The Wrap – Pickpockets, Grift, Greed and... Larry Ellison
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Mix-’n-match…
▶ICYMI. If you missed my take on the Pickpocket Economy a.k.a. the Golden Age of Grift, you can read it here…
▶Leopold, who? Truth be told, and I proudly admit: Distracted by a bunch of other crazy stuff, I missed the whole Leopold Aschenbrenner phenomenon. My first exposure was a few weeks ago when I wondered if a long/short friend had done any work on Hut 8 HUT 0.00%↑, a stock I had started to look at. His response..
I have not spent much time on HUT. It’s in the Leopold, Situational Awareness portfolio.
The implication was that he had better things to do than spend time fighting the Leopold crowd.
I was like: Leopold, who?
By now, if you’re like me, you now know the founder of the hedge fund Situational Awareness is likely to be another asterisk in the history of this period. In this case – a from-out-of-nowhere 24-year-old bull-market genius who became a stock market/media hero-to-zero sensation. And who, as of this week, faced margin calls upon margin calls, forcing him to sell his public positions… the same ones retail investors followed him into. The only thing keeping the market from imploding was a bailout by Citadel, which bought most of Aschenbrenner’s publicly traded holdings after his portfolio tumbled 67% in July.
The whole episode prompted one friend to muse…
With regard to Lack of Situational Awareness, one point that has not been made yet is the moronic investors there. If you put all your money on one number at the roulette table, if it hits, you take your winnings and run away from the casino as fast as you can.
It sounds like almost none of the morons in the fund did that.
You would think the fund’s performance would have set off some alarm bells for anyone with a brain about the amount of risk that was being taken.
But I guess it didn’t.
Why? Because apparently, a lot of the capital in the fund came from Silicon Valley VC types who were all drinking the same Kool-Aid, and also have zero concept of risk.
Better lucky than good, I guess. A lot of dummies have made a lot of money in recent times. This is what a lack of price discovery and too much money in the economy can do. But as they say, he who is closest to the monetary spigot drinks the most, until they don’t, I guess.
To which another friend responded…
In his 1929 book, Sorkin points out that many, if not most, investors/speculators knew the market was overvalued, but they thought that they would be smarter than others and get out before the crash. I have a couple of high-net-worth friends who are quite bearish on the market long-term but are convinced they will know when to exit, and they are currently quite long the market.
Just as supposedly the smartest of the smart convinced themselves with SPACs, thinking they’d pass that empty bag onto someone else, only to get bagged themselves.
▶Speaking of bagged... Now that reality has set in, especially with the latest AI rout, South Korea is pondering reinstituting a ban on short-selling that was originally lifted in March of last year. I mean, who woulda thunk?
As I wrote last September, in the continuing saga of the South Korean Kapers…
As we now know, it did not mark the tippy top. Nowhere near.
▶Speaking of tippy top… This essay headlined, “House of Ellisons on the Brink,” via Notes from the Circus – published earlier this week – is making the rounds. In it, I was drawn to this…
Where does an eighty-one-year-old get $40 billion in cash? He doesn’t have it. Forbes went through the estate: less than $10 billion in cash, only about $4.7 billion of Oracle stock sold this century, and a family trust whose asset is 1.16 billion Oracle shares. The guarantee is Oracle paper. Before the Warner bid, 346 million of his shares were already pledged as collateral for personal ventures — about 30 percent of his stake — and those pledged shares have lost roughly half their value since. Alongside the family money: $24 billion from the sovereign wealth funds of Saudi Arabia, Abu Dhabi, and Qatar, which would hold 38.5 percent of the combined company in non-voting shares. The DOJ approved the deal in June with zero conditions. The sitting president had already said out loud that he wanted CNN in the Ellisons’ hands.
The collateral chain runs in one direction. An AI circuit inflates Oracle equity. The equity backs a personal guarantee.
Then came an exhaustive deeper dive a few days later by the New York Times into Ellison, headlined, “Larry Ellison Bet It All on the A.I. Boom. Will He Be the Face of the A.I. Bubble?”
It’s impossible to say, but what we do know: Ellison has historically had a way of getting himself and his company out of jams, often via buybacks or acquisitions. Then again, as I wrote in my report from last December, headlined, “How Oracle’s Larry Ellison Finances His Lavish Lifestyle”…
For Ellison’s sake, he had better hope his luck hasn’t run out, by having gotten caught up in the moment when everything in his world appeared to be firing on every cylinder – and then some. (He is, after all, human… as vulnerable to the same delusional dopamine and endorphin rushes as the rest of us.)
Just ask Leopold, his followers and his fund’s investors, who learned that lesson the hard way. But, hey, on the bright side: For the non-pros who hitched themselves to Leopold, the best way to learn how to invest and discover your true risk tolerance – and how not to confuse brains with a bull market – is to make mistakes. My risk tolerance, not surprisingly, is very low.
Moving on…
▶GFL shell game continues – rumor, rumor, whosa gotta rumor?… With news reports last week that GFL Environmental GFL 0.00%↑ had six bidders interested in doing something with the company, a friend messaged…