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Right now, tonight, 1.2 million people in South Korea are looking at a message from their broker saying their assets have already been sold. Not "you should sell." Not " you are approaching the margin circle." Sold while they were sleeping. The machine sold their savings for them. And they couldn't do anything about it, because it wasn't their decision from the very beginning.
And here's what should really scare you. Wherever you are in the US right now. What just happened in Korea is not a Korean problem. This is a smaller, faster version of the deal that America is now doing on a larger scale, with more leverage and on fewer shares than ever before in Korea. I've been doing this for a long time .
I have made a lot of money in the markets and lost a lot. And if 40 years have taught us anything, it's that collapse never announces itself in advance. It's just quietly maturing. And then one day the mechanism underneath breaks, and everyone pretends to be shocked. So for the next half hour, I want to show you in detail how this mechanism works.
Show the numbers that prove: America is in a more dangerous situation than Korea was. And then I'll give you a specific algorithm that I use myself. The one that helped me survive each of these crises since the 80s. This is not a video about the end of the world. I am not predicting the apocalypse .
I act rationally. These are different things. And in the end, you will know exactly which path you have chosen. Before we begin, one request. What I am about to tell you has cost me decades of effort and many costly mistakes. Mistakes that cost real money and sleepless nights. I won't pretend that I'm doing this for any noble motives.
I'm not that kind of guy. But I will say this . If it saves you from even one wrong decision during the next major correction, it's worth much more than any income the channel will earn from your subscription. So do it now. Click " subscribe" because in the next part of the series I will talk in detail about determining position sizes and exiting the market.
And you won't want to miss it when it flashes across your feed. Let's start with who these people are in Korea, because it matters more than you think. Korea has a population of about 50 million, and approximately 14 million of them are ordinary retail investors. They call themselves " ants". One ant won't change anything.
14 million ants moving in the same direction at the same time can change the entire market. And you have to understand why they took such a risk. There is a deep cultural belief in Korea that by a certain age you should have a stable job, your own home, and start a family. But housing prices have become so far out of step with ordinary salaries that an entire generation has looked at this " social ladder" and realized that they will never climb it through work.
So they made a completely human decision. If home is out of reach, the stock market becomes the only open door. One of the country's most respected financial commentators even called it the last chance to accumulate capital. Think about it for a moment, because this was n't a group of thrill-seeking players .
These were ordinary people who put their future on the line because they sincerely believed that there was no other way out. But they didn't just limit themselves to buying shares. They took out loans to buy them: personal loans, loans against future salaries. And a huge portion of that money didn't even go to common stocks.
They went into leveraged funds . I want to explain this part slowly because that's the whole point of the story. And this is exactly the same mechanism that is quietly operating beneath the American market today. Conventional fund: the index increases by 1%, you earn 1%. Double leveraged fund: the index goes up by 1%, you earn 2%.
Triple Leverage Fund: You earn three percent. It gives an incredible feeling while growing. Everyone feels like a genius. No one explains the other side of this math until it's too late. And here she is. The same fund with a triple lever. If the index falls 10% in a day, you do n't lose 10%. You lose 30.
The same tool that made people feel brilliant during their rise destroyed them during their fall. And he did it in weeks, not years. So, where did all that borrowed money really go? Mostly in two companies. Two companies, Samsung and SK Hynix , accounted for more than half of the entire Korean stock market.
I've studied Korean markets in detail before, and they are amazing. These giant conglomerates own pieces of everything, and they are all interconnected in such a way that the index looks diversified on paper, when in reality it is not at all. So what looked like a broad national stock market was actually one concentrated bet under a hundred different tickers.
And here is the mechanism that turned a normal fall into a complete collapse. In a normal market, sales slow down when sellers get tired and simply stop. But when the market is built on borrowed money, no one has to choose whether to stop selling. The sale happens automatically, whether you want it to or not.
When you buy with leverage and the price falls below a certain level, your broker does not ask for permission. They send a message: add cash by morning or we will sell everything for you. And if you don't have cash, and at this point almost no one does, they sell your shares at any affordable price.
Not at a favorable price, but simply at one that forces you to sell, which lowers the price even further, which provokes a margin requirement from the next player, which forces you to sell even more, and so on in a circle. This is the "death loop." And leveraged investment funds have made it even worse, because they are mechanically obligated to sell more every day to maintain their ratio, regardless of what anyone thinks about the fundamentals.
As a result, the Korean market fell by 25%. Over a million accounts received margin calls. About 360,000 were completely destroyed. Forced liquidation, no negotiations. And the youngest were the most affected. The 20-30 year olds who had the least ability to handle it and who took the biggest emotional risks, the ones who were trying to buy their first house, to start a family that culture told them they should already have.
