Martin Shkreli Breaks Down the Collapse of Situational Awareness

This is our full interview with Martin Shkreli. We discussed the collapse of Leopold Aschenbrenner's AI-focused hedge fund, why leverage turns market corrections into disasters, how Wall Street unwinds massive positions, why AI infrastructure stocks sold off despite record AI demand, whether the AI trade has further to fall, and much more. TBPN is made possible by: Ramp - https://ramp.com Public - https://public.com Cisco - https://www.cisco.com Console - https://www.console.com CrowdStrike - https://www.crowdstrike.com Figma - https://www.figma.com MongoDB - https://www.mongodb.com NYSE - https://www.nyse.com Railway - https://railway.com Shopify - https://www.shopify.com/ Codex - http://openAI.com/codex Sign up for TBPN’s daily newsletter at TBPN.com Follow TBPN: https://TBPN.com https://x.com/tbpn https://open.spotify.com/show/2L6WMqY3GUPCGBD0dX6p00?si=674252d53acf4231 https://podcasts.apple.com/us/podcast/technology-brothers/id1772360235 https://www.youtube.com/@TBPNLive

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00John Coogan?

  Let's bring in Martin Scrawley to break it down for us. I believe he's here. How are you doing, Martin? Good to see you again.

• 0:05Martin Shkreli?

  Hey guys, I'm doing great. How are you?

• 0:07John Coogan?

  Perfect.

• 0:08Jordi Hays?

  Perfect. Uh, how's your last?

• 0:11John Coogan?

  Take us through it.

• 0:12Jordi Hays?

  Twenty-four hours.

• 0:13John Coogan?

  What's the last twenty-four hours been like for you?

• 0:14Martin Shkreli?

  It's, it's been interesting. I do invest myself, so uh, it's been a, it's been a, probably one of the craziest months uh, in Wall Street history. Um, I was talking to some friends last night about long-term capital management, uh, Ameren's, uh, other famous liquidity-driven blowups. And uh, this is up there. Uh, and um, yeah, it's just a really crazy thing. We had heard rumors, um, sort of mid-last week and then they really started crystallizing. Um, last night, um, and this morning, obviously, sort of a fait accompli. And I actually think they did a wonderful job of, of keeping it relatively quiet. I think some

• 0:55Martin Shkreli?

  players were already positioning, say, early in the week, Monday, Tuesday, looking to do what my old boss Kramer used to call, uh, you know, shooting against a fund. So if you know, know somebody has to liquidate, the best thing for you to do, unfortunately, sadly Darwinian, is to go sell all the positions you have in common and then go start shorting everything they have. Um, and it accelerates the, the sort of downfall as quickly as you can. And this is a very common practice when these things, you know, happen. Um, certainly not something, I, I had overlap positions with them, so certainly not something I would do, but no wide number of funds that were shorting all of these stocks, hoping to cause a panic and a crash.

• 1:36John Coogan?

  How do you trace back the start of this correction? Is it the war? Is it oil? Is it jitters around open source or just hyperscaler capbacks? There's so many different narratives around why the AI infrastructure trade, the bottleneck trade might be weakening. At the same time, it feels like there's some really solid progress and the models are progressing along like, pretty like as expected.

• 2:03Jordi Hays?

  Yeah, yeah, you have the labs having some of the best months in business history of any companies ever.

• 2:10John Coogan?

  Yeah.

• 2:11Jordi Hays?

  But then all the infrastructure correcting.

• 2:14Martin Shkreli?

  Yeah, none of that stuff matters. You know, the only thing that matters is, is the propensity of the buyer and seller to buy or sell. And what you had happen was the smart guys get in early, start buying, see the prices go up, buy some more. And then less smart guys take, take note and say, I want to do that. I want to be up 400% this year too. Guys like me started buying right near the top. Hey, this is great. I love memory. I love bottlenecks.

• 2:46Martin Shkreli?

  And uh, and then, but by, the weakest hands are buying at the top, so they're also the first to sell.

• 2:52John Coogan?

  Sure.

• 2:52Martin Shkreli?

  First to panic.

• 2:53John Coogan?

  Yeah.

• 2:54Martin Shkreli?

  And it just creates this like, you know, every bubble's sort of the same. You have this euphoria, this peak, and then, you know, everyone sort of panics at once. You know, the fundamentals basically don't make a difference. You know, I think they, you know, they sort of drive the marginal buyer and seller, but you know, the eighty or ninety percent of the assets shareholders don't change hands. It's that five percent of the margin that's deciding the price. And if that five percent is in the state where they're, they're levered up three X, or four X, as we heard, uh, SALT is, uh, was a four X levered fund, which is, that's a lot of leverage. You know, a twenty-five percent drawdown takes you out of business.

• 3:32Martin Shkreli?

  Um, interestingly, we heard that three firms were bidding on the assets, so uh, Jane Street, Millennium and Citadel were sort of brought in in a closed, closed circle, sort of late Friday to, to bid on the remains of, of the firm. And uh, we got offered uh, a look at a hundred million dollars of Anthropic stock, which we were puzzled, puzzled by. You know, sometimes you see these SPVs, sort of interest comes across, uh, you know, here and there, and we thought that was interesting. Um, I sort of raised my eyebrow and said, is that Leopold? It's because, you know, sometimes when you want to sell four billion dollars or something, you don't come out and say you want to sell four billion dollars.

• 4:14Martin Shkreli?

