The AI Hedge Fund That Blew Up | The Situational Awareness Story

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0:43And there's actually some parallels to something similar that happened very much like this in 1998. So those of appropriate age listening will definitely know what firm I'm talking about. But for those who don't, stay tuned, because it's almost like history repeats itself at the center of this. It's us humans who seemingly are highly valuable to these types of opportunities and events. And then the other thing is, as a segue, this will lead us into the S &P 500. So with a bit of a clean out of these highly levered AI funds, the confidence returning and the S &P back to record highs. Not only that, we've got a steep decline in oil prices, blockbuster Q2 earnings, and obviously the relentless march higher and recovery of some of the big hyperscalers back in business.

1:41But Piers, you look like, if anyone's watching this on video you look like you're backstage at the Oscars ready to go out onto the onto the stage or something

1:53Piers Curran: my location will remain under wraps you've got some sort of new new anthropic release and they've put you in some little TARDIS to try things out is that what's happening it's my new booth my new set up you know okay let's carry on

2:16so let's start then with uh situational awareness and so yeah let's dive into this so who are they what happened then we'll go from there well yeah i mean obviously it's an easy

2:30Piers Curran: one to jump on from a sort of uh you know i the irony of the name of this hedge fund um it the name actually doesn't come well actually we'll talk about it but it wasn't a hedge fund to start with but situational awareness obviously the huge irony because the chronic lack of awareness of the situation um absolutely led to their downfall and demise or i should say his downfall and demise because it's really one individual um behind all of this but um basically this is a story of highly levered positions in an incredibly narrow set of companies. So a chronic lack of diversification and a monster leveraged position that kind of led to the downfall.

3:24Piers Curran: But this is a guy called Leopold Aschenbrenner, as you said. The backstory on him is very interesting A bit of a, you might say A little bit of a sort of childhood prodigy Born in Germany Went to university very young Graduated from Colombia Actually just at the age of 19 Did a BA in economics Anyway, more interestingly Wound up joining OpenAI In 2023 On their super alignment team whatever that means um and you know 2023 well i don't know when in 2023 i'm not sure the month but i was just we were just chatting before we came on air here it's amazing that yeah chat gpt was launched in the autumn of 2022 we're actually nearly four years in to this sort of ai revolution right it was chat gpt that dropped that really kick-started this whole thing i can't believe it's been four years already um anyway back in 23 you know open ai was was really the place to be if you're a young person um you know if you've got a lot of technical skills and so on then then in terms of super cool places to work on you know in silicon valley that was top of the list right um so you know his focus there was basically technical methods to steer and control super intelligent ai systems okay so that's that's 2023 23 april 24 he gets fired so less than a year i assume into his kind of role there and there's a little bit of uh there's two sides to every story of course um but open ai are saying it was over alleged information security leaks um ashen brenner obviously disputes that and says that um it was basically he was let go after sending a memo to open ai's board highlighting security vulnerabilities regarding potential foreign espionage so i mean that's a whole other story right i don't think we'll go into that now but look this guy obviously i think um i well i would say well maybe we'll talk we'll come on to things like greed and dare i say arrogance there's a real whiff of arrogance here and maybe ego but he as a super young lad gets fired thinks he's been harshly dealt with and kind of his response was to write an essay an open essay that he launched onto the into the internet space and it just kind of caught fire and became viral the essay was titled Situational Awareness.

6:15Piers Curran: And it was basically him setting out his thesis about what is this AI revolution, what's coming, and basically talking about how the current AI progress. And this is 2024. And you've got to say, this essay, I wasn't aware of it in 2024. I missed this. But I tell you what, he was right. Well, so far, there's still time to go. But he was talking about AI progress trajectories. He was saying it could lead to AGI, artificial general intelligence, by 2027. So that's the piece we're not quite sure whether he's right on yet or not. But his point was, if that were to happen, then automated AGI researchers could rapidly accelerate algorithmic progress, basically leading to superintelligence.

