SpaceX IPO: The $2T Sign Of The Times

DANO WEIR: We hope your holiday weekend's getting ready to blast off and have be a phenomenal weekend for you and your family. Is a little bit of market news, kind of something small, not really happening right now that we're getting to this week. And it is our lead story. My name is Dan O'Weir. I'm the marketing director for Sonoma Wealth, the private wealth arm of Fermata Advisors.

DANO WEIR: And we are talking about SpaceX announcing an IPO. The largest IPO filed in history with a $1.7 trillion price tag, but most of the numbers seem to be made up, so let's just round up to $2 trillion. SpaceX IPO, the $2 trillion sign of the times. Starlink is the only division, according to their S1 filing, that is turning a profit.

DANO WEIR: The rocket business loses money, the AI business loses even more money, and Elon controls 85% of the voting power. So we're asking. Is this a high watermark for the fundamentals-less MAG7 era, or is it the bellwether for a new world with no math? It's a sign of the times. Let's get into it.

SPEAKER 2: The stock market, the economy, your money. What's the latest and what could be next? Find out now with Fermata On The Markets. Straightforward financial market updates for the brands of Fermata Advisors, Sonoma Wealth Advisors, Fermata 401K, and Fermata Tax. On the Markets starts now.

DANO WEIR: Our managing principals, Chris Sipes, Daren Blonski, guys, SpaceX announcing this week that they are going to IPO. And the phone calls are already rolling in and people are asking, should we be getting in on this thing?

DAREN BLONSKI CFP®: Indeed, they are. And it depends on your situation, Dano.

CHRIS SIPES CFP®: Right, right. Very, very well played, Daren. Of course, we cannot say yes or no or anything for compliance reasons on the show. So sorry to let everybody down on your question.

DAREN BLONSKI CFP®: Way to bait it though, Dan.

DANO WEIR: Yeah. I mean, yeah, we're going to get into it. I think that's the focus of this week's episode is it seems very, it seems enticing or interesting. And when you look at it, I think the key question is, is what does the math say? And then what do you really think the future is going to be?

CHRIS SIPES CFP®: You know, and I hesitate for on conversations like this because you just don't want to be the wet blanket, you know, and everybody's so excited.

DANO WEIR: Yeah.

CHRIS SIPES CFP®: I know. Guys, I am looking. I am looking forward to the day where I don't have to be.

DAREN BLONSKI CFP®: It's going to be such a fun weekend. And you're like, well, let's look at this critically now.

CHRIS SIPES CFP®: So true. So true. But one of the characteristics of, you know, so Markets have moved in cycles all throughout history. Now, this time could be different, right? And so it's going to hold, you know. Past performance doesn't indicate future performance, all of that, of course.

CHRIS SIPES CFP®: And you have to kind of look at, like, historically, what usually happens when you do a rash of IPOs, initial public offerings, do those come out at market bottoms or market tops? At least when Markets are very favorable. And the answer is they usually come out when Markets are very favorable. Think about it. Why would they?

CHRIS SIPES CFP®: Why would a company want to go from private to public unless it was a lucrative thing to do at the time? And now definitely feels like peak AI hype and expectations. And so now you've got the SpaceX IPO, you've got Anthropic, OpenAI, all of them coming out. And so literally, potentially trillions of dollars in...

CHRIS SIPES CFP®: Market cap coming to market. And that's generally not something you see, you know, at market bottoms. Right. I don't know. Anyway. So again, don't want to be a wet blanket, but, just want to, I guess, bring up the fact that you might be cautious in these environments because, things are feeling a little frothy.

DANO WEIR: Yeah. And it's very interesting, very interesting too, this week too, that you know as soon as SpaceX makes their announcement here comes open open AI oh we're gonna ipo2 you know it's like these are the moments where they try to make these things very complicated and very financial and very you you wouldn't understand and to me it just feels a little bit more like junior.

DAREN BLONSKI CFP®: High than people let on so the Dan thank you for bringing that up because that is exactly where i was headed with this and you Here's the truth that most people don't want to hear.

DAREN BLONSKI CFP®: So the thing you really have to pay attention to in any IPO, and if you look in the Tesla filings, there's a very structured way in which the people who already that have worked at these companies that are about to IPO, how they can sell their shares after the IPO, because you have to be really structured to support the market not getting completely eviscerated. When the IPO.

DAREN BLONSKI CFP®: And the reason is, if you think about it, there's a million people working for a company and then all of a sudden their shares, they can now trade their shares on a public market. That's what an IPO is. So you can buy shares of these companies right now on the non-public market, on the private market. But what happens on an IPO is the initial public, let me emphasize, public offering.

DAREN BLONSKI CFP®: Well, companies don't go, oh, I can't wait to just offer my stock. To the rest of the world because I think it's such a wonderful deal. I want them to partake in like that's asinine. That's not what's happening here, right? It's in it's people inside the company, including Elon Musk in this case on some level who need liquidity.

DAREN BLONSKI CFP®: What do I mean by liquidity? They need money. So they say, I've got all these shares. If I offer it to the public, they'll give me their money in exchange for a piece of the company. So that's not saying the stock's going to go down and obliterate, but we tend to in our society celebrate IPOs.

DAREN BLONSKI CFP®: But in reality, IPOs in some ways are a sign that a company is short for cash. And in fact, that's what you're seeing with, there's just a race to build out this compute for all these AI companies. And Elon Musk is very intelligently packaged and called it the SpaceX IPO, but in it, embedded in it is...

DAREN BLONSKI CFP®: He put the AI company embedded in it, and which I think is actually probably the more valuable of the assets is the Starlink, right? And the internet he provides on Starlink. And so if you take a bunch of ugly ducklings and put them together with a really pretty duckling, all of a sudden it looks pretty and people want to buy a piece of that pretty.

