This episode covers the massive Korean stock market crash (KOSPI down 40% in July), the forced unwinding of AI investor Leo Aschenbrenner's positions, and crypto's surprising resilience with ETH up 22% in 30 days. It also discusses new Fed Chair Kevin Warsh's first FOMC meeting, where rates were held steady but a shift to quantitative tightening was signaled, and the strong correlation between global liquidity and crypto prices.
Summarized by Podsumo
The KOSPI (Korean stock market) crashed 40% in July, liquidating over 500,000 retail accounts due to leveraged single-stock ETFs on memory chips, wiping out $2 trillion
Leo Aschenbrenner, the 24-year-old AI investor, was forced to unwind his entire public book after using up to 4x leverage; Citadel bought the book, potentially signaling a bottom
Crypto blue chips outperformed AI stocks in July: ETH up 22%, Bitcoin up 11%, while AI stocks like SanDisk dropped 50%; the ETH/BTC ratio broke a 4-year downtrend
New Fed Chair Kevin Warsh held rates steady in a 9-3 vote, signaling a shift to quantitative tightening over rate hikes; the 30-year Treasury yield hit a 19-year high of 5.2%
Michael Howell's research shows a 1% increase in global liquidity correlates with an 11% rise in crypto, making it a 4x better hedge against monetary debasement than gold
"A 1% move up in global liquidity yields an 11% up move in crypto. This is 4x the performance of gold."
"It doesn't feel like the Fed's rhetoric has changed structurally; this is austerity, hard money, and risk assets are not into that."
"The winds are changing—AI deflating and crypto being a hard asset class could be a major narrative shift."