  You come out and you say, you want to sell a hundred million dollars of it. And usually a guy who wants to buy a hundred is enough to buy five hundred or more. And you sort of fill them out and say, here's a hundred. Okay, do you want five by any chance? And then, you know, your eyebrow starts to raise a little bit that, you know, maybe he's got even more. Um, now, of course, this is a really odd situation. So I, we, we heard Millennium did put in a bid. Uh, Citadel's bid was better. You know, I think Ken wants to be the guy that everyone goes to when they're in trouble. And that's the, you know, Buffett is getting older. This is not the kind of stuff Buffett wants to do anyway. Um, but you know, Citadel did this in the Ameren's deal, you know, when Ameren's blew up, uh, natural gas futures. I think Citadel took that portfolio.

• 4:59Martin Shkreli?

  And virtually every blow up in finance, they've come to the rescue.

• 5:03Jordi Hays?

  Enron, where they just raided all the talent.

• 5:06Martin Shkreli?

  Yeah, they wanted to do it in Enron as well. I, I think, yeah, they just sort of, Ken is a very smart guy, sort of shows up and says, you know, how can I, you know, how can I, uh, you know, be a partner to the Goldman's and the Bank of Americas when they need to get out, you know, uh, of a really risky position? They basically take it, take over the book, right? So if you, I'll give you sort of an example and you're asking the question. So let's say, you know, you're at forty-five billion, you know, sort of try to trace this back, and you're, you're, uh, you know, ten billion of that is in Anthropic, from what we understood. Uh, so you have thirty billion dollars of, of cash in your bank account. Uh, and running four X levered means you have a hundred and twenty billion gross market value.

• 5:49John Coogan?

  Oh.

• 5:50Martin Shkreli?

  Um, so if your GMV drops, I don't know, twenty-five percent, that doesn't sound so bad at a hundred twenty billion. Uh, maybe that's, you know, I don't know, uh, thirty billion. So you're down to ninety billion, but that's not your equity. So your equity drops from thirty-five billion to five billion. And no, no prime broker is going to let you keep ninety billion of gross market value, because once you get your equity below zero, it's their loss, not yours. And they're not going to lose a penny after Archegos and after these other kind of blowups. And that's not their job. And they kind of have the right to take over your portfolio, which is, is sort of, uh, you know, something I hope nobody ever has to experience, but they basically call you in and say, listen,

• 6:35Martin Shkreli?

  you know, these are our, our assets now. And, you know, we're, we're going to decide what their, what their disposition's going to be. And the rumor is over the weekend, he contacted about ten parties to place Anthropic in an effort to shore up liquidity. Selling the Anthropic stake for, for allegedly, the offer was at one point one trillion, uh, equivalent market cap. Um, which, you know, I think roughly where it's trading. Uh, and um, you know, it's unclear whether that was sold or half of it was sold, is what we reported. Um, that, that half of it was sold. It's still a little unclear who bought that, what's happening exactly, but that's, that's the best we've got.

• 7:15Martin Shkreli?

  And then, you know, when it came to um, the public, you know, book, it does sound like, um, you know, the, the buyer of that book basically got a, from what we were told, a three to four billion dollar insta-markup. So, you know, they basically now have to work them, have to work out of, of three to four billion.

• 7:35John Coogan?

  Yeah.

• 7:36Martin Shkreli?

  Uh, uh, more than three to four billion, quite a lot more. Uh, but in essence, if they work out of these positions without disrupting the market, they, they'll print a three to four billion on the trade. Which, you know, is unusual and interesting trade, but you know, really exciting. One of the parties reached out to me last night, one of these three parties, interestingly, after my reporting, and they said that

• 7:58Martin Shkreli?

  in essence, in some substance, yes, Leopold flew a little too close to the sun, and your numbers are, um, are a little off. And I asked what direction, and they wouldn't, they wouldn't confirm or deny. I, I received a lot of pushback on the reporting, to your point, uh, privately and publicly, that, that it's not so bad. And that, you know, he's only down thirty percent. Thirty percent you can kind of live with. Uh, but also, if Anthropic hasn't changed its mark, that means you were down sixty in the public book. And if your Forex levered, you know, that means you're sort of down fifteen on the public book. Um, which sounds too good to be true. If you're trading these stocks, they were down like fifteen percent a day.

• 8:38John Coogan?

  Yeah.

• 8:39Martin Shkreli?

  So, we've also heard the other, other AI funds are, are hurting, maybe not as, as much as in trouble, but, but certainly hurting as well.

• 8:47John Coogan?

  Where does the fund go?

• 8:48Jordi Hays?

  Yeah, he gives some good, he gives some good cover to all the funds that were effectively copy trading him.

• 8:53John Coogan?

  Oh, sure.

• 8:53Jordi Hays?

  Maybe even being more risk on and later to these positions, because they were, they're naturally just late if you're trying to copy trade someone and you're.

• 9:03Martin Shkreli?

  Trying to catch up, you know?

• 9:04Jordi Hays?

  Yeah, you're trying to catch up, basically. So, yeah, yeah, more leverage, you're, you're, you're coming into these trades way later. Um, do you, do you recall, uh, like, how did you process Ryan Jacob in, in around the year two thousand? Because you were at Kramer's firm, I believe, you joined maybe right before the Ryan Internet Fund started collapsing?

• 9:29Martin Shkreli?

