Something I've spent the last few days thinking about...

Everyone is racing to sell as much stock as they can at the same time. This is a 180 degree turn from where we were three years ago during the "staying private for longer" and record-setting share buyback era. The switch flipped.

Alphabet just did a second IPO for its data center business after ten years of share buybacks.

SpaceX wants $75 billion.

Anthropic and OpenAI will be right behind it with gigantic offerings.

Wall Street's sell-side is turning over the couch cushions to find this money. The covers of the books have 30 firms on them. The roadshows at JPM and Morgan Stanley look like Coachella.

Fidelity just lowered its retail account minimum for IPO participation from half a million bucks to $2,000.

Robinhood is launching venture funds for the TikTok crowd.

CNBC is running a SpaceX segment in every hour block of daytime programming.

I know it's not 1999. It could be 1966.

Exactly 62 years ago this week a company called COMSAT went public. It had investments from AT&T and a hundred other players in the communications business. Investors were bulled up on space and it was the SpaceX of its day. The $200 million IPO was massively oversubscribed.

The whole thing started when President John F. Kennedy used the surprise Russian launch of its Sputnik spacecraft in 1957 to galvanize the nation. He used it as an example of Eisenhower-era complacency while in the Senate. In 1961, as President, he cited it again during a joint session of Congress in which he first laid out his administration’s intention to beat the Russians at something more meaningful:

"I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the Moon and returning him safely to the Earth."

In the summer of 1962, Kennedy signed the Communications Satellite Act which created COMSAT as its public-private corporate vehicle to launch a constellation into orbit. This kicked off what they called the Space Race when they taught it to you in high school but on Wall Street it launched an absolute frenzy for stock market investments involving rockets and component suppliers to NASA and anything that had even a loose connection to the theme.

COMSAT’s IPO was not the end. Companies came public much earlier then than they do today. The stock was for sale at $21 and then ran to $28. Within a few years it would get to $87 before the craze had run its course. Public investors who had “chased” each other into the stock on IPO day still had lots of potential upside in front of them.

Within weeks there were companies adding “Astro” and “Space” and “Orbital” to their names. Their share prices would quickly go vertical as the appetite for Space Age investments only grew in intensity. Burton Malkiel tells the story of one such company, which sold record players…

“Promoters, eager to satisfy the insatiable thirst of investors for the space-age stocks of the Soaring Sixties, created more new issues in the 1959–62 period than at any previous time in history … It was called the tronics boom, because the stock offerings often included some garbled version of the word “electronics” in their title, even if the companies had nothing to do with the electronics industry. Buyers of these issues didn’t really care what the companies made—so long as it sounded electronic, with a suggestion of the esoteric. For example, American Music Guild, whose business consisted entirely of the door-to-door sale of phonograph records and players, changed its name to Space-Tone before “going public.” The shares were sold to the public at 2 and, within a few weeks, rose to 14.”

Here’s the New York Times documenting the success of COMSAT’s initial public offering a few days after the debut:

Yes, you could make a few changes and publish the same article today, precisely sixty two years ago to the day. Livermore said there is nothing new under the sun. The names and dates change but not human emotion.

“There is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again."

The fervor intensified. Malkiel relays:

“the 1960s saw a proliferation of then new-age but now-forgotten companies whose names ended in ‘onics’ or ‘tron.’ Companies taken public included Transitron, Dutron , Vulcatron and Astron , as well as Circuitronics, Supronics and Videotronics, according to ‘A Random Walk Down Wall Street,’ by Burton Malkiel, a Princeton University professor who has studied stock markets. Much like today, some companies changed their names and sold IPOs under the rubric of a fast-growing concern. ‘Buyers of these issues didn't really care what the companies made -- so long as it sounded electronic, with the suggestion of the esoteric,’ Mr. Malkiel noted in his seminal book. ‘The name was the game.’“

The market topped in 1966 on an inflation adjusted basis with a nominal price top in 1968 but the bear market lasted a full 16 years.