7:00Piers Curran: He was talking about, this is the bit he absolutely nailed, infrastructure bottlenecks. So in 2024, Before he was talking about specifically around power grids, semiconductors, data center buildouts, then other stuff around national security risks and so on. But he basically set up a hedge fund to back his thesis, this essay, Situational Awareness. And this is where the name of the hedge fund comes from. So he set up Situational Awareness LP. and basically because this essay went viral all of a sudden everyone's piling money in i mean this kid's 22 years old and by the way has trading experience of zero years zero months and zero days and yet he started to attract tens and actually hundreds of millions of dollars so i think just forget about this individual this is a great story also about the hype engine around ai and you could say you know those that think this is a bubble well this is an absolute classic story to support that thesis for sure but you know all of a sudden he's raised huge amounts of money and he starts piling it in to his the bets on his thesis and you know what it was perfect it was he was one of the best performing hedge funds like out there in fact by 2026 before his demise his fund was up 439 percent in two years um so that's the kind of backdrop to this story and it was going amazingly and and i think yeah here's my my words like greed probably start to come into play because the better it got the more right he thought he was the better he thought he was than the rest of the market and then he started to make some really stupid you know naive mistakes that stink of a complete lack of experience so he just started to lever up and lever up and lever up so let's just say what is that what does that actually mean so you know if you've got if you've got a hundred pounds right in your bank account and you're like okay i want to i want to place a bet i want to place a trade i want to i'm going to buy some invidia stock because i think invidia is going to go up my analysis says my invidia is going to go up 25 by the end of the year okay let's say that's what i think great i could take my 100 pounds i I could buy Nvidia stock.

9:43Piers Curran: And if I'm right, awesome. I make 25 % and I cash out at the end of the year and I've got£125. So I could do it like that. Or I could borrow money on top of the 100 cash I've got. I could borrow another 100. Or maybe I could borrow 200. Or maybe I could borrow 300. And then instead of having 100, I borrow three and I buy 400 pounds worth of NVIDIA stock. I've borrowed money there, so I've got some interest payments to make on that loan, but they're relatively small. And then at the end of the year, if I'm right, my 400 pounds turns into 500 pounds. I cash it all in and I've taken my 100 and I've doubled it.

10:32Piers Curran: minus some interest costs, right? So that's leverage where you've got a bet and you just lever it up to increase the exposure, ratchet up the exposure to try and obviously amplify your returns. Okay? Awesome when it's going well. And that's how you go to 439 % up in your fund in two years. In that scenario, though, I mean, everything you're saying makes sense. Let's say, though, he is a little bit more savvy than you think. And whilst on the top level, it looks very leathered and one-dimensional and naive. What if he's actually using some of the returns to fund private investments into funding rounds in Anthropic?

11:20And he's building up other non-disclosed holdings. because I understand that with this fire sale, which we could talk about, he's actually still got a lot of other private stuff that he's managed to hold on to. So it's not like financial media is like great to throw an egg on his face and say, what an idiot. Presumably he comes out of this way richer than he went in. So this is true. And so does all the early investors.

11:50Piers Curran: He made some good decisions and you're absolutely right to singularly pick out and throp it. because he did pile in and obviously it's hard with a private so you know what's the value of his anthropic holding well we don't know because it's a private company and there's no you know there's no way to mark to market the value of that business especially now as we've seen this you know big kind of ai pullback in the month of july you know what what is the value we don't know but people picking numbers out of thin air some people think it might be worth as much as 5 billion in which case fair deuce to this guy right it could be worth a lot less than that but I think it's going to be worth enough such that he's going to come out of this for sure you know a very rich individual it's just he might well have pissed off the majority of Wall Street you know as he's done it so is this like whenever there's like yeah I don't smoke without a fire is probably the wrong analogy because there's there's lots of other smokes going off and this one's just happened to blow up what does the do we have any visibility on the degree of which there are other you know mainstream people would have never heard of this guy or his fund so how many other of this guys and their funds are there from what we can tell well i think the events that happened back end of july would have flushed them out and this was the i don't know how many others there are there's probably others but they're a lot smaller that we just don't don't it's not even worth a headline or whatever right but what i can definitely tell you is his trading strategy was not unusual he might have been early on it and And he may well have been one of the kind of loudest cheerleaders for that strategy from an earlier stage back in 2024.

