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This is the extraordinary behaviour of fish when a shark bursts through the school. This is the bewitching murmuration of starlings over a twilight meadow. In an instant that entropic, Brownian normalcy disappears and every particle darts the same way at once, as if by magic.
This is the extraordinary behaviour of fish when a shark bursts through the school. This is the bewitching murmuration of starlings over a twilight meadow. In an instant that entropic, Brownian normalcy disappears and every particle darts the same way at once, as if by magic.


You could spend a lot of time trying to predict
We are mesmerised but not surprised to see starlings perform their aerial magic. We would be gobsmacked if a cup of tea did this.


We may be mesmerised but we are not surprised to see starlings perform their aerial magic. We would be go smacked if a cup of tea did this.
When the planet has unexpectedly gone into lockdown as a result of a global pandemic, buying habits for toilet paper and, oddly, lentils suddenly ''change''. The fact that there are only three tins of lentils left on the shelf leads you to grab them. The fact that there are ''none'' leads to a nationwide run on tinned pulses people don’t, in normal times, much ''like''. The Contrarian household still groans under the weight of tinned borloiti beans years after the last new variant.


When the planet has suddenly gone into total lockdown as a result of an unexpected global pandemic, buying habits for toilet paper and, oddly, lentils, suddenly ''change''. The fact that there is only three tins of lentils left on the shelf leads you to grab them. The fact that there are none leads to a nation wide run on tinned pulses people don’t, in normal times, much like.
This is not just the crowded theatre phenomenon, when everyone stampedes for the exits at once, and the narrow aperture makes the stampede all the more urgent, and therefore dramatic — but second-order features. An investor long “on margin” might wish to, and be able to, ride out a short-term crash by meeting margin calls. In most dislocations this is the obvious and — if you can manage it, correct — thing to do. The market usually recovers, at least in the short term. But meeting your margin call means drawing on your [[revolving credit facility]] and your bank is experiencing a liquidity crisis and unexpectedly pulls your lines, or suspends withdrawals, as a result of its ''own'' market exposure to the crash. Your [[prime broker]], usually patient with you and tolerant of peripheral looseness in your margin operations, is also under pressure, has told you today there is no flex, and for good measure, it is jacking up your IM.


This is not just the crowded theatre phenomenon, when everyone stampedes for the exits at once, and the narrow aperture makes the stampede all the more urgent, and therefore dramatic — but second order features. An investor long “on margin” might wish to, and be able to, ride out a short term crash by meeting margin calls. In most dislocations this is the obvious and — if you can manage it, correct — thing to do. The market usually recovers, at least in the short term. But meeting your margin call means drawing on your revolving credit facility and your bank is experiencing a liquidity crisis and unexpectedly pulls you lines, or suspends withdrawals, as a result of its ''own'' market exposure to the crash. Your prime broker, usually patient with you and tolerant of peripheral looseness in your margin operations, is also under pressure, has told you today there is no flex, and for good measure, it is jacking up your IM.
All that near-perfect information in the market evaporates — rather, other information, which the market ''didn’t'' have, but took for granted, such as the solvency of systemically important financial institutions, suddenly becomes much more important. And it dramatically impacts behaviour in the market. All at once, no-one fancies “taking a view” on ''anyone’s'' credit.
 
All that near perfect information in the market evaporates — rather, other information, which the market ''didn’t'' have, but took for granted, such as the solvency of systemically important financial institutions, suddenly becomes much more important. And it dramatically impacts behaviour in the market. All at once no-one fancies taking a view on ''anyone’s'' credit.


Cash is suddenly King, Queen, Jack and Ace. There are people on the TV in sharp suits wandering dazedly around outside their buildings clutching [[Iron Mountain]] boxes full of personal effects.
Cash is suddenly King, Queen, Jack and Ace. There are people on the TV in sharp suits wandering dazedly around outside their buildings clutching [[Iron Mountain]] boxes full of personal effects.
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All indicators are going one way, across the board, in all markets and all asset classes.
All indicators are going one way, across the board, in all markets and all asset classes.


Now we find the model we were using has stopped being largely right, or broadly right, or even vaguely right. It is flat out wrong.
Now we find the model we were using has stopped being largely right, or broadly right, or even vaguely right. It is flat-out wrong.


You will find at this stage limited tolerance for blaming a model. If you say things like, {{Viniarquote}}. This is not a good look for the CFO of a bulge bracket [[Vampire Squid]].
You will find at this stage limited tolerance for blaming a model. If you say things like, {{Viniarquote}}. This is not a good look for the CFO of a bulge bracket [[Vampire Squid]].
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