Situational Awareness down 67% in July in AI stock rout • Hacker News Board

Re: Situational Awareness down 67% in July in AI stock rout

#121

Post by cmiles8 » Fri, Jul 31, 2026, 4:56 PM UTC

scrlk wrote: post #31

> Aschenbrenner party blamed short sellers who targeted the firm’s positions for exacerbating the fund’s losses, the letter said. The letter compared Situational’s experience to a bank run. 4 years ago, it was SBF blaming Changpeng Zhao for shorting FTT and triggering a run on FTX. Now another EA has followed the path of making a lot of money relatively quickly and losing it just as fast, using the exact same argumen…

He had to liquidate everything that’s liquid and is left, seemingly, with some iffy-looking things that have paper returns but are broadly illiquid. Thats a disaster for a fund no matter how you slice it.

Re: Situational Awareness down 67% in July in AI stock rout

#122

Post by bad_haircut72 » Fri, Jul 31, 2026, 5:00 PM UTC

Ekaros wrote: post #117

vessenes wrote: post #28

Earlier quoted context omitted.

To be clear, I'm not claiming Citadel created double digit drops in SK Hynix / Samsung. I am saying that as market vol hits, vol traders might choose to make it worse. And when word hits the street someone has a liquidity position, prop traders WILL come and pressure. SA's filings were clear how concentrated they were, and this was known. In this case, Citadel (hedge fund) bought, while I imagine Citadel Securities w…

It really sounds like market manipulation... But oh well it is the biggest boys doing it so it can't be that illegal... Free markets and everything for them right?

Im not a trader but my understanding was that some traders at Citadel heard a rumor these guys were exposed, which gave Citadel an advantage because they knew they would have to liquidate? That doesnt sound like market manipulation to me, just trading with all the information you have

Re: Situational Awareness down 67% in July in AI stock rout

#123

Post by sudb » Fri, Jul 31, 2026, 5:12 PM UTC

I found a tweet purporting to show the letter that Leopold sent to his LPs - it looks pretty thoughtful and doesn't sound as bad as some news sources seem to be portraying.

https://x.com/tbpn/status/2083226453509030285

Re: Situational Awareness down 67% in July in AI stock rout

#124

Post by ElProlactin » Fri, Jul 31, 2026, 5:19 PM UTC

cmiles8 wrote: post #114

"Smart men go broke three ways - liquor, ladies and leverage."

And if you're really good, you do all three.

Re: Situational Awareness down 67% in July in AI stock rout

#125

Post by animal_spirits » Fri, Jul 31, 2026, 5:37 PM UTC

vessenes wrote: post #3

This is everywhere. For reference, former FTXer and OpenAIer raised $225m into a hedge fund structure, went long and short, and reportedly peaked at $40bn of value; leverage bit hard this week and they sold their entire-ish portfolio to Citadel at $10bn. (Which, I imagine was very likely aiming at this outcome in their trading in the last few weeks). Not reported anywhere -- was additional money raised in to the fund…

If you owe someone 10 thousand dollars that’s a big problem for you. If you owe someone 10 billion dollars that’s a big problem for them

Re: Situational Awareness down 67% in July in AI stock rout

#126

Post by mr_toad » Fri, Jul 31, 2026, 5:39 PM UTC

marcosdumay wrote: post #83

francisofascii wrote: post #41

Which AI stocks suffered a rout?

SPCX is getting lower and lower, MSFT is currently down 15% in an year, Oracle is close to 50% YoY...

It’s an odd kind of bubble that slowly deflates over the course of a year.

Re: Situational Awareness down 67% in July in AI stock rout

#127

Post by holtkam2 » Fri, Jul 31, 2026, 5:42 PM UTC

forgetfreeman wrote: post #106

cmiles8 wrote: post #68

An inexperienced portfolio manager that’s never seen a down tech market in his life has created a massively leveraged position on frothy assets in a bubble and the bubble is looking ill. What could possibly go wrong. Many of these AI plays are massively entangled and leveraged. It all looks good until it doesn’t and when there’s a hiccup things unravel quickly and exponentially. I fully expect in the next 12 months w…

I'd be excited for the show myself if I had any idea how to prevent my portfolio from tanking when this clusterfuck finally unravels.

That question is probably what inspired someone to create the first ever derivatives market

Re: Situational Awareness down 67% in July in AI stock rout

#128

Post by mikestew » Fri, Jul 31, 2026, 5:48 PM UTC

forgetfreeman wrote: post #106

cmiles8 wrote: post #68

An inexperienced portfolio manager that’s never seen a down tech market in his life has created a massively leveraged position on frothy assets in a bubble and the bubble is looking ill. What could possibly go wrong. Many of these AI plays are massively entangled and leveraged. It all looks good until it doesn’t and when there’s a hiccup things unravel quickly and exponentially. I fully expect in the next 12 months w…

I'd be excited for the show myself if I had any idea how to prevent my portfolio from tanking when this clusterfuck finally unravels.

Sibling comment says "diversify", and I tend to agree. I've seen some shit, man. 2000 dot bomb, 2008, bumps along the way. 2000, I was in tech stocks like everyone else, lost a bunch. 2008, learned my lesson and was much more diversified. Lost some money, but not nearly as much as others. It was amazing watching, say, the S&P crater while our portfolio..just didn't. It just went down a fair chunk, and came back later (and probably didn't come back as much as it did for those that held on to their equities).

Diversification is a smoothing function. You won't get as much upside holding 25-30% bonds, but your portfolio won't suffer as much on the downside. If you're young and not ready for boring old-people investments like bonds, at least limit your tech stock exposure. Go buy boring utilities or something, maybe Berkshire Hathaway B shares.

One other advantage to diversification that I hear very little about is this: if you have to sell in a down market, you can sell your bonds and hold on to your equities in the hopes they'll bounce back. Regardless, you're not held to selling depreciated assets like equities, you can sell the bonds which are boring, but probably actually went up while everything else turns to shit.

Re: Situational Awareness down 67% in July in AI stock rout

#129

Post by victorbjorklund » Fri, Jul 31, 2026, 5:59 PM UTC

andy_ppp wrote: post #120

tyre wrote: post #104

Earlier quoted context omitted.

You’re talking about the same fund. They were open about their gains. It was the margin calls and illiquidity that got them, not going negative. Some of their assets, like Anthropic stock, isn’t worthless, it’s just illiquid.

“isn’t worthless” is still to be decided IMO. Until you can sell it it defines worthless!

You can sell it on secondary market? I’m sure many investors are bound up but there are transactions there.

Re: Situational Awareness down 67% in July in AI stock rout

#130

Post by victorbjorklund » Fri, Jul 31, 2026, 6:01 PM UTC

Ekaros wrote: post #117

vessenes wrote: post #28

Earlier quoted context omitted.

To be clear, I'm not claiming Citadel created double digit drops in SK Hynix / Samsung. I am saying that as market vol hits, vol traders might choose to make it worse. And when word hits the street someone has a liquidity position, prop traders WILL come and pressure. SA's filings were clear how concentrated they were, and this was known. In this case, Citadel (hedge fund) bought, while I imagine Citadel Securities w…

It really sounds like market manipulation... But oh well it is the biggest boys doing it so it can't be that illegal... Free markets and everything for them right?

Short squeezing is legal. No need to protect short sellers from the market.