  Yeah, there's also the Ameren Fund. There was a fund in the 60s called the Manhattan Fund that Warren Buffett criticized for being the go-go kind of lazy fund. It was run by a guy named Gerald Tsai. And so like every generation, you've seen the memes about Kathy, you know, um, every generation has it, you know, the guy that believes in that cycle and it goes balls to the walls on that cycle. And look, I have a lot of respect for for somebody who's who's willing to do that. I I used to tell a friend who who kind of did the same thing. He followed this trade, but he was very early. So he had sort of Leopold like numbers. Um, and he sort of did hedge it at at what

• 10:13Martin Shkreli?

  sounds like close to the top. So sort of a miracle trader, best trader I know. And I joked with him, I said, you know, if Leopold sells at the top and turns short, like I will absolutely adulate him as the greatest of all time. It's just that, you know, usually when you're so spellbound by that narrative of whatever happening, in this case AGI, you know, there are people out there that say, look, AGI is here slash coming. When it comes, the entirety of finance is not relevant anymore.

• 10:41John Coogan?

  Yeah.

• 10:41Martin Shkreli?

  You know, we might as well just run it up and and kind of see the end of days this way. And of course, there's some guys sitting on a trading desk at Goldman Sachs, you're like, these people are fucking nuts. You know, it's just the stock market.

• 10:53Jordi Hays?

  Did you, given, given that Leopold had had been at FTX right up until the the the fall, did you think that maybe as as risk on as he was, like, maybe he was like, you know what, I just, I can't go through that again. Uh, he wasn't necessarily, he wasn't necessarily directly tied to any of this sort of nefarious activity at FTX, but he did have to viscerally experience it and and I believe resigned the day of the collapse and

• 11:23John Coogan?

  Yeah.

• 11:23Jordi Hays?

  Uh, I would, I just would have expected to not like, yeah, to run it back like so quickly. You would, you would expect even like, you know,

• 11:31John Coogan?

  Yeah.

• 11:31Jordi Hays?

  Go and do it, have a normal, you know, great career for a decade, whatever, then maybe come back to leverage and be like, I'm ready to dance again. But

• 11:41Martin Shkreli?

  There's a lot of questions, like one question is, what's his carry? You know, when a lot of firms in the hedge fund industry, believe it or not, they have clawback provisions for carry.

• 11:51John Coogan?

  Like high watermark provisions, right? So you have to clear something?

• 11:54Martin Shkreli?

  Sure. Everyone has a high watermark, but what's increasingly happened is is a is a carry provision where you have to return the 220 you earned if you have a severe drawdown.

• 12:05John Coogan?

  Yeah.

• 12:06Martin Shkreli?

  Which, you know, could actually end up being a tough situation. Now, as you guys know, the fellow's getting getting married this weekend as well, which is, you know, a little bit of tragedy with a little bit of triumph mixed in. Um, but, um, obviously, you know, uh,

• 12:21Jordi Hays?

  But does every, how common are those clawback clauses? Because you have to imagine in this fundraiser, he had like massive, massive leverage, you know.

• 12:30John Coogan?

  Like, demand was very high.

• 12:31Jordi Hays?

  Demand was very high. That feels like a term

• 12:33John Coogan?

  The numbers were so good. Yeah.

• 12:35Martin Shkreli?

  It's a more institutional thing. And I, you know, speaking of which, you know, obviously, the guy basically had no experience. Um, and again, you know, in times like this, nobody wants to to do grave dance, and I'm not doing that. But I had some institutional friends, one of the biggest fund of funds in New York, for example, who passed on Leopold, basically laughed at him and said, you know, there's no way I could invest in this. And of course, you know, he goes on this tear, you know, makes like 20x or whatever it was since inception and does fantastic. And he feels sort of sheepish, but ultimately, you know, somewhat vindicated after all of this. So you did have a manager that had no experience, um, kind of a long only or extremely long bias, starts to do privates, which for many hedge funds is kind of the death knell. Um, you know,

• 13:20Martin Shkreli?

  you know, when, when hedge funds put on their VC cap and try to try to do what those guys do, it it often doesn't end well. And, um, that that goes back like, you know, 50 years, basically, uh, of hedge fund history. And, um, very few people have been able to do both. And the other thing I'd point out is we're gonna see July numbers very soon here from from quite a lot of hedge funds that I think were in the same trade.

• 13:43John Coogan?

  Sure.

• 13:44Martin Shkreli?

  And so this, this is not just Leopold's 100 billion gross. It's like that times maybe five or 10. And the market, while the market's liquid, but that's a lot of downward pressure in a few weeks. And, you know, it's amazing to see this all compressed in a month, whereas like the dot com bubble took three or four years to like patiently go up and patiently go down. Um, you know, seeing that compress instantly is interesting. What's gonna happen next is really gonna be fascinating. There's some theory out there that, you know, that we see all time highs again now that all this liquidity is out. And there's other theories there that we actually were just having this nice big downtrend and that this liquidity pop will fade and will be back down further and further. Um, you know, nobody knows what will happen, but it certainly, uh, while you're right

• 14:29Martin Shkreli?

  that, you know, the anthropics and open eyes are having record business results, so is Microsoft and Google and Meta for that matter. There's still, I think, some more discerning questions about is, are, is this capex investment worth it?

• 14:39John Coogan?

  Sure.

• 14:40Martin Shkreli?

  Um, you know, they rewarded Microsoft for being prudent. They they punished Meta and Google for not being prudent. So one wonders what what the future will bring there. But yeah, out as crazy as things have gotten on Wall Street in in many years, uh, probably at least since FTX and certainly crazier than the the the sort of Tiger SoftBank venture boom of 21. And then, you know, really since then, uh, the away insanity. So it's, it's, um, it's quite a spectacle. And I think, you know, no matter how much people want to learn the lesson of leverage over and over and over again, we all seem to repeat it. And, uh, you know, it is what it is. But I think the the Jane, the Jane Citadel Millennium, kind of like entire hedge fund

• 15:25Martin Shkreli?

  complex, sort of becoming this like shadow bank is quite interesting.

