The Situational Awareness situation. It is now being reported that the AI hedge fund has exited its entire public equity portfolio this month. But, what does this really mean? As of July 1st, the Net Asset Value (NAV) of the fund is now being reported to have been ~$45 billion. First, let's put this into perspective. NAV = (Assets − Liabilities). This is the fund's equity capital, also known as the investors' money after accounting for borrowings. This is NOT the same as the size of the fund's positions, particularly because the fund has been known for utilizing extreme amounts of leverage. For example: 1. At 2x leverage, a $45 billion NAV supports ~$90 billion of gross market exposure 2. At 3x leverage, that rises to ~$135 billion 3. At 4x leverage, that rises to ~ $180 billion This means that exiting its "public equity book" does not necessarily imply $45 billion of stock changed hands. It was likely much more. Depending on the fund's leverage and portfolio construction, the gross amount of securities unwound could have been well in excess of $100 billion. When considering these facts, the market has actually held up exceptionally well. There has never been an era of investing like the AI era. Volatility is the new normal.

Are @leopoldasch and Situational Awareness marking the AI bottom? Here's our take from the show:m“And while I don't know if Leopold has the size to literally bottom the AI market, I didn't really understand people saying that they were raising money out of some panic. It doesn't cost that much to run a fund. I don't think they needed to be funding operational costs or plugging holes.”