Summary
- Recent market turmoil stems from combined deleveraging in South Korea and escalating Middle East tensions, creating a double black swan scenario.
- South Korea’s KOSPI, heavily weighted to AI via Samsung and SK Hynix, experienced an 8.3% plunge, exposing systemic leverage and volatility risks.
- Rising inflation, limited prospects for rate cuts, and potential energy shocks challenge the AI trade’s sustainability and broader equity valuations.
- I advocate raising cash, diversifying away from AI, and deploying capital at SPX pullbacks to 6700, 6000, or deeper corrections if momentum breaks.
- This idea was discussed in more depth with members of my private investing community, The Pragmatic Investor. Learn More »
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Thesis Summary
It has been a rough week for investors across the globe.
What looked like a simple deleveraging event on Friday has morphed into a full-blown breakdown.
This is no longer about positioning but
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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