• 15:29John Coogan?

  That's

• 15:29Martin Shkreli?

  You know, and that like, these guys are are sort of there to, normally the banks would sort of take this on the chin. But now that there's other folks who are like, you know, Jane was an LP, for example, and reportedly was not interested in bidding, uh, which is fascinating. May have taken the anthropic, however. Um, really unclear. We're gonna learn more, obviously, as some days go on here, but it's a, it's an unprecedented time and, you know, really an insane story that, uh, may just get more insane as we learn more.

• 15:57John Coogan?

  Is there a world where the fund continues? Because I'm just hearing the numbers and it's like, you know, for up at 45 billion, the actual money into the fund was maybe 5 billion or something if you sell the positions.

• 16:12Martin Shkreli?

  Right, right, right.

• 16:13John Coogan?

  There's a world where you wind up with like 10 billion in a bank account and the LPs are like, well, we gave you five. Keep going. Get back in the game, you know?

• 16:22Martin Shkreli?

  I hope, I hope that's the case for the LPs who are awesome, for the

• 16:26John Coogan?

  Yeah.

• 16:26Martin Shkreli?

  fund manager who obviously got quite a lot of whiplash.

• 16:30John Coogan?

  Mm hmm.

• 16:30Martin Shkreli?

  But, you know, at the end of the day, you know, there's, there's this concept on the street as, as you guys know, like, once there's blood in the water, like, these positions would go to zero. Like, we'll send Micron to $5, you know, just to liquidate this guy at three, right? Like, that's, you know, the craziest thing is like, that's, that's the nature of of Wall Street. When this happens and there's a guy that has to sell 100 billion, you'll have a trillion dollars in front of them, just like, you know, let's, let's see this guy cry uncle. And it's the saddest kind of most Machiavellian thing. But like, he had, he sort of had to blow up, you know, there was no other ending sadly.

• 17:07John Coogan?

  Yeah.

• 17:07Martin Shkreli?

  Um, because of the leverage level, it's just like one slight, you know, I remember my old, my old boss was a Tiger, uh, Tiger portfolio manager, reminding me of the 2000 era where there's this very slight change in tone from one, uh, optical component supplier. And that's like him and his partner from Soros just decided to go like as as short as they could. It's because they knew ultimately these vulnerable hands were sort of sitting there. After the easy part of the bubble was over, you have this like, okay, what's, what's next? Things have to get a lot crazier. You saw Dorekesh's tweet.

• 17:42John Coogan?

  Yeah.

• 17:42Martin Shkreli?

  Things like that would have to sort of happen for there to be enough second derivative for somebody to be surprised.

• 17:48John Coogan?

  Yeah.

• 17:48Martin Shkreli?

  You know, everyone knows AI is in this boom. Everyone knows chips are in this boom.

• 17:52John Coogan?

  Yeah.

• 17:52Martin Shkreli?

  What could possibly shock you to the upside? Not much. So if you hear any little like, you know, we're not going to spend as much, the whole shit hits the fan and every, it's just too heavy. So I, I actually wonder if we're, you know, if we're not in for a longer, more protracted decline. Things feel great today. You know, you have this huge boom, uh, this relief rally. Um, a lot of the froth is out of the system, but you know, what next? You know, I, I don't know that, you know, a patient and calm market is going to emerge because you had the hyperscalers and the big companies, they FOMO too. They FOMO just as hard as Leopold did, right? If not harder. So this isn't just him. It's the whole world collectively saying, fuck, I gotta, I gotta go

• 18:34Martin Shkreli?

  all in in AI. And it's, it's, and who, who had the guts, you know, other than one man, Tim Cook in the back saying, not me.

• 18:42Jordi Hays?

  Do nothing when

• 18:43John Coogan?

  Yeah.

• 18:44Martin Shkreli?

  Yeah.

• 18:44John Coogan?

  No, really, it is Tim Cook. Yeah.

• 18:47Jordi Hays?

  Yeah, the, the funny thing, you know, we, we had been joking, uh, we were joking in like Q4 when, you know, they're prior to like coding agents really starting to rip, you know, OpenAI revenue growth had like slowed a little bit and like there's some jitters and, and a lot of this stuff wasn't, you know, public at the time, but you, you could tell some of the kind of crossover types were like getting a little nervous, right? They kind of expected

• 19:14Martin Shkreli?

  MAU, DAU numbers.

• 19:16Jordi Hays?

  Yeah, yeah.

• 19:17Martin Shkreli?

  You know,

• 19:17Jordi Hays?

  Yeah.

• 19:17Martin Shkreli?

  They really plateaued.

• 19:18Jordi Hays?

  And, and, and then we, and then there was a correction, like there was like briefly, you know, for a period, it was probably like eight weeks. It was like, okay, like, uh, and then it started ripping again. And we were taking like a sort of a, um, a bit of a joking, like victory lap, being like, cool, like AI corrected, you know,

• 19:38John Coogan?

  Bubble popped, now we're able to build back sustainably. We're good from here on out. It's smooth sailing. No, I completely agree with you.

• 19:47Martin Shkreli?

  I think the most unexpected thing is it would be if we saw brand new all time highs for the entire thing. I think almost everyone on Wall Street is skeptical this will happen, which means it has a chance of happening.

• 19:58John Coogan?

