My two cents on "Situational Awareness"- I'm sure Leopold was a smart fellow. I'm optimistic he will find something worthwhile to do to contribute towards society. And while I see a lot of grave dancing, he is yet a young man who deserves second chances. However, there is one thing I will stand by with stubborn conviction and you can hold me to: and that is my belief that he should never manage institutional client capital ever again. Listen to the below exchange, and watch his demeanor as Dwarkesh asks about how to avoid blowing up as so many hedge funds get either the the timing wrong, or approach with too much theory mindset. After a series of hurried affirmations, he starts by responding: "Yeah, I mean look obviously, you can't ... you know, not blowing up is sort of like task number one and two, or whatever" For any trained stewards of client capital, this is the ONLY phrase you need to have heard to realize everything you need to know from this two hour interview. You don't need to know his IQ, his pedigree, his experience. You know the only thing that matters. He doesn't care about the golden rule of money management. He is going to blow up. As an RIA with fiduciary duty and standard of care, not blowing is, in fact, task number one. It is the only task. There is no other task, and it is definitely not a "whatever." There simply remains no ambiguity in the human mind as to what the job is. Now, listen to his answer one more time. There is something else here you probably missed the first time. He starts by saying "Yeah I mean look obviously you cant..." and then stops and pivots. Take a moment to think about what you think he was going to finish this sentence with if he didn't just realize that he probably should not finish that thought? Finish his sentence, I dare you. And now you know why it was obvious that he was going to blow up. One more thing- I debated whether I wanted to post this or not. It's always really painful for me as a PM to watch others blow up in the industry, because I know how much client capital has been damaged (and other collateral damages in the service providers). However, recently there has been a trend of internet personalities who celebrate these kinds of misadventures by justifying risk taking. We must stop celebrating this culture of charlatans. There are so many public figures that I see online, who simply have no business of managing client capital, vying for attention where they play the very same game. In fact, the people who often come out defending Leopold are more likely that charlatan than not. Because anyone who understands the solemn gravity and incredible privilege of managing client capital knows that what Leopold just said in this video is so horrific to the professional investment management industry. Allocators must be more mindful of who they choose to build trust with. The best allocators know that belief and trust are not the same asset. So good luck Leopold! I genuinely believe you are a smart, capable, and well-intentioned person-and excited to see what you will do next. We've never lived in a more exciting period in society to affect incredible change and contribution. Refocusing your energy towards what you are actually really good at and deeply care about, is the highest form of effective altruism you can do for others. In fact, it's probably the highest form of situational awareness there is.

