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🚨 An Important Message to All Investors. Last week, we saw Leopold get his investors' public stock portfolio liquidated. Likely in a matter of days, possibly leaving only his private Anthropic stake. I made a video, very upset. But my criticism comes only from lessons I had to learn myself. Here, I’m going to share them. Around January 14, 2022, the Nasdaq 100 was 6% off its peak, but my personal stock investments took a "leveraged" elevator down. At the time, I had about $32m in stocks and $20m in real estate. But I had margin debt on the stocks of about $14m - that's 43.75%. I thought I was safe. But my exposures were concentrated. The Federal Reserve Minutes for the December 2021 (released Jan 5) meeting were the WORST minutes I had ever read. I still tremble thinking of that day. I made a video about the Minutes and could barely process it. Unfortunately, it took me another 9 days to come up with a plan and execute. In the days prior, my videos became more bearish and I shared fears and concerns. But I didn’t know what to do yet. By then, my portfolio was down ~33% in a matter of weeks (on just a 6% Nasdaq decline). I didn't get margin called. But knowing that one day you could wake up to one is enough to make you lose sleep. And even if you can sleep well, you’re more likely to make other stupid mistakes because your emotions start destroying you: (sunk-cost fallacy, embarrassment of selling, admitting to making a mistake, etc.). Ironically, 6 weeks earlier I shorted ARKK with $3 million as a hedge at about $100, but I paper handed my hedge within 3 days! I didn’t have the balls to stay short! The Nasdaq 100 went on to lose another 30% in the next ~10 months. ARKK was down 68% from my entry. But the market took the stairs. I took the elevator with weak balls. Now, I want to be clear. Concentrated positions were part of this. So this isn't all about "leverage." Instead, it's the FEAR of what callable debt, on volatile assets, does to your psychology during a crash, and how even hedges don’t solve your psychological fears without a clear risk framework. Recently, the Nasdaq 100 puked into correction (down 11%) the last few weeks. Yet, the equal-weight S&P 500 was making all-time highs! So even a "diversified" investment into the Nasdaq 100, especially on margin, could be disastrous. But with margin debt or callable debt, you look every 5 minutes. You wake up sweating. You don't know how bad it's going to get and you know the Grim Reaper is going to come knocking on your door the next time the market's circuit breakers don't work and there's not a damn thing you can do about it. So, the real damage-inflicter... the real final boss? Callable or Margin Debt. It’s really fun on the way up! While I was riding massive returns on the way up, when the drop hit, my personal stock "peak" fell 10x faster (speed-wise) than the market in 2022. At that rate of change the nightmares of a margin call are enough to drive you mad! In December of 2021, I almost bought a $23 million dollar Praetor 500. So, I sold ~$14m in positions at the top for the plane’s down payment, much of that in margin. Well timed, right? Well... JP Morgan then surprised me with a loan including a "remargining provision", which meant they could call me up and demand more cash, if the plane's value declined. (Plane values have been fine, but they also crash 50-60% in recessions). I politely told JP Morgan, "no thanks," and currently refuse to do business with JP Morgan (more reasons, but let's focus). Then, the money I raised to buy the plane? Oh, I invested that back in where it was. In margin. F**K. In the third quarter of 2022, I launched HouseHack and swore off debt for as long as possible. To date, we have 100m+ in market-value real estate rented out and/or in development with ZERO bank debt. And, in the 4th quarter of 2022, I bought stocks like Nvidia, and swore to never buy stocks with debt again. The beauty about that NVDA purchase? I bought it and forgot I bought it. Sold it up about 10x. Sometimes, lessons are best learned FROM OTHERS. Apparently, I've had to learn for myself (stubborn, I guess!). Fortunately, I got lucky. I didn't get wiped out. I got "nipped". But I didn't learn from others getting sucker punched once. I had to learn it myself, over and over again, in slightly different ways. Learning is never linear. I made more mistakes, and I still worked for a better future. But I still got sucked in AGAIN! With some lessons learned. In November of 2022, I launched an ETF, and while the fund returned over 24% to investors in the just over 2 years it existed, I became so fearful that, even while I was calling for the greatest Nike Swoosh recovery from the bottom of 2022 (which happened), I still hedged the conviction. The conviction was right! But the damage of what short-term pain can do to convictions was enough to say: HEDGE! I used small positions in leveraged ETFs INSIDE the ETF to hedge against a downside. Without the hedges, we outperformed in our first year. With the hedges, we underperformed. I closed the fund and returned every dime to investors, a few weeks before Liberation Day. I feel good about having tried. I did try my best and my efforts came from a good place. But I was still shell-shocked from early 2022. And that fear combined with hedges, led to an underperformance relative to the S&P 500 over the life of the fund. Of course, I wasn't done learning... I bought a smaller plane on a 20-year fixed-rate loan with no "remargining" provision in December of 2022. Unsurprisingly... The happiest two days of my life, as the saying goes (again, I should have listened), were when I bought the aircraft for $12.9m, and the day I sold it for $12.969m - Today, I'm totally debt free. I also have to say I'm f**king lucky to have sold a plane I flew for nearly 3 years for more than I paid for it. (Sale price $12.969m, escrow total includes prorations, commissions, and closing items.) I also paid off all my real estate debt by selling some properties to consolidate my balance sheet, minimize risk, maximize peace of mind, and focus on HouseHack/Reinvest. My dream is to build a business like Buffett. That's why I launched my startup (now called Reinvest - previously HouseHack). But it took falling on my face (a lot) to learn how bad debt was and how important risk management is to investors. Anyone who hasn't learned this should NOT be managing someone else's money. While I'm still learning, I believe today I'm building very strong foundations that will survive, hopefully for 60 years (when I'll be Buffett's age). Zero bank debt means: ➡️ We're like Citadel, not Leopold. ➡️ We're waiting for the opportunity, like Buffett. ➡️ We're a buyer, not a forced seller. While I hope this market keeps mooning, and I'm sure I'll make some mistakes again, I want to be transparent about the one wish I still today regret didn't come true: My ONLY WISH: I wished someone personally grabbed me by the shoulders and told me: GET OUT OF MARGIN NOW. Today, let this be a message to you: Get out of margin debt. What motivated today's post? 7 days ago on the Disney Cruise, Jack said: "Dad, the last time I had a sugar cube was years ago. It was the bell ringing." https://t.co/30LwyMfof5