Because of a technical flaw, this Overview Of The Week was not published yesterday. I’m very sorry, but here it is.
Happy Father’s Day to all Belgian fathers!
Yes, in Belgium, we celebrated this a week earlier. If you are Dutch, American or in many other countries, it’s next week. If you are in Switzerland or Lithuania, it was last week.
My wife and daughter spoiled me this morning with a delicious breakfast.
Articles In The Past Weeks
In the past weeks, you got four articles, but this week, the pace dropped a bit and this is ‘only’ the third article this week.
This week, you couldn’t ignore the SpaceX IPO. And of course, this meme is as true as it is funny.
This is another one about the SpaceX IPO.
Because of the IPO, Elon Musk became the first trillionaire ever. The difference with the other billionaires is so big that we are all actually closer to Larry Page, Sergey Brin, and Jeff Bezos than they are to Musk. Pretty crazy. That gave rise to this meme, I guess.
This week, there was also the launch and suspension of Fable 5, the version of Anthropics Mythos for the general public. The American government thought it was too dangerous for foreign use, including Anthropic’s own overseas employees. Pretty wild. That’s when you get situations like this.
Interesting Podcasts Or Books
This week, I listened to The Compound and Friends. The theme was the state of the market and why the knockout punch everyone expects doesn’t come. Interesting stuff.
Oh, one tip, if you are only interested in the investing stuff, you can start at minute 10. Before that, they talk about basketball and other things. You can listen to the episode here.
The markets in the past week
Last week, the market indexes lost quite a bit, mostly because memory stocks dropped sharply. How about this week?
As you can see, it was a volatile week and the indexes only got in the green on Thursday and Friday. The S&P 500 was up 0.65% and the Nasdaq 0.70%. The Russell 2000 was up 3.90%, which is actually what you want to see, as it means the market strength is broadening. If you don’t know what I mean, I refer to the podcast episode above.
Last week, I said not to buy the SpaceX IPO. This week, some said that I was apparently wrong. I think they read me wrong, haha. I’m not a trader. I’m an investor. There’s a fundamental difference between the two.
Now, some also thought I said I would never invest. I have not written that in any way or form.
I just never invest in IPOs.
This is what I wrote in 2020 already:
Why I never buy IPOs
I wait for at least 2 quarterly results, preferably even more, but normally at least 8 or 9 months after the IPO. There are several reasons for that.
1. FOMO or fear of missing out: a lot of investors don’t want to miss out on the next ‘hot’ stock but fear of missing out is not the best investing principle. You buy a stock not because the company executes so well or because you are impressed by the conference calls but simply because so many people tell you it’s so exciting.
There seems to be huge social proof and as human beings, we’re very susceptible to social proof. If so many pundits are upbeat about it, it must be a good investment, right? Well, maybe. But wait for it and you can have proof in the quarterly results. You can judge for yourself then instead of believing others.
2. The bank-fueled hype machine: banks buy the shares of companies that want to IPO and then sell them at the IPO. That means that if the bank buys for $31, like nCino and shares jump 150% that they pocket that difference. That’s why they will do everything in their power to push everyone in the industry to hype stocks before the IPO. And you know how it goes in a business where everybody knows everybody: most will simply do what they’re expected to do and will contribute to the hype. As an outsider, I am a bit more skeptical.
3. Execution. Very important: I want to see how a company executes under the eye of the world for at least a few quarters. Public scrutiny is something else than operating as a private company. The expectations come from outside analysts now and missing earnings in your first few quarters paints a whole different picture.
4. The lock-up period: After 6 months (mostly) the lock-up period expires so insiders can sell as many shares as they want. Management and early investors often seek to cash out at least a part of their holdings and that means that millions of shares flood the market.
5. Price drops: That selling often causes the price to drop, so plenty of time to buy then. I’ll give some examples of the best stocks, although I picked them randomly. I just had a look at them and they fitted into a pattern that I often see.
In investing, patience is a virtue. Don’t be the ball but be the player that controls the ball. And think who can take advantage of hyping you up for an IPO.
I added more examples than just Shopify, but I didn’t want to make this too long.
Now, it’s very hard to pinpoint the exact buy point before it goes up. But I can wait out ‘dead money,’ unlike funds, which are judged on their quarterly performance.
So, if SpaceX’s stock drops enough, I might be interested. But don’t expect a second Tesla. Why not, you may ask? Well, because of this.
A whopping 25,420% gain? Up more than 250x? That would mean SpaceX would have to grow into a company with a market cap exceeding $500T. To give you some perspective: the total market of all American stocks is $79.5T, and the market cap of the whole world is $136T.
I’m happy to wait for the drop. And I’m pretty sure it will come. When? It could already start in three months, but more likely between 6 and 9 months.
Now, if you hold IPOs long enough, that can still work out. Look at this table. But also look at the difference in P/S between SpaceX and the rest of the IPOs.
But of course, there is Elon Musk. He knows how to pump the stock of his companies. I mean, if you can keep up this stock's momentum with those fundamentals, you can do it with another stock as well, right?
Now, I’m not dunking on Elon. That would be utter stupidity. Long-term Multis also know I owned Tesla in the past but took my gains. I admire Elon deeply and after reading Walter Isaacson’s great Elon biography, that admiration even grew.
But that doesn’t mean I can’t say Elon’s a stock pumper. Part of that is naive optimism, as he always thinks that things will be rolled out much faster than possible. Just like Steve Jobs, he has a reality distortion field. That’s a power, as he can bend reality into the shape he wants it to be over the long term, but over the short term, it makes them almost impossible to work with and irritating when it comes to setting expectations.
A new example of this came today when Elon replied to a post on X.
To be honest, I would be surprised if SpaceX’s revenue would be greater than $1T in 2031. I can’t say it won’t reach that in, let’s say 2038 or so, but even that is very uncertain.
Sometimes, people have trouble seeing the negative pendant of geniuses, but I don’t. It makes these incredible people, who change the world we live in, much more human to see them multi-faceted, just like we are all not one thing, but many things at the same time.
2. There’s TSMC And The Rest
This week, I saw this image.
This again shows how important TSMC (TSM) is for chips. All other foundries combined only have a quarter of the whole market.
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