Big news today that CME launched single stock futures - these will trade 23hrs/day, weekends, cash-settled leverage, on the 55 most liquid equities names in the US market! But this is actually not the first time CME has tried to do this. In fact, they made a huge effort in 2002- and failed fantastically. It's worth studying what happened, what's different now, and what this means for the frontier of finance. Time for a side quest- That story starts with the Commodity Futures Modernization Act of 2000. This was the ugly byproduct of a 20yr reg turf war between the SEC and CFTC (sound familiar guys?), in which margin rules/short sales/reporting requirements were so complicated that even after approval broker dealer compliance framworks had no idea how to handle it. Most people don't remember this brief glitch in history because this was in fact just a big sideshow for what was actually the bigger/$$$ gamble of a darker legacy - exempting OTC derivatives from regulation altogether; this would in turn allow the CDS market to expand without oversight, and we all know what happened after that... But perhaps more practically speaking in fairness to the regulators, the more obvious reason why SS futures failed at the time was probably that there was just no genuine economic advantage over existing tools- because you can in fact get most of the leverage via listed options! Maybe you got slightly better capital efficiency for directional bets, but it wasn't good enough to otherwise offset the biggest reasons why most financial products fail: fragmented liquidity. So why are they attempting to do this again? There are many factors you can point to, but the single biggest difference now is that the retail market structure has changed enormously. American retail is more comfortable with leverage than ever in history, zero commission trading has brought in surplus liquidity beyond wildest dreams, levered ETFs and 0DTE options cant grow fast enough, and crypto perps have demonstrated that there is a ton of appetite for this kind of risk that simply just didn't exist before 2008. If you look at what the CME has been doing, the "retailification of leverage" has been happening for a long time already, starting with micro bitcoin futures called "BFFs" (Bitcoin Friday Futures lol) and the cringy Gen Z social ad that followed for those that are still scarred from seeing it. It's why CME launched for SS futures standard contracts (100 shares) but also micro contracts (10 shares). Honestly - who needs 10 shares futures contracts? The other reason, and probably more critically important, is to pursue a defensive posture. The CME doesn't compete in a vacuum anymore - with exchanges like Coinbase, Robinhood (+ a JVs between Susquehanna for predictions market), Hyperliquid all going after the same retail customer, the race to become the "everything brokerage" is just as much about distribution as much as it is about product design. And we know distribution is everything in finance because the beauty of Reg T + futures based margining is at its most competitive with scale and diversity, for the physics of money operates like a gravitational field: the larger the mass, the stronger its pull. So what does this mean for you? The single stock futures is not the product. You are the product. YOU are the yield. You are the currency that feed these HFTs, market makers, "big finance" just like you were the data currency for social networks, marketers, "big tech." Your intent to trade, the order book you create as makers, the tape you paint as takers, your inability to discriminate for best price when there are tens of seemingly fungible but slightly variant risks being offered, is their profit. And while it may all sound really dire when I frame it like this, but there is actually a way to win. And it goes back to the first principle of why the single stock futures failed to gain traction back in 2002. You must trade OPTIONS. Of course none of this is actual investment advice and you must always do your own research. But as I've written many times before on X already, options are the best tools retail investors have to protect against big finance. That's because options have the greatest asymmetric leverage embedded in the physics of its product that allow great convexity with great duration. When CME's Duffy says "perps are bad products for retail" he is not necessarily wrong- perps have the potential to be the most dangerous products for retail because they have no assurance or guarantee to control their own outcomes, especially given retail is so small- institutions can liquidate you (or each other, and you're just an ant caught in a stampede of bulls) where you have no agency. The reality is that the commodities futures market since the beginning of time has been found useful because it combines speculators WITH natural hedgers. And there is no natural hedger on earth who would take perps risk to hedge their long term business. Duration is an asset. Duration deserves a premium. Term structure exists because there is in fact a market for time. And when you own an option, it means you have the choice, but never the obligation, to meet time where and when you demand it. As I write this, I'm reminded that history has a peculiar sense of humor, delighting in the ironies of fate. The same bill that allowed then failed single stock futures market in 2000 is the same bill that gave us the reg vacuum for the CDS market that basically is the single biggest proximate legal cause of the 2008 financial crisis. And twenty years later yet again now as we head into CLARITY posturing for the next two weeks, on another epic settlement for a CFTC vs SEC battle, there are public debates occurring on various salient features that the crypto industry cares about. But you would all be wise to take note that if the past precedence holds again, the most consequential thing that will happen will actually be interpreted as a footnote, just like the "the Enron loophole" (aka. the OTC swap exemption) and it WILL involve offshore derivatives just as it did last time. And that footnote is what is going to let crypto industry expand again, bigger, stronger and faster. Because that is the other physics of money beyond a gravitational field: the harder you try to confine capital, the faster it leaks across borders.

This headline is actually hilarious because Warsh resigned from “Helicopter Ben” Bernanke’s board in 2011, the chairman who is now serving as advisor to… you guessed it, Citadel This is Bravo TV for bond nerds and I’m here for it

