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Over the past 30 years, the purchasing power of the US Consumer Dollar has halved due to inflation. At the same time, the S&P 500 has risen 852% (7.8% annually) AFTER adjusting for inflation. Why you need to invest for the long term, in one chart…
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The most important charts and themes in markets and investing…
1) The Four Most Dangerous Words
The four most dangerous words in investing, according to legendary fund manager Sir John Templeton, are: “This time is different.”
That’s why a warning went off in my head last week when many said that in regards to the SpaceX IPO.
When I noticed how every major IPO in the last 15 years traded below its first-day close at some point in its first year, the overwhelming response was: “This time it’s different. None of these companies are SpaceX.”
Fast forward to today and the laws of gravity come into play, with SpaceX experiencing a 35% drop and trading below its first day close.
Where does it go from here?
No one knows. But the surge in supply is coming, and the additional selling pressure when it occurs is not unprecedented.
When are insiders allowed to start selling?
Most pre-IPO investors and employees could sell after the first earnings report, which is expected in early August. After that, there is a series of staggered unlocks at 70, 90, 105, 120, 135, and 180 days after the IPO. Elon Musk and certain pre-IPO investors will be subject to a longer prison sentence of 366 days.
In terms of supply, these shares will dwarf the initial share price which is less than 5% of outstanding shares. Within 180 days, it is estimated that 58% of the company’s total outstanding shares will be released. Keep in mind: these are investors and employees with huge unrealized profits (SpaceX was a $10 billion company 10 years ago), and the temptation to lock in at least a portion of these lottery-sized winnings will be very high.
2) From Equity Bubble to Credit Bubble
AI hyperscalers (Google, Amazon, Meta, Microsoft, and Oracle) have issued 47% more debt in the first 5 months of this year ($159 billion) than in all of last year ($108 billion). Their YTD debt issuance exceeds the combined 2020-2024 issuance.
In the past week, Nvidia ($25 billion in sales) and SpaceX ($25 billion in sales) have joined the party.
Every equity bubble will inevitably become a credit bubble before it bursts.
3) Narrowing Down Technology Leadership
20 stocks in the S&P 500 have more than doubled so far this year.
Of these, 19 are related to the AI infrastructure boom.
This is the type of narrow leadership often seen in times of speculative mania.
While semiconductor stocks ($SOXX ETF) have more than doubled so far this year, the Magnificent 7 ($MAGS ETF) is down 3%.
Old Wall Street warning: “They shot the generals.”
Translation: former market leaders are starting to split.
Also worth noting: the gap between top and bottom performing Tech companies is at its widest level since the peak of the dot-com bubble in 2000.
Who are these bottom performers?
13 of the 20 worst performing stocks in the S&P 500 this year are software and related services companies.
The market treats AI as a real threat to most of the software industry.
4) Voting capital with its feet
One of the widest performance gaps we’ve ever seen:
-South Korean stocks rise 126% in 2026.
-Taiwan shares rose 73%.
-Chinese shares fell 12%.
Capital votes with its feet.
5) Warsh Passes His First Exam
“Committed to making it happen [on reducing inflation] strong, round and unambiguous. And I think that’s an important message. We have missed it for 5 years. And we will fix it.”
So said Kevin Warsh at his first FOMC press conference last week. By doing this, he passed his first test: establishing the Fed’s independence (he voted in line with the other 11 FOMC members in voting to keep interest rates steady) and not ignoring the challenges ahead.
The elephant: an inflation rate that has been above the Fed’s target rate for more than 5 years.
The key sentence of the much shorter FOMC statement (half of the previous version): “The committee will provide price stability.”
What does that mean?
Tighter monetary policy and interest rate increases are possible this year.
There has been a big change in the Fed’s dot plot with the median member now expecting 1 rate hike this year whereas previously they had forecast 1 rate cut.
And the bond market is now pricing in 2 Fed rate hikes by the end of the year, a 1% change in expectations compared to when we started the year (2 Fed rate cuts).
This is the right move if the Fed wants to regain its credibility as an inflation fighter.
6) There Are No Free Lunches
Back in April, Michael Saylor (Chief Executive Strategy Officer, Bitcoin Treasury) said this in promoting his preferred stock offering (Ticker: $STRC): “delivers financial market-like stability” with “market-leading risk-adjusted returns.”
If it seems too good to be true, it is. Strategy’s preferred shares have experienced a maximum drawdown of 16% and are down 8% this year.
Lesson: There is no stability like a money market with market-leading returns. Any investment with the promise of a higher return than cash carries higher risk. There are no free lunches at the market.
7) Some Interesting Statistics…
a) The S&P 500 is up 15.6% annually since the start of 2020, its strongest decade-long pace since the 1990s.
B) The 2020s will be the worst decade in history for 10 Year Treasury bonds with a total annual return of -0.6%.
c) US Strategic Petroleum Reserves are now at their lowest level since July 1983. Over the last 5 years we have seen a decline of 285 million barrels (a 46% decline).
d) The US government has never consumed a larger portion of its economy than it does today.
e) Memory ETF is now the fastest ETF in history to reach $10 billion, $15 billion, and $20 billion in assets under management.
f) Elon Musk earned 99.9% of his $1.2 trillion net worth after turning 40.
And that’s all for this week. Thanks for reading!
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Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. Read our full disclosure here.
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