  Yeah, bullish. So you're saying there's a chance. I love it. Can you, uh, can you give me a little bit more insider baseball on, uh, what it takes to unwind a big position, uh, as a shareholder? Because, uh, a lot of people who are not inside the hedge fund world, uh, are sort of, uh, maybe confused around, okay, yeah, you own, uh, $50 million of a $1 billion chip stock. Can't you just dump that on retail? Can't you just like sell, market sell that on E-Trade or Robinhood? And in fact, it's much more complicated when you're at this level, even though it's public markets. There's not just a big button. Can you walk us through what it actually takes to like,

• 20:43Martin Shkreli?

  Yeah.

• 20:44John Coogan?

  sell a big position when you're at that level?

• 20:48Martin Shkreli?

  Yeah, there's a lot that goes into it, interestingly. So the first is you have this advertisement system. So if you sell into the into the market, you can try that. And that's called selling into the screens. The screens are the numbers on your screen. Anybody could buy and sell, Robinhood, whatever. So you don't normally do that if you can help it. Selling on the screens is at least somewhat quiet. You can just sort of trickle out. There's always this conspiracy that as I'm selling on the screens, there's some guy who can see my screen. And he's like, this guy's got a B Y market order to sell 10 million shares. That's like, you know, I'm going to tell somebody. And that knowledge would be very, very powerful. And there's even some even crazier conspiracies out there that quants could actually use different,

• 21:31Martin Shkreli?

  all kinds of insane ideas around what they can do to sort of sniff out that this is happening. So there's people that are scared of that. Then you can pick up the phone, and this is the way you'd normally do it. And you call Goldman, and you say, listen, I need to sell five, you know, five million shares of Microsoft or something like that. And they say, hmm, you know, should we take it? Or do we find a guy that wants to take it? And they'll sort of try to decide. Now, Microsoft is easy. If you're trying to sell share in AI, a NeoCloud in Australia that nobody wants, that's a tough one. And you own like 10 days of volume. So if you try to hit the screens, you have 10 days of volume. You'd have to be the entire volume for 10 days before you'd be out. You'd probably take the stock down 50% or more.

• 22:13Martin Shkreli?

  And you don't want to do that. So you try to, you know, do this advertisement process, you know, and you basically can post in the stock market that you are a seller of a stock. And you can post that your four-digit, what's called market maker ID. And so Goldman's is G S E O. So G S E O would be a seller of, say, you know, Nebius, which was one of his positions. And so you'd call up, you'd say, okay, Goldman, I'm a client too of Goldman. You know, what do you got on Nebius? And the guy would say, listen, we got a pretty big seller here. You know, and say, how big? You know, half a million shares? And he's like, a lot bigger. You know, and so you'd say, hmm, okay. Because they have to advertise that, you know, they're working your orders. So they have to sort of tell people that

• 22:58Martin Shkreli?

  there's a seller. They're they kind of are trying to be coy about how big, but they're not going to waste somebody's time either. So the guy who's heard that there's a big seller, well, he might turn around. He's not supposed to do this. He sort of might turn around and say, you know, if there's a huge seller of Nebius out there, and I'm just a little baby fish, maybe I could short 50,000 shares and get in front of this guy. If you're an actual interested buyer, you might also still be nervous because you'd say, well, if he's really got a ton of size, I might have to be judicious about how I step in. And so if you combine that with the sort of like pressure in the market, and you add it all up, and then usually what you do is you'd have say, oh, I know a guy that works

• 23:40Martin Shkreli?

  there. And let's see if he's returning calls. And, you know, when you hit up the guy, and he's not on Bloomberg, he's hard to reach, it's kind of like, well, it sounds like it could be them selling. So it's not too many people that own that many shares of that security. So you look at the holders list, and you're sort of like, who could it be selling 10 million shares? So you call Fidelity, and they say, no, we're not selling. You call the next guy, no, we're not selling. Next guy's an ETF, next guy's an index fund. You know, it's got to be him, you know? And so if it's them, and they're there, and then you start noticing all of their positions are down, it gets really hard. So ultimately, the bank decides, because you might say, you know, I don't want to sell. The bank says, I don't care what you want. We're selling regardless. And Goldman Sachs is not in the

• 24:23Martin Shkreli?

  business of holding AI stocks. You know, we're going to sell at any price we can because our board would rather know for sure that we're down a billion, and just take the rip the Band-Aid off, than to wonder if we could lose 50. And so it's Goldman's position that we're just going to just cut this, cut the arm off right now before it metastasizes. And so they'll do a fire sale. And of course, Goldman's smart, they're going to reach out to a guy like Citadel or somebody else to place it carefully. But selling the whole portfolio in one shot was a very smart move. Now, again, we've heard the discount could have been as big as, you know, 20 to 50%, which is, you know, mouthwatering discount to buy, you know, some quality companies at. But to end it and have finality, what

• 25:06Martin Shkreli?

  was really, to answer the question finally, what you really needed to do is the buyer of these stocks has to have the liquidity to hold them for five years and do nothing. Because the market, guys like me, and to a very small extent, and guys to much bigger, will sit there and say, I don't think you can hold this. And they'll start shorting it, and shorting it, and shorting it, and trying to make you cry uncle. Kyosha in Japan, one of Leopold's holdings, also one of mine, is trading at three times earnings. You know, they basically force you, you're forcing the guy to really, you know, to sell. And if you're going to hold this stock, you have to make sure that you can hold it until it's two times earnings or one time earnings. And the only player big enough and more powerful enough to sort of hold $100 billion in that blink is somebody like Citadel. And even

• 25:49Martin Shkreli?

  still, some keep the rumors out there, there are the people who are going to try to pressure Citadel, which I wouldn't advise, you know, but something like that where, you know, maybe they'll now have to suffer the same contagion. So it's a very crazy time in the markets. And I don't think we've seen everything yet, because I do think there are some large tech funds that have had the same trade on. I do think liquidation is over, thankfully. But I do think that there are some funds that are about to be found out to be down 30% or down 40% or something like that.