13:49Piers Curran: But come 2026, almost everyone's on that trade. So actually, Bank of America do an annual or actually, sorry, a monthly survey to their block of asset management clients. And 80 % of fund managers in that survey in June responded to that survey, basically saying that they named long global semiconductors. That's the most crowded trade. So everyone was in that trade, which actually in of itself is a problem if you're overexposed to it. So look, it comes back to this leverage thing, right? This is where he went wrong. Fine. He might be okay. What did he say? His quote was, I kind of, I live to fight another day.

14:35Piers Curran: I think his quote was as he kind of sheepishly walked out, having had his, yeah, his savior was Ken Griffin, which we'll talk about in a second. But it's his leverage, right? If you're like my example there, my simplistic example, I've got£100, I'm going to borrow£300, that's 3x or 4x leverage, right? The problem is, let's say you're 3x leverage and it's hard to know. Basically, he was between two and four, depends how you calculate it and who you're talking to two and four times leveraged the problem is on the way up great it amplifies your returns the problem comes when on the way down when the speed of descent is rapid and look some of his if we just talk maybe quickly about some of his holdings of these are his public company holdings right um obviously anthropic is one of his private company holdings but his largest holding was actually in bloom energy where before in q1 of this year this is the data i've been able to get he had 879 million dollars worth of bloom energy stock then sandisk 724 million core weave 556 million he had iren who to be honest, I've never heard of them.

15:56Piers Curran: $400 million. Core Scientific,$389 million. Applied Digital, $320 million. People will know these names if you've kind of been sniffing around the kind of semiconductor trade, right? But Bloom Energy was his top stock. When he bought that in June 2024, it was trading at$12 per share. The high prior to the big sell-off in July, the high was$351. $12 to$351, that's a 2 ,800 % return, right? Awesome, especially if you're leveraged on that kind of move. The problem is it dropped 53 % in the second half of July. Here's your problem, right? If you're levered 3x, if the stock goes down 10%, well, you go down 30.

16:51Piers Curran: If the stock goes down 20%, you're down 60. The stock only needs to go down 33%. Bosh, you're zero, okay? So this is the problem with leverage is when the wheels come off and markets tank, sink then you are in serious trouble and the analogy is what people say generally is what it's the stairs up and the elevator down in terms of normal price movement so when it happens you can't react quick enough essentially to get out of these positions yeah and in this case it was the staircase up and it was like a free fall plummet off the edge of a cliff down because he's levered now here here comes the problem because you can't get out because if you've got such a monster-sized position if you're holding on to what was 879 million dollars worth of one stock well if you have because here comes the problem sorry we need to say one part of the story which is margin calls well hang on who's he borrowing the money off and who are these lenders who come along and go, oi, hang on.

18:05Piers Curran: I'm worried you're going to go bankrupt. I want my money back now. So these are prime brokerage divisions of the big bulge bracket banks. Okay, I think you might have to fact check. Was it JP Morgan and Morgan Stanley? The usual suspects. Maybe the lead ones. Yeah, the usual ones, right? So the prime brokerage divisions kind of basically provide this financing for hedge funds, okay? So the big banks are exposed to this as well, but they've got to kind of manage that exposure but what happens when the when when ultimately the stock starts to tank then there'll be mechanisms you know in the legal lending agreement mechanisms such that you know if you get drawdowns of x and y and z well then we'll have margin calls this means that you the hedge fund you need you need to now wire more cash onto account because the value of your holdings has gone down and you no longer have enough cash to cover it.

