As someone who has been invested in a handful of Leopold investments before he came onto the scene, want to share my thoughts on what I believe happened here.
Leopold is obviously a brilliant mind and was able to identify a lot of these themes/trends before almost everyone else. But having a brilliant mind and understanding the ruthless nature of capital markets are entirely different things.
As of last year (iirc, firing this at the hip btw so may get some things a bit wrong) he was directionally long with shares and options. That is great, and he had a phenomenal year. The first sign of concern was the 13-f this spring where we saw a bunch of puts and other shorts, even some on software (which had already been taken to the woodshed), and at this point the fund had became a bit of an over levered clusterfuck
It’s been disclosed that citadel was the (gracious) recipient of his liquidated book. They also announced their belief a rate hike was coming earlier this week. I’m fairly confident that was just a final nudge to get these stocks (many of which already down 40-60% in 4-6 weeks coming into FOMC) to the point where he’d have no choice but to sell. Scummy but anyone familiar with this game knows it’s not surprising.
Now had Leopold remained directionally LONG in the manner he was a year ago, you wouldn’t
be reading this right now. Even with this momentum rollover we saw the past month, sure his calls would be hurt badly and port value would have taken a hit. But he would still be in the game!
For whatever reason, young Leopold decided to press. This is a man who had turned 150M to 25b+ in about 18 months, and yet was still caught with his pants down, levered 3-4x, and was just taken out of the game on a 50% momentum drawdown. Think about this. 150M to 25b, in less than 2 years, and it WASNT ENOUGH. He just had to press, with many stocks up 5-10x. Hard to comprehend, and I believe many other individuals went down with his ship this past week.
This is an example of the psychological delirium you can find yourself in when you are on an ungodly run. You feel untouchable. And then Ken Griffin comes knocking a month later to remind you what this game actually is. And that is managing money. Not picking stocks, but actually MANAGING the capital. And that is what young Leopold failed miserably at despite being so freaking right on the specific companies he invested in.
Margin is horrible guys. The market goes up and to the right. It has for 100+ years. The only person who is going to prevent you from making money in this lifetime is YOU. If you must use margin, keep it to shares, and don’t be retarded.
If a guy this bright can blow up from overconfidence and overleverage, it can happen to anyone when you introduce leverage and margin.
TL/DR - doesn’t matter if you’re the best stock picker on earth if you don’t know how to actually manage capital and control your emotions