This story is making its round all over the financial world where confidence can punish you the minute you think you are untouchable. The financial markets sometimes work to the T giving you the impression, the conviction your idea is unique. I guess timing the market works when you have the funds to dictate and empower your desire.
This is the example of Leopold Aschenbrenner. He is a smart guy finishing school early with great fanfare. When you have many guys on Youtube talking about you, you made it in the world of finance. I locate a page for him in Wikipedia describing everything you may know of him lately. If you want to go through details you may visit it and from there you will find everything you need to know about him.
If you want to read his essay named situational awareness* it is available at his website. It is a 165 page essay released in 2024. This document made him famous to a point where big money did come to his hedge fund with the same name. Now this is the hammer dropping moment. This fund at its peak had $45 billion AUM. This is a lot of dough considering how hard for a new fund to generate that much so quick.
When you bet on #AI at the right time, you betcha you will reap large. Now the problem with him, he is way too confident. He overleverages his funds times four to go faster. I think just by hearing and trying to understand his dynamics, that is way too risky in a market where you are not sure how the next hour will behave. Success you may say comes with great discipline. On the other hand to make it in life you need to be ready to take certain risks.
LEVERAGE
This word makes trading really good when you are heading to the positive. The minute the cards change, leverage can magnify your loses and change your mental acuteness. This is where margin calls are knocking everywhere making you liquidating your portfolio. Despite all that it happens everyday to investors. This is not a one time story. This is the power of risk mixed with investing. You got to time the market.
Leopold is not broke. He will be fine since he found someone, I mean another hedge fund to bail him out, buying out the hedge fund positions. His net worth is still in the millions. I can be sure he will come back. This time he will be careful and slowly back his company to pay back his investors lavishly. #AI is not going away. Betting on them is a smart decision. Long term bet means you understand the markets do not move in straight line. Temporary you may go crazy as long you can weather the storm.
Do you remember this story of Archegos Capital management in 2021 going under by risking way too much. Yes by leveraging way more than they can chew. This guy was in big trouble by losing the investors money. At one time the fund manager was a billionaire.
I hope this story has nothing to do with liquor or ladies. It has a lot to resonate with leverage, overconfidence, crazy risk, lack of understanding of capital preservation. I am trying to wrap my head about the loss of his hedge fund. It is around $35 billion US. I am sure the lesson is learned. He will be back stronger hopefully to put his smart move to work with guardrail. You and I respect risk is the key to build sustainable wealth.
It certainly is true. There is a famous saying "Even the clever crow eventually eats his own shit." No matter how sophisticated the financial markets are, everything ultimately depends on the amount of capital you have. If you have a lot of money, almost any strategy can look perfect, but with limited capital, all you find is struggle.
Leopold made his biggest mistake when he increased his leverage. If you already have plenty of capital, then what is the need for leverage? I have gone through all of these mistakes myself. Even today, I actively trade, and I currently have both gold and silver hedge positions open but I use only 1× leverage.
To me, leverage is simply another name for destruction and ruin.
Charlie Munger was one of the greatest for a reason. 👍🏻
Overconfidence can sometimes be beneficial, but we should never assume we are infallible in business, especially in volatile markets like cryptocurrencies and some other investment funds. As the saying goes, we must find a sustainable wealth model that helps us maintain our financial stability and avoid decline, as unforeseen events are always a possibility.
If he they didn't end up 100% broke, they it's possible to bear the loss and just recover it all back. As you've said, the lessons have been learned, but that's honestly still a lot of money that was lost..
Usually it is other people’s money. Life continues. Another lesson I learned when you have way too many funds at your disposal losing a lot doesn’t change the game at all. The guy is still rich since he got bailed out by another firm.
Sending you some Ecency points. Please check your wallet.
Risk needs to be taken but in a very calculated manner. Lessons learnt move on...
At the end of the day, risks must be taken. At the same time, however, they must also be coldly calculated.
One of my friends used leverage when trading stocks and less than one year ago it had 7 digits in his wallet. Than he continued with a bad bet over and over again hoping it will turn around and it lost almost everything. I stay away from leverage and not even thinking about it.
!BBH