2026: A SpaceX Odyssey

I am going to gloss over the rather clever play on words drawing inspiration from the title of Kubrick's book/movie, mention in passing that I came up with it without the help of AI, and move straight to the gist of my tirade. When it comes to finance/investment, I have strong feelings! 

Unfortunately, what happens in the US equity and bond markets impacts everyone around the globe. I truly wish it weren't so. I truly wish Indian markets were insulated better against what happens with FIIs, bond markets and the overall US equity markets. But the ground reality is that this is not the case. The current hot news doing the rounds is the SpaceX IPO. What an event. Everyone wants in. Valuations are sky-high, profits are . . well, there aren't any. Yet. Events like these really call into question the efficient market hypothesis. As a disclaimer, I am not arguing about the future potential at all. Far from it. SpaceX might be the Star Trek of our times. They might change the world by mining asteroids and putting up data centers on the moon. All might be legit. But it certainly ain't happening overnight. To quote Roy Amara, "We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run." Lets sum this up for a bit. 

On May 1st of this year, NASDAQ changed a bunch of rules (reduced seasoning period before index inclusion, public float thresholds, amongst others). On Jun 11th, SpaceX debuted on Nasdaq. by July 7th, it capitalized on every single one of these structural loopholes to force its way into the Nasdaq-100. There's no doubt about this. Debating this point is moot. It's generally accepted the rule changes were for SpaceX's benefit. 

While this is happening, the research teams of the SAME investment banks that underwrote the IPO published buy ratings that defy common sense, logic and math. For example, Raymond James published a target of USD 800 for SpaceX which would take it's market cap to USD 10 trillion which is 31% of total US GDP. 

Cherry on top - SpaceX still lost 7% of its value since its inclusion in the index and 39% of its value since its post-IPO peak. Not surprising since it's not turning profits, hemorrhaging money and does not have a contract pipeline beyond its defense contracts. Rigged game if there ever was one. Nasdaq gets bullied into a mega-IPO. Passive funds get bullied into adding SpaceX in their indices. Research analysts get bullied into publishing nonsensical buy ratings. 

In Ayn Rands dystopian novel Atlas Shrugged, one of the protagonists, Francisco D'Anconia,  deliberately hypes up worthless, non-existent copper mines to drive corrupt politicians, looters, and parasitic investors into a speculative frenzy, only to watch the engineered bubble burst and bankrupt the very systems trying to leech off his productivity.

Looking at the SpaceX listing, it's hard not to see the parallel. Either Elon is the ultimate con artist, or he is playing the real-life d'Anconia. If it’s a grift, it’s a historic transfer of retail capital to the top. But if it’s a d’Anconia move, Elon is playing a spectacular joke on modern financial systems. Forcing captured regulators, passive indexing giants, and fee-chasing underwriters to choke on a capital-hemorrhaging physical utility they valued as a multi-trillion-dollar monopoly just because he slapped an "AI" label on it. Either way, Galt's Gulch has never looked this expensive.

But there's some hope. While Nasdaq and FTSE Russell practically tripped over themselves to change their listing rules, S&P Dow Jones Indices flatly refused to play ball. They stood firm on their strict requirement: a company must show consecutive GAAP profitability over four quarters.Because SpaceX posted a massive $4.28 billion USD net loss in Q1 2026, it remains strictly locked out of the S&P 500. It turns out, guardrails can exist when a registry actually respects financial math over transaction-fee dopamine. Nasdaq surrendered its integrity for a historic listing fee; S&P looked at the same spreadsheet and chose to act like the only adult left in the room.

I could go on and on about how the underwriters and corporate insiders earned a hefty profit and left the retail investor literally holding the bag. Mega funds like Blackrock, Vanguard, global sovereign wealth funds from the middle east . . all earned a profit. They bought in at USD 135 per share. The IPO commenced trading at USD 150 per share. Guaranteed profit. Most cashed out. Some waited for the frenzy to peak at around USD 225 per share. The mechanics of this wealth transfer are almost beautiful in the scale of their grift. But the real master stroke was the NASDAQ100 index inclusion. By forcing index inclusion in just 15 trading days, they unleashed a legally mandated wave in passive fund buying. This algorithmic, non-negotiable volume provided the ultimate pool of exit liquidity, letting the smart money (read corporate insiders) systematically dump shares without crashing the market. The net result - the retail investor, the common man is left holding the bag. 

On a side-note, SEBI treats merchant banking and equity research like radioactive isotopes. While SEBI swings the other way by being too interventionist, they proactively hunt down predatory "finfluencers" and try to prevent cross-selling. It's not perfect, but SEC can really learn something from SEBI. 

