Fortunes from Heaven and Earth
We’ll begin with SpaceX. Then, we’ll switch gears for a quick look at what’s happening with markets, especially metals and miners. And yes, the two broad themes are connected.
I’ll set the stage by noting that next month, on Sunday, July 20th, Shark Week kicks off for its 37th year on Discovery Channel. To which you may be thinking, “Huh?”
Yes, bear with me; read on…
If You’re Not a SpaceX Insider, You’re on the Outside
I mention Shark Week, above, only because we may as well call this week “SpaceX Week.”
This Friday, June 12th, Space Exploration Tech Group, aka SpaceX (SPCX) will launch its initial public offering (IPO). And it’s a Really Big Thing across the markets. There’s massive interest out there…
But the truth is, SpaceX will only “sort of” go public. The company will release less than 5% of its shares. Which is to say that over 95% of shares will remain locked up with Elon Musk, his management team, employees, and other well-connected insiders.
This limited release of shares is designed to support what’s called a “monetization” event, and in this case it’s a market cap of about $1.8 trillion, or the ballpark equivalent of the GDP of, say, Turkey or South Korea. It sets a new record as the biggest IPO in history.
There’s much to say about SpaceX, and if you’re interested, I discussed this earlier today in the Rude Awakening.
I pointed out that SpaceX is already a massive industrial ecosystem within the space, aerospace and related tech sectors. To use a term of astrophysics, it’s a “gravity well” for talent and money. And no doubt, the company’s IPO will affect markets everywhere, both within the space sector and with much else that’s space-adjacent, and even distant from space.
For example, many index funds have already sold or will soon sell assets to raise significant cash. No doubt, they’ll chase SpaceX shares, bid up the price, and just buy-buy-buy out of a perceived need to own this new shiny thing.
Likewise, many retail investors want a piece of the action and will buy no matter what. And SpaceX insiders know this, so they’ve reserved a portion of the IPO for retail. Right away, this is unusual because big IPOs are usually parceled out to institutions and favored customers, while everyday punters must buy in the secondary market at higher prices.
Sure, we might see a strong rise for SpaceX shares in the early days after the IPO. But when you consider all the glitz, glitter, hype and utter $$-size of the event, whatever happens will not be true “price discovery.” No, it’ll be hot money blowing in like rocket exhaust, and momentum chasing momentum. In other words, SpaceX IPO stock is a high-risk play.
Here at Paradigm Press, several editors have followed SpaceX over the years. They studied the recent prospectus. And it’s fair to say that they urge outsiders to steer clear of the IPO.
In particular, our AI authority James Altucher; our macro maven Jim Rickards; our trading pro Enrique Abeyta are all on the same page with this one: don’t chase SpaceX as it blows the hold-down bolts and lifts off from the IPO launch pad.
Still, whatever our editors say, we understand that many investors are primed to grab SpaceX shares, if for no other reason than to “be there,” if not to trade in and trade out. And okay, some people might even make money; but again, keep in mind the risk.
If nothing else, just understand that big money guys and trading pros have inherent advantages with this IPO, let alone the SpaceX insiders. And if you’re not on the inside, you’re outside.
The New Space Economy
That said, there are other ways to participate in the market boom for the new space economy. Because, yes, costs to access space have fallen dramatically, and more and more “mass” is going into orbit: big satellites of course, but also literally tens of thousands of small satellites that perform a vast range of missions.
There are fortunes to be made in the heavens above. And along these lines, if you don’t want to play in the sandbox with SpaceX, you can buy other publicly traded companies that are its suppliers, or that work on space exploration and telecommunications on their own.
Two companies that come to mind are AST SpaceMobile (ASTS) and Intuitive Machines (LUNR). But note: these names are from independent sources and are not necessarily official recommendations from our publications. As always, if you buy shares in anything, read up first, and then watch the charts, wait for down days in the markets, always use limit orders, and never chase momentum.
And I can think of at least ten other publicly traded companies that offer a close fit to SpaceX, either as competitors, key vendors or other participants related to SpaceX’s core businesses.
Last Week’s Market Swoon
Meanwhile, for all the SpaceX excitement and Big Money in play, last Friday we had a serious down-day in markets (speaking of gravity wells). That is, on Friday, June 5th pretty much everything dropped.
Big losers included many recent big gainers, for example memory chips and AI. Of course, those sectors have had massive runups this year, courtesy of hyped narratives about what AI can or will do, as well as an ocean of hot money, which tends to be fickle.
The sell-down was rooted in a few basic reasons. We had a robust national “jobs report” that showed stronger-than-expected hiring gains. To some, this indicates that the Federal Reserve might actually raise interest rates under the new Chairman. But really… C’mon, man…
No, the Fed won’t raise rates this summer, not as we move towards mid-term elections. And the federal government is already paying over a trillion dollars per year of interest on the national debt, so raising rates will just drain the Treasury.
Then again, strong job growth may indicate that the Fed won’t lower rates anytime soon, which is not what the broad market wanted to hear. Indeed, investor sentiment this year has leaned into the expectation of rate cuts; hence markets were primed for that kind of easy-money news. But the strong job numbers changed the narrative.
One example of risk-off sentiment out there comes from Bank of America, which now recommends that investors “exercise caution” with U.S. stocks due to an increasing number of “bear market signposts.” According to B-of-A Securities, we’re “approaching a top” and there are “too many red flags.”
So, “take profits,” says B-of-A, because according to the firm’s metrics, “70% of bear-market signals” have recently been triggered, which has marked numerous prior market peaks.
Closer to my own wheelhouse, Friday’s sell-down hit mining plays quite hard. Big names, intermediates and a long list of superb juniors sold down in the realm of rocks, mines, minerals and metals.
Well, between Friday morning and Friday at close of markets, nothing changed with any mining play. It’s all the same people, same assets, same geology and engineering, same exploration and development plans, same kind of production profiles. And developing an exploration play or building a mine is still a long-term effort, while production is forecasted months and years ahead as well. So… It’s a bargain-hunter’s market just now, with all the usual caveats about care and moderation.
More specifically, with $4,300 gold and $65 silver – and solid prices for most of the rest of the periodic table – we’re still looking at what were record highs as recently as February of this year. And many of the recent high levels of share prices for miners were yearly highs as well. For many producers, earnings are strong, if not growing.
But yes, last week blew off the top, and Friday’s charts were bright red on the daily trackers. Now, for the long-term? Miners and metals have done well, with more to come after market sentiment recalibrates. The fact is there’s not enough copper out there. Or aluminum. Or silver, gold, zinc, lead, tin, bismuth, rare earths, and a host of other metals and materials.
Which brings us back to Elon Musk and SpaceX, if not the entire solar system of companies in the new space economy. That is, if the idea is to put “mass” into orbit and make money out of it, everyone will require the usual, familiar metals and alloys, plus other quite exotic materials. And the geological fact is that everything begins as a rock in the ground.
In fact, last week in Philadelphia, at Paradigm’s “76/26 – America 250” event, my colleagues and I discussed metals for both normal economic use and in the new space economy. Between five editors, we laid out 53 names of strong companies across the boards, including many mining names.
As we look ahead, people will still make money from rocks in the earth, as well as from rockets and satellites up in the heavens. Which prompts me to ask… Did you tune into that event last Thursday, June 4th? If you missed the broadcast, here’s the replay.
And there’s always more to say but that’s all for now. Thank you for subscribing and reading.
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