Record profit. Stock crashed 10%

The exchange in Seoul stopped trading at 1:51 this afternoon. Someone had to flip a giant off switch. Samsung had just posted the best quarter any company has ever had over there. Better than Apple. Better than Nvidia. And the stock fell ten percent anyway.

I can't stop thinking about this. Because the same trap they built in Korea, we've built here. Ours is bigger.

Here's what happened. Samsung made 58 and a half billion dollars in three months. Their profit was 19 times higher than a year ago. This should have been a party. A record. Champagne on the trading floor. Instead the whole Korean market fell almost six percent in a few hours. SK Hynix, the other big chip company over there, dropped seven. The exchange stopped trading for twenty minutes to let things cool off. It was the fifth time this year they had to do that.

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Why? Because Korean savers had piled 155 billion dollars into a strange kind of fund. These funds don't just track Samsung. They track Samsung times two. Every move up or down gets doubled. When Samsung goes up one percent, you make two. When it drops one, you lose two. Same for SK Hynix. And those two names alone are 60 percent of the whole Korean market.

It happened fast today. Samsung reported before the opening bell. The stock rallied for a few minutes. Then something turned. By late morning both giants were bleeding. By lunch the whole board was red. By 1:51 the exchange had to stop everyone from selling. Twenty minutes later they turned it back on. The bleeding kept going.

I don't think most people realize how much money is in these things. And it's not just Korea. We have the exact same products right here at home. TSLL doubles Tesla. NVDL doubles Nvidia. There's one for Palantir. One for Coinbase. One for Alphabet. One for Amazon. They even launched one for SpaceX last month. NVDL alone holds more than four billion dollars.

Then you have the bigger cousins. TQQQ triples the Nasdaq. It holds 31 billion. SOXL triples the chip stocks. Another 17 billion. Add it all up and we are past 170 billion dollars in these leveraged funds. Five years ago that number was basically zero.

Here's what worries me. These funds don't get to wait. They can't. Every single night the math forces them to rebalance. If Nvidia falls, the fund has to sell more Nvidia. Not because anyone chose to. Because the formula demands it. Then that selling pushes Nvidia down more. Then the fund has to sell again. This is exactly what happened in Seoul today. On record good news.

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A Korean lawmaker called the market a casino this weekend. He asked the regulators to shut these funds down. The central bank there, which almost never speaks up about a single product, said out loud that these things "amplify concentration and one-way trading." Plain English: they push everyone the same direction at the same time.

Nobody knows when the same thing hits us. But the shape is identical. In Korea, two stocks make up 60 percent of the market. Over here, seven or eight names carry the whole S&P 500. In Korea, savers borrowed a record 28 billion to buy on margin. Over here, margin debt is also at all-time highs. In Korea, the leveraged funds were the kindling. Good earnings were the match.

I get it. These products look fun on the way up. Double the gain. Triple the gain. You feel smart for a while. Then one Tuesday morning something small breaks. The machines start selling. And there's no bid. Not for you. Not for anyone.

The number I can't shake is this. Samsung just had the biggest quarter of any company in history. And its stock lost a tenth of its value in one session. Not on bad news. On the best news they've ever printed.

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That's the part that keeps me up. When good news isn't enough to hold a market up, something else is running the show. In Seoul today, it was the machines. If it can happen there on a record profit day, it can happen here.

I'm not telling you to panic. I'm telling you to look at what you own tonight. If any ticker in your account has a "2X" or a "3X" in the name, ask yourself one question. What would you do if it dropped forty percent by lunch tomorrow? Do you have the stomach? Do you have the cash? Because plenty of Korean savers had to answer that today. On the best day their biggest company ever had. Many of them didn't get to choose. The machines chose for them.

More on this tomorrow.

— Lauren
Editor, American Ledger

*Disclaimer: Energy Exploration Technologies, Inc. (“we”, “us”, “our”, and “EnergyX” is conducting an offering of securities pursuant to Regulation A of the Securities Act of 1933, as amended. An offering statement covering this offering has been qualified by the U.S. Securities and Exchange Commission (the “SEC”). Neither this communication nor any of its content constitutes an offer to sell, solicitation of an offer to buy or a recommendation for any of our securities by our company or any third party. Offers and sales of the securities are being made solely by means of the qualified offering circular. Investing in our securities involves significant risks. Before investing, you should consult with your financial advisor, accountant, and/or attorney legal, and carefully review the qualified offering circular (including the “Risk Factors” section) and any offering circular supplements.

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