Prof G Markets - Wall Street Is Pumping SpaceX — So Why Is It Falling?

Episode Date: July 13, 2026

Patrick Boyle, professor at King’s College London and portfolio manager, fills in for Scott. He and Ed discuss how SpaceX’s stock has traded over the past couple weeks. They break down the price targets that analysts have issued and explain why they’re concerned about potential conflicts of interest in equity research. Then, they discuss why crypto bros don’t find crypto exciting anymore and have moved onto AI. Finally, they explore why the housing market is showing new signs of strain and what it would take to get home prices back to a reasonable place.  Patrick Boyle is a professor at King’s College London and a portfolio manager with more than 20 years of experience at hedge funds, investment banks and private wealth management firms. He’s also the author of several books on finance and hosts the podcast, Patrick Boyle On Finance. Subscribe to the Prof G Markets Youtube Channel  Subscribe to the Prof G Markets newsletter  Order "Notes on Being a Man," out now Note: We may earn revenue from some of the links we provide. Follow the podcast across socials @profgmarkets Follow Scott on Instagram Follow Ed on Instagram, X and Substack Send us your questions or comments by emailing [e-mail] Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Scott is off today, but we have got a very, very special guest filling in, someone who a lot of you guys have been very excited about. The one and only Patrick Boyle is joining us, Patrick. Great to see you. Hello, thank you for having me on as the fill in bald guy for the channel. It's funny. Last time we had Robert Armstrong, who is the Financial Times commandator, also bald, also very smart. also very insightful. So clearly there's a theme going on here, but we love it. Good to see you. How are you? Great, thanks. How are you? I'm doing very well. I'm very glad you're here. We're recording this

before the England game for the World Cup, which I'm very excited about. But are you supporting anyone in the World Cup? I mean, your accent is Irish. So I have to assume that maybe you wouldn't want England to win. Like, where do you stand on this? The way it works in Ireland is that we don't acknowledge sports that we're not good at. So if we were in and doing well, it would be huge. But we just view it as a foreign sport that's, you know, it's not worth watching. So what are the sports then? It's basically just rugby. Rugby's acceptable. But then there's also, you know, GAA football, which is better.

We've got hurling. You know, we've got all of our own sports. We don't need your sports, you know. You've got your own things going on. Don't need to participate in all of the popular sports, the sports that matter. But I won't continue down that path. Just for everyone who doesn't know Patrick is a professor at King's College, London, and a portfolio manager with more than 20 years of experience. Many of you probably know him from his YouTube channel. Patrick Boyle on finance.

Patrick breaks down these very complex topics in a very simple, understandable way, and we just love his insights. And he became our favorite person to discuss. SpaceX with, and we will be discussing it again today. Just before we get into the show, Patrick, I think a lot of people are, like, dying to know your origin story, how you ended up becoming this superstar YouTuber, but also Professor of Finance.

Like, how did you get into this stuff? You know, a lot of it, I was just asked to teach at, originally Queen Mary and then King's College. and, you know, I teach the Masters and Finance students. And then I sort of always liked cameras and things like that. And so I started, you know, students will come to you with questions. They'll say, you know, can you explain that again? And often I just thought it would be easier to record it and be able to send that to the students.

Wow. And that then turned into a whole YouTube thing. That's very interesting. Yeah, Scott often says that being his history of being a professor, was kind of a cheat code because he got to test out his material on his students. And then if the students like it, then he'll take it to the public, then he'll take it to the big leagues and talk about it on TV. Clearly it works. Clearly it's a good system. So let's get into this today. We've got three very interesting stories.

We're going to be talking about SpaceX. We'll be talking about what's happening in the crypto markets, something that a lot of people are now calling the Great Brotation. We will be explaining exactly what that means. And then we will be ending with a little breakdown on what is happening in the housing markets. Newsflash prices are not going down. So let's start with SpaceX. Now is the time to fly. I hope you have plenty of the world at all. Last week, SpaceX officially joined the NASDAQ 100.

It qualified under the new FAST-track listing rules, which reduced the required trading history to just 15 days, and it also eliminated the minimum public float requirement. That same day, the stock received an overwhelming vote of confidence from Wall Street, with 18 out of 19 analysts publishing a buy rating, and only one publishing a hold rating, which was honestly quite surprising to me. I mean, as I think a lot of people know, I think that the stock is way overvalued. I know other people think that, too.

I believe Patrick believes that as well, but we'll get his official views in just a moment. Despite all of that positive momentum, both those ratings from Wall Street and also its inclusion in the NASDAQ, which essentially meant billions of dollars of passive investment, which should prop up the stock price. Despite that, SpaceX shares fell nearly 6%. And at the time of this recording, the stock is now down 13% over the past week, and 34% from its peak. So despite all of that positive influence, things that should really be raising the stock price,

the stock continues to fall, and it's now trading below where it was on its opening day when it first IPO. So, Patrick, I guess let's just start with your reactions to how the stock has traded over the past week, two weeks. It hasn't been great. What do you make of what's happening here? I mean, the truth is it's above the IPO price.

Like if you put in for the IPO, you got it at 135, you're pretty happy with the return. And it's sort of in line with what you get from IPOs. I forget the name of the researcher, but there's a, I can't think of it now. But there's a guy who's an expert on this and he's done all the research and it shows that typically IPOs jump about 18%, which was right in line with what as SpaceX did. Now, the thing is, if you bought it on the day of the release, you were buying post-pop, right? I think it hit the market. Maybe it's some like 165 or something like that.

So most people who didn't get a fill and bought it at the market open, they'll be down on it. But the truth is, it's trading at a, you know, very high valuation. And if you invested in it, you can't really claim to be too surprised. And you've probably done all right out of that. Just to break down the dynamics here, as you say, the IPO price was 135, and the IPO price was the price that was allocated to the insiders, people who had access to the IPO. But if you are a retail investor, if you were just buying it on Robin Hood or whatever your trading platform is, the lowest price you could have gotten in at was what it was when it

immediately went out, which was 150. And we're down from that price point. In other words, as we kind of predicted, everyone who bought this as a retail investor has thus far lost money. They're all down. And the guys who bought it when it was going close to 200, those guys are really down at this point, which was kind of what we all sort of expected. And it's certainly what you talked about as well. So just looking at the valuation now, they did a little over $19 billion in revenue in the past 12 months. They're trading at 101-time sales, which is already quite absurd, and you've pointed that out.