• 26:19John Coogan?

  Take me through the mind of Ken Griffin, like a couple weeks ago. There's this rumor that he was sort of like pushing or signaling that there might be a rate hike. But what I'm interested in is if you suspect that there's going to be a fire sale on X, Y, and Z companies, is there a world where you build the hedges before you acquire those assets? Or is that two 4D chess? Because that, if they, if they wind up acquiring these for 50%, 20% off, but they already have offsets, then they sort of come in market neutral? Is that possible?

• 26:56Martin Shkreli?

  I don't think so. So I'm familiar with Citadel's performance for this month, which is surprisingly up. So I think they're probably one of the only hedge funds in the world that's up this month. It's up

• 27:06Jordi Hays?

  So they were actually, they were actually hedged, is what you're saying?

• 27:09Martin Shkreli?

  Yes. They have a diverse platform of different businesses, a guy trading weather, a guy trading rates, a guy trading stocks, you know, about 1,000 guys trading stocks. And they have a computer fund, you know, called Citadel Securities, that is a market maker, that trades a good chunk of the volume of every instrument in the world. And ultimately, I think that the prime brokers, the Goldmans and Bank of Americas, they do so much business with Citadel. And they've done this before where they know who to go to, just the same way the US government went to Warren Buffett when they wanted to shore up Goldman. They know that the right person to call is Ken. And he is really going out of his way to

• 27:50Martin Shkreli?

  make himself the guy to call. And I think that is a great brand, because you may not need to be that guy more than once every decade. But look, once a decade to make a free 5 billion or 10 billion is a great, great guy to be. And, you know, it's sort of like, he becomes a dependable, trusted partner to these banks. And if he wants something from the banks, he's helped them. Because without him, they might have had to sell that at a negative number. In fact, some people think, I don't think this is what happened. But some people actually think the equity in Leopold's prime brokerage accounts went negative.

• 28:24John Coogan?

  Okay.

• 28:25Martin Shkreli?

  Which I think is, you know, something that, again, the Goldmans and Bank of Americas try to stop you before you get there. But, you know, they also don't want to sell, like I said, share in AI, which is an illiquid, tough to sell security. You know, they'll sell out your Micron very fast, or you'll sell it out before then. But if you're left holding this bag of like a liquid crap, that you have 60 days of volume to get out of, it's pretty tough to sit there and tell your prime broker, don't worry. Which is why, again, I think he needed cash. Probably somebody on Monday or Tuesday tapped them on the shoulder and said, your margin's looking a little thin, you know, can you add, you know, a couple billion here or more? And things happen so quickly that there was just

• 29:05Martin Shkreli?

  no time. And, yeah, it's, I think Citadel learned about this at the 11th hour, as every, as you're supposed to. You know, the firm didn't leak out that they were hurting. They didn't have, to my knowledge, daily performance. In fact, from what I'm told, situational awareness as a young hedge fund was not so great with communication, not surprising, especially with monthly and quarterly letters, could have been more timely on some of those. So it's a small group of a couple of guys. So I don't think that this was the thing where

• 29:38Jordi Hays?

  Rewind, what was it, only a month ago that the, or

• 29:42John Coogan?

  13F was late.

• 29:43Jordi Hays?

  13F was like late, and everyone was questioning, like, okay, did he work out, did he work out some kind of deal to get it, you know, keep it confidential? But it, it sounded like you just like, didn't get around to it. They had other priorities, maybe. Do you think you can

• 29:57Martin Shkreli?

  Yeah, I mentioned

• 29:59Jordi Hays?

  Do you think you can rebuild a career as a venture investor? Because like, in venture, you're just, you're just like, gig along always. Like, it's like, you know, one of the few forms of investing where it's just so hard to get out of position.

• 30:13Martin Shkreli?

  Well, that's the thing. I mean, why become a hedge fund manager? Just, I have a friend who wants to, just sorry, I have a friend who wants to start a hedge fund. I told this is the most painful, horrible business in the world. Why do this? And if you start a newsletter business that makes 100 million a year, even 50 million a year of revenue, you've done better than almost every hedge fund on the planet. Like, you do not want to do this job. And the reason, you know, the reason people do it, and I did it too, and I would never do it again, is it's the sexiest thing in the world. You think you're, you know, the glory is

• 30:45John Coogan?

  Master of the universe.

• 30:46Martin Shkreli?

  Is incredible. Yeah, you're the master of the universe. And I had friends of wanting to quit really high profile jobs to be a hedge fund. I was just like, you're out of your mind. You don't know what this job is. It's waking up at 3 a.m., checking Korean stock prices, and, you know, waking up back up at 6, you know, wondering what's, what's happening in the world, stuff like this. And there's absolutely no productive thing you're doing. You know, you're providing capital. You know, but other than that, you know, you're really playing this high stakes, crazy poker game. And, you know, it's certainly fun and interesting. But when it's painful and raw, you know, I hope he'll, he'll do something. You know, he's a brilliant person, brilliant people like that. I mean, look, Peter Thiel had a hedge fund that didn't quite have this level of liquidation or anything like that,

• 31:30Martin Shkreli?

  but it had a rough last few years. And, you know, Thiel was able to, obviously, not only continue his venture investing efforts, creating one of the biggest funds of all time, one of the most successful funds of all time, investing personally, doing amazing, also getting back into macro trading with Thiel Macro, which supposedly has done well. So I do think there is this, like, period of a few years that, you know, he can reset and take the learnings, take whatever talent and skill, and certainly genius, that nobody denies that he's a brilliant guy, and rebuild. I don't think it's the end at all. And I hope he's keeping like that even temperament about this, because, you know, I think a lot of people respect him quite a lot, no matter how this turned out, you know, he'll be back

• 32:12Martin Shkreli?

  and successful. But it is a little bit of a humiliation thing that I think most people on Twitter or in other places are sort of saying, well, the market tends to humble you. And this is like, an extremely humbling moment from being, you know, just two months separated from the biggest hedge fund on planet Earth and most successful to being forced to sort of liquidate. That is quite a rapid sort of, you know, reversal.