19:02Piers Curran: So they basically, they say, give us, you need to wire money now, or if you don't, we're going to have to, we have the legal right to force sell your position and liquidate and take whatever money as the lender that we can get from that. So this is what happened to him. He started to get massive margin calls. The problem was, how do you come up with the cash? you can't sell anthropic shares. So you have to sell your Bloom Energy stock or your Sandisk or your Corwee. The problem is this market's in freefall. If you then come into the market with a massive, massive sell order, you're going to collapse the whole thing.

19:42Piers Curran: Now, why is it in freefall? Because there's clever people in the market that are short this stock because they know there are highly levered hedge funds that are going to get margin calls and are going to get stopped out so they're short basically forcing the margin calls in some sense and so this is he was stuck he had margin calls he couldn't sell his stock because they were too large in a plummeting market and so waltz in your white knight ken griffin and actually this is what happens. So obviously the banks know what's going on and they say, okay, well, look, we'll help you. We will auction off your portfolio off market.

20:28Piers Curran: We will engineer an over-the-counter trade. So we're not going to touch the market and cause another wave down with huge sell-side volume on an order-driven system. We're going to organize an off over-the-counter deal with some of our clients so they went to citadel millennium jane street and they held an auction but it's a competitive auction process and basically ken griffin and citadel won the auction buying his entire portfolio of public publicly traded stock at a 10 discount to market at that date 10 discount discount on what was a market that just dropped 30 percent and and like the the kicker of this is i think you alluded to it earlier is that you flush out some of these highly leveled names which makes the broader market sentiment a little bit more comfortable about the ai trade again and so what what happened shortly after this it was like the watching the cosby the south korean stock index yeah panic and then the next day it's up almost 20 and so what we've had here is this big rally we're back to all-time highs pretty much and what ken griffin and citadel have been sitting riding that puppy all the way back up with these new threat positions yeah look be careful here the s &p has made a new all-time high these stocks i mean go and check out like bloom energy is definitely not anywhere near its high.

22:07Piers Curran: It had a massive rebound when Ken Griffin bought, right? So Ken sat on a nice, tidy little profit, but this stock is still, I mean, it's way off. The high in June was 350 bucks. It's still trading 230. Having had a big rebound, it's still way off those earlier peaks. Yes, the broader market, when you look at the whole S &P index, has ticked to a new all-time high. But these stocks, these specific kind of semiconductor plays are still kind of heavily, heavily lower. But I think with Ken Griffin, well, two things, right? He's almost like the Warren Buffett of our times. Progressive's accident response can contact emergency services if you're in a major accident.

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23:19Piers Curran: You know, there used to be something called the Buffett effect. enough actually if you go back to the financial crisis in 2009 uh 2008 uh buffett bought an organized a deal with goldman sachs to buy goldman sachs shares and to buy warrants i think he bought five billion dollars worth of shares and then he bought five billion dollars worth of warrants to buy another five billion in the future at the same price if he wanted and it basically called the bottom of what was a collapsing banking system because it was like wow the best investor of all time is buying oh well this must be the bottom then so i'm gonna buy right so it's kind of that herd he's the leader it's like ken griffin now steps in well if hang on if citadel are buying okay the bottom's in that's one thing the other thing is well then the biggest levered short in the system was also now out.

24:21Piers Curran: So those that were shorting because they thought this fund would have to sell, forcing the market further lower, were then covering their shorts because this leverage player in the system is now dealt with. So covering your short means you're buying. So that also meant that's why you got this. And actually, SK High Index was up 30 % in one day. I mean, it dropped 60. It was up 30 or 50. It was up 30 % in one day. I did have Stephen WhatsApp in me going, what's happening? What's happening? When it was on the way down. Yeah. Keep calm. Carry on. Yeah. All things will return to normal. We're given enough hours, never mind days.

