The AI Unwind And Warsh's Long-End Gamble | Weekly Roundup

**Felix** (0:00)
Nothing said on Forward Guidance is a recommendation to buy or sell any investments or products.
All right, what's going on, everybody? Welcome back to another round up edition of Forward Guidance. Just to do it this week, Tyler is on summer dad duties on vacation right now. So we'll give him a break as the two guys without children. So, you know, sometimes you got to do that with Mr. Tyler. But yeah, what's going on, Quinn?

**Quinn** (0:31)
Not much, man. Another week flying by. Can't believe it's August already next week. So yeah, no shortage of excitement for a summer.
That's for sure.

**Felix** (0:43)
Yeah, I know. I was hoping for a chill summer, but it's like definitely not that. We'll get into it.
All right, before we get into it, dude, just want to do a quick shout out, quick show here about the Digital Asset Summit conference is coming up this fall. We're going to Asia for the first time. Singapore, one day affair, right around Token 2489 happening at the same time too. So the whole industry will be there. But yeah, get your tickets. That's going to be a great one. Got the Digital Asset Summit as well in London that we're doing once again in November as well. So keep an eye out for that. Tickets will be going up in a couple of weeks, I believe. So make sure you get in early because, yeah, as always, these things sell out pretty quickly and prices go up in time. So yeah, get ahead of yourself and get a ticket. It should be fun.

**Quinn** (1:29)
That'll be a good time, man.

**Felix** (1:31)
Should be good. Stoked.
Yeah, I've never been to Singapore, so it'll be cool to see that. I don't know. I don't know if I have you.

**Quinn** (1:38)
Yeah, I've been. It's a cool place for sure.
Yeah, it's a cool city.

**Felix** (1:45)
Nice, man.
All right. With that out of the way, why don't we get into things? So we're recording Thursday today, and I want to talk about the talk of the town, talk of the news right now around the Wonder Kid. Leopold Asperger, once again, Icarus flew a little too close to the sun.
Yeah, obviously, we've been talking about the AI trade on wind over the last few weeks here, and it's obviously starting to hit the big dog. Yeah, news started to come out that last night, I believe, he was looking to try to raise capital. Typically, if your main market that you're trading is in the downtrend and you're trying to raise capital, it's probably not for good reasons. So there's already hints of that coming down the pike. And then this morning came out with news that, yeah, basically, they had to basically sell off their whole public markets position. I think some of their private marks too, like Anthropic and everything. And first off, it came out that it was just a single buyer. And lo and behold, the legend himself, Ken Griffin, Kenny Griffin, Citadel came in and, yeah, bought the lows once again.
Man, I'm curious of your thoughts, like especially from the market practitioner aspect. If you see a main character develop, like suddenly everybody was tracking his 13 Fs and try to copy trade, and you have that, and then you have the washout and then the forced liquidation. Feels to me like that's a pretty meaningful signal, Alyse. I don't know if I'd say that we're going to be... Obviously, we saw the reversion higher as the big buyer slash seller was taken out of the market, and everybody coming back into the trade today, pretty big rotations back into long duration tech and everything. Yes, the low end, what do you think?

**Quinn** (3:34)
Well, the macro conditions, which we'll talk about the FAD and environment after this, but just as it pertains to this example, I think obviously you get a fat mean reversion. I had been writing starting Tuesday that the selling had started to get pretty, not necessarily disorderly, but high volume and pretty aggressive, and was covering things up a bit from the short side. And then yesterday, I was very surprised in the morning how heavy the tape still was, because you had rates lower a little bit. So for futures up, I specifically wrote, there's a lot of things about this that don't make sense, because you just had this idiosyncratic, huge selling inequities. And I just drew it up as FOMC panic. But the rates market wasn't panicking.
You had a couple of these big calls, one of them from Citadel, which suppose is unrelated to this, I guess, but saying rate hike could happen. And so I guess there was that vibe that some people thought to de-risk ahead of it. But yeah, man, it's, you know, we've talked on the show about how much of this, you know, the weeks and months ago, it was like, is it priced in, right? Like are these things trading at fair value? Is the AI trade, you know, fully appreciated by the market? And I would always, you know, we'd point to the fact that how much of the semiconductor asset class and sector was being driven by these 3X retail ETFs that were causing rebalancing of, you know, basically every day the SOX moved 4 to 7%. There was no 1% day because if there was, it would be a 3% day because the market was all levered ETFs. And so when you just take a step back and you're like, all right, that got flushed, right? The AUM is like cut by 2 thirds. You have Korea, the Korea degeneracy that obviously margin call. We all saw those stats last week.