• 32:37Jordi Hays?

  Also, just imagining what the fund looks like in two or three years if you just survive, right? Like, you know, he, you know, there was a clip that was circulating yesterday from his, you know, appearance on Door Cash, where he's like, oh, there's obviously like 100x, you know, left before AGI, right? So like, he was like, up, you know, 20x or whatever, thinking like, I got, I got so much room to run, but just couldn't stay in the game.

• 33:07Martin Shkreli?

  Extrapolating is always a risk.

• 33:11Jordi Hays?

  I gotta, yeah, I gotta say, it felt like a, felt like a huge moment for you and your business, just because everyone, the whole finance world was learning about the situation from your posts. I'm sure a lot of people were glued to your terminal. And it felt like a changing of the guard, because, again, you were getting pushed back. You were getting some pushback, but then, two hours later, it was like Financial Times and Bloomberg and Wall Street Journal, they're all kind of, clearly, they needed a couple hours to like, run it down. But you got to it first. And, yeah, I was, I was quite impressed.

• 33:48Martin Shkreli?

  Thank you. Yeah. I mean, I think that, you know, we've talked about this in the past. I mean, there is a change of the guard. You guys helped change the guard in your space. And I think that, you know, the folks at the Journal, the folks at Bloomberg, the folks at these other companies, they're fantastic reporters, but they're not active or former players. And, you know, we will hear, we will always hear things before them. Because, especially on the street, because that's just...

• 34:14Jordi Hays?

  Well, and the crazy, the craziest thing is, you, you actually waited until it was like, over, effectively, to, to share, right? Like, you had been hearing about this...

• 34:24Martin Shkreli?

  There's a lot that we sit on that we don't want to share.

• 34:26Jordi Hays?

  Yeah, yeah, yeah. And we, you know, we've been in that position, like, hundreds of times, where it's not appropriate to share anything. And sometimes you're sitting there being like, I'm really surprised that, like, legacy media hasn't picked up on this story. It feels like it's just common knowledge. And there's, there's a, definitely a time and place to just not, not say anything and let something work its way through the system.

• 34:47Martin Shkreli?

  Yeah. I mean, to give the devil their due, the information is also quite good at, you know, this type of thing. And they are particularly good at scoops on OpenAI, but the, which I still haven't unraveled how, but they're obviously very good reporters. But a reporter in a place like that, in trad media, they generally don't care about burning bridges and resources or contacts. So they want that news out yesterday. You know, I do care. And it also is a conflict of interest, because I don't want to hurt somebody that's giving me good information and betray their confidence, because I have to keep the confidence of these folks if I want to keep talking to them. But I also, in the case of this situation,

• 35:31Martin Shkreli?

  as the carnage is unfolding, you know, there's sort of a, the balancing, the need for everyone to know with the need for, you know, protecting friendships and relationships, you have to make that judgment call each time. And I hope that our customers understand that there will be things that we know before others, we can't disclose, because we want to protect folks and protect our friends. Bloomberg, Wall Street Journal, they'll never do that. They're, they're always going to serve their customer, who's the reader. We can't necessarily do that. You probably know things about a litany, like you said, hundreds of times, different fundraises going on, different things like that. And you have, we have to all keep our lips closed, because, you know, that will be the last time we hear about a fundraiser. And, and I think that this was a situation where it sort of merited

• 36:14Martin Shkreli?

  discussion. It was going to happen momentarily, anyway. I, in fact, to your, to your point, the thing that got me to publish was my friend saying, everyone is hearing this now. Once that happened, I said, all right, well, you know, it's time to, I can let the cat out of the bag, it's about to be let out anyway, so.

• 36:31John Coogan?

  Yeah. I have two more quick questions, if you have a minute. One is, just about how leverage works at a hedge fund. I think, you know, again, from the retail perspective, from the much smaller player, you might know that you can go to a, you know, a brokerage and get a little bit of leverage. But what does the process look like as you're scaling into the tens of billions of leverage? At a certain point, you have to go to all of the banks, certain banks, who's actually, like, what is that process to get leverage at that scale actually look like?

• 37:08Jordi Hays?

  And also, let's, let's appreciate for them, for a moment, that I feel like just a month ago, the West Coast broadly was taking this insane victory lap, being like, the West Coast is eating Wall Street, like, the best and biggest hedge fund is no longer on the East Coast. Like, we just have everything now, finance and technology, and then, and then just deeply humbled within the span of 30 days. And it turns out, turns out, you guys over there, you know a thing or two, and here we are, asking you, so how would one go about getting?

• 37:47Martin Shkreli?

  So, so one of the things that I think is not well understood is the prime broker

• 37:51John Coogan?

  Yeah.

