Aschenbrenner’s AI Fund Collapse Is Just The Beginning
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Money market's mad.
If money is evil, then that building is hell.
Show goes up. The price are never watching. Show sell. Welcome to Professor G Markets. I'm Ed Elson. It is August 4. Let's check-in on yesterday's market vitals. The major indices climbed after president Trump called off an attack and Iran indicated Hormuz negotiations are making progress. The Dow closed at a record high and Amazon reached a $3,000,000,000,000 valuation for the first time. Meanwhile, Brent crude fell, the yield on ten year treasuries declined, and finally, the Japanese yen climbed after The US joined Tokyo to support it. More on that later. Okay. What else is happening? For mo
the quick answer is is that when you look at somebody who is engaged in the behaviors that Leo has, there's really no mechanism for him to have learned not to do this. And so he had a very strong thesis, he expressed it with the extraordinary use of leverage. His initial exposure was largely to non public entities and he had grown his business under that framework, which has a component of much lower volatility framing to it because non public entities don't reprice themselves in the same manner. But when you start running strategies that are running that much leverage against this much volati
stocks that he was invested in, the semi stocks Nebius, Sandisk, Micron, etcetera, how a lot of the activity and the volatility that we're seeing in that market has been the result of the rise of leveraged ETFs. Could you talk more about how that is impacting the semiconductor sector right now and why it matters to investors?
A levered ETF carries the same characteristics as LEO's portfolio, which is obviously running at four x leverage. And the difference between the two is is that a levered ETF, because it has a prospectus that requires it to maintain that levered exposure, has to rebalance every day. And this is where volatility creates a phenomenon called volatility drag. If you imagine a series in which I make 10% today and lose 10% tomorrow, many people would assume that the answer to that is I now have a zero return. But the reality is I start with $1 I now have $1.10, and I lose 10%, I have point nine nine,
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