DAREN BLONSKI CFP®: That's the IPO, and that's what's happening. That doesn't mean it's not going to be an incredible investment. It could be, and it might be an awful one. This might be, like Chris says, peak times. I will call peak market when the politicians start making it for them to insider trade, just like the Fed did last week in 2022.

CHRIS SIPES CFP®: Yeah, that's a good point. When that happens, be careful. Okay, so what's this book? Peribach, How Nature Works, The Science of Self-Organized Criticality.

CHRIS SIPES CFP®: This is a book written by a scientist about science. And the idea is essentially if you picture a pile of sand and how you can continue to pile sand higher and higher and higher and higher until you get that last bit of sand that topples the whole pile and it flattens out. And so this scientist, along with some others, spent a lot of time and energy modeling that phenomenon.

CHRIS SIPES CFP®: Because they found that phenomenon to repeat itself mathematically in all different types of areas within nature. Things like earthquakes, population explosions and population collapses. All these different areas of nature. I wouldn't quite go so far as to say it's a law of nature. But he was talking about how this pattern repeats across.

CHRIS SIPES CFP®: The natural world in so many different areas. And I, I, I really enjoyed it because, you know, applying it to Markets, it, it works very similar in that, you know, they always say that, what, what is it that the, the market takes the escalator up and the elevator down. And, so you tend to get like very gradual progress on the way up.

CHRIS SIPES CFP®: And then when, when things do change when that self-organized criticality reaches its crisis point they change quickly and you get a sudden change in the environment and that that i think because you see it in nature that's what you should expect in in any type of system that we're all a part of including the Markets so maybe this time is different maybe the sand pile never collapses but I I would be very, very cautious in making that bet.

DANO WEIR: The Fibonacci sequence as well, the golden ratio, similar to what you're talking about there.

CHRIS SIPES CFP®: Yeah. To me, I love reading about that kind of stuff because it's beautiful that nature works in that way. It's a very amazing, simple, complex thing that once you boil it down, it's a simple concept that most people, it can pass you by if you're not reading about these things and going, oh, that's how it works. That's just a beautiful, amazing thing.

CHRIS SIPES CFP®: Another tough week for Ohio sports, man.

DAREN BLONSKI CFP®: You don't deal with Ohio sports is right.

DAREN BLONSKI CFP®: Oh, please don't deal with Ohio sports.

CHRIS SIPES CFP®: Yeah. Yeah. The, the weather, the, the sports it's, it's, it's sometimes tough, but anyway, so this, this is illustrating another, another concept in investing. And this is why. We try to avoid words like always, never, you should do this or whatever. Because there's always a chance, right? It's like the dumb and dumber line. So you're saying there's a chance, right?

CHRIS SIPES CFP®: Look at the win probability that Cleveland had in the fourth quarter against the Knicks. They were up by 22 points. I believe it's the second time out of like 535. First-round playoff games like this, or semifinals, sorry, that a team has been up by that many points and lost after the fourth quarter. And so there's always a chance, right?

CHRIS SIPES CFP®: There's always a chance that something could happen. I was listening to a podcast this week about the investment parameters around different models and such. Most of those models have an input that interest rates were zero bound. And then we had that period of time just recently where interest rates, especially in Europe, got negative.

CHRIS SIPES CFP®: That wasn't in the models because it was outside of the realm of probabilities. Or so they thought, well, listen, anything is possible. And even when you think it's a lock, you think it's a 99.9% chance, you know, the SpaceX thing, how could... How could this not be the most amazing opportunity that's ever existed? Well, there's always a chance.

DANO WEIR: Was that from last night, Chris? This Cavs game?

CHRIS SIPES CFP®: No, this was game one. Game one, yes.

DANO WEIR: Game one of the conference finals. That's right.

CHRIS SIPES CFP®: Yeah, last night they lost by a lot more.

DANO WEIR: Just imagine looking at these numbers on Polymarket, you know, and you see this and you go, oh, yeah, I'd place that bet if you were a betting person. And in fact, the 0.1 did actually end up hitting.

CHRIS SIPES CFP®: Yeah. Well, and if you said I would place that bet, right. And, it was already priced. Like you weren't, you weren't going to make any money by betting on Cleveland at that point.

DANO WEIR: Exactly.

CHRIS SIPES CFP®: And so, so that's the other thing is like, sure. You think it's, it's going to be a great investment. Well, guess what? So does everybody else. And so unless you have a non-consensus view, you're going to get the expected return based on the price. What's the price? Well, for SpaceX, that price is over 100x revenues, not earnings.

CHRIS SIPES CFP®: You know, we talk all the time about price to earnings, PE ratios. That's the common, like one of the most common valuation metrics. We're not talking about earnings here because guess what? SpaceX doesn't have earnings. They have losses. We're talking multiples of revenue.

CHRIS SIPES CFP®: And I didn't put it in here, but if you want to look up the now famous quote from the CEO of Sun Microsystems during the dot-com bubble when he referenced the time that Sun Microsystems was being valued at 100x revenues. And he's like, look, you're valuing the company at my top dollar before I have to pay for R&D, before I have to pay for people, before I have to pay for anything. And you're saying it's worth 100x that.

CHRIS SIPES CFP®: And he's kind of like you're crazy right and again this time could be different but like i think you should be really really careful expecting because because it's already priced in even if this company is the most amazing thing that ever happened to humanity it better be because it's priced that way right so anyway i think you just want to you want to approach this with care so let me just read a couple stats this was from jaguar analytics so is it SpaceX is expected to go public at somewhere around $1.75 trillion to $2 trillion, maybe over that, who knows.

CHRIS SIPES CFP®: The 2025 sales. Were 18.7 billion. So a trillion is what? A thousand billion, right? So just think about that. A thousand billion is a trillion dollars. I think now that we're into the trillion dollar valuations, the human mind just can't. I can't even think of a billion dollars, let alone a trillion.

