Scott Curry is the founder and CEO of five successful businesses, a speaker, author, and influencer. His videos have been viewed by more than 2 million people.
Colorado, USA
Joined May 2012
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Stocks historically perform the worst when we have a Republican president and Democrat congress. Buckle up!
When the stock market crashes 6% in one day, everyone drinks beer and eats donuts to feel better, apparently.
Hedge Funds that Collapsed, Liquidated, or Restructured This Week
- Walleye Capital - $17 billion in losses
- Engineers Gate - $2 billion in losses
- Millennium Management - $1.5 billion in losses
- Brevan Howard - 5 portfolio manages quit today
Hedge Funds in Trouble
- Lone Pine Capital - has faced massive losses, but has not collapsed, despite some online rumors
- Situational Awareness - today's losses estimated to be over $2 billion
NOTE: There may be many more private funds that aren't publicly known that also collapsed today.
Why is this happening?
According to Goldman Sachs, UBS, and RBC, multiple hedge funds have been heavily selling AI debt. When debt (bonds) are sold, the interest rates on those loans skyrockets. Those higher interest rates are causing a complete halt to funding, and many AI companies have found it impossible to fund operations and growth over the past week. Without funding, AI companies will collapse and AI growth will come to a standstill. That destroys the 100%+ growth targets these AI companies have, which in turn in destroying multiples (valuations). Stock prices are crashing as investors re-price growth stalling. In addition, bond prices are crashing as funds sell their AI corporate bonds. The losses in both the bonds and stock prices combined are causing heavy losses for hedge funds, especially those that most heavily invested in AI companies and purchased bonds in addition to stocks.
When will the selling end?
Hedge funds are capitulating right now, which is causing the sell-off. Over the next few days, we will most likely see continued selling as more funds are liquidated, margin calls start rolling in, and retail investors panic sell. At some point, stocks and AI corporate bonds will get too cheap and hedge funds and large institutions will start buying again. Timing this is very difficult, and depends upon announcements from government officials on proposed fiscal and monetary policies and AI regulations, as well as timing how long it will take the margin calls and liquidations to work their way through the system. In the past, these scenarios have been resolved within a few days to a few weeks, but the exact timing is impossible. The real question is whether this will be over quickly, or if it will trigger an AI bubble burst leading to a sell-off like we saw during the dot-com bubble. In the vast majority of cases, it's over quickly. Once every 10 - 15 years, we get a major bear market.
All 3 of these are true at the same time. 🤯
- Margin utilization is the highest in history.
- Stocks are the most overvalued in history. The last time this happened was 2001 and the S&P fell 50% and the a Nasdaq fell 80%.
- Homes are the most unaffordable in history. The last time this happened was in 2008 and it caused the Great Financial Crisis.
Stock futures are green because oil futures are down 2%. The market is behaving rationally right now. This could all flip in an instant if Trump starts a full invasion of Iran.
Another great trade on these overnight XSP calls. Trade alerts are posted here: weprofit.io/stockdads/
Calls for tomorrow. Hike is already priced in. Warsh is dovish, and he won't give future guidance, which means he won't indicate more rate hikes are coming. The market will rally.
