“No, this sucker’s electrical, but I need a nuclear reaction to generate the 1.21 gigawatts of electricity I need.” – Back to the Future
Ouch, I guess eclipse jokes can be dark.
I’ve heard the phrase “If you can’t spot the sucker in the first half hour at the table, then you are the sucker,” many times in my life.
Mostly, after I’ve realized I was the sucker.
Recently, I’ve been watching the markets the same way I watch a late-night poker game at a kitchen table. The cards are the same for everyone. The rules are printed right there. And yet, somehow, the same faces keep walking away with the chips.
Let’s start with three recent examples that should make people who actually save, invest, and try to play by the rules say . . . huh.
Is 2,000 pounds of Korean money a Won ton?
Let’s start with South Korea’s leveraged massacre, 2026 edition.
Normal guys in South Korea were betting on the right side of the trade. I mean, they were on the right side of the trade before the South Korean market began hemorrhaging cash this week as China starts to look pretty strong in the chip-making business. But before that massacre, retail traders (they call them “ants”) piled into brand-new single-stock 2x leveraged ETFs tied to Samsung™ and other Korean tech firms who were benefiting from the A.I. bubble.
The bet is simple. If Samsung© goes up 10%, your ETF goes up 20%. Get on the right side of the trade, and double the profits that all of the suckers are making.
By law, the products rebalance every single day by a public formula: sell more when the stock drops, buy more when it rises. Sophisticated trading desks know the formula, know the size of the flows, and know when they hit: near the market close. These firms essentially buy the stock beforehand, and scalp the 2x part of the trade.
But if the stock declines, the automated selling amplifies the decline. Hundreds of thousands of accounts of small guys saw their accounts evaporate. The “little guys” who thought they were investors discovered they were only “market liquidity” that got liquidated. I imagine it’s even worse this week as their market is imploding.
I wonder after the first tsunami hit Japan if they had lots of different names for it, you know, a title wave.
Let’s move next to the microsecond arms race.
Investment firms pay serious money to put their servers inside the same data center as the exchange matching engines. Why? The firms can see slower orders coming, cancel their quotes, reprice, or step in front. They legally front-run purchases, getting a bit of the action, like me getting in the cheeseburger line in front of Rosie O’Donnell, buying all the burgers, and then making her pay twice the price to me because you know she wants one.
But instead of burgers, my pension and my 401k are the funding source and the burgers. Or they buy the burgers. I forget. Just thinking about Rosie eating is unsettling.
I once installed a trampoline on Aerosmith’s tour bus. Now everyone wants to jump on the bandwagon.
Next? A.I. bets: Pensions and 401ks are literally soaking in it.
Nobody actually requires pension funds to buy speculative A.I. bets. But when the benchmark rate that the fund is trying to replicate is the S&P 500©, over half of that index is now A.I. Private credit and datacenter infrastructure funds are sold as “diversifiers.” The Aptly Named Larry Fink has been open about it and I’ve written about him before: a big chunk of the A.I. build-out is coming from “your savings accounts and pension accounts.”
If, or more likely when, the power plants never get built or the market discovers that no one really wants to pay a lot for A.I., the little guys eat it. We’ve seen this movie with mortgage-backed securities in 2008, but after 20 years, who isn’t up for a sequel? And don’t mention Star Wars®.
Those three are current “legal” scams.
There are larger, longer-running and still legal versions that hit responsible investors. Here are a few.
Steal a man’s wallet and he’ll be broke for a day. Teach him to play drums and he’ll be broke for the rest of his life.
Payment for order flow.
My “commission-free” IRA firm sells my orders to the big market makers.
They see the flow first. Every time I click “buy,” someone is being paid to take the other side with better data than I will ever have.
Index and ETF reconstitution.
The rules for what goes into the big indexes are public. Active money buys the adds and sells the deletes before the passive funds are forced to do it on the effective date. If you own index funds (and most of us do, in 401ks and IRAs), you are systematically buying high and selling low on the reconstitution days. The front-runners collect the spread.
Private-equity leveraged buyouts.
A PE firm buys a solvent company, and loads it with debt. This is what happened to Toys’r’Us©. And Sears™. And RadioShack©. And TWA®.
And I could keep going.
They then extract fees and dividends, cut costs, and exit leaving like a vampire leaves a dried husk before the Sun comes up. The workers get fired. The store sits empty, as what was once a business becomes a blight. If my pension was invested in those funds, I’m also funding the vampire extraction while the downside lands on the real economy.
Glass coffins? Schrödinger was not a fan.
