Failure to Launch

After a brutal three-day drop, going on four today, SpaceX (SPCX) is back at its IPO price of $15o per share.

In the opening week, back on June 12, the stock jumped from its initial price to a high of $201 four days later. After yesterday’s sell-off, it’s down an aggregate 3% from its day-one close.

Par for the course for an IPO. Consistent with a public mania. You can like a company, its ideas, its founder, how it’s run and what it does. None of that has any bearing on the stock price once the crowd gets all lathered up.

Traders who leveraged up trying to beat the market in SpaceX are getting tormented at the moment. Returns of SPCH, an ETF that launched to 2X the long side returns of SpaceX:

In its first two days of trading, the 2X long leverage SpaceX ETF shed over 40%. Not a good look. (Source: Econompic via X)

The 2X Long SPXC Daily ETF was designed to profit from retail investors’ greed. And it’s a big reason why leveraged ETFs aren’t great investments. Plus, it’s an example of how Wall Street will take advantage of you during any trading situation.

If your timing isn’t perfect, it’s costly. And you don’t have much control over your money anymore.

The reason for the space stock’s sharp sell-off is a curious one. SpaceX announced a $20 billion bond sale yesterday. The fervor over the largest IPO in history yielded $75 billion to Elon & Co., which apparently wasn’t enough capital for their ambitious plans.

We’ve identified the trend in Big Tech companies hitting the bond market right now. Alphabet (GOOGL) and Meta Platforms (META) have done the same recently. The Great Race and AI intelligence buildout is proving to be an expensive endeavor. SpaceX investors didn’t like their shiny new toy asking for more money, taking on debt.

In World Cup parlance, you might call it an “own goal.” Financial commentator and venture capitalist Jim Cramer warned investors against buying SpaceX shares, citing the South Sea Company, cautioning that its massive valuation could echo the 1720 bubble.

Investors in the IPO were always going to get a hot, bumpy ride as they exited the stratosphere. Thus far, the ride has been hotter and bumpier than expected.

Today’s Grey Swan Pro reveals an alternative name in the space sector that got a lot cheaper following the SpaceX IPO, but will be a critical part of space infrastructure in the years ahead — details here.

~ Addison

P.S. On Thursday, we’ll host Dan Amoss for Grey Swan Live! In a brief conversation we had with Dan following Warsh’s first press conference, Dan, skeptical, explained how he believes the Fed, even under Warsh, will be forced into “financial dominance,” a fancy way of saying monetary policy will be under Trump’s thumb at least until November.

After a brutal three-day drop, going on four today, SpaceX (SPCX) is back at its IPO price of $15o per share.

In the opening week, back on June 12, the stock jumped from its initial price to a high of $201 four days later. After yesterday’s sell-off, it’s down an aggregate 3% from its day-one close.

Traders who leveraged up trying to beat the market in SpaceX are getting tormented at the moment. Returns of SPCH, an ETF that launched to 2X the long side returns of SpaceX:

In its first two days of trading, the 2X long leverage SpaceX ETF shed over 40%. Not a good look. (Source: Econompic via X)

If your timing isn’t perfect, it’s costly. And you don’t have much control over your money anymore.

Investors in the IPO were always going to get a hot, bumpy ride as they exited the stratosphere. Thus far, the ride has been hotter and bumpier than expected.

~ Addison

Copper and resources are sending us a cleaner market signal than AI stocks.

Channeling Ludwig von Mises, we observe this morning that price is not just a number; it’s information. Price reflects what buyers and sellers collectively believe: demand, scarcity, fear, speculation, disappointment, future expectations and available supply.

When prices rise, and inventories fall at the same time, the message is usually straightforward: buyers need the stuff, and there is not enough of it.

A low VIX does not predict disaster. It measures complacency. A serial skeptic will read it as the calm before a storm. We shook off that feeling this morning and opted to pursue an opportunity instead.

Here goes:

A VIX reading below 15 means the market is not pricing in much near-term trouble, even though there are obvious risks still sitting in the room: Iran, oil prices, memory chip speculation, circular financing, high valuations, epic high concentrations, spiking long-term interest rates, a regime change at the Fed, a meltdown in Japan and a historic deficit and rising national debt.

Money is not flowing in a clean, straight line from outside investors to productive businesses. The firms at the top are investing in and buying from each other.

Microsoft and OpenAI are the easiest examples to follow.

Microsoft says OpenAI has contracted to purchase an additional $250 billion in Azure services, while Microsoft continues to account for $13 billion in funding commitments to OpenAI as an investment.

At this stage, it’s a stock picker’s market.