Ultimately though, we can't hope that financial regulators grow a spine and start looking out for the little guy. That's not going to happen. The system relies almost entirely on the financial illiteracy of the common man to swindle him'/her out of their hard earned savings. Boom-and-bust cycles will always exist because human greed is an immutable constant. But when the common man stops providing the free capital that keeps these valuation hallucinations alive, the investment banks are left choking on their own supply. The path to this financial literacy begins with mastering the basics. The very nature of money. There's a ton of good literature out there about the psychology and history of money. From Morgan Housel to Robert Kiyosaski (bit controversial). From Michael Lewis to Nassim Taleb. Point is - an informed investor can behave a bit more rationally than someone who is just "buying into the hype". It's time to understand how the plumbing works and call out the BS.  

Stranger Things

Those who don't learn from history are doomed to repeat it. 

- George Santayana 

Many economists, investors and market experts have studied, spoken, and written about economic cycles. From boom to bust and back. I'm hardly any of them. I've not studied economics, am not a bigshot UHNI investor, nor can I call myself a market expert since my journey with value investing began in 2017 which is less than a decade ago. Though I boast a decent alpha, good CAGR and a healthy passive income due to the quantum of my investment; I am no expert. So this article is more a sharing of thoughts and experiences than any prophetic call to arms. 

So . . . Indian equities have seen a roller coaster year so far. As of Oct'25, markets are up 7% YTD. However, gains for the past year (since Oct 24) have also been muted (around 6%). That's not great by any stretch of the imagination. My own investments have plateaued as well. Macroeconomic indicators remain strong though and I wouldn't have been worried too much IF it were left to Indian markets alone. Unfortunately we live in a very interconnected world and what happens in the global marketplace affects us. Which brings me to this rant. Given all else were equal, I wouldn't consider changing course - continue looking for value where one finds it, continue with the same old boring SIPs, continue with the same old index linked equities, let my PMS's do their thing and stay the course. All things not being equal of course, me (and so many investors like me) are in a bit of a quandary. 

Why? Some very strange things are happening in the global economy in general and the US in particular. As a bystander, it's very entertaining. If my money wasn't at stake, I'd grab a bucket of popcorn and enjoy the show. As it happens, for better or for worse, I can't be just a detached spectator; I'm an interested party. 

• Strange thing 1 - Booming US equities. You'd say, "Hey, why is that a strange thing?" . . And you'd have a very valid question. But look deeper and there's something afoot. First off, whats strange is that most of this growth is driven by the Mag 7 (AAPL, AMZN, GOOG, MSFT, META, NVDA and TSLA). To test this hypothesis, I charted out the YTD (annualized) and 1yr growth rates for Mag 7, XMAG (S&P500 index linked ETF less Mag 7) and overall S&P500. The numbers are quite striking. To sum up, Mag 7 accounts for 37% of the overall market capitalization for the S&P500. That's big. Even at the height of the dotcom bubble, the top 10 companies represented 26% of the overall market cap. Traditionally, the top 10 companies have a weightage of between 20% to 25% of the overall market cap. The fantastic results that US equities have shown is a direct result of the Mag 7. Keeping the Mag 7 aside (which is at an overall return of 24.66%), YTD annualized returns for XMAG is 18%, which is 666 bps lesser (not my fault that's such an ominous number). 
  
  
  
• Strange Thing 2 - Malaise in the macros. So, we've identified that most of the growth in US equities is because of the Mag 7 AND that they contribute to an unnaturally large % of overall market cap. That in itself would be strange enough, but we all know that's driven by AI growth and the heavy capex flowing into data centers and investments around AI tech. So far so good. But can we really explain what's driving the "still-great" returns for XMAG (S&P500 less Mag 7)? 18% returns are still fantastic. What's stranger is that these returns are despite some very contradictory macroeconomic indicators - Political affiliations aside, these are numbers released by the govt so we can take them "as is" - First off, US Job growth has really tanked this year. From an average of 122k jobs per month for the period ending Apr'25 (JFMA-25) to an average of 26k jobs per month for the next four months (MJJA-25) to no data at all for Sep'25. Secondly, Unemployment numbers reflect a similar story. That's increased by 30 basis points this year (from 4% to 4.3%). Additionally, Inflation is trending higher as well since Apr'25 (increased by 70 bps from 2.3% as of Apr'25 to 3% as of Sep'25). To sum up, inflation creeping up, unemployment creeping up, job growth tanking. But what does the market do? Keeps going up! Not just the Mag 7, but across the board - 18% growth is AMAZING. Remember, with far healthier macroeconomic indicators, Indian equities have barely returned 9% (annualized) this year. 
  