Most of y’all aren’t paying attention to the fact that the CME just launched single stock futures trading today. We’re talking 55 standard single-stock futures and 22 micro single stock futures covering more than 50 of the largest U.S. stocks including Apple, Microsoft, Nvidia, Amazon, Tesla, Meta, Broadcom, Micron, Coinbase, and SpaceX. They’re cash-settled. No physical delivery. Simpler than options and more precise than index futures. They allow much easier shorting than traditional stocks and easier hedging of individual stock positions. Those of you who have been around legacy markets for a while may remember when they attempted this previously. It never hit critical mass, at the time, before closing, but now there are multiple things converging that may see it do so including retail participation in markets being much greater this time around, much more sophisticated algo trading, better clearing infrastructure, lower capital requirement due to micro contracts, and what may end up being most important which is the demand for 24h trading and tokenization to allow for more flexible equity exposure. The next 12-24 months is likely to decide whether this lives or dies. We need to see liquidity ramp up in this over that time period. And if it does, we are likely to see options on these single stock futures follow. Beyond that we are likely to see cross-margining with equity index futures and more sophisticated portfolio margin treatment. We would see them expanding single stock futures beyond this initial group. And then, eventually, we would see tokenized securities interacting more with traditional futures within regulated infrastructure, bringing us closer to a 24h capital market that trades across multiple instruments. As @AP_Abacus reminded everyone last week on Beards and Bitcoin, we used to say the stock market is not the economy. Today, however, that’s becoming much less true as Wall Street has moved from observing to allocating, and so markets have begun to increasingly shape the economy. Finance has moved from downstream to upstream: from economy -> market to, nowadays, market -> economy -> market. And the wealth effects make this feedback loop even stronger. AI in the loop now can accelerate it dramatically more creating a positive feedback system. Instead of asking which companies will benefit from economic growth, as investors have done for most of the 20th century, we probably now need to start asking which companies control the bottlenecks that determine WHERE capital flows? This idea of bottlenecks is something I’ve been focusing on mentioning quite a bit with energy and AI over the past two years, but it is especially important in terms of capital markets overall as well. As a result, portfolio construction will likely need to change. We’ve already been talking about the death of the 60/40 since the turn of the decade. And @dgt10011 has introduced his radical portfolio theory, which I think is a great start and he’s asking all the right questions. But what if we move even further from portfolio theory toward capital allocation theory which means we need to be asking where is capital itself flowing and, more importantly, who controls those flows? This post has already become much longer than intended. Should I continue to flesh it out more in an article? Is that something y’all would be interested in?

Carry Trade Frenzy: Why Bitcoin Will Outlast Wall Street’s Leverage Game Gather around guys, it's story time - When the Fed began raising interest rates in 2022, old-school boomers lamented, "Wall Street is doomed because there’s a generation of ~40-year-old MDs who’ve never managed risk in a high-rate environment." Well, guess what? Equities are now at an all-time high. So clearly, those concerns were misplaced. But there's a valuable lesson in this. After nearly a decade of the "Fed put," the world has become conditioned to view the global financial system as one giant carry trade. And I’m not just talking about just the FX implementation. Look at companies like Apple issuing cheap debt to buy back stock, private credit markets yielding better returns than public debt, and structured credits, like CLOs, ending up in ETF wrappers. The underlying theme is the same: liquidity flows from those that are low to those with high. Carry trades, by definition, involve leverage and are short volatility. In this context, the Fed put becomes more valuable as rates rise. Why? Because with rates further from the zero bound, there’s more room for the Fed to flex its muscles, using trial and error to manage policy. The higher the rate, the more powerful and frequent the Fed’s intervention can be. There’s an important insight from seasoned derivatives traders about how models can break under extreme conditions. Typically, increasing implied volatility on an out-of-the-money put makes its delta more negative, as the option becomes more likely to end up in the money. But when volatility reaches extremely high levels, something counterintuitive happens—the delta starts to turn positive. Why? Because the downside is capped at zero, but the upside is unbounded. This demonstrates how asymmetrical risk becomes when volatility soars—extreme moves to the right are more likely than extreme moves to the left. The Fed put operates in the same way: it’s inherently more powerful at 5.5% than at 0%. This fuels even more "carry trade" risk-taking, which partly explains why equities are at an all-time high. It’s a mistake to think the stock market reflects the health of the economy; in today’s world, the economy reflects the health of the market. That’s the result of financializing global liquidity to this degree. As a trader, I know that nothing short-vol lasts forever. One day, this will all unwind. What does this mean for crypto? Right now, equities and crypto seem correlated, with many claiming both are risk-on assets driven by global liquidity. That’s wrong. Equities are a risk-on asset within the carry trade, fueled by global liquidity; Bitcoin, however, isn’t part of anyone’s carry trade—yet. And for good reason. At its core, Bitcoin is the anti-carry trade asset. Its natural state at low volatility tends to creep lower like a theta decay, with the explosive ups and downs. It’s a long-vol asset, and low leverage (only 3% of its spot market is derivatives, compared to TradFi, where the derivatives market is 10x the size of the spot market). If you believe this, we’re on the verge of a pivotal divergence between equities and Bitcoin. For now, both can rise in tandem, but mark my words: the day will come when equities implode as collateral multipliers collapse. And when that reckoning arrives, Bitcoin will thrive—because its collateral is unshakable: it is itself. The old 60/40 portfolio split between equities and bonds is dead. The new paradigm should be long global carry and short global carry—because that's where the real battle for financial survival will be fought.