But then we get the price targets from Wall Street. And I'm just going to read out these price targets, and I want you to react to them. So Goldman Sachs' price target for SpaceX. This is what they think the stock should be trading at. Their price target is $205 a share. So that is a $2.7 trillion market cap. that implies a 139x price to sales multiple. J.P. Morgan, 225.

That implies a $2.9 trillion market cap, trading it more than 150 times sales. Deutsche Bank says $255. That's more than $3 trillion in market cap, 173 times sales. Morgan Stanley, $300, nearly $4 trillion market cap, more than 200 times sales. Here's the best one, though.

Raymond James, their price target is $800 a share, a $10.4 trillion market cap, an implied price to sales multiple are $542. What the hell? I mean, you have to wonder if they built spreadsheets to justify this, or they just pulled out the numbers. Because, you know, to people at home who aren't familiar necessarily with these ratios, like nothing trades at a hundred times sales. Like it doesn't happen.

And the kind of thing that even could potentially trade at a very high price to sales ratio would be maybe like a software company where sales basically converts straight into profits, you know, like where there's no real costs. There's massive, massive costs here. There's the cost of the rockets, you know, but that's not really what SpaceX claims to do anymore. or it's an AI company. So it's the cost of all of those Nvidia GPUs and whatever.

You know, they're burning, I think, about $5 billion a quarter. So, I mean, it's not just losing money. It's losing a shocking amount of money. And you're really paying up as if, well, it would be hard to justify paying 100 times. Because if you think about if all of the sales passed straight through as profit,

you're still, do you want to pay 100 times, you know, 100 years worth of profits for the number? next year's profit. Like, you have to wait 100 years to get your money back. It doesn't make sense, you know, 300 years to get your money back, it's getting wilder. And then, of course, to the listeners who are going, oh, oh, but what about growth? You know, because, of course, the revenues should be growing and hopefully it will eventually become profitable. It's not really growing that much either. I think it's, you know, SpaceX is a growth rate of around 15%, which compares to when Google went public at, I think, 10 times sales, or maybe it was less,

Google was growing about 200% a year, right? So it's sort of an ex-growth company that's putting itself forth as an AI, primarily an AI and, in fact, enterprise AI business, when they're not really much of an AI company. I think they've got a 3.5% market share. So it's, you know, it's just hype-based. And in truth, even why did it fall once it hit the NASDAQ index inclusion? Well, a lot of people were buying for that pop, you know. And so to a certain extent, you know, the thing everyone is waiting for has happened now. Like, I mean, what's the next, what's the next hype? Like, what's going to be so exciting? Like something's going to have to dramatically increase growth or, you know, you have to have another massive forced buyer out there. So hearing all of that, and I appreciate you putting into context what it actually means to trade it 100 times sales. Like, yeah, what we're basically saying is that you've got to make your money back on the earnings. What are you even talking about earnings? We're talking about the top line.

So we're just ignoring the costs here, which kind of begs the question, like, how on earth are these Wall Street analysts justifiably setting these price targets? And I just want to get into some of the details that we got from the Raymond James research report on SpaceX. This is the one that their analyst, Brian Giswale, who set the price target at $800. I'm just going to give you some of the data points or his projections that how he justifies that valuation. So he estimates that SpaceX revenue will rise from $19 billion last year to $5.2 trillion. by 2035. That's his estimate. He says that 94% of that revenue will come from AI. In other words, he thinks that SpaceX is going to generate $4.9 trillion in AI revenue in 2035. He says, quote, we see the company as one of the defining industrial infrastructure companies of the 21st century,

just as railroads, electric grids, and the internet reshaped prior economic eras. We believe SpaceX is building the foundational platform for the next generation of industrial capacity. So he's comparing it to railroads, electric grid, internet chips. Essentially a bunch of things that were bubbles that all blew up. Like, you know, to talk about, to be like, oh, it's a lot like investing in railway a couple of hundred years ago. It's like, and how did that work out? Or the dot-com bubble. Isn't that what they call the dot-com bubble? So it's a lot like many bubbles in the past in that the price could go up before it finds, you know, before gravity has its effect. Exactly. That's a very good point. I was going to make the point that if you look at all

of those industries and the biggest companies at their peaks, you look at U.S. steel at its peak, it was worth 6% of U.S. GDP. For Cisco, it was worth 5.5% of U.S. GDP. You make a good point. They've since come way down. If SpaceX were to hit a $10 trillion valuation, which is what Heath believes this company is worth, it would be equal to a third of the entire GDP of America, which to me doesn't really make much sense at all. But if you think through, what would the other AI companies be worked? Because this is the smallest one. This is 3.5% market share.

Like, you don't want to own space. You know, the reason they have to say that it's an AI company is just that the, you know, the only thing that's kind of sort of profitable is the, the satellites, the satellite internet thing. But that can only grow so much, right? It's only ever going to get so big. So you can't justify its current trillion plus dollar valuation on satellite internet. The rocket launch business, you know, it's worth noting that that loses money

and that most of the launches are launching their own satellites. So when people even point out that the satellites are profitable and the launches are unprofitable, that's sort of like McDonald's saying, well, we're profitable on the hamburgers, but we're losing money on the buns. It's like, aren't they tied together? That is a very, very good analogy. Like, maybe they should up the price they charge their biggest customer. Then the whole thing would be profitable.