Institutional money vacuuming up single-family homes.
Large capital pools decided residential real estate was an asset class. They bought the inventory that used to go to . . . families. Prices and rents rise. I already owned, so I was insulated. But the kids?
Too-big-to-fail.
When the “systemically important” institutions get into trouble, they will be bailed out. I’m betting that OpenAI™ is working to get as big as it can as soon as it can so it can sink its tentacles into the economy deep enough that if it fails it brings the whole house down and then they will have to bail Sam Altman out so he can keep his mansions, cars, and bunker. Hey, I guess it’s just a business model.
Even though he won, he could tell there was no future in it.
I guess I can stop pretending the game is neutral, because I could go on and on and on with more examples. To the big players, the Elons, Altmans, the Finks, we’re just liquidity and our retirement account is being used as their stack of chips.
The cards are the same.
The edge is not.
Don’t be the sucker.
“Don’t be a sucker” is good advice … but for the average person what is the alternative? If you’re lucky you work for a company that has a half-decent 401(k) match and fund choice, but all the choices lead to the same circumstances described above.
The best you can do is low cost index funds or some kind of target date funds. At least you aren’t getting killed with management fees for subpar results (not investment advice)
This works great right until it doesn’t. Passive flows are now big enough (or very close) that a down turn in the economy (dont really need mass layoffs, just a decent reduction in 401k deposits) has a high likelihood of crashing the markets. This would happen because without passive deposits, there is a greatly reduced bid, or worst case, no bid.
They do. It’s a matter of trying to avoid most of the abuse. Some people bought gold. Some followed Arthur’s advice. Avoid leverage. Look at what the rich people are doing – it often involves land . . .
If you can’t beat’em, join’em.
A thoroughly lubricated rail.
The reality train approacheth.
Objects in mirror are closer than they appear.
The next chapter of “Repairs” is posted today. Let me know what you think: https://zaklog.substack.com/p/destination?r=2nmhek
Excellent!
Love the Schrodinger joke. For the financial world today, they are deliberately keeping their eyes closed regarding the ongoing AI situation to try to keep the market in its current both-dead-and-alive state, which is better than the dead-cat-bounce we’re gonna have once all these off-book private-credit AI construction deals come out in the earnings calls.
A few days ago the tsunami siren went off for AI investments when CDS (Credit Default Swaps) rates for Nvidia spiked overnight. Overall, this insurance rate for Nvidia stock has doubled in July. Shades of Michael Berry and 2008….
https://newsfile.futunn.com/public/NN-PersistNewsContentImage/7781/20260728/0-803cf873a4e140988b6504c8bc4b45b0-0-e312a65b259067ddacb0c4acc2763e47.png/big?imageMogr2/quality/minsize/1/ignore-error/1/format/webp
This is all behind-the-scenes shuffling not visible to the average retail investor but is instead a smoke-filled-room transaction between too-big-to-fail banks and the hedge funds that are the custodians of all those retirement plans and 401Ks. Oracle, which has the main contracts to get the concrete poured on all these new data centers, had been clobbered by CDS rate hikes for months now causing their stock to decline over 60% in the past year. Once the same story plays out for stock market darling Nvidia, it’s look-out-below for the US economy.
But to get back to Schrodinger. This week I came across the best video I’ve seen about his famous equation, which he dreamed up while shacked up with his mistress. Atoms and guitars have a lot in common. Who knew.
“Nobody Explained the Schrödinger Equation Like THIS!” :
They’re running out of money to throw at data centers.
“They then extract fees and dividends, cut costs, and exit leaving a like a vampire leaving a dried husk before the Sun comes up” – I think there is something missing here.
Thank you! Fixed!
” This is what happened to Toys’r’Us©. And Sears™. And RadioShack©. And TWA®”
factories across the Rust Belt before that …
textile mills in new england before that …
Time is inexorable; an organism that is not growing is dying: there is no stasis in life.
its a dog eat dog; root, hog or die world.
a society can build a great set of etiquette around that to cover the banalities.
eventually, it devolves back into subsistence lifestyles and crude behaviours.
You have covered the symptoms well, but blaming the system is being myopic.
life is hard, even harder when you’re the sucker at the table.
and i, too, am frequently the sucker; im not being arrogant.
Ditto. I’ve been the sucker. More than I’ll admit.
The old joke goes – “….no corporate investment advisor ever got fired for buying Exxon.”
