Yesterday Today Tomorrow

Guest (Male): Yesterday, connecting past. Today, with an outer view. Tomorrow, to understand future. Yesterday, Today, and Tomorrow is the program that covers the current contemporary social issues in the light of our history to understand our yesterday, to live fully today and tomorrow. Yesterday, Today, Tomorrow with Inseong Kim.

Inseong J Kim: Hello, this is Inseong Kim from Yesterday, Today, and Tomorrow. Thank you for listening to our program. Most of the time, we ask why we dig into the past and talk about stories from the past. It is because we learn a lesson and we see the pattern, and somehow we can change the directions. The same pattern is happening today with the AI boom and the same machinery lived in the three markets in August 2026.

I covered a little bit about South Korea and what happened. It was a cover story that we hear, but it is not all the story that we know. In the next program, I am going to dive deeper into what actually happened in South Korea so we can learn from it. The basic story is that 2.118 trillion disappeared. SK Hynix's operating profit ran from under 10 billion in quarter one of 2025 to over 35 billion in quarter one of 2026.

The question is, their market is still good until the Chinese market comes. We have the South Korean market, and SK Hynix has a high order already, but one news story can crush the stock market. That is the news that China is coming. Their chip market is coming. As an investor, when they hear this news, then the near future, the couple of years or even—we don't know—that market is going to change. When they foresee it, what do they do? They can change their decision-making process.

The trigger was SK Hynix's results failing to impress despite a six-fold earnings jump. The market had priced in even more. Remember, President Xi Jinping in China said, "We can destroy you with the chip items. Everything is built into the cost-effectiveness that nobody can catch up with the competition what they had."

Fourteen million retail investors held long-funded three-times leverage memory ETFs, and KOSPI hit eighth circuit breakers as margin calls struck on 1.2 million accounts. This is one of the examples of the panic in Korea that has never probably happened before. South Korea has been very good at keeping stewardship and managing their finance because, after the war, South Korea was destroyed and in ashes.

After that, generations worked so hard to build this South Korea. But it goes to the second generation and goes down to the third generation who did not work so hard and didn't understand the depth of the economy, how it got built. It becomes an uneducated decision that was made, and it can cause this disaster. It hurts the actual people who funded money.

In China, it is different because they are—they might, we are not sure—the warning is from two of China's best-known hedge fund managers who called the AI rallies a super bubble whose collapse point may not be far away. AI stocks in China went up 65% in the first half of 2026. Following the mounting bubble warning, even though there was warning, people were investing in the Chinese AI market.

A Chinese chip designer, Shanghai Baren, surged early 120% on its Hong Kong debut and was over-subscribed by retail more than 2,300 times. But one source said China will be okay because they have other industries that are also still going up. The difference between South Korea and the US versus China is because we put everything in one basket. China has an industry that out-sourced supply chain all over the world.

They can hold their bubble burst, and so the China chip open-source models have closed the gap with the US models to 2.7%, threatening the price power behind AI valuation everywhere. Basically, we are doing our best to win the competition. The Chinese model is very open and has less regulation than the US. We are building AI very slowly and making sure everything is working properly, whereas China is the Wild West.

The connection risk hasn't been tested in the US, and the S&P 500 year-to-date as of mid-August 2026 is on track for a fourth straight double-digit year at 13.4%. This year's hottest AI trade memory stocks like Micron, SanDisk, and SK Hynix are already down year-to-date even as the broader index rallies.

Skeptic Michael Burry took a large leverage short via SOXX puts through January 2027. Also, Druckenmiller and Einhorn have raised a similar concern. There is a concern about the AI bubble as well, like the dot-com bubble. We don't know how it is going to play out. That is why history matters. Why all the panic happened is because of hype and over-promotion of the new industry, and then heavy lending with low cost.

Whenever it goes in one extreme direction, there is always the consequence of the fall. Balance is everything. But a lot of people don't want to lose the chance that they can make money. That's what happened in the housing market, dot-com, and everything that we went over historically. It is the same pattern. Major tech earnings miss and an unexpected rate hike, or growing proof that hyperscale CapEx isn't translating into productivity gains.

There is a gap between investment and actual profits generated, and how much we can endure those times is the question we have to ask. Like I shared, China has a different plan because they have a lot of reserve. At the same time, their AI industry was more prepared with the foundation of the old school. That is the difference between what happened in South Korea and what can happen in the US, putting everything in one basket.

Three countries and one question. It is the same structural risk at three different stages. South Korea already broke on that system. Unless they bring a new invention, which they are talking about already, the leverage index concentration may trigger a six-fold earnings beat that still missed inflated expectations. 2.18 trillion was gone in two sessions. That is really sad.

China had a 65% gain, but we don't know if the bubble is coming or not. In the United States, there is the same concentration risk as Korea. A handful of stocks are holding up the index, and that is the question that we have to ask ourselves. Again, the old school matters in our time: the savings and investment balance. That is something we haven't really thought about because when you save money, the money is not growing.

It is going backward, so they intentionally push people not to save it and put everything in the investment to develop money in the R&D and our industry. But is this direction healthy nationally? That is the question we really have to think about. A household with no cash buffer isn't a rational retailer of the stock in a downturn, and it's a forced one.

100% investing and a zero-cash cushion is dangerous. A 20% drop isn't a paper loss, it forces real involuntary selling, margin calls, unpaid bills, and panic with nothing to fall back on. That selling hits whatever bid exists, pushing prices down further and triggering the next round. This is the literal mechanism behind the Korea crash. Leveraged retail accounts with no cushions were forced out simultaneously.

