Animal Spirits: When Genius Failed, Again

Leopold Aschenbrenner's $45 billion AI hedge fund, Situational Awareness, collapsed in late July 2026, triggering a 75% volatility spike in semiconductor stocks (SOX Index), the third such instance after March 2020 and April 2025. The fund's liquidation also caused the largest one-day retail outflow of $243 million since the Covid crash, according to Vanda Research. The event drew comparisons to the Long-Term Capital Management blowup, as detailed in 'When Genius Failed.'

Today’s Animal Spirits is brought to you by YCharts : This episode is sponsored by YCharts. To get your copy of Top 10 Visuals, and receive 20% off your first YCharts Professional subscription through Animal Spirits. Visit https://go.ycharts.com/animal-spirits https://go.ycharts.com/animal-spirits Offer valid for new customers only. On today’s show, we discuss: A Bull Market in Nostalgia https://chartkidmatt.com/p/a-bull-market-in-nostalgia His Wedding Guests Were Arriving–Just as His $45 Billion Fund Was Falling Apart https://www.wsj.com/finance/leopold-aschenbrenner-situational-awareness-ai-fund-597633d3 Inside the Meltdown of a Wunderkind’s A.I. Hedge Fund https://www.nytimes.com/2026/07/31/business/situational-awareness-leopold-aschenbrenner.html The 24-Year-Old AI Wiz Who Counts Jane Street as an Investor https://www.wsj.com/finance/stocks/the-24-year-old-ai-wiz-who-counts-jane-street-as-an-investor-1c30d751 Balancing Innovation and Inflation in Portfolios https://www.gspublishing.com/content/research/en/reports/2026/07/10/ce510cb7-570e-477c-932b-8b706e7188d6.pdf Boaters Are Splurging to Make Fishing Yachts Run Like Supercars https://www.wsj.com/business/boaters-are-splurging-to-make-fishing-yachts-run-like-supercars-78d33212?mod=e2fb Here Comes the Next Wave of GLP-1s. They’ll Treat a Lot More Than Obesity. https://www.barrons.com/articles/glp-1-obesity-drugs-eli-lilly-novo-nordisk-stocks-19200dcc?mod=hp LONGREADER A 1 UBS helped trigger exodus from Blue Owl private credit fund https://www.ft.com/content/4c75ea97-8411-445d-b1fd-393b2b4222f8?syn-25a6b1a6=1&utm source=substack&utm medium=email Listen here: Charts: Tweets/BlueSky: Dispersion within the S&P 500 is massive S&P 500 -0.1% in July Despite top 3 stocks positive $NVDA : +0.3% $AAPL : +6.8% $MSFT : +24.6%6/11 sectors had 1%+ returns $XLE : +12.1% $XLF : +6.2%S&P 500 Momentum: -11.1% @CarsonResearch @RyanDetrick pic.twitter.com/YsINnDydyg — Sonu Varghese @sonusvarghese August 3, 2026 Since I sent this tweet 2 days ago: AAPL is down 12% MSFT is up 17% META is down 7% AMZN is up 18% Markets never let you catch your breath anymore Everything happens at warp speed now https://t.co/K3zmTCUbpt — Ben Carlson @awealthofcs July 31, 2026 The Leopold liquidation pushed semiconductor single-stock volatility up to 75% SOX Index . This is only the third time semi volatility has reached this level. The other two instances: March 2020 and April 2025. pic.twitter.com/D02L22tgji — Warren Pies @WarrenPies July 31, 2026 Crazy how this Situational Awareness blowup is right inline with the Long Term Capital Management blowup on the Netscape/ChatGPT timeline. Gray shading is When Genius Failed… Past performance is no guarantee of future results. pic.twitter.com/O4FizP5kWp — Bespoke @bespokeinvest July 30, 2026 "Retail sold a net $243m of single stocks yesterday, marking the largest one-day outflow since the Covid crash"– @vandaresearch — Gunjan Banerji @GunjanJS July 29, 2026 I still don't like the group, but noteworthy that investors are starting to throw in the towels on the Mag 7 ETF. 3-month outflows approaching the peak level of net inflows the fund saw at its January 2025 peak pic.twitter.com/posIIYmlEG — Scott Brown, CMT @scottcharts July 27, 2026 Just to update through y'day: I estimate DRAM earned a ~88% since-incept cumul. NAV return. But investors lost a cumul. ~$1.6B over that span at NAV bc flows arrived late. Not mgr's fault but shows potential pitfalls of streaky products. Hopefully investors stay put, it rallies https://t.co/mMENlzDvsZ pic.twitter.com/LyZxDVRVwq — Jeffrey Ptak @syouth1 August 1, 2026 Bank of America says the market's reaction to Kevin Warsh resembles an emerging market facing a credibility shock pic.twitter.com/OHmzODwUSg — Joe Weisenthal @TheStalwart August 3, 2026 For me, this was the standout comment from the ISM Manufacturing survey for July: “No normalcy in sight in the world of metals. It makes me yearn for the coronavirus pandemic chaos, which was more manageable than whatever this is that we are in.” — Kevin Gordon @KevRGordon August 3, 2026 Over the next few years you are going to have to fight with everything you’ve got to retain your humanity. They will try to convince you to give up connecting with each other, to give up truly being alive. It will be the most important fight of your whole life https://t.co/Qj59OMORsy — BuccoCapital Bloke @buccocapital July 31, 2026 Well, that happened quickly. More than 100,000 customers have opened agentic trading accounts. https://t.co/6BcWtIcDdY — Vlad Tenev @vladtenev July 31, 2026 July 23, 2026, was the busiest day for commercial air travel ever, according to data from @flightradar24 .A whopping 153,359 commercial flights were tracked worldwide. pic.twitter.com/0fJ9mcjZkY — Colin McCarthy @US Stormwatch July 25, 2026 Hollywood scores its biggest collective weekend in box office history with more than $406M grossed domestically across all films. ‘SPIDER-MAN: BRAND NEW DAY’ $355M ‘THE ODYSSEY’ $51M pic.twitter.com/hyyqHmn3uQ — Film Updates @FilmUpdates August 2, 2026 Rick Moranis gets a Hall H standing ovation during the Spaceballs : The New One’ panel at Comic Con. SDCC pic.twitter.com/rMu7DxC4Iy — Rotten Tomatoes 🍅 @RottenTomatoes July 25, 2026 Recommendations: Obsession https://www.youtube.com/watch?v=gMC8kkwbIQQ House of the Dragon https://www.youtube.com/watch?v=xZUavocHU2g Masters of the Universe https://www.youtube.com/watch?v=X21JsHLHnY8 The Odyssey https://www.youtube.com/watch?v=Mzw2ttJD2qQ Shrinking https://www.youtube.com/watch?v=YjHfjQDWl1A The Men Who Would be King by Nicole Laporte https://www.amazon.com/The-Men-Who-Would-Be-King-audiobook/dp/B003KWL5VI/ref=tmm aud swatch 0 Follow us on Facebook https://www.facebook.com/animalspiritspodcast/?ref=settings , Instagram https://www.instagram.com/animalspiritspod/?hl=en , and YouTube https://www.youtube.com/channel/UCBRpqrzuuqE8TZcWw75JSdw . Check out our t-shirts, coffee mugs, and other swag here https://idontshop.com/ . 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