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The $5.5 Billion Blindside

The $5.5 Billion Blindside

Chris Campbell

Posted December 02, 2024

Chris Campbell

Credit Suisse, a bank that had weathered wars and depressions since 1856, understands risk better than any bank.

Or so it - and everyone else - thought.

In 2021, their risk models - passed down like family heirlooms through generations of bankers - said Archegos Capital was as safe as houses.

(Spoiler alert: it wasn't.)

Long story short, this cost them $5.5 billion - an entire year's profit.

Thing is…

While Credit Suisse focused on complex metrics - volatility, correlations, value at risk - they missed obvious warning signs hiding in plain sight.

As you may know…

This has been a common theme in the 21st century: The fancier our tools get, the blinder we become to the obvious.

And, in fact, it’s happening right now.

While traders squint at their complex charts, they're missing the coming profit parade marching down Wall Street with brass bands and confetti.

Let me explain.

The Only Pattern We’re Watching

Before we get to the pattern that’s going to blindside most investors (except, of course, you)…

Think about how most pro investors approach the market.

They're juggling multiple indicators - PE ratios, technical patterns, RSI, MACD, moving averages, Fibonacci retracements.

They're reading earnings reports, following insider trades, tracking options flow. They're watching CNBC, reading Wall Street research, following Twitter gurus.

Don’t get me wrong: These indicators can come in handy.

But this complexity creates A LOT of noise. And it tends to obfuscate the simple.

One example:

Consider what happened with Carvana. In early 2023, investors were analyzing:

  • Used car pricing trends
  • Interest rate impacts on auto loans
  • Technical support levels
  • Short interest ratios
  • Cash burn rates
  • Debt covenants
  • Management commentary
  • Market sentiment

This complexity led Morgan Stanley to cut their price target to $1. TheStreet.com predicted bankruptcy.

The stock had crashed 98%. All the sophisticated analyses pointed to failure.

And yet, nearly ALL of the analysts missed the ONE simple thing that mattered:

A simple indicator called the “1-2-3” pattern.

(Enrique Abeyta, our newest Paradigm colleague, made a killing on Carvana during this time. More on that in a moment.)

This same pattern appeared before Palantir jumped 309%, before Vistra soared 573%, before Nvidia rocketed 2,093%.

And though investors are still ignoring it…

It’s flashing green right now.

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