Absolute chaos on the timeline last

night, this morning, around Leopold

Auerbach's hedge fund situational

awareness. They have been forced to

unwind their public stock portfolio

after steep losses on AI infrastructure

bets. CNBC reported this on Thursday,

today.

Uh

Prime brokers reportedly rushed to raise

cash to meet margin requirements while

Ken Griffin's Citadel, my former

employer,

>> [laughter]

>> uh reached a deal to purchase the fund's

publicly traded assets.

>> Did Ken ever do anything to you?

>> No.

>> Like this?

>> No.

>> [laughter]

>> What? No.

>> You were just an intern.

>> I was an intern. I would I I would have

loved to be getting him coffee or

something.

>> to maybe intentionally send the markets

into turmoil just to test you?

>> No, but I mean, honestly, the story of

Citadel is is crazy. I mean, after the

the housing crisis, the fund was down

50% and it was a very very dark time.

There were building

>> Ken that at that time, Ken Griffin, what

he would become didn't exist. And

otherwise, he probably would have eaten

the young Ken Griffin alive.

>> [laughter]

>> Yeah, maybe. Maybe.

>> Much like it seems that Ken has done to

uh Leopold.

>> Yeah, maybe. Maybe. The other The other

frustrating thing is that they went down

50%. I think the next year they went up

50% and then

and they were, you know, this is the

classic, you know, explaining

fund math to people. Oh, you're back up

50%. Great. You're back to where you

were? Nope. You need to go back up 100%

if you're down 50%. Of course. Anyway,

the fund had built concentrated

positions in AI infrastructure companies

including Nebius, Sandisk, Micron, and

Coreweave, while also betting against

software companies such as Adobe. Those

trades have as unraveled as AI

infrastructure stocks plunged in recent

weeks before rebounding sharply today.

Now, how much of the plunge is around

shaken faith in AI's ability to deliver

value, open source, or just oil

inflation.

The Fed's actions, we'll get into all of

this because there's a lot of moving

different moving pieces that led us to

where we are today. So, also relevant

here is from the TBPN newsletter. You

can go sign up at tbpng.com. And what a

bunch of people are pointing out

actually is the fact that on Tuesday it

was reported that Citadel expected a

surprise rate hike from the Fed meeting

that took place yesterday. Which did

coincide with more sell-off in the

market. So, the market has been selling

off based on what might happen at the

Fed. We reported on the the Fed news.

There were three Fed governors that said

we should raise rates, but the rate held

steady, but mortgage rates are high are

at over a one-year high at 6.66%

today. Very odd number. But yesterday

the Fed left the rate unchanged, and

today many of the stocks in Leopold's

portfolio are up double digits, and

we'll sort of go through them. They're

up today based on the news that Ken

Griffin is buying the portfolio, but

they are still down over the last month,

for example, in many cases.

Ash Brennen, a former OpenAI researcher,

rose to prominence after publishing his

2024 essay series situational awareness,

the billion-dollar PDF, as Will Manidis

put it, I believe, which argued that

rapid AI progress would require an

enormous build-out of chips, memory,

power, and compute infrastructure. That

thesis became the foundation of his

investment strategy. After launching the

fund, he also engaged He is also engaged

to Anthropic CEO Dario Amodei's chief of

staff. The news is coming in hot and

fast on the story. Here's a timeline of

the most important headlines so far. So,

Bloomberg, 9:25 p.m. yesterday. I

remember I think you texted me this as I

was going to sleep.

We're like, "Whoa, this is big deal." I

wonder

how how crazy this will get over the

next few days. It got very crazy very

quickly. So, Bloomberg reported Leopold

Ash Brennen's situational awareness

seeks to raise capital after AI route.

There was an article in the Financial

Times as well last night just saying

that hey, there's some there's some

rumors that are leaking out from LPs

that they got a letter saying like, hey,

the market's down now's a good buying

opportunity. The thesis is as strong as

ever. If there was ever a time to put

more money into this fund, now's the

time. That can be good. You want to be

buying when things buy low, sell high,

right? But at the same time, if it if

it's to cover margin calls, it's if it's

because the fund's getting beat up, it's

a little bit rougher of a pitch. Then at

6:05 a.m. CNBC announces that AI

investor Leopold Auerbach has been

forced to unwind all public stock

positions after steep losses according

to CNBC sources. And then the Wall

Street Journal reports at 8:39 a.m. that

Citadel has stepped in to buy

Situational Awareness's stock portfolio

after big losses in AI. And so

>> After living through FTX and SVB

and now this on the timeline.

Uh no.