25:07Yeah. But I did see that Citadel, the FT were reporting that, you mentioned there last month was a month of two halves almost and you know they all got slammed to a certain degree then we've had this most recent bounce in the recent days or week but citadel along with all of the other hedge funds were struggling because they're all in this trade like you were talking about earlier um but they've gone the numbers that the ft were floating was that basically going from like scratch to looking maybe like a slight dip to then flat to up to 5.9 6 % after Ken's come in for Citadel their flagship fund specifically

25:48Piers Curran: it's just beautiful from Citadel you just got to admire it you just kind of step in and go right everyone stop this is the bottom yeah their fund I mean look he runs a fund that's about 80 million billion but then they lever it up as I've just been talking about but yeah they were flat the whole fund's now up 5.9 % basically because of this trade um and like you said and look it could be like from citadel's point of view it could be that they were short some of these stocks and so buying his book means they're covering off and getting out of their short you know off market um so yeah it's genius play from ken like you like you said that it's classic ken that comes from the idea that i I think it was in 2006 I had in my notes.

26:38They bought the entire trading book of Amaranth advisors alongside JP Morgan after that fund blew up from bad bets on natural gas at the time. And then another one, a similar scenario, snapping up the credit portfolio of so would capital management when it collapsed. So money makes money. Yeah.

27:00Piers Curran: He knows what he's doing. whereas Leopold does not when it comes to public market trading Do you know what, I like this Leopold character though because I think he's right to be a little bit arrogant and make that offhand comment because I mean, why not level up when it's played out and he can recycle it within the wider AI ecosystem in a private manner like I don't think uh i think it's too negative on him well he thought well he wouldn't have been in those levered positions if he thought the market could possibly the stocks he would own would possibly fall 30 that's where he's naive to think that these stocks can't have a pullback of that magnitude given the huge astronomical exponential gains they've had that's the naivety of it so he he was born in what 2002 is it something like that yeah so yeah there was a famous incident happened four years before he was born which perhaps he was born a little too late so what was that one because you were around and this was probably just about when you started trading i'm not that old um i started trading in 2002 this happened in 1998 thanks very much i was i just started university oh no uh yeah i was i was starting my second year at university when this happened lccm long-term capital management um some of you listening will certainly know about this you might have also read a book um when genius failed which i would very strongly recommend and it's all about this story but it's basically the same thing you know it's a concentrated you know correlated bets that are all basically expressing like one thesis right there's one strategy and you're kind of all in on it add in extreme leverage um and then you know you have a monster drawdown that forces a liquidation event or margin calls and then your prime brokers come in and basically organize this mechanism of of death as they might call it where basically they're then auctioning your book off and you're dead.

29:24Piers Curran: Long-term capital management didn't own any private company. So they did go dead, whereas Leopold does live to fight another day with his monster anthropic position. But what happened was, so it all kind of came to a head in 1998. But actually, the pedigree of this fund, I mean, they were a very, very well-respected fund. For the first four years of their existence they never lost money more than two months in a row so it's basically make a money printing machine they were hugely experienced traders unlike leopold so they kind of span out of salomon brothers um which again most may not even heard of them but that was uh one of the old investment banks um and they were there for two decades right showing similar great track record these are seasoned seasoned professionals you then add in a sprinkling of new directors two of whom had nobel prizes for their work on pricing derivatives like the black shoals model for example um and it still all went wrong um and that's because they borrowed too much and they levered up too much and their models didn't account for the 1997 Asian financial crisis and so this is it it's like a black it's these black swan events right I don't care how clever you are I don't care how good you think your model is you cannot predict the future.

30:58Piers Curran: And so anything can happen and stuff you can't even imagine could happen, which can then result in everything unraveling. It was actually one of their side bets that was their unsticking though. They actually had some exposure to Russian bonds and basically the trigger came in August 1998 when Russia defaulted on its domestic debt and dramatic devaluation of the ruble and ultimately this triggered a massive global flight to quality everyone rushed to kind of safe havens everyone rushed out to kind of get liquidity all at the same time and the problem was that all of their trades across different markets and asset classes and stuff were basically the same as in it was basically short liquidity and short fear and basically this episode just triggered this monster, monster behavioral-led move.