DAREN BLONSKI CFP®: What is a trillion anyway? That's like whatever, right?

CHRIS SIPES CFP®: Yeah.

DANO WEIR: So anyway, we're going to, we're going to need to refresh because everyone has been clarifying to me when they say billion, that it's with a B we're going to need to update that because it's now trillion with a T. So I know there's a lot of confusion and that's usually something people like to say. So make sure to get your teas ready. Cause now we're saying trillion with a T.

CHRIS SIPES CFP®: Right. Right. So, so trillion with a T in terms of the valuation. So what you're paying to buy into this company. And then the sales are currently, so again, sales, not profits.

CHRIS SIPES CFP®: This is just top line revenue, 18.7 billion in 2025 with an operating loss of 2.6 billion. So they still lost money. So there's no, there was no, you know, return to investors, based on any types of earnings. So, so it's, you know, like just, just understand that.

DANO WEIR: Investing is always you know a game of probabilities and in this case the the the probabilities are are wild wild and and just to compare so you can put some teeth around what 18 7 18.7 billion in revenue not profit revenue is like Coca-Cola random company i picked had revenues of $47 billion. So Coca-Cola has revenues three times this company.

DANO WEIR: And yet the value of this company is sky high. And that is because of the potential. And one of the ways that they've been selling this potential when it comes to this IPO is what they call TAM, the total addressable market. Meaning what they see is less about where it is now and where it could be going. And so this is from that S1 filing.

DANO WEIR: And I'll just read this here. We believe we've identified the largest actionable total market in human history, a TAM of $28.5 trillion, consisting of $370 billion in space from space-enabled solutions, $1.6 trillion in connectivity, across $870 billion in Starlink broadband and $740 billion in Starlink mobile, as well as additional opportunities in enterprise and government.

DANO WEIR: $26.5 trillion in AI across $2.4 trillion in AI infrastructure, $760 billion in consumer subscriptions, $600 billion in digital advertising, and $22.7 trillion in enterprise applications. So essentially what they're selling for this IPO is, yeah, yeah, we're losing $4 billion right now, but when everything's in space, we're going to be the new internet in space.

DANO WEIR: We're going to be the new everything in space. And we're going to be the company to take you there, which maybe, maybe not. But I added this slide in here, Chris, because I read this amazing book a few years ago called Riding Rockets, which is by an astronaut named Mike Mullane, who was a part of the space shuttle era.

DANO WEIR: And if you don't know a lot about the space program, 60s and 70s, obviously, you know, we're doing rockets. We're sending rockets to the moon. And it's all government funded. And we're just sending them to the moon because we're trying to make a statement.

DANO WEIR: In the 80s, yeah, that vibe, that space race kind of cooled off, and there started to be this government idea of like, yeah, how are you guys going to pay for all that? And so there was a NASA idea that, hey, let's make this profitable. Let's run NASA like a business. We'll start using space shuttles for private enterprise, and they can rent from us. Spoiler alert, that didn't make any money and didn't work.

DANO WEIR: So, Chris, to to your to your point earlier about the patterns, right, this is something that is being pitched right now is something that has already been tried by the government. Will it work now with, you know, the world's real life equivalent of Tony Stark and his magic touch? It's very possible, but I wouldn't say it doesn't feel like a sure thing.

CHRIS SIPES CFP®: Yeah. And, and. So to your point about the valuations and you mentioned Coca-Cola, sorry, what did you say was their 47 in revenue, 47 billion in revenue, 47 billion in revenue, and the market is valuing Coca-Cola at 350 billion.

CHRIS SIPES CFP®: 350 billion in market cap, meaning basically a third of a trillion, a third of a trillion. And so several times the revenues, Coca-Cola is actually making money and has for a long period of time, you know.

DAREN BLONSKI CFP®: I can't wait to show you guys what this looks like on the heat maps. Because all these numbers are so like, but wait till you see the size of the square of Coca-Cola.

DAREN BLONSKI CFP®: And nvidia and like what Google or i guess this new SpaceX square is going to be it's going to be like one of the big ones right yeah so i love this chart from Bank Of America's ian hartnett he's showing the history of.

CHRIS SIPES CFP®: Previous stock market bubble concentration concentration in a certain sector Thanks. So this goes back to the railroads and you can see that was the big one. It was 63% of the stock market. Now, of course, the stock market at that time was like, America was basically an emerging market at that point.

CHRIS SIPES CFP®: It was not anywhere near as developed as a country or as a stock market as we are today. But at that point, railroads hit 63% of the stock market.

CHRIS SIPES CFP®: They were the kind of original bubble in the roaring 20s we got utilities telecoms industrials because remember at that time you know all of that was the new fangled you know technology that had hit the market and and really set people's imaginations ablaze then in the 70s you had the nifty 50 that peaked in the early in the early 1970s and of course those were all A lot of those companies are still around today.

CHRIS SIPES CFP®: However, they were kind of considered the no-lose stocks of the time, and people were putting money into them. Stocks like Kodak that's not around anymore, but other stocks like McDonald's would have been in there. And they were like the blue-chip American companies that everybody's using, and it's the nifty 50. So that's another kind of sign of like...

CHRIS SIPES CFP®: The narrative's building steam, right? Whenever you get names for whatever segment it is, the MAG-7, the Nifty 50. Okay, so then you look at the next bubble that was in the 80s, Japan. Japan at one time hit a CAPE ratio of close to 100, a cyclically adjusted price to earnings.

CHRIS SIPES CFP®: They were 44%. Japan was 44% of the global stock. Market value at the time that it peaked in the late 80s. And I don't have the exact stats, but it was something like the real estate that was beneath the presidential palace in Japan was worth more than the entire state of California real estate. I mean, there was just all kinds of crazy stuff that happened at that time.

