC) is irresistible. The world of high finance may be headed for another "Lehman moment."

Before Archegos, there was Greensill Capital, which went belly up in early March, inflicting wounds on Credit Suisse and other banks and businesses, including the coal mining concern of West Virginia governor, Jim Justice, Bluestone Resources, SoftBank, and the steel and mining empire of Sanjeev Gupta, GFG Alliance, which employs 35,000 people worldwide. Financial media have largely overlooked the story, which has raised havoc in industries tied into Greensill's innovative, leveraged business model of supply chain finance. The New York Times offers an interesting background perspective.

So, yesterday, up popped Academy Sports and Outdoors (ASO).

KKR took the company public on October 1, 2020.

Sporting goods retailer Academy Sports and Outdoors Inc ASO.O sold shares in its initial public offering (IPO) on Thursday at $13 apiece, below its target range, to raise $203 million, according to a person familiar with the matter.

The IPO valued the Katy, Texas-based Academy Sports and Outdoors, which is owned by U.S. private equity firm KKR & Co Inc KKR.N, at $1.1 billion.

Academy Sports had aimed to sell 15.6 million shares at a target price range of $15-$17 per share.

The lockup period for insider shares ended April 1 and those shares are now hitting the market, but not before the price of ASO doubled from its IPO six months prior. It's now coming back down in a hurry. After topping out at 33.48 on Tuesday, it opened Thursday at 29.52 and continues to fall. Other than Zero Hedge no other news outlet seems to be aware of this developing story.

It might be just another run-of-the-mill scandal involving shoddy and shady accounting practices (ASO's two quarters were both blowouts, more than doubling street estimates), or it could be that other shoe hitting the floor as part of a systemic, approaching, global meltdown.

The IMF and World Bank are meeting this week, addressing the pandemic, income inequality, climate change and funding to less-developed nations. Here is a transcript of remarks and answers to questions by World Bank President David Malpass.

Finance ministers and representatives from central banks at the second virtual G20 meeting of the year agreed to use "all available policy tools for as long as required" to help out countries negatively impacted by the coronavirus. That would be just about every nation on the planet, so one could call the G20 countries, "all in."

As a reminder of where things could be headed, here's the author of "The Big Short," Michael Lewis, telling late night host Steven Colbert in 2015 that the banks should not have been bailed out in 2008.

At the Close, Wednesday, April 7, 2021:
Dow: 33,446.26, +16.02 (+0.05%)
NASDAQ: 13,688.84, -9.54 (-0.07%)
S&P 500: 4,079.95, +6.01 (+0.15%)
NYSE: 15,838.85, -39.11 (-0.25%)