31:51Piers Curran: And anyway, they lost 550 million in one day. And then they lost about 4.6 billion over the next couple of months, before ultimately then they got stopped out and they died a death. Yeah, when genius failed. So we can be talking about arbitrage opportunities in the market, complex technical ways of trading, complex technology in the modern sense with AI so that part is interchangeable but the commonality is this pilot the human who's in control and the behavioral side of investing or trading can I ask you you will never say this publicly and it's a little known fact but you used to be like the biggest German shats trader like in europe by volume whatever the stat line was but so so obviously this is different scales that we're talking about with these hedge funds but the psychology i imagine is the same so you know i won't say the numbers but there were some big trading days back in the day that i remember when you've done a good job so yeah how do you manage greed i mean as a principle because you did it in a trading sense but a lot of people who listen might invest and they might be on this ai or had been on the gravy train how do you sensibly manage that and be disciplined with it well it's one of the hardest things for sure um i think to start with it's not you know try and not make it about the money this is where it's very hard because it's almost impossible to do that um but you know from an analytical point of view it's kind of more about the chart, the price chart, like Bloom Energy, okay, you know, based on my analysis, what price do I think is a, you know, a realistic target on the upside for that stock?

33:47Piers Curran: And then, right, if we reach that share price target, great, I'm going to start to get out of my position. Rather than looking at your portfolio and going, oh, wow, it's doubled, now it's tripled, oh, now it's quadrupled, oh my God, this is amazing, I can't wait till it's 10x and then I'm going to be a millionaire and I'll go and buy my Ferrari, right? So you've got to be disciplined in exit strategy like you are in your entry strategy and try and make it more about the share price and the stock and analyzing the chart rather than the dollar sign in your bank account. That's definitely the most important one.

34:26Piers Curran: And yeah, exit strategy, just start to trim your position you don't have to get out if you're really if you've got strong conviction that it's still going to go and there's more to go on the upside just start taking slithers off so you start to de-risk it you're still in it but you're de-risking it because that black swan it's always just around the corner right so you you kind of just never know but i final point is when you are big in the market you can't you know you can uh you contribute in a really meaningful way to how that market behaves. And if you know there's other people in the market that need to sell, well, then you can make it really, really painful for them because you can meaningfully impact the market's direction to the downside.

35:20Piers Curran: And you're basically squeezing other players in the market. That's definitely what happened here. That's definitely what happened in 1998, big hedge funds knowing for a fact there's a massive short position that they're going to have to get squeezed out and they just, they bury them, right? You just force the market down and down and down until that's it. The margin call comes and they're out. So what you're saying is that you're a bully. You were a bully in the chat's market back in the day. I never had you down as a bully. I'm just saying if you're a naive kid who has no experience and you think you're better than the market the lesson is really painful and he's just had it yeah and it is a great lesson of intelligence because yeah i was reading about uh him and he he got he got fast tracked through high school like you say he started at columbia and he's like 14 or something does that super quick so that's not the marker like if it was that easy if he's really good if he's really good right that this he's just had the most important lesson of his entire life he's only been alive for 20 odd years but that will eat that will right that be the most important lesson of his entire life he'll either really humbly learn from that and he'll come back and be the powerhouse that i'm sure he can be it could be a beast or yeah or he won't learn from it and this will just basically be the beginning of the end which is interesting though just to finish on that point because if you've gone through life and i was reading about it his parents i think i might misquote are both doctors so i'm assuming he's come from a fairly decent background good schooling smashed it yeah left right and center academically yeah he's he got bumped out of open ai he's felt a bit bit fecked off with that starting his own fund which in itself shows the degree of the type of person he probably is from a personality perspective yeah it's interesting how he could deal with this because it is public so public does it either go screw you lot i'll show you or all the words come off a bit if you've what i'm saying is if how resilient are you if you'd never failed in your life right indeed i don't know i don't know him obviously and we've only had a few sound bites out of him but you know it sounds like he's he's taken this one on the face and taken i guess the first part is just accepting responsibility for what happened it was your fault it wasn't the market's fault it was absolutely your fault isn't this what you traders let's learn isn't this what you traders used to do like the five stages of grief or something of that well that's right yeah indeed all right well look just to finish then because whilst all of this has been such a cool story to talk about as i was saying the s &p 500 this week has got back to record high the Dow's just hit 54 ,000 I thought very quickly just a couple minutes we could just break down why that's happened because there are a few parts we've kind of talked about the the house cleaning the spring clean if you like or the summer cleaning of the AI levered trade so what else has been driving this move?

