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.