CHRIS SIPES CFP®: Because the narrative was that Japan was going to dominate the future. They had this manufacturing process that was just unrivaled and just in time and all these things and Japan couldn't be stopped and people really bought into that. Okay, then we have the dot-com bubble in the late 90s, early 2000s, where you can see they reached 41% concentration at that time.

CHRIS SIPES CFP®: And then where we're at today, now we are at 40% pre all these IPOs that are coming out. And Bank Of America's heart and it says the history of the stock market bubble concentration, add mega IPOs to AI big boys and market concentration easily surpasses. His estimates around 48% that that'll push this number to, he says it easily surpasses the bubbles of the early.

CHRIS SIPES CFP®: Of the roaring 20s, the nifty 50s, 70s, Japan 80s, the TMTs and 90s, but not railroads. So railroads were the OG. So that's the other thing that's hard about these types of Markets is you don't know how long they're going to last. I mean, AI could become 60%.

CHRIS SIPES CFP®: Who knows? It could go more than that. Going back to the probabilities, anything is possible. And so there's not a limit. That it's going to hit and then suddenly things change. You just don't know when that last piece of sand is going to hit the top of the pile and cause the self-organized criticality to fall apart.

CHRIS SIPES CFP®: But when it's done.

DAREN BLONSKI CFP®: I mean, why can't we just be excited about the SpaceX idea?

CHRIS SIPES CFP®: Right. I know. It's like, I feel like I'm, you know, telling my kids they can't eat the fifth, you know, handful of candy on Halloween. Like, just come on, dad. Just stop.

DAREN BLONSKI CFP®: Chris, just stop telling us to eat our vegetables. Okay.

DANO WEIR: That's right. But Darren, I mean, Darren, you're being facetious though. You're, I mean, you're, you jacked on this.

DAREN BLONSKI CFP®: Yeah, I am actually kind of jacked on it. So like, everything Chris is saying is absolutely true. And I think it's absolutely important. I do actually really think that Starlink is an incredible technology that is going to change the face of the world and how communications happens and how we interact with each other around the world.

DAREN BLONSKI CFP®: I mean, if you think about it, the rural community now is immediately linked to the internet, right? Boy in Timbuktu can now communicate on the internet and the way that opens up the future for humanity, I think is incredible. And I think there's a lot to celebrate about what Starlink is doing.

DAREN BLONSKI CFP®: Now that doesn't mean that all these fundamentals that Chris and, Dan are talking about are absolutely true and absolutely concerned. But I'm actually, for one, really excited about it. The other thing I'm really excited about is I want SpaceX, to be successful. Why?

DAREN BLONSKI CFP®: Because if we can get SpaceX to be successful and we start generating compute outside of the Earth's atmosphere, then we're using less energy because there's a lot of untapped energy coming from the sun. And I think that's really hopeful for all our power bills, but I think it's hopeful for our future as well. So I think there are some really cool things that we need to celebrate here. But yeah, proceed with caution.

CHRIS SIPES CFP®: Yeah, I totally, I totally agree with all of that. I want it to be successful too. I think it will be successful and it may not be a good investment.

DAREN BLONSKI CFP®: Yeah, right. Yeah.

CHRIS SIPES CFP®: Because, you know, think of the, think of the railroads, like that brought an unbelievable technology to that same kid that was in the rural area, like riding on a horse, couldn't get to the next town easily, you know, now they can ride in a.

CHRIS SIPES CFP®: Somewhat protected railroad car and get there a hundred times quicker and safer than they could before. So the technology itself was life-changing and still used today. And I think AI will be too. And if you had bought into those railroad stocks at the peak, you didn't do very well. So that's all I'm saying.

DANO WEIR: Yeah. I think in general.

CHRIS SIPES CFP®: We're just kind of saying be wary of the hype train yes and here's why okay these are drawdowns in recovery periods so you you might recognize some of those same time periods that we were just looking at here where there's been many times in u. s stock market history where the market's really gone nowhere for an extended period of time the the one that is the the the most recent for our for most of us was the 2000 era market.

CHRIS SIPES CFP®: The last time the stock market was this highly valued was 1999. That's the only time we've ever had a CAPE ratio higher than where we're at today. And you can see the last time we ended up having 13 years of the market essentially going sideways.

CHRIS SIPES CFP®: It went up, it went down, it went back up. But that's a long time. And so the hype train can lead to these periods of time that are very painful to go through. Obviously, the most painful one that people always talk about is the Great Depression, 1929. Now, that depression didn't last as long, but the stock market being down, look at that, 1929 to 1954.

CHRIS SIPES CFP®: I mean, that was an insane amount of time it took to get back to even. So that's all I'm saying is it's just, like you said, the hype. The hype is intoxicating, right? It is intoxicating. And I think you want to recognize when you feel that intoxicating allure that maybe just take a step back and take some deep breaths.

CHRIS SIPES CFP®: Okay, now, earnings on the MAG-7 have been... Largely supportive of the market's returns, right? About American exceptionalism and how the U. S. Markets have dominated everything else for years. And that concentration is for a reason. There's a reason why the market so highly values those companies because all the earnings were there.

CHRIS SIPES CFP®: But this stat still was mind blowing to me. Look at this from 2016, the European earnings growth and the Ex-MAG stocks of the U. S. Have been basically the same. It's been the MAG7 that have driven all the earnings growth outperformance in the U. S. That we've seen, which I think that's a pretty mind-blowing stat given that that's a 10-year period essentially.

CHRIS SIPES CFP®: And if you look at things in the economy like retail sales, this is over the last five years, retail sales really haven't grown when you take out adjustments for inflation. So there's a concentration in the market There's a concentration in the economy and that is driven. That's where all the returns have come from in the U. S. Market.

