What Did Happen?

Thursday July 30, 2026

So now we know.

Situational Awareness LP (SALP), the firm running the AI show, ran out of capital and was forced to raise additional funds.

What we don’t know is how that situation played out in the market. Let’s look at the facts as reported by various journalists. As of June 30, SALP was up ~%429 net and was periodically running 4x leverage.

To keep the math simple. Let’s say the fund hat $100 January 1st. By June 30th, before fees, the fund would have had around $600. Running 4x leverage that means Leopold turned $500 into $1000 on the year. An un-levered return of 100%. I built a model to show closer to the reality based on what the firm’s thematic lean is. Long equity with calls on runners, short with puts under performers.

Whenever the exact details come out you can compare. Based on my model the fund is still up YTD.

Then as of July 24th, they had no free capital. This means the account drew down so much that the lenders were requiring margin payments which my model bears out.

Back to the simple math. So the firm had $1000 June 30th but were down to ~$700, 24 days later and had to bring out the tin cup and sad face emojis.

Over the next six days everything collapsed.

Either (A) SALP is the Michael Saylor of AI and is the only reason these stocks were propped up, (B) other traders knew about the liquidity crunch and used it as an opportunity to short - which would mean last nights leak of the information is a signal being sent to the market or (C) SALP was forced to sell positions which is why the market dumped.

As of now, we don’t know.

If (A) is true than the entire AI market is based on that one fund’s ability to stay liquid. We have seen this before with LTCM. If SALP is still liquid and was recapitalized squeeze it is.

If (B) is true then short sharks have had a real taste for meat now and might begin to attract more sharks.

If (C) is true then this should have past and reality should take over.

No matter what happened it means the bullshit has already hit the fan though. The question is - is the fan on?

Going to back away from hedging and rolling PUTS. At least for the day until there is more clarity.

—AJ