>> You're just grizzled.

>> No, the the my key the key takeaway is

like when leverage is involved

>> Mhm.

>> things just move so so so fast, right?

You remember with FTX

>> Yep.

>> just kind of some rumblings

>> Yep.

>> a couple couple posts from SBF saying

like, we're fine, it's all good, and

then it was over.

>> And it is

>> And then the same thing with SVB, like

couple rumblings, maybe like a

couple weeks a week beforehand, few

posts here and there, and then it just

moved so so fast, right? Yeah, quite a

bit different than traditional venture

world where when a company's dying, it

dies over

two, three years, often sometimes more.

>> Yeah. Yeah. Yeah. Yeah.

I'm thinking of like I mean we've had

some of these companies on from the

private markets where they've gone

through big booms and busts like Bird

and then they built back and they've

turned around, but there's so much more

No, I don't know. Lime turned around,

but but but it took like an extra five

years for Bird to actually wind down,

and it's because there's no leverage in

the system. There's just a bunch of

dollars that sit there as equity, and

those get burned down, but every every

month if the business is deteriorating,

you're cutting costs, shrinking the

business, tightening things up, making

that 12 to 18 months last 24 months, and

then you wind and then you wind up, you

know, 24 months in and you're like, "Oh,

we're not going to be able to raise

again. Let's stretch this again." And

and right-size the business again. And

all of a sudden, it's so it takes like

years and years for these things to

unwind. Although they are correlated in

the venture world, they can be

decorrelated in the unwinding process,

and then there can be other things that

are outweighing the portfolio. So, every

VC that had Bird on their books probably

also had some SpaceX on their books or

something. And so, there's this

balancing effect, and it takes it takes

years for these things to balance out,

and they can be unwound at different

periods in the market as opposed to

everything needing to happen all at

once. So, I like this post from Richard

Craib,

one of my favorite investors. He runs

the quant hedge fund Numerai, and he

says, "I think it's cool that funds like

Situational Awareness can exist in

America, and that there's a market for

them, but the outcome was never about

being right or wrong on AI. At 150% vol,

variance drag alone is 113%

a year, and risk of ruin is roughly a

coin flip over the fund's life. A child

can do the math on a napkin. Claude did

it for him. AI says ruin wasn't

unlikely, it was roughly even money. So,

there's a 50/50% chance 50% chance that

that the fund sees you know, so many

losses that they have to that they have

to do this liquidation process. And

that's basically what happened. And it's

it must be so frustrating because this

is not really does not feel like, "Oh,

Leopold was wrong about AI and the AI

bailout." It's like, "Well, there's oil

and a war and interest rates and all

these other things going on that are

creating some jitters." And then also,

once the AI trade and the the

trade got so big, you wind up with like

this retail froth on top that makes

things even crazier. And then

>> All that he was benefiting from.

>> Benefiting from, but also it's much

harder to do sort of a first principles

analysis on what the psychology of a

frothy market will do as opposed to just

retreating to, "Okay, well, there's this

the model progress is progressing like

this and and token pricing is is is you

know, counting the ooms." Stop sort of

working when it's like, "Well, will this

particular stock become a meme stock,

right?"

>> Pull up this picture. There was a lot of

this going on

this morning.

>> But the memes are flying. This is truly

like

>> This was This was my This was my

the the first meme that popped into my

head of people saying

Oh, I don't know why the guy's head's

cut off. Are you guys okay? [laughter]

>> This was you.

>> No, this was this was just a lot of

people on the timeline being like, "I

knew he would blow up."

>> [laughter]

>> Yeah, yeah, yeah, yeah.

The armchair experts are out in full

force today and

in many ways we are among them.

>> So, I like to think about it like at

least some of the more high-profile LPs

>> Yeah.

>> that

in in situational awareness

>> a lot of them are like, you know, great

founders. You know, they you know, maybe

they have big big positions in in the

labs and all these different things and

it's quite possible that situational

awareness, at least when they invested,

was like 5% of their portfolio and

they're just thinking like

>> go giga long. Like go

>> Yeah, yeah.

>> of these people it might be like

>> one less than 1%, right? Whatever it is.

>> Have you ever

>> it's it's actually somewhat pragmatic

for them to just be like, "Yeah, go

crazy. Do whatever you want."

>> Yeah, that's the product.

>> That's the product. That's what I want

to buy. The rest of my portfolios fine.

You're going to have a a lot of AI

exposure whether you like it or not. But

yeah, it it's it it is actually crazy

that it didn't even take a three-month

drawdown, right?

>> Yeah.