AI = dot.com = 2008 MBS. I have my SEPIRA, so can choose my investments. Learned my lesson back in 1991; the broker/friend that set it up said “I’d buy Phillip Morris”. So, I did. This was in the wake of KKR doing the LBO of RJ Reynolds. Looked good at that time.
Clinton got elected, and PM lost 50%+ due to the fear of Hillarycare by mid-93.
Sold it and bought Exxon. Still own it. FAFO.
I still get a quarterly statement for my shares of Enron that have been worth zero for decades, it is a nice reminder if nothing else.
as-
That same broker was touting LDDS in the mid-90s. LDDS renamed itself WorldCom. He probably lost a few clients several years later. Its HQ was in Jackson, MS, where I grew up. Was warned about it around 2000 or so by childhood friends who thought Bernie Ebbers was a shyster.
Big funny – First Union loaned Ebbers $21MM (unsecured) in the late 90s. They ate that.
Who’s paying for postage?
Bingo. Plus dividends.
The market manipulations by pedophile protector POS preezy of the steezy Moshe Trumpsteinberg (MIGA) reveal that it is fake gay and retarded just like everything else.
Try zoloft
I like crack and LSD.
Yeah, so-called “Shell Answer Man”. Obviously you’re filled with misinformation and bad attitude. Who do you think you are to criticize the greatest president since Abe Lincoln? You need to touch grass and to educate yourself.
Take your SSRI (Zoloft is good). Eat your McGoyslop. Drink those THC-enhanced beverages when they come out (Seagrams would have been proud, if only that idiot Ed Jr didn’t wreck the family drug business). Learn to worship sportsball players (I recommend Robert Kraft’s Patriots). Support lesbian (or trans) athletes and wear a Brittney Griner jersey. Take a long weekend and do some gambling at the Las Vegas Sands (Miriam Adelson can always use more money — she spends it on the Best Causes). Watch your Larry Ellison-approved TV shows and movies that are totally free of any political bias or agendas. Enjoy the ever more deviant and incest-promoting pornography available for free. Free!
Recalibrate that bad and broken brane of yours and become a normal Fatmerican like all the Good People.
ROTFLMAO…Hope you are doing well Brother…
It is fake and gay.
Re “Poker with Tarot Cards”… 1:46 if it doesn’t cue up there.
https://youtu.be/lvhRPJH5Tgw?si=HsB0Fj-baVAEl921&t=106
Hahahaha!
Three Laws of Thermodynamics: 1. You can’t win (conservation of energy). 2. You can’t break even (entropy increases). 3. You can’t get out of the game (system temperature is > 0 K). Deal with it.
Just because you can’t win or break even, doesn’t mean that you have to lose a lot. You can lose more by being stupid. Money can’t buy happiness, but being poor isn’t any fun.
Lathechuck
Nope, it isn’t.
Metal, Miners, and Energy is the ticket.
This 10 minutes.
> Don’t be the sucker.
Yes. But is it good for the Finks?
The Aptly Named Finks.
“I like to try and sell something to you.”
Heh. That movie, though, sold us the media as opinion makers.
LOL you know hate and anger could be useful if directed in non farting in the wind ways. People who believe the Bible have two things an infallible King and a knowledge of who wins. All of the trouble and distraction are spiritual not material. If you don’t see that do you really think that any or all of these as clowns are smart enough to be doing all of this?
Besides worrying about Credit Default Swaps (CDSs) for Oracle and Nvidia mentioned above, now we gotta also watch out for failures of Total Return Swaps (TRSs) which made the NASDAQ take a 700 point hit in 60 minutes…
https://cms.zerohedge.com/s3/files/inline-images/2026-07-30_06-53-55.jpg?itok=9LKbO0An
…when the AI whiz kids at the Situational Awareness (heh) hedge fund had to hit the red button and do an emergency fire sale when their TDS bets suddenly failed.
https://www.zerohedge.com/markets/archegos-20-former-openai-employees-fund-seeks-fresh-cash-after-levered-bets-blow#google_vignette
That’s nothing compared to what’s happening in Korea, where failed AI bets on Korean memory companies Samsung and Hynix have collapsed the KOPSI stock index by 40% in a month to wipe out $2 trillion in retail wealth held by over a million retail investors. Much wailing and gnashing of teeth there – the government is setting up suicide prevention call centers. Coming our way soon? Bet on it.
Korea is collapsing. Ouch!
Everything is illegal, everyone is a criminal, everyone is under surveillance 24/7, and no one cares.
Living in a police state means that you must live in dread of being arrested. You can’t help feeling hopeless.
Bingo. And they never arrest the “youths” with Glocks killing each other.