Just going through some more of these analysts, because to be clear, Raymond James isn't alone. This is basically the entirety of Wall Street that is an agreement on this. Deutsche Bank said that SpaceX is, quote, the apex of civilizational ambition. They said the company is, quote, bending the arc of history. JP Morgan said SpaceX's, quote, potential impact on humanity is bigger than any companies we've ever seen. Morgan Stanley called it the final frontier of AI. I think the report was called the apex of civilizational ambition, you know,

which I looked at like other Morgan Stanley reports like the one on Exam Mobile or the one on, you know, many of the other companies that we think about, they never add such drama, you know? Like they put the guy with the Hawaiian shirt analyzing this and he comes out with a title like that, you know? And I think the only other real company covers is Tesla. It's worth noting. Yeah, exactly, which is crazy.

And by the way, just when we look at that price target, I was looking into that Morgan Stanley report. So their price target that they have set is $300. So, again, that's like, double where we are now. They say that the bull case on the high end, their target is $600. Yeah, I guess there's a standard deviation around that, right? Right. But on the other side of it, they say that the bear case is $75. So it's quite a skewed distribution.

Exactly. It could fall 50%, but it could also rise 300%. So you're basically not telling us anything. I mean, it's a call option, basically, right? Like it's, yeah. Exactly. So when we were talking about this offline, you made a really interesting comparison to something that happened in the dot-com bubble

with this guy named Henry Blodgett. Could you just explain what the story is there and how it might have parallels to today? This is quite a famous story. It wasn't just Henry Blodgett, but he was sort of the most, the biggest example. He was the internet analyst at Merrill Lynch at the time. And basically, you know, after the dot-com bubble burst, you know, there were a few investigations. And they found

that many of the analysts were privately sending emails describing companies as POS, you know, which we work out what that means, while publicly going on TV and really like bullying them up and saying that they were the greatest companies ever. And so Henry Bludgett, I think he was hit with a $4 million fine. He was banned from the securities industry. He since went on. He's now, I think he founded Business Insider, so he's gone on to be a success.

But during, then, what was in 2002, Sarbanes-Oxley was passed, and there were regulations put in place because they basically said that what was happening at the banks was that, you know, the banks were making a lot of money, IPOing all of these internet companies. And it was sort of tied into, like, you know, which bank will I lead the IPO? Well, the one with the analyst who'll say the most good things about the company, right?

We need to get the price up. And I think even back then, IBD, the investment banking division, got to put in as to how much of a bonus the analysts would get. So that was all separated. You know, investment banking couldn't influence, you know, research reports after that, or at least that was the idea. But it's worth noting that SpaceX, which, you know, they raised, how much did they raise in the IPO? Was it 85?

85 billion. There's a research report out from a guy called, he's got a substack called Cape Fear Capital. and he dug through that IPO prospectus and very carefully added up all the uses of funds, you know, because normally in an IPO prospectus, there's sort of, you know, it's sources and uses of funds. Like, why are you raising this money? What do you need it for? And it was all spread out and like not very clear at all, but he added it all up. And I think he worked out that they need $235 billion in spend between now and 2030. So four and a half years.

So that actually means if you're working at Goldman Sachs, Morgan Stanley, any of the big investment banks, that Elon will be decided, you know, they need to raise capital. They'll be asking the banks to raise that capital. Banks charge about, you know, a 1% fee. I think they charged less for SpaceX because it was so big. But there's big fees in the pipeline. and if your analyst says that this is a POS, you know, you might not get that call from Elon. So it could be expensive to say the wrong thing. Now, you know, we believe that the banks are not supposed to be doing that anymore.

And it's reasonable. Maybe they just pick like the biggest Elon fanboys to analyze his stocks because otherwise, you know, I don't know that I would get a job as the Tesla analyst, for example. You know, should this go badly, which it's reasonable to think it could, I imagine, you know, that many of these people, you know, if you're on the Index Inclusion Committee at NASDAQ, or if you're, you know, one of the bankers who claimed it's going to be trading

at an astronomical level the likes no company ever has before, you know, you may get a nice day out in Washington while you attend some sort of congressional investment. action into your work. I would say hold on to your spreadsheets, you know. And don't delete, or no, do delete some emails, maybe. I mean, I think it's such an important point because, I mean, what we saw with the dot-com bubble and what we learned is that there is structurally a conflict of interest embedded into equity research. And that is, if you say something bad about a company, if you say that a company is a sell rating, then it's unlikely that the company will be

interested in working with you to underwrite your IPO through which you would receive your 1%. And if they're going to be raising $230 billion over the next four years, that's more than $20 billion in fees. And it is literally the bank's job to figure out how to make sure that they can go out, pursue that deal, underwrite these equity offerings, maybe underwrite some debt offerings, maybe underwrite some M&A transactions and pick up those fees. And so Elon is naturally going to choose whichever bank is nice to him. And we literally saw this exact same thing play out when there was the dot-com crash. So there was, as you say, Henry Blodgett, Merrill Lynch. He writes this exceedingly positive research in all of these different internet companies. He privately

calls those same stocks POSs, pieces of shit, junk to his colleagues. in private emails, and it ended up being that that was sort of what got him because it's illegal to publish research that isn't your genuine opinion. That's how they got him. And deeply unethical as well. Like even if we step outside, you know, the legality, I mean, what are you doing? You know, like this is, I don't know, to me, it's just such awful behavior. 100%. And we saw, but he was not the only guy. I mean, this was a problem across the industry. There was another example of an analyst at Salomon Smith, Bonnie. He said this company was a buy.

He had privately had called it a pig in an email to colleagues. And then there was another internal email that was sent by a Merrill Lynch employee. He said, quote, this guy had come to his senses clearly. He said, quote, we are losing people money and I don't like it. John and Mary Smith are losing their retirement just because we don't want an investment banking client to be mad at us. So this is like a thin in the industry. It's a problem. Yeah. And as a result, we saw this regulation that was designed to prevent this stuff from happening.