CHRIS SIPES CFP®: And Americans have more of a exposure to the stock market now than they ever have. This chart that's a little hard to read from the Acquired podcast here showing, you know, today it stands at around.

CHRIS SIPES CFP®: Sorry, in 2025, it stands at around 62% of Americans have an equity position in the market, which is the highest according to this chart. And look back in 1929, look at all the pain that that stock market crash caused, and only 2%, roughly 2% of Americans owned stock at that time. I thought that was mind-blowing.

CHRIS SIPES CFP®: But that reverberated through the economy when the market crashed. That way. So, you know, we as Americans and the politicians definitely have a situation on our hands, you know, to make sure that this, these plates keep spinning, that, that, that, that sand keeps piling up.

DAREN BLONSKI CFP®: Which is the fundamental thesis for why they can't let it stop. Right. So, yeah, you know, I, I tell clients all the time, there's only, there's only one thing. That I'm asking you to take my word for, and that is that the wealthy want to get wealthier.

DAREN BLONSKI CFP®: If you could believe me on that one concept, the plates have to keep spinning, right? Because they can't let the wheels come off the bus. And you're right, more Americans than ever are involved in the Markets, but their money versus the money of the institutions is a small portion.

DAREN BLONSKI CFP®: And so the system has to keep going up and to the right. Otherwise, all the wheels come off the bus.

DANO WEIR: In two instances where that absolutely came to pass, Darren, 2008 and COVID. Right. The Fed stepped in and said, yo, this is blowing up. This is imploding. And they took extreme measures. You can debate as to whether that should or shouldn't have been done and all of the ramifications we still experience today. But they stood up and took... Took those actions to prove exactly what you're saying.

DAREN BLONSKI CFP®: Communism, but only if it benefits us.

DAREN BLONSKI CFP®: Yeah, that sounds like the NFL.

CHRIS SIPES CFP®: And don't forget the GFC, you know, when they did step in, the market was already down. The stock market was down, you know, 50 plus percent at that point. So, and even during COVID, gosh, what was it? Mid thirties. In a few weeks. So I, I, I get what you're saying and I agree they're going to do what they can. I also think that the, the global financial Markets are so massive.

CHRIS SIPES CFP®: I wouldn't bet that the government's going to come and save you. Let me just put it that way. So, but there are other options. And this is, from Bob, Bob Elliott at unlimited funds showing the what's called a real yield on tips. So treasury inflation protected securities.

CHRIS SIPES CFP®: So, these in adjustment for inflation, which is why they call it the quote unquote real yield. That's like what you're expected to get after inflation. And you can see that that number is really the highest it's been, almost the highest it's been in the last 25 years. And, These numbers tend to peak at certain times.

CHRIS SIPES CFP®: We've been in such a low interest rate environment for such a long period of time that people left a lot of these. For dead, but tips and real yields are getting much higher, which is competition for stocks. Because if you look at the forward price to earnings of the S&P, and let's just take today's number, which is 21, and you do something called an earnings yield.

CHRIS SIPES CFP®: So if you invert that, instead of 21 over one, you do one over 21, you get an earnings yield, which is a little south of five percent it's 4.76 percent and that is an approximation of the market's valuation i guess of of like expected forward returns so 4.76 and then you compare that to a of an inflation protected real yield of 2.8 so you take 2.8 you add whatever inflation is that to get that comparable number.

CHRIS SIPES CFP®: And suddenly there's competition for stocks, in other areas of the market in terms of expected returns.

CHRIS SIPES CFP®: And so the, the, you know, the more that relationship kind of stretches, there's, there's, there's other, there's other options essentially, to, to take a look at, which could, could be a headwind for, for the stock market moving forward.

CHRIS SIPES CFP®: All right. And the last one is obviously the stress in Markets, in rates related to inflation and related to shocks. Oil shocks in particular tend to be not great for the Markets. We are looking at drawdowns of the SPR, the Strategic Petroleum Reserve. This is going back to the 1980s.

CHRIS SIPES CFP®: This one exceeds even what we did in 22, during the, the Ukrainian invasion. And so, huge drawdowns in the energy market, that, that were just published last month. So we, we, so far the market doesn't care, by the way, the market does not care about this. So I'm just, you know, yelling into the void at this point, but, but it is something.

DAREN BLONSKI CFP®: Isn't that what we're always doing, Chris? Yes.

CHRIS SIPES CFP®: Wet blankets, yelling into the void. That's what we should rename this podcast.

DAREN BLONSKI CFP®: Clint Eastwood. We should rename this podcast Yelling Into the Void.

CHRIS SIPES CFP®: Yeah.

DAREN BLONSKI CFP®: I would stand out alone on that.

DANO WEIR: Clint Eastwood and Gran Torino just yelling at anyone to get off our lawn.

CHRIS SIPES CFP®: Yeah. Yep. So I'll get off the soapbox now. Stop yelling at the kids to get off my lawn. Over to you, Dan.

DANO WEIR: I did have one I wanted to add in here this week because Darren loves when I make it about football. And yes, Darren, I found a way to make a SpaceX.

DAREN BLONSKI CFP®: It's always about football, my man.

DANO WEIR: I found a way to make this SpaceX IPO about football. I want you to help explain a scenario for me. So Indomitian Sioux, who is a defensive lineman for the Eagles and Buccaneers, he's a Super Bowl champion.

DANO WEIR: He's got a podcast and he interviewed Cliff Averill, who's also a Super Bowl champion, also defensive lineman. He won one with the Seahawks.

DANO WEIR: Cliff Averill invested in SpaceX early and he explained it on his podcast and i want to see if i can pull that up here we've never done this before so we're going to see if we can make it work so while it was a private company he he was able to buy into it somehow yes yes secondary Markets or whatever somehow you got access to it yeah he had an inside buddy that said you can get it Bye to this tranche.