• 37:51Martin Shkreli?

  make a spread on, I think that's somewhat understood, is they make, they make their business to make a spread on financing. So if you go to a prime broker and say, I'm never going to use leverage, uh, never? And they say, I'm never going to use leverage, and I'm never going to really trade a lot with, with, with your firm. They're just going to sit there and say, like, we'll still take the assets, because we can rehypothecate them and lend them to the guys that are going to take leverage. But in general, that's not a great customer. So if they're making a 1% spread, which is actually would be, is relatively a huge amount, and you're borrowing 4x, you're actually giving them 400 basis points of free money, which is sort of fantastic. In fact, you know, their borrowing costs

• 38:34Martin Shkreli?

  are probably less than, so far. So, you know, they may be getting as much as 600 or 800 bips of free money on huge amounts of capital. So leverage is the best friend to a prime broker. Now, the risk guy is sitting there saying, well, wait a second, you know, I love lending, but I don't like lending to concentrated portfolios. I don't like lending to short sellers. You know, short sellers can, can get big, big, big, you know, leaps in their portfolios, like GameStop, for example. So the most long can lose 100%, but if a 4x lever, the most long can lose 25%. So, you know, there's sort of this mix of, of things you have to think about. I think the, getting into the privates is usually like,

• 39:16Martin Shkreli?

  for me, a lot, a really bad sign for almost every fund, because it's, as tantalizing as private companies are, there is a whole group of people on the West Coast who are much better at that, than the guys on the East Coast. And of course, there are funds now, like Altameter and Co2 and others, that, that are doing both and doing both...

• 39:31Jordi Hays?

  Yeah. And what made that, what made it so tempting, obviously, for Leopold, that just how close he is to, like, he couldn't be closer to Anthropic. And it's a company that, over the last six months, has had 100x the demand relative to the allocation, right? So it just felt like, you know, and I don't know, who knows what the, what the structure on those investments look like. But it's like, if you're going to break your rule and do privates, like, then that's the company to do it with. But then you still get into a situation where you're like, wow, I really wish this was more liquid.

• 40:06Martin Shkreli?

  Yeah, I can't press the sell button.

• 40:08Jordi Hays?

  Give us an update before you leave on, on Korea broadly, because, you know, a lot of people are commenting on, on, on just how similar Leopold's approach is to Korean retail. I don't know how true that is, but I can imagine, like, it's, there's blood in the water over there, and the whole country is probably in shambles.

• 40:33Martin Shkreli?

  Yeah, I think so. I made a Kelly Criterion Calculator, and like, a little portfolio simulator tool, that, you know, basically, and Paul Trader Jones said this a while back, and I had a problem with this. Every single trader out there makes, makes one, seems to make the same mistake over and over again, which is their position size is probably 2 to 10x more than should be. And if you actually, you know, so, it sounds nuts, right?

• 40:57John Coogan?

  Yeah.

• 40:58Martin Shkreli?

  But if you actually run the simulator, and we, ours is a Kelly dot, Kelly, so Kelly was a guy at Bell Labs. He was a member of the technical staff. He's the original. Oh, gee, yes. And, and so Kelly came up with the proof, called famously the Kelly Criterion, which gamblers use, mostly was a gambler thing, before a financing. And it proves the optimal bet size. And the optimal bet size is your edge is attracted by the reciprocal event. So if you have 55% edge, your optimal bet size is 10%. That's still quite volatile for folks. And so people do half Kelly or quarter Kelly. Most, most folks don't, actually don't have an edge when they trade. But they're, if they did have an edge, they're trading

• 41:38Martin Shkreli?

  as if they had a 4x or 5x Kelly edge, which is, interestingly, like, you might sound, okay, well, that just sounds swashbuckling, and like, guy takes a lot of risk. No. If you run the simulator, you will go to zero each time. And the simulator is a really cool tool, that shows you, even with a 60, 40 edge on every trade you make, you'll go bust if you bet, if you overbet. And it's, it's an eye opener. We might say, who has a 60, 40 edge in the stock market? Nobody has 60, 40 edge. But you will absolutely go bust if you don't size correctly. And it's something that I've had to learn very painfully, very, you know, over, over the years, that I'm almost always overbetting. And I think every fund is sort of the same. And certainly, every retailer is the same.

• 42:21Martin Shkreli?

  And it's just sort of this weird variance math game that very few people actually map out and say, can I simulate portfolio? And just to see what is the sort of the right thing to do, in most cases. And in fact, I had a, after I left the Tiger Cup I worked at, I worked in a, briefly, in the office of a guy who worked at SAC Capital, not called Point 72 for years. And he was one of the best managers, who's a quiet guy, nobody's ever heard of, kind of retired. But I got to watch him, before I set up my own hedge fund and did the exact opposite, way overbet on everything. I got to sit with this guy for a few, few months. And I was astounded. So what I found is that, you know, he was managing, I don't know, 300 or 400 million of his own, basically. He almost never used

• 43:03Martin Shkreli?

  the capital. You know, 80, 90% of the capital was just cash. And he would just make these tiny trades. And the guy had almost never had a down, I think his record is, he never had a down quarter in 20, 20 something years of trading. And he had like, 20, 30% returns, which is great. And the guy just kind of, you know, just did these little, little nibbles. And he never lost money. And it was an incredible thing. And then, of course, the second I get the chance to get some capital, I'm 8x leveraged, you know? And it's just like, you know, it's the dumbest thing in the world, you know? And you live and you learn.

• 43:36John Coogan?

  Psychology, psychology. Well, thanks so much for coming on the show and breaking it down. This is always a great time.

• 43:41Jordi Hays?

  Yeah, looking forward to...

• 43:43John Coogan?

  Yeah, seeing where we go from here. Have a great week, have a great weekend. We'll talk to you soon.