There was Sarbanes-Oxley and there was also the global research analyst settlement, which I've been digging into since you brought a lot of this to my attention. And this was basically this agreement that was the SEC came up with in 2003 that was designed to completely separate the research side of the investment banks from the investment. from the investment banking divisions whose job is to go out and get those underwriting fees. And they literally said, you cannot communicate with each other unless you have like a chaperone who's going to sort of oversee all of this stuff and make sure that you guys aren't kind of meddling with each other. We're going to make sure that the research guys have zero compensation tied to whatever happens in the investment banking divisions. So I'm looking into this. I'm, you know, learning about this global research analyst settlement.

Something I learned last night is that seven months ago, that law was terminated by the SEC. I was not aware of that, but that is interesting, yeah. This is the headline, the press release. SEC agrees to terminate global research analyst settlement. And right after that happened, Arthur Levitt, who's the former SEC chair, he wrote an article in the Wall Street Journal titled, quote, the SEC may make Wall Street analysts corrupt again. and he warned about the dangers of getting rid of this stuff. The argument that they have proposed as to why it's okay to get rid of this is because

they say that we have new regulations that already do the job of what that old regulation did. But if you actually look into those regulations, what you learn is that it's, it kind of does the job, but way weaker, way more flexible. The communications restrictions are, you know, kind of loosey-goosey, the requirements on third-party research. independent verification, those are virtually gone. And the former SEC share said, quote,

don't be fooled by the promise that other regulations provide this separation. Financial regulators are floating the removal of quiet periods, restricting when analysts can publish research on their own banks, transactions. This is the natural pattern of regulatory surrender. So this, I'm sort of learning about this at one go. I feel like this might be an explanation to what's happening, not accusing anyone of anything, but it seems striking, now? It's pretty wild.

It's funny because even without this rule being changed, there's sort of just a general issue that if you work at one of the top investment banks that's really hoping to bring in billions of dollars in IPO fees, that it would be a career limiting move to put out a sell reporter to say anything bad about these businesses. So there's sort of a corrupting influence in there anyhow. And, you know, when you look at the list of analysts, like, you know, I'm not familiar with that many of them, but, you know, you kind of look at the CVs online. Like, they're, it looks to me like some of the banks weren't recruiting at the circus rather than at Harvard Business School in order to hire some of these people in. Well, just looking at the underwriters of the SpaceX IPO is basically everyone. I mean, Goldman Sachs, Morgan Stanley, J.B. Morgan, Deutsche Bank.

like Raymond James, like everyone who is putting a buy on this thing, they all had a financial incentive within the bank. So it seems hard to assume it's anything other than that. And just going back to like the dot-com bubble, when you look at mid-2000, you look at all the recommendations on the stock research, 74% of stocks had a buy recommendation, only 2% had sell. which it kind of makes me think that if there's ever some IPO boom, which there is happening now, it automatically, or if ever there is, you know, more deal-making on the table,

it incentivizes the entirety of Wall Street to suddenly say, these stocks are great. And if they all say these stocks are great at the same time, then we start getting into bubble territory, now? Yeah, well, it's funny because, you know, the IPO business was huge in the late 1990s, Then the dot-com bubble burst. And, you know, stock issuance really dried up. There was sort of, there'd been a bunch of articles about sort of almost where of all the stocks gone, right? Because you had companies been taken private.

You had these unicorns that were, you know, worth billions of dollars in private. And there was an argument that the public are not getting stocks to invest in. You know, there's a smaller and smaller group. And so now we flipped, you know, suddenly IPOs are back. But it's rather interesting to see the other echo of the past as well, which is, you know, questionable recommendations coming out of research at banks that are probably hoping to get, you know, IBD business. Yes, it's fewer IPOs than we saw before, but the size of the IPOs are gigantic. And what do you know, the ones where the size of the IPO is gigantic, those are the ones where all of Wall Street. is unanimous in his view that this is a buy. And not just IPOs also like secondary offerings, right?

Because even, I think Google issued a huge amount of stock recently raising more capital than SpaceX raised in their IPO, you know. So there's a bunch of big technology firms at the moment that it's probably wise to keep happy if you're hoping to participate in those flows. To what extent do you worry that this is causing like a real systemic, risk in terms of overvaluations across the stock market. In other words, that it is causing a bubble. It's an interesting thing because I think that while, you know, there's a lot of crazy stuff, I also think there's a lot of people talking about it. You know, it's not, I don't know,

like any sophisticated investor I speak to, like they're not really suckered into sort of thinking that these things have been issued at bargain base and prices. And, you know, the FT and the Wall Street journal are filled with opinion pieces of people worrying about, you know, concentration in technology and high prices and, you know, what if all of this stuff goes wrong? So I'm torn. Like I do think there's possibly a retail audience who haven't sort of been through this already and they don't recognize, you know, what a really hot market sometimes looks like. But, you know, I'm torn. Like, I do think, and especially nowadays, you know, where people get their information, like back in the 90s, you know, those analysts were all over CNBC all day long and also everyone, like the dot-com

bubble had everyone involved, like you'd be down at your dentist's office and they'd be talking about stocks, you know, it's not really the same today and I think also the analysts don't have the power they used to have. So to a certain extent, I view it as embarrassing Like I always think like for these guys, like in, you know, maybe you get big enough bonuses that who cares. But I just sort of think, gosh, wouldn't it be embarrassing? Like in years' time, you know, you're at parties. And people are like, you're the guy who said 300. Is that what you said?

It's a really interesting change where it's like they're saying the same things that they said back in 99. But this time around, people are informed enough to say, well, that's a fucking joke. That doesn't make any sense. I do wonder if maybe we're seeing almost like a bifurcation of the suckers versus the non-suckers. Maybe there's one part of the market where the bubble's really working, because people are actually listening to the $800 price target, and they're really believing it. And maybe there's another part of the market who listens to Patrick Boyle and watches Patrick Boyle's YouTube videos. They see those price targets, and they say that doesn't make any sense.

