Leopold Stays in the Game, Big Tech Earnings, OpenAI Slashes GPT-5.6 Prices | Diet TBPN

**John Coogan** (0:01)
We have a guest co-host today. Introduce yourself for those who don't know.

**Tyler** (0:04)
Jordi's out again, I'm back.

**John Coogan** (0:06)
Yeah, we got Tyler in the Ultradome, in the hot seat. You're back, you know who else is back. Leopold Oshenbrenner's back. He says, you're gonna have to drag me out of SALP, out of situational awareness LP, because he's down but not out. Little beat up, but he shared a letter that's making the rounds, thanks to some intrepid reporters on the TBPN team that posted this.
He sent an LP letter that clarifies a lot of the questions. Yesterday, I mean, even internally, we were going back and forth on like, okay, he sold a bunch of the portfolio to Ken Griffin to Citadel. Does this count as a liquidation? Does this count as blowing up? And these are like sort of vague terms, like what does it mean to blow up? There was definitely a drawdown. The fund definitely was underperforming that month. But what does it mean? Is the fund gone forever? Is he going to work at McDonald's as some people were trying to make it seem like it was happening? Obviously that's not gonna happen. He can have a long career. Lots of people are rooting for him. I'm certainly rooting for him. There are some facts in this letter that we should read through. So he writes, this is Leopold Oshenbrenner to the LPs of Situational Awareness LP. We let you down this month. We came closer to permanent capital impairment than is acceptable to us. While we ultimately found a solution that protected the fund and you as investors, that was the sale of the public equity book to Citadel. There was some other structure going on to get liquidity.
He said, we ultimately found a solution that protected the fund and you as investors. Our intention in running the fund is to never find ourselves in such a position in the first place. Volatility is the price of long-term investment returns. Over the past two years, we have delivered outstanding results. That's 100% true. It was up what, 1000% at one point or something like that?

**Tyler** (1:48)
Yeah, something like that. I mean, it got up to what, 45 is the number.

**John Coogan** (1:51)
Yeah, 45 billion AUM from an original raise less than two years ago, I believe, up $250 million, which seemed crazy at the time. People were like, he's a young, he's a young first-time hedge fund manager. He's got $250 million. That's crazy. Then pretty soon it was like, oh, he's got a couple billion. That's crazy. Then it was like, he's got tens of billions. Then he's got half a centi billion.
So he says, over the past two years, we have delivered outstanding results, despite occasional sharp pullbacks. Probably not the first time. There's been other pullbacks in the market, and those have probably been amplified, but never gotten to this level of actually distressing the fund in this way. He said, but our fund must always be structured such that we can take a loss and fight another day. That's a recurring theme in this. The writing in this letter is really good. Very clear, very direct, not being dodgy, very upfront.

**Tyler** (2:45)
I love the way it's written. Almost like there's the PG advice to write very clearly. I think it was very kind of in that line.

**John Coogan** (2:52)
There's a lot of that in here. So he says, I will make it my mission to ensure that we learn the necessary lessons from this experience. Here's where things stand. One, the portfolio experienced a significant drawdown over the course of July, which was exacerbated by extreme moves in core positions over the past week. Many AI names drew down by half or more while our positive long short spread reversed violently.
While we could say much more about how unusual the month was, we hold ourselves to a higher standard, irrespective of market conditions. Two, as these moves proceeded, we started to see increasingly adverse trading in names publicly associated with us. So this is the rumor that Martin Screlli was talking about yesterday, this idea that there's blood in the water.

**Tyler** (3:36)
Yeah, you can kind of sniff out if someone's hurting and then you kind of have them go in. Exactly.

**John Coogan** (3:40)
And then short sell those positions, sell those names, put some pressure on those downward pressure to actually intentionally hurt that fund. It's a knockout, drag out fight there on Wall Street, clearly.
But that's the game you're playing.
That's why you get paid the big bucks, if you can pull it off. So these dynamics are essentially similar to a bank run.