>> Uh it was What was it? June June 1st,

they were at a 45 billion of AUM,

something like that was was the net.

>> end of June.

>> And end of June, so beginning of July.

And then how quickly how quickly things

can change and uh you know, poor poor

Leopold already went through this with

FTX.

I believe he uh he and the rest of the

the future FTX Future Fund team, I

believe resigned like right when

>> Oh, FTX collapsed. What's interesting is

people are people are uh framing this as

like they got pennies on the dollar or

or Ken Griffin bought the portfolio for

pennies on the dollar. And when I think

pennies on the dollar, I think like five

pennies per dollar, so like 5% recovery.

But it might be closer to like 50% of

book value. It might be 80% of book

value. I don't know. Uh there's news in

Ferrari world that the Ferrari EV, the

Luce, designed by Jony Ive, has already

hit the 2026 sales target. The haters

are in shambles. Everyone doubted that

this would sell, and the Italian car

maker reports strong demand from China

for electric model, derided for its

unconventional design.

Uh there's a whole bunch of interesting

tidbits in here uh in the Financial

Times article. Uh Ferrari has hit this

year's sales target for its first

electric vehicle on the back of strong

demand from China despite a polarizing

design that drew backlash from investors

and enthusiasts. Remember, even the

former CEO, former chief design officer,

former executive came out and said this

is not a Ferrari. There was a lot of uh

back and forth in the timeline. I could

have designed a better one with uh

ChatGPT. A lot of people threw out

different designs, uh but this one is

selling, at least according to the

Financial Times. The Italian group has

not disclosed the target for the Luce,

but two people with knowledge of the

matter said it had aimed to sell this

year just under 500 units of the EV. Not

a but their goal for by 2030 over the

next four years is to get to 2,500

units. So, 500 a year for four or five

years. That's where they want to get

here, and they say they're on track. And

so, this is priced at 550,000 euros,

650,000 USD, something like that.

One of the two people said the target

had been reached earlier in July, just

two months after its controversial

launch when critics on social media

derided its unconventional styling.

There's also an interesting line in here

that Ferrari says they gave strict

instructions to dealers not to force its

traditional petrol-loving collectors to

switch to electric cars. Said, "If you

want a Luce, we'll give you a Luce, but

we're not going to make you buy a Luce

in order to get in line for an SP3, SP4,

some special F80 thing that's more

limited. Just if you want it, it's here.

It's a choice." And a lot of people have

made [snorts] that choice according to

these insiders. What do you think? Give

me the pushback, and then we'll debate

it.

>> I was pausing because I wanted to start

with something nice.

Uh I think

So, the videos that I've seen of it on

the road,

it does look even more strange than in

the images. I'll say

>> Wait, what [laughter] is this photo?

>> That's not

What is that?

>> The team just

>> wrong

>> just accidentally put in some random

car.

>> Uh okay. So, so the car the car is

strange. I love the interior, but the

car overall is strange. It's still

unclear to me who it's really for, but

they are finding buyers. The idea that

that

buying the Luce like

Ferrari is saying, "We're not forcing

any dealer to push this car" or

whatever, but the idea that it's not

going to have some whether or not you

bought a Luce is going to have some

weight on your future allocations to me

is just insane. There's just no way that

that's true because every single dealer

is going to look at their client list,

they're going to look what cars have

they purchased. Like, we know multiple

Ferrari collectors that are buying two

separate cars that they don't even want

of the same style in order to gain

status within the dealership and show

that they're a proper proper collector

and and they're properly sort of

cherishing the brand.

>> Yeah.

>> And so, I'm not at all surprised that

they've sold 500-ish units. That's about

as many

>> Mhm.

>> uh as I would have expected for 2026. I

actually I guess if you asked me I maybe

would have thought they would have done

more. Like, to me this was a car that

was so different than the rest of their

cars. It serves a wildly different use

case. I would have expected their sales

targets to be quite a bit higher simply

because when it comes to their really

special cars, they make about 500 of

them.

>> Yep.

>> And so, I would have expected at least

500 sales guaranteed and then you would

hope there was a bunch of incremental

buyers, people that are like, "Yeah, I

actually don't want a Ferrari sports

car, but I do want a daily and why not

go for a Ferrari daily, right?" So, you

would have thought that there would have

been like

500 for the first year was like my very

base case

and I would have expected a bunch more

on top of that. So, I think they're

positioning this as a win. I think

people are going to love the car if you

ignore the price, but I don't think it's

the win that

>> The Pope

in the blue jacket looks good.