And that itself is an entirely different ecosystem. And it's a good point. Maybe that is sort of the downside protection in this bubble. Maybe you're single-handedly preventing the bubble. Well, I don't know. I also think that people kind of do what they're going to do anyhow. Like, you know, you can tell people something's a bad financial. You know, you can hang big signs outside a casino telling people,

you know you'll lose all of your money here. And they kind of go, oh, that's other people, not me. And I feel lucky today. We'll be right back after the break. And if you're enjoying the show so far, send it to a friend. And please follow us on YouTube, Spotify, or wherever you get your podcasts. Support for the show comes from Vanta. Every new tool your team signs up for, every vendor that turns on AI features,

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has become the new frontier. It is the technology people are most excited about and it has captured the same sense of disruption and possibility that crypto once represented and it has been on a tear. The round-hill generative AI ETF is up 48% year-to-date. The Philadelphia Semiconductor

ETF is up 75% year-to-date. So here's the thesis. The same investors who once chased crypto as the groundbreaking technology are now moving towards AI as the next big thing. And perhaps that may explain why crypto is performing so badly. Patrick, I mentioned Ethereum and Bitcoin, which are not doing well. Bitcoin's been cut in half since its peak. Also, the meme coins are way down. I should just point out Dogecoin, which was all the rage right past COVID, it's down 47% in the past year. Trump coin is, of course, down 81% in the past year. It's down, I think, almost 99% from its highs.

What do you make of how crypto is performing, the once very hot asset class, which is now looking not so hot? Well, it's my opinion that the only, you know, there's no analysis you can do on crypto, right? You can't sort of sit down and build any sort of pricing model on it because it just sort of has a price driven by what people will pay for it. And basically its only selling point is that the line is going up, you know. And basically what gets people excited, people want to buy crypto because they know someone who bought it for, you know, a dollar and now it's worth $50,000 or $60,000. And they sort of say, you know, that will happen again, but for me.

And so it's really just a very trend-based asset. You know, now you look at it. And, you know, over the last few years, I mean, you know, an index tracker that your grandfather invests in is outperforming Bitcoin. It's no longer exciting. Because even I think some of these investments are things that people want to talk about when they're at a bar or at a party. You know, oh, I bought this thing and it's up huge.

Well, now, you know, you say you own Bitcoin. You're not really exciting. It's also, it was like an anti-establishment thing. It's not anti-establishment. You know, we've got like politicians all involved in it. The SEC guy is a crypto bro. You know, it's, what's his name? Howard Lutnik is a crypto bro.

Like, I mean, you know, this is not, all of Epstein Island were involved, you know. So it's just not, it's not exciting to say that you're doing this, you know. And so, you know, I don't know if you want to be exciting, you're now probably saying that you're making exciting bets on polymarket, on, you know, when the straight of Hormuz will reopen or whatever. But it's, it's, you know, to say that you're a crypto investor today is going to put people to sleep. And so I wonder if there just is, you know, I think a few people have been calling it the great broitation, you know, where if you're a crypto bro, you're moving into AI, into prediction markets, into just something that kind of seems exciting to you.

Yeah, I think the anti-establishment point is a very important point because, I mean, crypto was the cool kid. It was the cool kid in town. And part of why it was cool was because, one, its price was going up, so everyone wanted it, so it felt exciting. Two, it had sort of like a technological, like financially forward feel to it. And three, it was anti-establishment. it was punk rock, it was sort of sticking it to the man. Now it's the teacher's pet because President Trump loves it, and President Trump is the crypto president.

So all of that punk rock feel has evaporated. And at the same time, if you have no fundamentals, the only thing that makes it cool, and I think cool is the right word here, is the price. And so now it's lost the one thing that makes it, made it cool, which was the line going up. It also lost the anti-establishment thing.

And if you have no fundamentals, if you have no underlying cash flows, then there is no floor of value. Yeah, and all the claims of use cases have evaporated as well. Like it just, you know, no one is really telling me that I'm going to throw, you know, Chamat a few years ago was saying that Visa was going to go to zero because of crypto. And it's like, well, I think Visa has done just fine. You know, the crypto has performed like when it's a match Spacks, unfortunately.

Just looking at, like, what's actually happened. So I went through the Bitcoin numbers. Bitcoin ETFs have seen $8 billion in outflows in the past eight weeks alone. Crypto, since its peak, has lost $2.3 trillion in market value. The entire crypto industry has essentially been cut in half. And it does seem like the new hot thing now. if you're a crypto bro, if you're looking for those crazy lines going up, is AI, specifically kind of these more niche AI names,

these semiconductor names, Western Digital, Bloom Energy, almost 200% year-to-date, Seagate, Sandysk, these are sort of the sexy new trades. And in addition, what we are starting to see is a huge amount of leverage being taken on to buy these stocks. And we're seeing a massive up to... Yeah, the levered ETFs, exactly, yeah. The levered ETFs, which are becoming very, very hot right now.

More than 200 levered ETFs have been launched over the past six months, now worth more than $150 billion. I mean, this has a perfect analogy to Bitcoin, because, of course, we also know about Bitcoin that almost 70% of the Bitcoin trading volume last year were these perpetual futures, these kind of levered up options contracts. It seems like now they've just switched over to the other side.

I guess what does that say about the investment community that we're basically just yoloing into these stocks without, I assume, really looking at what they're even doing or what the fundamentals even are? I guess this is always life, though, is that, you know, people are always excited about whatever the... You know, the average investor hugely underperforms the stock market, and this is well-known, because they always buy the wrong stuff at the top, they liquidate at the bottom, they, you know, it's the switches that kind of kill them.

But this is just like your emotions as an investor are your enemy. Like the more emotion, the more strongly you feel, whether it's fear or excitement, these are emotions that are leading you in the wrong direction. But this is just the oldest story in markets is just, that most investors, it's not just that they underperform, but that they lose more money than is even naturally explainable by the returns in the market.