DANO WEIR: All right, here we go. Can you guys...

DAREN BLONSKI CFP®: Now he's been unloaded on the common shareholders.

DANO WEIR: Can you guys see that?

DAREN BLONSKI CFP®: I cannot see that. We're not seeing...

DANO WEIR: All right, let's see. Hold on. And we're going to...

DANO WEIR: What are we going to do? Where did that go? Add to stage. Remove. Add to stage. Whoa. Can you guys see that?

CHRIS SIPES CFP®: Yes.

DANO WEIR: Can you hear that? Can you hear it?

CHRIS SIPES CFP®: No.

DANO WEIR: Okay. Hold on.

DANO WEIR: Oh boy.

CHRIS SIPES CFP®: It's turtles all the way down.

DANO WEIR: Oh man.

DANO WEIR: This is a disaster. All right. We're going to try that a little at a later date.

DANO WEIR: The point he makes in the video is that he was an early investor in SpaceX. And when he got in, they were valued at $46 billion. And... Now they're looking at this $1.75 trillion.

DANO WEIR: Valuation. They're getting ready to IPO. And so on the podcast clip, which I unfortunately could not bring up, they're both like, damn, you know, I can't believe you got in early. Darren, I wonder if you could imagine some numbers.

DANO WEIR: Let's just say he put in a million dollars. Can you imagine some numbers that explain to me how investing in a company early that's about to IPO that's losing $5 billion a year is somehow a win because I can't math that. How does that work?

DAREN BLONSKI CFP®: Well, it's not about mathing it, right? It's just simply a function of, can you get people to buy your shares that believe in what's happening? I mean, I think at the end of the day, people would not be buying SpaceX. They're buying the future belief, the future earnings of SpaceX, and it's a conglomerate of other companies.

DAREN BLONSKI CFP®: If you try to math it out right now, I mean, think about Facebook when Facebook IPO. Everyone's like, this company doesn't make any money. It's losing a ton of money. And look where the stock has gone. Think about Google, right? So a lot of these companies, when they IPO, what's happened internally is they're gotten cash strapped.

DAREN BLONSKI CFP®: They still might have a very bright future, but they got to get through some hard times. So they IPO to bring in fresh liquidity. So it's not about mathing. It's just about how do we, one, get more people in on this to believe in what we're doing. And maybe someday we all turn a profit.

DANO WEIR: So if he's got 10 shares, I'll just make that up. If he's got 10 shares, the company IPOs, and let's say that it raises what? I mean, by the valuation, it's expected to raise that much, $1.7 trillion? No. He then is able to cash in his shares finally?

DANO WEIR: He's able to sell those shares finally? I guess that's what I'm asking. I think that's a piece that a lot of people don't understand. When stuff like this happens, when there's early investors or they're getting in, there's a lot, it feels like the peas moving around in the shells.

DAREN BLONSKI CFP®: Well, so when it IPOs, there's a certain portion of shares that are made available on what we call the secondary market, right? Individuals like this guy right here, Cliff, he might have a whole chunk of shares of this particular company. There is what's called lockups on him, though. He won't be able to sell it for a period of time.

DAREN BLONSKI CFP®: And if you read their disclosures, it goes through that in length. So his shares are still his shares. There's other shares that are getting sold to the market. And then Cliff can then offer his into the secondary market and sell his shares at certain lockup times. So day one, Cliff might not be able to sell any of his shares. But maybe within 90 days.

DAREN BLONSKI CFP®: There are certain bogeys in price that have to be hit. It's a very structured process. And they designed these processes to hold the share price in a healthy place. And actually, if you read the disclosure documents, it's actually built out pretty well, and it's pretty well thought out to support price action of SpaceX. Does that make sense, Dean?

CHRIS SIPES CFP®: It does make sense. And I just kind of wanted to... Finance, Dan, like in your, in your finance 101 courses is that any company, any business venture is the present value of all future cash flows, right? That's, that's like the basics.

CHRIS SIPES CFP®: So when you're valuing a company, you're trying to, you're trying to value what you will earn in, in cash flows on that company for, for life, right? On companies like Coca-Cola, that's one thing on what that value is because you have earnings, you have history, you can assume different growth rates and such and such.

CHRIS SIPES CFP®: Companies that aren't making money, it's a whole different game because it's not necessarily investments as much as it's speculating. You have to speculate on all these things. You don't know how much they're going to make in year five or year 10. And so it becomes.

CHRIS SIPES CFP®: Exponentially more difficult to like value those companies but to answer your like initial question is when he bought in the the consensus value of that company was 46 billion you know they might have gotten an evaluation done or whatever however they came up with that number and now that it's going to go public the the market is going to value it at you know 1.75 trillion so it's like, I bought this company for 46 billion and now somebody's going to say it's worth 1.75 trillion.

CHRIS SIPES CFP®: And if I want to sell at that value, you know, that's, that's how it works. Does that answer your question?

DANO WEIR: It does. Yeah, I just I was trying to boil it down a little bit because I think there's I don't know. I don't know that people stand up and ask those questions sometimes. So that's my job is to do that.

CHRIS SIPES CFP®: Yeah.

DAREN BLONSKI CFP®: All right. Well, let's talk about this talk market. And since a lot about SpaceX today, but it's going to impact the S&P and they're actually designing the IPO.

DAREN BLONSKI CFP®: End the lockup release of the people like Cliff who already own shares so that it keeps the price higher so that SpaceX will be put into the SPY index, the S&P 500 index very quickly. So Chris, when a stock is included in the S&P 500, what's happening there and why is that important?

CHRIS SIPES CFP®: So it gets added to the index, which is really important because most investing today is done passively, meaning that people buy a share of, you know, the S&P 500 via a fund, either via their 401k or whatever.