There are important fundamental and mechanical differences (as there always are) but the vibe is not different at all. We have a generation of investors who've never seen a meaningful market top or prolonged period of disappointment in stocks. The 60's was no different. Ben quoted John Brooks's Go-Go Years a while back in saying more than half of Wall Street's salespeople and portfolio managers had begun their careers after 1962 with no memory of anything but UP!

Rising rates killed the economy at the end of the 60's because the government was funding LBJ's socialism and the Vietnam War simultaneously and there just wasn't enough money to cover the deficits. We're doing the same today with tax cuts and Iran / Ukraine. There's simply not enough money for rates not to rise.

But that's not what killed the stock market back then and it won't be this time. What actually happens is that supply eventually catches up to demand. Three mega-IPOs plus surprise equity raises by mega-cap companies already public could be the final nail. Once everyone has "access" to all the stock they could possibly want, the prices stop rising. This changes the mood. Disillusionment sets in. It's hard to get the psychology back on track once this happens. Go ask your friends in crypto.

I'm hoping the SpaceX deal isn't the end. COMSAT wasn’t the market top for the Go-Go era or the Space Age. But it was the beginning of the end because it set the tone and served as a signal for the suppliers of stock that they could swing for the fences. And that’s exactly what they did. So much so that the supply eventually overwhelmed the demand. Happened in ‘66. Happened in ‘99. Happens every time.

Will happen this time too.

In NASCAR, the waving of the white flag indicates the final lap of the race. This is where the most desperate, aggressive behavior always happens. In the 10-year period between 2007 and 2016, every single 400-lap Daytona race had a crash take place during this last lap. All of them.

Bloomberg News:

So is it a bubble?

Yes, of course it is. But that doesn’t make it all bad. Everything successful eventually becomes a bubble. That’s part of what defines the success of the thing. Some bubbles end gradually in old age (I call these waves but we don’t have time for this digression today) and some bubbles burst spectacularly (the ones you end up reading about and fearing). But bubbles are the things that naturally accompany investor enthusiasm for a thing and investor enthusiasm rarely materializes out of nowhere and for no good reason.

How do we know definitively that a bubble is in the process of being formed? A simple checklist via the experts Brent Goldfarb and David Kirsh, authors of “Bubbles and Crashes – The Boom and Bust of Technological Innovation” makes it obvious.

Via Periscope by Srinivas Peri:

How can you possibly say the SpaceX IPO isn’t checking every one of these boxes?

I’m not saying short the stock, but my god, let’s at least be honest with ourselves about where we are.

I wrote about Rocket Lab (RKLB) in this space a few weeks back. I’ve also talked about Planet Labs (PL). Both stocks have had meteoric rises this year but are now coming back to earth (pun intended) on the heels of earnings reports that were really good but apparently not good enough. This is what happens when expectations cannot be matched and the aforementioned disillusionment sets in. Thanks to a 22% post-earnings decline in PL today, the Tema Space Innovators ETF (ticker NASA, because UFO was already taken) is getting absolutely shit-hammered right now (it’s a technical term). NASA’s largest holding is Rocket and third largest holding is Planet. The only thing these Labs are cooking up this week is profit-taking.

In the chart above, you see a lot of broken dreams. Whose dreams? The buyers who made NASA the largest of the space-themed ETFs were presumably there because it was the only fund that claimed a pre-IPO position in SpaceX as part of its holdings. My data source lists SpaceX private shares as approximately 6% of this ETF’s assets. No wonder it leapt to the front of the pack. Unfortunately, for people buying it in search of “access” - there’s that word again - they were reminded today that the remaining 94% of this fund is invested in something other than SpaceX.

While I was out this week, Michael hosted our friend Aaron Dillon for an inside-baseball conversation about the SpaceX IPO, how advisors are explaining the index inclusion thing to clients, how the lock-up expiration will be handled and more. You can watch or listen below on our advisor-focused podcast, Talking Wealth:

TALKING WEALTH

Josh and Michael dig into why a year-end melt-up is still on the table: positioning, flows, Fed expectations, earnings, and what could keep surprising investors into the close of the year.