38:48Piers Curran: Well earnings season in short has been stellar so I think what's the stats I think of this so This is earnings season, right? So quarter two earnings, April, May, June, basically. And right, so we've had 372 of the 500 S &P 500 companies report. 87 % have beaten analysts' expectations. And 69 % of companies have positively surprised on sales. So these are stellar numbers. So just park the semiconductor saga to one side for a second, and the majority of businesses are really on fire you know this is this is strong right we've also had you know continued ai infrastructure momentum um so like capital expenditures on ai infrastructure is continuing that's the news we've heard from you know the hyperscalers so when it comes to the invidias and the broadcoms and the microns although micron has been caught up in this big tumultuous semiconductor play but it has rebounded.

39:54Piers Curran: But look, the news is these hyperscalers are going to carry on spending. And so that's the kind of backdrop, as well as then some geopolitical, you know, positive news. Yet another ceasefire agreement, yet another deal to open the Straits of Hormuz. I mean, oil prices drop for now, right? So the timing of that with earnings season, with the semiconductor rebound has led to the S &P breaking out of what has been like a three-month sideways range. The S &P has been going nowhere for three months, May, June, July, just flat. And now pop, it's gone up through the top. And actually, it's been a bit of a risk on trade because you can see that if you look at some of what we've kind of weirdly call the safe havens on the defensives because Apple is now in that category.

40:45Piers Curran: And it's because it's an anti-AI tech trade, you know what I mean? So if you get the semiconductor AI rebound, well, it's Apple that kind of suffers from that because that's where you go when you're worried about that AI play, right? So Apple's off, pharmaceuticals down, Walmart down, big tobacco down, you know, these big kind of safe haven stocks have come off. But of course, the way that the S &P 500 index is geared up, very heavily leaning towards the tech sector, for example, then this has been enough, these factors. So the earnings season, good news geopolitically, semiconductor rebound together all in the same week, essentially, has been enough just to pop that index up through the top.

41:30We've still got the Labour report to come, but I guess the general consensus is that that's got to do something pretty spectacular to shift the dial over expectations on rates. But economic metrics in the US, I mean, just generally speaking, steady expansion without overheating, oil prices back down. What does that mean for inflation? I know it's a changeable scenario in the Persian Gulf, but that's a big drop we've just seen in oil in the past week or so. So is that also the fact that there's a little bit more, okay, Fed's probably not going to do anything crazy anytime soon. And that's another supporting factor.

42:07Piers Curran: Exactly. I mean, oil, you say big drop, it touched a hundred bucks. Now it's trading below 80. That's crazy. These are massive, massive moves. I'm just talking in the last two weeks, it hit a hundred bucks on the 23rd of July, right? Now it's 80. So look, yeah, I think from an interest rate perspective, which is always the biggest, you know, just the underlying beast of a force on markets is interest rate expectations. And I think that beast is just being kept dulled and quiet. And we're not expecting the Fed to hike this year. And that oil price coming off so sharply definitely helps with that.