CHRIS SIPES CFP®: And when they do that, that fund has to go purchase the companies that are underlying that index in the proportions of whatever size. So if you get included in the S&P, you've got a lot of flow of passive funds coming your way.

DAREN BLONSKI CFP®: So every two weeks, you mean when I put money in my 401k and I just buy the S&P 500, I'm automatically just buying SpaceX? Is that what you're saying?

CHRIS SIPES CFP®: Yes.

DAREN BLONSKI CFP®: That's exactly what he's saying. So what they're doing is they're designing this IPO so that in a very short order, some company is going to get kicked out of the S&P 500. And SpaceX will be included in the S&P 500. So every two weeks, most of America is going to be buying a little bit of Elon Musk's SpaceX AI. It's quite brilliant, right? And then that way they can flood in money into the business and continue to grow it.

DAREN BLONSKI CFP®: And then over time, the company can sell off its shares when it has liquidity events. And guys like Mr. Cliff, as their lockups break up, then he can then get liquidity on his investment. So that's why even if it's not making money, the way they're designing this thing, it's going to be included in the S&P.

DAREN BLONSKI CFP®: It's going to have an instant flow of cash coming at the wall regardless of its earnings, which is interesting. However, I will say typically once a stock is included in the S&P, that's the relative high for the stock for quite a while. And we saw that happen with Tesla. As soon as it was included in the S&P and it went live, it actually went down after that, whereas most people think it goes up. That's not always the case.

DAREN BLONSKI CFP®: So don't bet on it just being a perfect setup because it's probably not going to be. Now, so what's going to happen instantaneously is in the S&P 500, because SpaceX is going to be such a behemoth, it's going to be one of these big squares really quick.

DAREN BLONSKI CFP®: To Dan's point earlier about Coca-Cola, here's Coca-Cola down here. What was that comparison between Coca-Cola and SpaceX you said earlier?

DANO WEIR: Just revenue. Coca-Cola's revenue last year was $47 billion, and SpaceX's revenue is $18 billion.

DAREN BLONSKI CFP®: Right. But because the share price is going to probably have a bigger capital weighting than Coca-Cola. So you'll see the square probably, actually, I think it'd probably be bigger even than Walmart, which is kind of like stupid. Whatever. Who cares about logic?

DAREN BLONSKI CFP®: So if we go back to the S&P 500, the other thing I think is a really interesting point.

DAREN BLONSKI CFP®: With the IPO happening, it's going to flood a ton of capital into the Markets. So there could be some uplift potentially in the Markets because of that. What we're staring at right now is the one-hour chart on the S&P 500. You're looking at a top that was hit May 14th, excuse me, May 15th.

DAREN BLONSKI CFP®: May 14th, and then we've come back into that top today and was rejected of this long, I guess this downtrend line. But what's interesting, I'm just going to show you can see how much more interest in this area there was the second time around where there was a lot more trading going on during the session here versus when we hit this point a week or so, a week and a half ago.

DAREN BLONSKI CFP®: It immediately sold off. Kind of rounded out and sold off. If we look at this on the daily chart, you can see that's somewhat of... Telling us that that might have been a topping candle. We got a lower low, maybe a double top. But what's interesting is we're holding above this long-term trend line that goes way back on the S&P to 22.

DAREN BLONSKI CFP®: And we're holding above it, now broke above it, and we're going to close a week above it, which I think is really important. You can see last week, we didn't close the week above this long-term trend line. This week, in three minutes, it looks like we're going to close above this long-term trend line. That's very bullish. You can't really argue that any other way.

DAREN BLONSKI CFP®: So I'm not in the camp of this is a market top with the SpaceX IPO, unless this gets rejected and goes back underneath. You could make that argument building. Where I would make that argument building, I would look to no other than the front end of the risk curve, Mr. Bitcoin. And Bitcoin, you can see, is down today and it's trading.

DAREN BLONSKI CFP®: Which is the front end of that risk. I will note that on the weekly candle, it held its 20-week moving average. It didn't go below that. On a short-term basis, though, we did trade down below now this 20-week moving average. But there is this long-term trend line right here coming up, and we're going to trade right down into there, it looks like.

DAREN BLONSKI CFP®: So there's still some good support there, but the front end of the risk curve is looking soft. That would seem to indicate that this might sell back below this long-term trend line. If we hold this long-term trend line next week and we stay above there in the price by the end of the week, could go below it then back up.

DAREN BLONSKI CFP®: I think that's very bullish. Hard to fade that one. What's driving this? Well, a lot of the good news with the oil Markets. So I think this is kind of interesting to look at. I was getting this earlier and you can see this trend line down in the oil Markets. And you can see traded up.

DAREN BLONSKI CFP®: Into 119 sold off traded back into 114 sold off 108 sold off now 104 sold off if we trade back up so if us and iranians start fighting again around 102 look for some magical political announcement that we're getting along and we were close to a deal with pakistan as the middle negotiator between us and Iran and then all of a sudden the you know the oil market will go down The bad news about this chart, though, is we are doing a descending wedge, which often results in something like this and then a breakup.

DAREN BLONSKI CFP®: And that would tell you things when all heck broke loose in the Middle East. You could argue that it also does this and goes down. Either way, we're facing a decision point in the oil Markets. And that's what the Markets are telling you, that it's winding up, that it's going to go one way or the other. But there's not. Going to be a lot of this sideways chit-chat.

DAREN BLONSKI CFP®: Now, sometimes it can just continue on going straight to, right? Like we talked about earlier in the show, if anyone always says always, 100% of the time it's BS. But this is typically a descending wedge. It's telling us there's going to be a breakout to the downside or to the upside. We don't know yet.

DAREN BLONSKI CFP®: Right now, just because we're headed down, you would argue that we're seeing that breakdown, which would be good news for the Middle East, good news for the war with Iran. But if this all of a sudden reverts and goes back up, Watch that $102,100 range because the market's going to get really sensitive right there. And likely we'll see some headway politically made right around that area once price moves into that location.