You were mentioning when we were speaking offline this term, I forget who came up with it, but this term financial nihilism that is becoming kind of pervasive. Oh, yes, that's Dimitri Kaffinus, the guy who came up with that idea. He's a very interesting guy. Yeah, what does that mean? Well, it's based around this idea

that there's a lot of young disillusioned people and they sort of feel they can't afford a house, they are not getting the kind of jobs they wanted, a list of difficulties, you know, and they basically want to reach escape velocity. You know, they're on Instagram and whatever, and they see these people who've made masses of money through basically an all-in gamble on something,

be it meme stocks, be it crypto, be it, you know, Invidia, doesn't matter what it is. But it's just this, you know, yellow idea where they've decided that nothing matters, all the numbers are made up, it's all a con, and you just have to look after yourself, you have to make a big bed on something, you know, hopefully make, you know, a massive, massive amount of money, and then you're out. That's kind of the idea. And I think that is an idea that has been building really over the last decade or so, and I think really picked up during the COVID period when people were locked at home.

It's sort of an interesting thing because I think it really took off then as well, because a lot of people, they had no money to spend on stuff. Some people were getting stimulus checks and so on. So they had, you know, a couple of thousand dollars. Many people, if you're sort of working at Walmart or something like that, you probably never had as much savings as you had at that point. And you're sitting there looking at this thousand dollar check and you kind of think, well, you know, while I do buy clothes with it or go all in on something and try and turn a thousand dollars into a million dollars. And that's sort of the financial nihilism mindset. It seems like this awful combination of economic opportunity for young people in America at least has really never been lower, at least relative to other generations. Just look at housing prices today as an example and we'll get into this. But housing prices relative to income, have never been higher. Housing prices of seven-exed over the past 50 years. They've way outpaced wage growth.

Costs of college have tripled since 1980. That's adjusted for inflation. Combined with, I think, as you say, social media and the fact that we're constantly on our phones looking at all of these rich people who supposedly made their money on dogecoin, on. Trump coin, Pepe coin, Comrocket, you name it. Andrew Tate is out there, you know, driving his seven either rented or not Lamborghinis that he supposedly got because he went all in on crypto. I mean, this culture of levering up, borrowing money, trading options, trading crypto, getting into gambling, and then the illusion that that is actually going to lead you

to a place of financial success and well-being really seems pervasive, and it seems like it is having a substantial impact on the structure of equity markets. I mean, and all you can assume is that we're going to see crypto over and over again in different types of asset classes. It goes up, everyone gets excited,

then it just, boom, goes down as soon as the excitement fades, which makes me think, we've got to see the same thing again in some of these AI names and these semiconductor names, Perhaps we're already seeing it. We have already seen that at the past week, it's been pretty bad for the semiconductor stocks. At least there are some cash flows there, and at least there's actually a thesis fundamentally

behind those trades. But you have to think this is just going to keep going over and over again, no? Well, the only thing is once people get, in fact, the worst thing about this bubble bus cycle is that a lot of people, their introduction to investing, is sort of putting their money into some crazy thing that their friend told them was a good idea.

it gets totally wiped out and then they're sort of scared for life. And there were a lot of people I knew because I sort of, I was in my 20s during the dot-com bubble and so many people I know were really, really excited about all these internet names piled into them. They wiped out and then, you know, I'll talk to these guys, you know, 30 years later or 25 years later and they all say, no, no, I never invest. It's all a con. And the thing is, had you put your money in the S&P 500 or even actually held on to the NASDAQ or whatever from back then, you would have done quite well. While, you know, you put your money all in government bonds. You know, you'll have looked smart for about three years at that, you know, because stock market fell for three years after the bubble burst. But then in the long run, you don't.

And so the real, the problem sort of is financial education. It's that people don't understand sort of what normal expected returns are. Like it's not, you know, it's not like, you know, a 300% return in a year or whatever. That can happen. You can buy a thing and that can happen. But you should recognize that you were probably lucky and you didn't necessarily predict it. And that in the long run, like, you know, if you're 20 years old right now and you're going to retire in, you know, 40, 45 years time, you should hopefully just harvest the general market return, you know,

because for every, you know, lucky win you'll have, you'll probably have another unlucky loss, and it probably balances out to giving you about the return of the S&P, assuming you don't go too crazy and, like, leave her up at the wrong time or, you know, cut all of your losses at the bottom or whatever. Yeah, it seems as though the financial education point is basically the entire fix. to this thing, because, I mean, it's not just that these essentially gambling products are out there. It's the fact that we're kind of convincing people that those gambling products are not

gambling products, that they are investment products. I mean, if you look at the way we talk about, you know, zero-day options and how that has exploded among young people and perpetual futures, these options contracts that have basically no leverage cap, no expiration date. It's just a bet on whether it goes up or down. I mean, the prediction markets are good. What you're buying is called an events contract, and it's regulated by the CFTC as if it isn't gambling, as if you're actually trading, not even trading, investing in an actual commodity when you bet on whether the New York Knicks are going to win.

That's even the thing is that the whole argument behind, like if you listen to people defend prediction markets, they say, well, you know, what's happening here is that it's sort of providing information. It's, you know, it's kind of real economic events been bed on. But I believe some like 90% of the gambling is just on sports. Like it's just sports betting, you know. And it's wild the idea that the CFTC is now a sports regulator of sorts. regulating sports betting in states where sports betting is illegal. I mean, it has to crumble at some point. My view is I like the events contracts on the financial and economic events. I find it interesting and useful to look at that data, but then to make the argument that that should also be a venue to be betting on the outcome of sports games and World Cup games, that's just taking everything a step too far. But even one of the problems even about using it to bet on events, like if you want to

bet on a smaller election or something like that, is it possibly becomes worthwhile for a marginal candidate to sort of put their, you know, to put a bit of money behind it. And suddenly, the journalists all get on the air and kind of go like, oh, and this guy is really coming up from behind. No one expected this. But the prediction market said that he's now the leading candidate. It's like, or did he just drop a million bucks on a contract, you know? Yes. If the insider trading on those platforms isn't addressed, then the entire thing is compromised. The entire thing has no place. So that's, again, more reason for strong regulation related to what we talked about with the SEC and how the regulation preventing the equity research and the investment banking guys from collaborating. That's evaporated. The SEC's essentially been gutted over the past year. I mean, you look at the amount of enforcement actions. It was an all-time low, at least. for a transition year, 15% of the workforce has left. I mean, the reason you need all these things

is so that people can believe in markets and not become financially nihilistic because that's where we're headed. It's worth noting there's a requirement for balance. Like I felt a few years ago there was, I think, what was it, the FTC blocked a merger between two handbag brands by claiming that there would be sort of a monotone,

and mid-priced, I don't know, I forget it was Coach and Michael Coors or something like that. And they said, no, this would be a monopoly. And it's like, I'm sorry, but there's no such thing as a monopoly in the fashion industry. Like there's always someone willing to make a bag at a different price point. So there's arguments. The regulation thing I'm always on the fence about because there can be too much regulation and there can be not enough. and the problem is that both of these things can be harmful.

