This was one of those weeks that was a reminder to the world why New York City is still New York City. No place like it on earth. Within a few days we hosted the most watched NBA Finals of the century so far and pulled off the biggest IPO ever.

This week millions of New Yorkers came pouring out into the streets each game night, culminating in one of the biggest citywide celebrations in the 400 year history of this town. Maybe we’re still in the glory days of NYC or maybe that time has passed a long time ago (this depends on who you are talking to and what era they lived here) but right now, in this moment, we are the center of the universe once again. It’s still New York or Nowhere.

Anyway, while Donald Trump, Michael Bloomberg, Jimmy Fallon, Larry David, Jerry Seinfeld, Jay-Z, Timmy Chalomet, Taylor Swift, Sydney Sweeney, Ben Stiller, Fat Joe, Tracy Morgan, Chris Rock, Adam Sandler, Spike Lee, Mariska Hargitay and every other NYC-native or -adjacent celebrity were rooting for the Knicks at the most expensive basketball games ever attended, a few blocks away the Nasdaq was preparing to host the biggest initial public offering of all time. I’m happy to report the $2 trillion SpaceX IPO did not turn out to be a meteor hitting planet earth (and, by extension, your retirement account) after all. It was totally fine. Contained. The Dow Jones rallied 350, the Nasdaq ran 80 points. No sweat.

The concern about the deal’s unprecedented size gave way to the frenzy of willing buyers who gleefully accepted every share of stock on offer - an estimated $86 billion worth including the greenshoe allotment. The stock began trading around midday and the offering seemed to have gone off without a hitch, dozens of Wall Street investment banks and their market-maker partners finding an equilibrium of buyers and sellers at a price that was 19% above the $135 offering price by the end of trading Friday.

Here’s how the New York Times describes this monumental event in Wall Street history:

I went into the weekend thinking about how incredible our capital markets are. Only in America can a company start itself up in a garage and within a few decades become one of the most valuable businesses on earth. It takes intrepid entrepreneurship, sure. But what’s also required is you, the American investor. The Germans and the Japanese and the British and the Brazilians have their founders and their risk-takers, but what those markets are missing is the tens of the millions of ordinary people who are willing to back these dreams and gambles with their own investment capital. Nobody does this like we do. We are the descendents of dreamers and gamblers - many of whom left everything behind and took the ultimate gamble with their very lives on the line in order to get here. This started in the 1600’s and it continues until this day. Without the American investor, there is no SpaceX. Without the city of New York, there’s no transference of these risks from venture capital to the public stock markets.

The Knicks championship allows ten generations of fandom to take a deep breath and let fifty years of heartbreak melt away. The SpaceX debut sets us up for OpenAI’s and Anthropic’s trillion-dollar offerings, creating a whole new cohort of billionaires, centi-millionaires, deca-millionaires and millionaires next door.

New York City isn’t just having a moment. It is the moment. If you haven’t been back in awhile, book a flight. We’re announcing an event for early December that might give you the perfect reason to come to Manhattan. Subscribe to The Compound Insider and be the first to hear about it. Very soon!

This week Michael Batnick and I hosted our friend Brian Levitt, the Chief Global Market Strategist and Head of Strategy and Insights at Invesco. Brian’s pretty sanguine about the investing environment we have in front of us. Inflation elevated but due to fall with oil prices, credit spreads under control, household balance sheets and corporate investment at record highs, profit margins continuing to expand and no real stresses for the most consequential cohort of consumer households. It’s full speed ahead, at least for now.

We had a discussion about the fallacy of the “knockout punch” and why it seems that every big, bad event that’s going to knock the stock market off its course ends up petering out. The SpaceX IPO is just the latest example of this phenomenon, which includes FOMC meetings, elections around the world, White House policy decisions, earnings reports and all sorts of other detritus in the post-Great Financial Crisis era. There’s a whole coterie of market watchers who have it a twenty year mission to identify the next “Lehman Brothers” moment, in real time, and these people have cost you a fortune if you’ve taken action based on any of their relentless hysteria.

I made the point that, by the time Lehman was filing for the largest bankruptcy ever and shocking the world, markets were already deep into a bear and the economy had already unraveled. The “Lehman” moment knockout punch was very real - but it came as a consequence of the terrible financial markets, it wasn’t itself the cause. The knockout punch rarely (never?) arrives when things are going well. The way it really works is that the markets are struggling, the economic data is surprising to the downside, some shocks start to hit and everyone gets really negative AND THEN the knockout punch comes.

Madoff fessed up in December of 2008, three months after the Lehman bankruptcy and two months after the TARP rescue vote in Congress. Things has already been bad for a year before these events became a series of catastrophes for the economy and the stock market. That’s how it works every time. The mood changes, the losses become widespread and then the knockout punch slams into us, seemingly out of nowhere. Not the other way around. It just feels like it’s going to be that way.

I don’t think the process I’m describing is well understood so I wanted to highlight it here today. It’ll save you a lot of time and aggravation scanning the headlines for knockout punches in a bull market for the rest of your life once you understand it. Be sure to send this post to a friend or family member who could use this explanation as well.

You can listen to Brian and I along with Michael and the whole gang discuss this concept and more on an all new edition of The Compound and Friends below. I think you’ll love it.

One other thing you’ll hear about on the show this week is a breakdown of Savita Subramanian’s much-discussed note this week calling for investors to take profits, especially in tech stocks. She points out several similarities between today and the tech bubble peak in February 2000 that are just too close for comfort. The chart above depicts the extent to which the stocks within the tech sector have been diverging - with AI capex theme winners running away with game and other technology stocks (software) being left in the dust. We haven’t observed anything like it since the dot com bubble and bust.

I had some opinions on this as did Michael and Brian…

THE COMPOUND & FRIENDS

Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by ⁠Brian Levitt⁠, Chief Global Market Strategist at Invesco⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ to discuss: whether the AI trade has become too crowded, why earnings growth still supports the market, and what investors should actually watch for signs of trouble.