DAREN BLONSKI CFP®: All right, let's take a look at gold. So gold's been all the rage and all the discussion, and it's actually been pretty soft now since January. It's not been a great year for gold, but... Everybody's still coming off the hype of last year in gold.

DAREN BLONSKI CFP®: And we continue to see that going down. That would be on the side that risks off. People are less concerned. Maybe things are going to calm down in the Middle East. Let's take a look at the 10-year treasury. Why the 10-year? Because the 10-year is basically the backbone of the financial sector telling us what's going on.

DAREN BLONSKI CFP®: One thing we saw that was pretty eye-opening was 30-year mortgage rates this week. Just shot through the roof. I think what did we hit this week? I think this is weekly. I think at some point this week, we're back up at like 6, 6, 6, 8. In reality, this is just showing the average one across, depends where you live and what they are, but you can see they're on their way back up.

DAREN BLONSKI CFP®: Why? Because inflation's on its way up. Why? Because oil's been going up. Why? Because everything's made out of oil in the economy. Or has some touch point to it within its production lines, that's something. Pay attention to. If interest rates go up, this will move the move index up, the volatility.

DAREN BLONSKI CFP®: This will impact the bond Markets. Bonds have had a nice run as of late. But just when they broke even from 22, it's like they turned around and went back down in the better and went back down in direction. So, Chris, you can still drive your 1980s Mercedes because you won't be buying a new car with your bonds.

CHRIS SIPES CFP®: Talk about a wet blanket, man. Okay.

DAREN BLONSKI CFP®: That's right. For those who don't know, Chris loves old cars, so it's made in Justin. That's fine. But he certainly could afford a new car if he wanted. He just loves the old classics, right?

CHRIS SIPES CFP®: That's right.

DAREN BLONSKI CFP®: So when we look at the 10-year, you can see this looks like a bull flag in the making on the weekly chart. So it almost looks like rates are headed higher long-term. I wonder if we enter into an era of the Carter administration, when rates were way up there.

DAREN BLONSKI CFP®: Everyone's like, oh, rates are high. But in reality, the 10-year has been a lot higher for a lot longer, so we could go a lot higher. So to our poor friends in the mortgage business, because it has been a rough couple years, it could actually get worse.

DAREN BLONSKI CFP®: But what tends to happen when rates go higher is people just start adjusting and downsizing for the rate and the expense of a home.

DAREN BLONSKI CFP®: So overall, I think we're actually in a really positive spot in the market. But the fact that we've moved up so high so fast, that makes me concerned. We broke above this long-term trend line, but the fact that we did close above it on the weekly tells you that it could get pretty wild. I would, though, given how fast, how hard we've moved, be expecting some sort of pullback in the near future.

DAREN BLONSKI CFP®: Really pretty crazy when you look at that chart. This was 2001. This is 2008, and look where it's come. Since then. That's why I said, if you can take one thing that I say for granted, and that is that the wealthy want to get wealthier, then the chances of the market going higher are likely.

DAREN BLONSKI CFP®: I think I'm going to leave it there. Market overall looks pretty constructive. Rates going up, inflation going up. I think that's also helping drive stocks because one of the best places to be when inflation is riding is in equity. Not advice, of course, just general.

DANO WEIR: Information not advice general information and that's what we were hoping to address this week obviously with the news of SpaceX making its IPO one more thing before we go out the door guys because where did this go there it is we're talking about a spaceship company sentient AI is real and there might be aliens Now, I was told my whole life as a child that liking Star Wars was being a nerd. But in fact, I was just a futurist.

DANO WEIR: New Star Wars movies out this weekend. So I just want to say it may in fact be a documentary because all this stuff is coming true.

CHRIS SIPES CFP®: Good point. Good point.

DANO WEIR: There's always a chance.

CHRIS SIPES CFP®: There's always a chance. That's right.

DANO WEIR: That's right. Thanks so much for checking out the show this week. Subscribe wherever you are. And we will see you next week on The Markets.

CHRIS SIPES CFP®: You're up to date with Fermata On The Markets. Learn about how the Fermata Advisors family of brands can help your family and business in finance. Sonoma Wealth Advisors, a comprehensive, holistic finance solution offering financial planning, asset management, and tax planning.

CHRIS SIPES CFP®: Take our free wealth analysis now at SonomaWealth. Com. Fermata 401K. Business retirement solutions for small and large companies with a fiduciary commitment. Learn more at fermata401k.com. Fermata Tax, personalized tax services for yourself, your family, or your business with an emphasis on efficiency.

CHRIS SIPES CFP®: Find out how at fermatatax.com. If you haven't already, like and subscribe to Fermata On The Markets on YouTube, Spotify, and Apple Podcasts. Firmada on the Markets features human hosts, editors, and voiceover talent. Music by Dr.

CHRIS SIPES CFP®: Delight on Soundstripe, voiceover by Joan Alloway Nash. Thank you for listening to the very end. We appreciate diligent viewers and listeners. Firmada Advisors LLC is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered or is excluded or exempt from registration requirements.

CHRIS SIPES CFP®: This content was produced by Fermata Advisors, LLC, DBA Sonoma Wealth Advisors, DBA Fermata 401K, DBA Fermata Tax. The opinions expressed by Fermata Advisors, LLC on this show are their own.

CHRIS SIPES CFP®: Information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but are limited to the dissemination of general information.

CHRIS SIPES CFP®: A professional advisor should be consulted before implementing any of the options presented. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.

CHRIS SIPES CFP®: Investments involve risk. And unless otherwise stated are not guaranteed. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for any individual.

CHRIS SIPES CFP®: Viewers and listeners are encouraged to seek advice from a qualified tax, legal, or investment advisor to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.