Yo Pit Crazies,
I was wrong about the SpaceX IPO.
I thought Elon Musk got out at the top of the AI run. The stock half of the call worked. SpaceX (SPCX) ran from $225.64 down to $104.83, a 53 percent haircut off the peak.
SPCX isn’t a short anymore.
The company put up $7.81 billion in second quarter revenue against the $6.93 billion analysts wanted, closed back above its $135 IPO price on August 10, and has tacked on about 35 percent this month.
NVIDIA Corporation (NVDA) disclosed a $21 billion stake. Demand for AI compute is limitless with the technology we have.
Anthropic is next, and its backers are targeting an October listing at $2 trillion or better. One of them sketched a path to $3 trillion. SpaceX priced at $1.77 trillion in June, so Anthropic will make SPCX look cheap. Look for our Anthropic IPO goody coming soon.
3-Month SPCX Chart
Mid June was a busy stretch. SPCX went public on the 12th, and on the 17th the U.S. and Iran signed a memorandum to reopen the Strait of Hormuz to commercial ships. Crude sold off hard on that news.
That progress is gone.
The Summer Discount on Oil Is Over
3-Month USO Chart
Above is the United States Oil Fund, LP (USO), and the move is steady and unfriendly. The Hormuz deal collapsed, Iran hit tankers, and Washington put the naval blockade back on. WTI sits near $84 with Brent near $89.
The Strategic Petroleum Reserve is under 300 million barrels, its lowest since January 1983. President Trump is telling Americans to live with higher pump prices while this drags on.
Interest rates are doing the same steady, unfriendly thing. The 30-year Treasury printed 5.21 percent last month, a 19-year high, and it has not backed off since. In the early fall I expect investors to raise cash for Anthropic the way they did for SPCX, which pulls money out of stocks they already own.
The minutes on the 19th will not surprise anybody. The USGov carried $10 trillion in debt in 2008, the last time long rates lived up here. We sit at $39.8 trillion now, with interest costs running past $1.07 trillion this fiscal year.
That is a bigger line item than Medicare and a bigger one than Medicaid. It would solve a lot of health care problems if politicians cared about it instead of talking about it. This piles up until the market notices that $7 trillion of spending is run by knuckleheads, and traders eventually stop liking it.
The VIX Got Cheap at the Worst Time
10-Day VIX Chart
VIX closed at 14.2 on Friday, its low for all of 2026. Tuesday it popped to a two-week high with the broad market only 1.5 percent off the record. I use VIX as a signal when it will not hold a low it should be holding.
The September VIX futures (bets on how jumpy the market gets a month out) are stubbornly holding 18.
Wednesday at 2 p.m. Eastern we get the minutes from the July 28-29 meeting, and that is the best read yet on how Fed Chair Kevin Warsh's committee splits. The vote was nine to three to hold, and all three dissenters wanted a hike. That was the first three-way hawkish dissent since September 2016.
Warsh gives his first Jackson Hole keynote as chair on the 28th and I expect him hawkish. Traders already put roughly two-thirds odds on a hike by year end.
NVDA reports on the 26th. That is another catalyst and another reason to sit on your hands.
Tuesday showed the shape of it. The semiconductor index dropped 5.4 percent and shed something like $680 billion, memory names took the worst of it, and the reason was plain: high long rates cut what future tech profits are worth today.
BTIG's Jon Krinsky adds one more. In every midterm election year since 1990, the equal-weight S&P has fallen at least 7 percent from its August 18 peak into mid-October.
This week gives me the feeling that $750 SPY is in the cards. I am done shorting the AI story. I am watching what oil and the long bond do to everything sitting next to it.
Hopefully this was helpful,
Andrew