The situation became so critical that the country's president had to intervene with emergency measures to somehow stabilize the situation. National emergency caused by leverage in the stock market. And I want you to think for a moment about the human side of this issue, because deep down they didn't think of themselves as reckless.
They were in the black. They felt smart . They felt they had finally found a way out. And in about 3 weeks, the car took everything back, and no one even asked them. Here's an inconvenient truth you need to hear before we go any further . Headlines like this will continue to appear. Today it's Korea, next year it's somewhere else, and no one, not me, not even the smartest person you know, can tell you exactly what headline and on what morning will finally lead to collapse.
What you can do is create a portfolio that doesn't care what headline appears in the news. One where a day like the one Korea experienced is just a setback, not a knockout. This is the main purpose of what I am explaining to you here. Now let's talk about why this is not just a problem for Korea. At its peak, Korea's total marginal debt relative to their economy was around 1.3%.
Currently, in the United States, investor margin debt is about 4.7% of the economy. This is the highest level ever recorded in American history. Read this again . The country that just needed emergency presidential intervention had a smaller debt load , significantly less than the United States has now.
We have three to four times more debt relative to the size of our economy than Korea. And in pure monetary terms, it is about 50 times more. And here's the part that actually worries me more than the main number. This 4.7% figure only takes into account traditional margin loans through a broker. It does not take into account credit ETFs.
It does not take into account exposure to options. It does not take into account the private credit that is quietly behind many of these positions. The real figure is almost certainly higher than what everyone is reporting, which means that 4.7% is not the ceiling. This is closer to the bottom. For context, at the peak of the dot-com bubble, margin debt was about 2% of the economy.
In 2008, it was about 2.3%. In 2021, about 4%. Each of these moments was soon followed by a major correction. Every time we reached a new leverage high in the history of this country, it led to real pain. Not in most cases, but every time. I want to tell you something about myself because I think it's more important than another schedule.
Early in my career, I got burned badly while maintaining a concentrated stance. I was in love with the type of asset where you keep looking for reasons to stay even when the evidence is against you. I convinced myself that I understood something that the market didn't see. I was wrong. And it cost me so much that I still remember the exact figure decades later.
The lesson I learned wasn't about that particular action at all. And being right about the story and being right about the timing and leverage behind that story are two completely different skills. And most people, including many professionals, only practice the first. The 14 million Korean "ants" were not wrong in that artificial intelligence and technology would be important.
They were mistaken about how much borrowed money was safe to invest in this faith. And this gap between the correctness of the idea and the incorrectness of the size calculation is where fortunes are destroyed . I've seen this happen to smart people over and over again for 40 years. And the scheme never really changes.
Only the ticker changes. You might be sitting there thinking, " Okay, but I don't use margin. I just have an index fund. I'm not part of this story." I want to delicately object , because if you own the S&P 500 index right now, about half of its value is actually one concentrated bet on artificial intelligence, not diversification.
One deal disguised as 500 tickers, same story as in Korea where 100 companies are actually two. Most portfolios I've been looking at lately have 60-70% exposure to this single theme, even without the owners realizing it. This is the level of concentrated risk that many professional asset managers avoid, and ordinary investors carry it casually, owning what seems like a safe and boring choice.
So let's talk about what actually holds this whole structure together, because I think this is the aspect that almost no one explains clearly. A handful of huge companies, the big cloud and software giants, are spending about 3/4 trillion dollars this year building out artificial intelligence infrastructure.
These costs do not disappear into the void. They become revenue for chip manufacturers. They become revenue for memory manufacturers. They become the engine behind all the AI trading you hear about all the time. And it is this booming income that justifies skyrocketing stock valuations, which in turn are being bought with record amounts of borrowed funds, as the same giant companies can borrow cheaply against their own overvalued shares to sustain the spending cycle.
Exactly the same as there, only on a much larger arena. So keep a close eye on one indicator in the future. Keep an eye on what's happening with the spending plans of this small handful of companies. After all, the collapse in Korea did n't even require a real drop in demand. All it took was for investors to get nervous that this could happen.
Fear alone was enough to set the whole mechanism in motion. Now imagine that one of these giant companies says during its earnings report that they are cutting spending plans for next year. They won't put it that directly. Of course, this will sound like a cautious phrase about reprioritizing capital allocation during the fiscal year, but the market will understand what it means, because these expenses are someone's income.
And once they slow down, the real hit will be on the suppliers at the bottom, not the giants at the top. We've seen this movie before, just with different actors. There was a period in 2000 when one large beverage company reduced its usual equipment order from about 10,000 units to about 2,000 the following year.
A boring, ordinary corporate solution . But the company that made this equipment was the hottest stock of that entire era. And that one customer who cut back on an order was part of what helped trigger the collapse in the value of those stocks. And from there began a broader collapse of the entire technology sector, which wiped out most of the value of the NASDAQ.