the enduring opportunity in asset mgmt will be crypto x tradfi global access to perps, binaries, 0dte options, tokenized interests for ALL of the worlds assets some ppl want securities on crypto rails some ppl want crypto on tradfi rails toll both sides alpha is in the seams

I don’t think Bitcoin is selling off because of MSTR I think it’s being tapped to fund the market’s upcoming hot ball of money trades: SpaceX, Anthropic, whatever else everyone suddenly “has to own” This means in the future, the correlation breakdown will itself become the fuel

Carry Trade Frenzy: Why Bitcoin Will Outlast Wall Street’s Leverage Game Gather around guys, it's story time - When the Fed began raising interest rates in 2022, old-school boomers lamented, "Wall Street is doomed because there’s a generation of ~40-year-old MDs who’ve never managed risk in a high-rate environment." Well, guess what? Equities are now at an all-time high. So clearly, those concerns were misplaced. But there's a valuable lesson in this. After nearly a decade of the "Fed put," the world has become conditioned to view the global financial system as one giant carry trade. And I’m not just talking about just the FX implementation. Look at companies like Apple issuing cheap debt to buy back stock, private credit markets yielding better returns than public debt, and structured credits, like CLOs, ending up in ETF wrappers. The underlying theme is the same: liquidity flows from those that are low to those with high. Carry trades, by definition, involve leverage and are short volatility. In this context, the Fed put becomes more valuable as rates rise. Why? Because with rates further from the zero bound, there’s more room for the Fed to flex its muscles, using trial and error to manage policy. The higher the rate, the more powerful and frequent the Fed’s intervention can be. There’s an important insight from seasoned derivatives traders about how models can break under extreme conditions. Typically, increasing implied volatility on an out-of-the-money put makes its delta more negative, as the option becomes more likely to end up in the money. But when volatility reaches extremely high levels, something counterintuitive happens—the delta starts to turn positive. Why? Because the downside is capped at zero, but the upside is unbounded. This demonstrates how asymmetrical risk becomes when volatility soars—extreme moves to the right are more likely than extreme moves to the left. The Fed put operates in the same way: it’s inherently more powerful at 5.5% than at 0%. This fuels even more "carry trade" risk-taking, which partly explains why equities are at an all-time high. It’s a mistake to think the stock market reflects the health of the economy; in today’s world, the economy reflects the health of the market. That’s the result of financializing global liquidity to this degree. As a trader, I know that nothing short-vol lasts forever. One day, this will all unwind. What does this mean for crypto? Right now, equities and crypto seem correlated, with many claiming both are risk-on assets driven by global liquidity. That’s wrong. Equities are a risk-on asset within the carry trade, fueled by global liquidity; Bitcoin, however, isn’t part of anyone’s carry trade—yet. And for good reason. At its core, Bitcoin is the anti-carry trade asset. Its natural state at low volatility tends to creep lower like a theta decay, with the explosive ups and downs. It’s a long-vol asset, and low leverage (only 3% of its spot market is derivatives, compared to TradFi, where the derivatives market is 10x the size of the spot market). If you believe this, we’re on the verge of a pivotal divergence between equities and Bitcoin. For now, both can rise in tandem, but mark my words: the day will come when equities implode as collateral multipliers collapse. And when that reckoning arrives, Bitcoin will thrive—because its collateral is unshakable: it is itself. The old 60/40 portfolio split between equities and bonds is dead. The new paradigm should be long global carry and short global carry—because that's where the real battle for financial survival will be fought.