Okay, three points in response to yours

two. First point, the design's

absolutely growing on me. Like, watching

these videos here, it just looks way

better than when we first saw the the

first pictures and I don't know if it's

just distance and I'm becoming more

familiarized with it, but it looks a lot

better. Even the exterior. I've always

agreed on the interior. I think everyone

agrees on that, but the exterior is

looking better to me somehow. I don't

know if this is just like I'm getting

used to it.

Two,

yes, there are there are the 4D chess

Ferrari collectors who are saying, "I

know I'm not getting pressured, but I'm

buying one anyway because I think it'll

help me jump the line and I'm doing that

independently of any pressure that's

coming. Uh but there's also just

collectors that are like, this is going

to be a piece of Ferrari history

regardless of if they What if they never

make another EV again? What if the What

if the Purosangue is canceled next year

and Ferrari literally for 30 years never

makes an EV? This thing is it's

important historically. It's an

interesting thing to have in your

collection. And then there's also just

people that are like, I want I I'm a

true collector. I want every possible

Ferrari experience. Give me the SUV cuz

I want to see what that's like. Give me

the

uh the the mid-engine. Give me the front

engine. Give me the the the the

electric. Give me everything. Give me a

vintage. Give me a new one. Give me a

a road car. Give me a track car. Give me

I want I want a Ferrari F1 car. I want

all of the experiences because I just

want to experience everything Ferrari

cuz I'm that deep with the brand. And

then lastly, the question of, you know,

what was their goal? I don't see this as

their Urus. I don't see this as they

were trying to make a mass-market daily.

I think that they were trying to make a

very iconic, very iconoclastic, very uh

contrarian car that was bold and weird

and different and it happened to be

daily-able. And the fact that it is

daily-able is what is weird about it.

Like they're not known The brand is not

known for being able to be daily-ed and

yet they made one and that makes it

weirder. And and I don't think that they

were going after their This is something

that will be like a Lamborghini Urus,

which they can sell in mass volume and

completely change the profile of their

of their sales curve.

>> My view is that they I think those are

all great points. My view is that I

don't think they should have done a car

like this because I do think it hurts

the brand unless it was going to drive

so many sales that it could make the

rest of the cars that they make better,

right? Like what the Cayenne did for

Porsche, and what the Urus does for

Lamborghini.

>> I have one last post I want to go

through. Jordy, have you seen

Spider-Man: No Way Home?

>> Absolutely

no. Absolutely not. Should I?

>> I think I have.

>> into movies now. I saw The Odyssey, and

I appreciate film.

>> You're a film buff now. You're film

snob.

>> you whatever Yeah.

>> Honestly.

Uh no. Uh there was a question on the

timeline from Rob Felt rewatching He was

rewatching Spider-Man: No Way Home to

prep for Brand New Day, the new

Spider-Man movie. In Spider-Man: No Way

Home

the movie, uh the prequel to Brand New

Day, I think uh

uh Homecoming is in in this in this

series, right? There's a whole series of

new the latest round of Spider-Man with

Tom Holland, right? Is that it? Uh

Daily Bugle web show scene pops up, and

all I can think about now is a question.

Is the TBPN aesthetic inspired by J.

Jonah Jameson's web show? And if you

look at it, it does sort of look like

our show. And so it's a good question.

Did we see this film? Did Jordy, who is

the brand architect of the TBPN

aesthetic, watch Spider-Man: No Way Home

and say, "Ah, I like that color. I like

that design. Let's bring that into our

studio." And the answer?

No.

>> No.

>> No. Lots of other influences, but this

was actually not one of them. I I

believe I have seen this I like Yeah, we

like the color green. I remember Jordy

one morning uh we were working out, and

he's like, "We should do green." And I'm

like, "Okay, yeah, that sounds good. I

like green." And he's like, "No one's

done green."

And I'm like, "That's not true. Like

Robin Hood is green. There's plenty."

He's like, "No one in tech No one in

tech has ever used green before."

>> green.

>> I'm like,

"Uh it is a white space in the sense

that like yeah, I couldn't think of

another podcast with the green dark

green background." Uh and we And we did

find our own space. Uh We We We looked

at Pinterest a lot for different

references, some photos, some catalogs,

Ralph Lauren.

>> look at Pinterest.

>> What What What What What What images

were you pulling from? Cuz I know you

had some references. I mean, obviously

F1, but you just use your brain?

Just your brain? You don't let much go

in there, but [laughter]

>> Certainly not movies.

>> Certainly not movies.

Sign up for our newsletter at tbpn.com

and we will see you tomorrow. Goodbye.