One customer who canceled one order undermined the foundation of an entire market narrative. Today, the vendors at the heart of the AI spending story are, in a very real sense, the market itself. Now I've spent a good chunk of time explaining to you everything that concerns me, and it would be unfair to you if I didn't give you something that you could actually use.
So, here is a working structure. The same one that kept me from complete collapse throughout all the cycles I've been through. And it works whether you're managing ten thousand dollars or ten million dollars. None of this requires predicting the future. I don't have a crystal ball, nor does anyone else on television who pretends to have one.
The first step is to do the most honest audit of what you actually own. Because you can't fix a risk you refuse to look at directly. Ask yourself three questions. First, do you have any loan funds, anything with 2x or 3x in the name? If so, clearly realize that it was this mechanism that turned the correction in Korea into a complete collapse, and think carefully about whether such instruments even have a place in your account.
Secondly, do you use borrowed money in any form? Margin trading , portfolio loans, “buy now, pay later” services secured by investments— anything where losses can exceed the actual funds you invest. To be honest, I don't have any personal debts. Not because debt is evil, but because I've never needed it enough to pay for it with a loss of flexibility during a real storm.
Third, and this is something people ignore: is n't your portfolio secretly just one trade disguised as diversification? Discover your real assets and check which sector they are actually tied to. Most people fail this test without even realizing they are passing it. Step two is to make sure that no event can destroy you financially.
And there are two parts here. The first is the position size. No asset should be so large that if it collapses tomorrow, it will drag your entire plan down with it. Korea bet everything on two stocks, and when those two stocks fell, the game was over. The second part is true uncorrelation. Owning assets that don't move for one reason and at one time: real estate , industry, something completely outside of technological history, because there are thousands of companies to choose from in this market.
And the financial media has a strange habit of talking about only one sector. Step three—determine your exit while you are still calm, before day "X" arrives, not during it. I have a written plan for every single position I hold. The level at which I sell is determined in advance in a calm moment with a clear head.
This is what Korea proves better than any lecture. It is almost impossible to make the best financial decisions in the midst of general panic. Rules you write when you are calm always trump decisions made in a state of terror. Every time without exception. No exceptions. I'll be honest: writing down this plan seems almost pointless on a quiet, boring Tuesday, when everything around is green and no one is worrying about anything .
That's the point. The whole value of a plan is that it was created on a calm day by a reasonable version of you for a future scared version that doesn't exist yet. When this scared version appears—and it always does eventually— she will be unable to think clearly. No one can do that when they see their account plummeting.
So you're not actually writing a plan for today. You are writing a letter to your future self, who is about to panic. And the only gift you can give that person is a decision that they won't have to make in a panic because you've already made it for them. And here's the part that almost no one talks about because everyone is too busy being afraid.
For a prepared investor, a crash is not a catastrophe, it is a sell-off. When hundreds of thousands of Korean accounts were forcibly liquidated, someone was on the other side of every such transaction, buying up shares at a pittance from people who had no choice but to sell. I'm not telling you to go and buy Korean stocks.
I say that this is the whole difference between the two types of investors. Those who are forced to exit at market bottoms, and those who feel comfortable enough to become buyers themselves. The goal is never to scare you and make you sit on the sidelines. This is a separate type of error. The goal is to put you on the right side of what happens next.
Let me leave you with one image before we finish. Just before the Titanic hit the iceberg, a representative of the ship 's construction company publicly stated that he had absolute confidence in the ship's unsinkability. He said this when the water was already rising—that's what the peak of any bubble in history sounds like.
Complete confidence right up until the very end. This was right before the Korean market collapsed. The 14 million investors there had the same confidence. Every bubble in history dies with someone saying, "This time it's different." So, let me clarify something before I go, because I don't want my words to be twisted.
I'm not telling you to run away from this market or run away from artificial intelligence. I truly believe that some of these companies will be worth a staggering amount of money over the next decade. What I mean is that many investors are now paying tomorrow's prices, using borrowed funds, as if the future had already arrived and was guaranteed.
Be careful with leverage. Be careful with debts. Especially now, at this particular point in the cycle. If you take only one thing from everything I just said, let it be this. Build a portfolio that will make the next scary news headlines irrelevant to you personally. I don't sit around glued to financial news.
I have n't done this for years because when your rules are written down in advance, the headline no longer demands an emotional response from you. It simply requires you to stick to the plan you have already made. That's the whole point of the game. Subscribe if this was helpful to you , because next time I will go into more detail on how I determine position sizes and exit structure step by step.
And if you know someone who is in one of these overloaded briefcases without even knowing it, send them this video . This is honestly the only favor I ask. Take care of your money as if it really matters to you, because it does.
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