An interesting phenomenon is why it's happened now. We can see it in two different ways. One is, as we public know, it's not a conspiracy theory. As public know, the current South Korean president is more pro-China because South Korea is deeply entangled in their financial market and then all the industry with China.

Again, this is a lesson that we have to learn. A small country as South Korea exported tremendous amounts of their Samsung items and all other memory chips. The money they made wasn't enough, so they had to invest in China thinking that they can have better leverage later on. Now, reality hits. I am going to go over what actually happened in South Korea next program, but the reality actually hit.

With a buffer month of expense held in savings and smaller invested positions, the same 20% drop is a choice, not a crisis. There is no need to sell at all. Multiply that across millions of households and the same price shock produces an ordinary correction instead of a cascading panic. The math is that fewer forced sellers means less self-reinforcing selling. The mechanism is not just a mood change.

Stability is about psychology. Psychology in the stock market is tremendous. It affects mental health, even physical health. When the stock market crushed during the 2008 housing market crash, and even before that, I saw what happened to my neighborhood. A lot of families went through divorce during that housing market crash. A lot of families pulled apart.

The middle class was hit the most. These are the observations that we need to see and carefully study how and why these things are repeating over the years. Rather than a margin call, I'm going to name it as a Margin Room Rule. In an economy, you run at 80%, not 100% or 110% of what we don't have, and invest everything in the market.

Household companies and markets alike, whatever happens in the individual family, it does the same at the national level. Some economists say national level finance economy is different than a household or corporation because it's national, but I don't believe that. If the government or the national economy runs by debt, it is debt. We cannot paint it in a different picture.

A 20% hold back isn't wasted capacity. It's room that turns a shock into an inconvenience instead of a margin call. We need that Margin Room Rule applied in every sector of the business. 100% fully committed, with no slack left to absorb surprises, works until the first bad quarter, rate hike, or earnings miss. Then there is nowhere to go but forced selling.

That is the key. Over-lending and over-purchasing the stock market to surge it, this pattern has happened in every panic. 110% is leverage past capacity. Borrowing room from the future has not arrived yet. This is where every panic in the deck actually lives. 10% margin in 1929, and three-times leverage in Korea, and re-leveraged mortgage in 2008.

Over-investment from the borrowed money is dangerous. An 80% margin room is enough to hold back and absorb a shock without a forced sale. It is the structural difference between a correction and a panic. These are very important concepts that we can make a new rule for, the Margin Room Rule, in every sector of government, corporation, and family to stabilize the economy.

We can invest and we can have gamble in a certain percentage of our investment, but not everything. Can we prevent the next one? That's the question. It takes wisdom. Panic is not legislated away, but it can be contained. We need some kind of lesson and toolkits to apply to each family, each company, each corporation, and government. Is it too late?

As we have consumer power in this country, I don't think it's late. I think we have to take it seriously and change the landscape of our finance markets. Also, we have to understand that we have a fragmented economy or organization where everybody is so smart and intelligent in one thing. They are experts in one area, but we don't have governing power that oversees everything to connect them together.

When the housing market was happening, before the housing market crash, the governing body just gave permits without statistics, without evaluation, and without understanding the consequence of it. It is so fragmented. Construction companies do their own thing, and the state gave permits because it generated income for the state. Everybody's doing their own thing. They're all experts in what they do, but nobody saw the overall picture.

The toolkit is to slow the crash down. Circuit breakers force a pause so selling cannot cascade in real-time. It was used by the Korea Exchange and by the US since 1987. We have to slow down. Competition is happening because we open the market. We did a free market, and then we are the ones rushing in for the competition.

We don't have to open a 100% free market. We can regulate it to manage internal national security and the national economy to be stabilized. Also, stop contagion spreading. The lender of last resort keeps one failing institution from taking down the solvent ones. That has been the Fed's founding purpose since 1913.

If we see it, all the international organizations, their intention was good to help people, but actually, they are breaking people. Something happened. Also, the capital leverage regulation that followed the 1929 margin spiral. Korea's 2026 crash shows the lesson gets relearned in new forms. This time it was loan-funded leverage ETFs.

Make risk visible. A post-2008 rule pushed derivatives onto exchanges so risk is visible before it detonates, not only after. We are experiencing a similar pattern with NVIDIA right now. The loop and this same mechanism that we shared from throughout history is playing out in the AI boom right now.

Circular financing is what we understand because we hear from the main media: suppliers invest in a customer, the customer buys the supplier's product, and then revenue and stock rise and repeat. So, customers and consumers are the investors right now. I think I shared many times: Do not eat your own tail.

This system that we are in together needs to be sophisticated, analyzed, and some of the directions changed, rather than living under this stock psychology and security. 53 billion plus was invested by NVIDIA across roughly 178 AI deals from 2020 to 2025. 23.7 billion of that was in 2025 alone. This is public money.

This is not all NVIDIA's money. There are customers who are using AI and who are building AI. All together. This whole economy is all tangled together. How we navigate has to be—the only way we can find out is we have to step out and think about it and re-evaluate it before it hits the panic.

The sign is hyped promotion and lending. We should not get into that. That might prevent a panic this time. Thank you for listening to Yesterday, Today, and Tomorrow. I'll come back with details about how the South Korean market crushed and who the real players were behind it. That will explain to us how we can prevent it happening in our country in the United States of America. Thank you for listening. We'll be back next week. Thank you.

Guest (Male): You've been listening to Yesterday, Today, and Tomorrow with Inseong Kim. You can also find more from Inseong Kim at inseongkim.org. That's I-N-S-E-O-N-G-K-I-M-dot-O-R-G. Thank you for listening to the show.

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