42:48Piers Curran: So that's all good. But what I would say is, again, this rally in the S &P, it is very narrow still. So we have made new all-time highs, But you know what? 90 % of the move, 9-0, is because of 13 stocks. But that's a concern we've had for like 12 months, the narrowness of the rally. But Microsoft are the big gun at the front of that. They've been a little bit kind of unloved in 2026, trading down on the year. But all of a sudden, they've whipped up Amazons up, Alphabet's up, NVIDIA's up, Broadcom's up. You know, those big guns, they're the ones that are really doing the heavy lifting as the index goes new highs.

43:32yeah it's such a it's such a classic psychology of it i was looking at microsoft uh in my account the other day and i was like wow it's just really compared to the others but you're like look whenever i've been in my career long enough that in the 1990s microsoft at the top in the 2000s at the top 2010 at the top don't panic with microsoft yeah absolutely um what about final close any thoughts on spacex did you see any of that that came out um basically beat on revenue first look under the bonnet the ai spend is like ginormous stock dropped yeah but at these levels i mean we still in the washout exploration like the price discovery phase or we'd be on that

44:22Piers Curran: 100 i think we're definitely definitely still in that we're trading at 108 dollars remember it ipo at 135 opened on the nasdaq at 150 it rallied to i mean i can't even remember now 200 220 dollars was it um and here we are down at 108 so it's more than halved off the top i don't know it's obviously easy to sit here and say oh i'm not surprised given the valuations on this thing um but look i definitely say we're still in the price discovery phase for sure is it a goodbye at 108 i've no idea could it go below 100 yep could it rebound sharply yep i mean i'm you know i don't know elon musk did say on the earnings call and this will be something that might move the needle he said data centers in space that's not like that's not like a something in the future thing we're going to start shipping that stuff in 2027 if that happens then okay maybe that's going to be an interesting maybe spacex is ahead of the kind of schedule if you like with a monster pinch of salt which is elon musk's kind of prediction on timescales for delivery of product is very famously he's ultra aggressive with his timelines and tends to be way off the mark and things get shipped way later.

45:51I need to book my cyber cab because my humanoid at home just cooked me dinner. So I need to shoot. Oh, no, it's not happened yet. No, not yet. I put my delivery order in two years ago. However, when I was in New York last week, I just sat there having a coffee with a colleague in this cafe. And do you know how many cyber trucks drove past us? bearing in mind we were in uh midtown up by central park where all the action is fun country so how many cyber trucks do you think we saw over a 15 minute coffee three correct three and they were different drivers because when it went past the second time i was like is that the same person it was different drivers i was like people actually bought those or is and i said to my my colleague i was like surely given where we are location wise that's marketing and they're just

46:44Piers Curran: people driving around from tesla yeah wow people who own these things surely yeah driving around manhattan it's a good point it's a good point yeah but here we go it's like it's like manhattan's chelsea tractor i mean these things when you see them you're like are you for real that car still blows my mind but anyhow look thank you everyone for listening if you're not subscribed to the show make sure you do we've got another episode just a reminder dropping at the beginning and the end so book ended on the weeks we have a global macro like we've just chatted about major market events that have happened backward looking for the week and then at the start of the week we have what were the biggest deals in m &a private equity and so on a really interesting episode where we talk about the Argus spinoff by Sainsbury's.

47:36Are you an Argus fan or not, Piers? Spend much time down at the Argus perusing the catalogue?

47:41Piers Curran: There is one about 100 metres from my house, actually, and I never go in it. So there you go. Oh, there you go. Well, don't listen to our upcoming episode. I'm like a super fan. you even spoiler get to see my last argus purchase live oh on the episode that's going to drop like yep wow okay just wait wait for it okay i'll leave it there i know now my mind's now going on a hyperdrive to try to think what the product is that you might have bought yeah i'll leave you hanging all right thank you piz and thank you all for listening have a great weekend. Catch you later. Life is all about making decisions.

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