  
  
• Strange Thing 3 - All that glitters is gold? - So what have we got so far . . It's strange that equities are heavily concentrated. It's stranger that growth is so good despite slowing macro-economic indicators. What's even stranger is the flight to gold. Traditionally, equities and gold are inversely correlated. What's so strange is that in 2025; both have witnessed parallel and remarkable growth. Confidence in US equities is at an all-time high and still people (read central banks) are buying gold like nobody's business. You might say that fair enough, gold is going up because people have lost faith in the dollar not the stock market. But take a look at YTD US 10yr treasury yield and that's gone down as well (low yield means high bond prices)! As of Oct'25, the US10Y yield is at 4.003%, down 57 bps from 4.573% in Jan'25. Which means that people are still buying US treasuries (still going long on the dollar) but also buying gold AND also buying stocks! Weirder and weirder!
  
  
  
• Strange Thing 4 - Private Credit! Now this one's a bit scary! What's more, it could explain the inexplicable growth. After 2008, central banks came together to form the Basel III accords. Legislaters in the US pushed through the Dodd-Frank Act. These regulations forced traditional banks to hold more capital against riskier loans, making middle-market lending slower, more expensive, and less profitable. The Basel II accords were intended to prevent the stupidity and mania that led to the subprime crisis. However, humans being humans and greed being the norm; the market circumvented these rules through something called private credit. Not private equity with which it is often confused. Private credit is direct, one-on-one corporate lending (often to middle-market companies) that is funded by institutional capital managed by specialized non-bank financial firms . And that's even scarier. Atleast banks and financial institutions had to report their NPAs, their balance sheets and their cash holdings. Private credit funds (NBFIs) don't even have to do that. Their relationship with their clients is 1x1 AND is not disclosed at all to investors. Which means that we have no idea how much loans private credit funds have given out, how many of these are still good, and how much cash they hold against these loans. What's even scarier is that they don't use traditional deposits for their lending activities. They use investments. So they take money from pension funds, insurance companies, sovereign wealth funds, AND select private individuals (usually UHNIs) to give credit to venture capitals and middle-market businesses who are too risky to get credit from banks. To give some perspective, in 2000, private credit AUM was at USD 40 billion. As of Oct'25, AUM is at USD 3 trillion. Since 2008, the private credit industry has grown tenfold! Surge in credit activity, no reporting, no governance, no oversight! In Sep'25 Tricolor holdings and First Brands Group declared bankruptcy. Tricolor was a subprime auto lender and First Brands was a manufacturer of auto parts. Tricolor was heavily involved in a segment of finance closely associated with private credit, often called Asset-Based Lending (ABL) or Specialty Finance. The company primarily funded its loans (subprime auto loans to customers) through large "warehouse lines" from major banks like JPMorgan Chase and Fifth Third Bank. These loans were then packaged into Asset-Backed Securities (bonds) and sold to investors. These non-bank financial methods are a key part of the broader private credit ecosystem. Jamie Dimon (CEO, JP Morgan Chase) ominously said there's more cockroaches in the woodwork. Coming from a survivor of the 2008 crisis, and nobody can deny he was in the thick of things with his takeover of Bear Stearns, those are scary words indeed. 
• Strange Thing 5 - Lack of data - In this crucial phase, when it's super critical for policy makers to keep a hawk's eye on macroeconomic trends, the data pipeline is shut off! With the US government in the midst of a shutdown, we don't know if the next month's numbers will be released and if they will be accurate. That's a big problem for the Fed and policy makers across the globe who are looking at these numbers to formulate their own policies. It's akin to driving a large trailer with a blindfold on. Not just government data, some sources are also saying that the practice of publishing quarterly results for listed companies will be moved to half-yearly. Which means investors might be using 6 month old data to make decisions. 

Any one thing in itself is strange indeed. All of the above coming together is not just "stranger", its downright bizarre! One thing is certain, the global economy is undergoing a reset. Global supply lines are moving (probably decoupling from the US), settlement in USD is going down and more importantly, economies are clearly marking themselves into groups and alliances. Nowhere is this clearer than data on holdings in 10yr US treasury bonds. Since Jul'24, traditional allies (Canada, Europe, Japan) of the US have increased their holdings of treasury bonds (US10Y) by 12.35%, adversaries and neutral parties (China, Hong Kong economic zone, India and others) have decreased their holdings by almost 4%. Which means the strong demand for the US dollar is from allies. The rest are selling the dollar. The trend is clear. The numbers are published by the US govt. A decoupling is underway. How this plays out is anybody's guess. 

What's my takeaway as an investor? Sit tight. Something's afoot. I am building cash reserves so that when the next correction comes along, I can jump in and buy. This served me in good stead during the pandemic when I made the first big jump into equities. It gave me rich dividends. I think another big opportunity is coming along. I keep remembering the golden credo of value investing - Be fearful when others are greedy, and greedy when others are fearful. Right now, everyone's greedy. Call me a vulture, circling the bloodsport happening on the ground. Waiting for the pickings. For what it's worth; at the very least - the heady world of high finance is giving me a great ringside view of some once-in-a-lifetime series of events.