We'll be right back, and for even more markets content, sign up for our newsletter at profgmarkets.com. Support for the show comes from granola. It feels good to walk away from a meeting that actually felt productive, but our brains can only hold so much info. You might look back and realize you either, A, got caught up in your notes and missed some important stuff, or B, you couldn't even take notes,

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Just head to granola.a.ai slash markets. That's granola.orgia slash markets to get your time back, get three months free at granola.orgia slash markets. Is Kamala Harris running for president again? Listen, I might. I might. I'm thinking about it. But does anybody want that?

Yeah. Yeah? Yeah, I do. Well, I don't see why not. Absolutely, I think Kamala Harris should run for president again. I don't think there will never be a woman president in the United States. Now, why, whoa, way, you can't just walk away on that. Tell us why.

I know it's still early to talk about 2028, but as we build to our post-Trump future, it seems to be a big question about the Democratic Party. Kamala Harris leads all of the presidential polling. So, does this mean that the person who led the ticket in 2024 is going to lead the party again? in 2028? The campaign needs to be called bye-bye, it's just a tainted brand.

Do you think from a donor community largely that there's any appetite for a Harris return? I don't. I'm a Stead Herndon, and this is America Actually. Catch us every Saturday on YouTube or wherever you get your podcast.

One, two, day. I'm stand-up comedian John Marco Serrezi, and I'm actor-penus model, Russell Daniels. The downside is our podcast where we bring on guests to talk about how miserable their lives are. Because let's face it, things are not getting better. Every episode we talk about what's wrong with our lives, our guest lives, the world. But in a fun way. Bottom line is you're going to walk away feeling better about your life.

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This is the downside. We're back with Profi Markets. The U.S. housing market is showing new signs of strain. Last month, the median price of a home in the U.S. hit a record high at $408,8,8,000, and the median U.S. housing payment saw its first year-over-year increase since October. This is part of a broader trend we've been tracking on the show. Home ownership is becoming increasingly out of reach for the

average American. In fact, 75% of homes currently on the market are unaffordable for the typical household. Patrick, you've been talking about this, researching the housing market, explaining it over on your channel. It's always something that's just befuddling to me, like how it continues to go up every year, despite the previous year being a crazy record. It still keeps happening. what's the deal with housing? Why does it keep going up? Yeah, I mean, it's a big problem in big parts of the Western world. It's interesting because there's certain parts of the United States. Like if you look in Texas, there's not really the same problem as you'll see in New York City and Massachusetts and whatever. And it's because

it's just easy to build in Texas. And, you know, essentially a home there's price is more tied to the cost of building materials and, you know, interest rates than anything else. While everywhere else you go, it's often sort of the land value is the core value. And, you know, some of it's things like, you know, growing populations, which are, you know, starting now to reverse. But it's, you know, an interest rate's coming down, a will have made houses more expensive because people typically buy what borrowed money. But, You know, in the very long run, if you look at a very long history of housing prices, there's no reason to think they should go up.

But it's become sort of an investment class. You know, years ago, if you speak to your grandparents, they'll never talk about the concept of real estate investing. They bought a home that they needed to live in. Once it became an investment, and we'll say in places like the UK, where it is by far the biggest investment, like it's what people do with their savings to sort of either buy their own home

or buy to let a property. You end up with this situation where the government have incentivized people to buy homes. They want prices to go up or at least stay steady. And so, you know, in an election year or whatever, you know,

are you going to sort of permit a load a new building that'll hit house prices? Are you going to allow, you know, changes that would make it affordable to young people. And for the last 20, 25 years, the answer has been no. And so we've seen prices go up and up. And, you know, the political motives are all there. And you see politicians saying, you know, we want affordable housing for young people, but we don't want to hit the, you know, the home values of retirees who are relying on it. And it's like, well, you get one or the other. Yes. You said in your video,

I think this quote, really sums it up. You said, quote, once a country decides its houses are supposed to make everyone rich, it has to keep prices rising forever, which means restricting supply, blocking development, and quietly pricing out each new generation, which works until it doesn't. And I think what I appreciate about that view, I think is right, is the fact that it is a choice. I mean, it is an intentional policy decision to decide that if you're starting from a place of people expect the value of their homes to go up, then we have to do whatever we can to make that happen. And I think this was really crystallized for me earlier this year when the president who had sort of said that he wanted housing to become affordable, I thought we had all agreed that that was something we all wanted to. to figure out, he said the following, and we'll just play this clip and get your reaction.

There's so much talk about, oh, we're going to drive housing prices down. I don't want to drive housing prices down. I want to drive housing prices up for people that own their homes, and they can be assured that's what's going to happen. This is the problem, right? Because that's who votes, right? Like, that's who votes.

You know, homeowners, the elderly vote. Young people don't vote, so they don't get a say. Something you were saying is that we shouldn't, necessarily expect the price of a house to go up. That's not a given, which I thought was an interesting comment because I've been trained to think that it should. Why do you believe that? Well, if we just look at a regular home, you know, the example I was saying to you yesterday was if we look at a home near a hospital that a doctor lives in, right? And we've got to assume that when the doctor bought that home, it was affordable for someone on a doctor's salary. If we move forward 50 years,

the hospital is still there, that home should probably be filled by another doctor. It's not going to be a Russian oligarch, a crypto billionaire or whatever. It's going to be a regular person who works at the hospital. And thus, it must be priced such that the doctor can afford it. And the rate at which wages go up is roughly in line with the rate of inflation. So to believe that house prices should go up significantly more than inflation in the long run doesn't really make much sense. It's, you know, we can't live in a world.

There's a lot of scaremongering even, you know, where you see people out there and they say, well, no one will ever own homes again. They'll all be owned by billionaires and blah, blah, blah. And it's like, well, even if billionaires own them, they have to rent them out, and they have to rent them out at a price that we can afford. And if they overpaid for them and are renting them out at a low price,

they're losing money on that. So, you know, if you're buying an asset at an all-time high, It seems really unaffordable to a regular person like you. It might mean that that's not a great investment. We seem to take it as a given, especially in America, that if you buy a home, it's going to go up. Like, it is an investment. That is the way people see it. And it's sort of like, have your cake and eat it too.

I get to live in this home. I get to have a roof over my head. And at the same time, I am making like a financially responsible decision that's going to pay out over the long term. And I guess it doesn't, you've made it clear to me that there's no reason we should assume that or why anyone should assume that. Like, the only reason you should assume that your house is more valuable five years from now than it is today is if you invest in renovation and make it nicer, or if you believe that the specific locale that you have bought your house in, the neighborhood, is going to be. become a hot neighborhood and everyone's going to want to live there. To me, those are the only two reasons. Yeah, if it suddenly boomed because a very profitable business opened down the road or something like that. But yeah, there's no reason to think that a regular person's house

should explode in value, that it should go up at, you know, like the stock market does. You know, the stock market is companies who are, you know, making and selling goods at a markup. Your home is just sitting there. And in fact, it needs a roof repair every once in a while. And, new siding and, you know, the kitchen wears out. Also, if you just look at a long-term return on housing versus the stock market, housing grossly underperforms the stock market. Like, it's not the best pay. I understand the emotional urge to own the place you live, but an emotional urge is different to an investment decision, you know, and the investment decision is, you know, is this going to go up at a higher rate or with a lower rate?

risk than other assets I can invest in. It almost has parallels to our conversation about the crypto, where the reason the price of crypto is staying up, or was staying up, was because people just fundamentally believed that it would keep going up, and that was the proposition. And when I look at the price of housing today, I would imagine that a large reason why, I mean, of course, there's the supply problem, which we obviously have to get fixed. but I think it may be in addition, there is the fundamental belief

among Americans and current non-homeowners that the price will go up. And if you believe that, then there's more incentive to go out and buy a home as opposed to investing in anything else. And I wonder if your point,

if we would have philosophically change that mindset in America and in the Western world, and it does seem to be kind of a Western world thing. This doesn't really exist in Singapore, as an example, it doesn't really exist in Japan. They don't think of these houses as investments per se. If we were to eliminate that mindset and treat it as, this is a place where I live and it's a cost. And if I want to invest, then I go and I invest in stocks and I invest in businesses, I invest in the S&P.

Perhaps that would solve the problem? Maybe that would shift things. I mean, what would it take to get prices in a reasonable place? It's so interesting though because even, you know, we've seen in New Zealand there's been a fall in house prices and what ends up, and even in the United States, home affordability has collapsed in recent years, even though house price haven't gone up that much. But because, you know, a few years ago you could borrow at, you know, under 3% to buy a home. And then when it goes up to, you know, 7% or something like that to buy the same home, the same cash flow does not buy that home at that price. Like, you know, you know, It's almost like the house price is up, you know, 60, 70%, or at least the cost of funding, the purchase is up a lot. Now, you would say, well, who are all the people who can suddenly afford to pay this much more? Like, they haven't had pay raises or anything. And the answer is they don't exist, but the sellers are not willing to mark down their homes, right? They've locked in at a low mortgage rate.

And so you see in the United States just transactions have collapsed, you know, like sellers aren't willing to market down and take a massive loss, and it's totally unaffordable to buyers. So you just end up with this frozen housing market. In other parts of the world, in England where your interest rate is usually variable, you can only lock it for a few years. You actually feel the pain. Like when interest rates go up, your mortgage bill goes up, and you have to ask yourself, you know, can I afford to keep paying this? And so you're more likely to see a squeeze on homeowners.

in places with variable interest rate mortgages, but in the United States, you just see the market freeze up. And that also, it's worth noting, like it's kind of lucky, but it's not always. Because, for example, if you had, I don't know, a great job and you're offered a promotion, but you have to move across the country, you know,

you think, well, gosh, you know, if I sell my house now and I get $500,000, and I buy a home in this other place for $500,000, And the mortgage me, you know, the cash flow, I can't do that. Like I'd have to buy a $300,000 home in order to, you know, to finance it with the same cash flow. And so I won't take that job promotion. And so it sort of harms people, you know, worker mobility and careers and things like that, all just sort of clinging on to this investment.

Let's take a look at the week ahead. Next week we'll see inflation data from the consumer and producer price indices for June. earnings season will kick off with the big banks reporting. We'll hear from J.P. Morgan, Bank of America, Goldman Sachs, Wells Fargo, City Group, and Morgan Stanley. We'll also see earnings from ASML, TSM, Johnson & Johnson, United Airlines, United Health, and Netflix, pretty big earnings week. This is the part of the show, Patrick, where I usually ask Scott for a prediction.

So if you have one, I will ask you, do you have a prediction for us for the week? head or for otherwise. Well, mine is a controversial prediction. I'm predicting that Count Binfaces is going to win the by-election in the UK against Nigel Farage. You know, as sort of Nigel Farage, you know, kind of brought about this by-election. You know, he was hoping to sort of be able to run as someone running against elites, but the only person running against him is a man who claims to be from space and he wears a trash count. on his head. And he's running on, I think, one of the best election proposals I've ever heard, which is to reduce your taxes but raise them for everyone else. I love that prediction. And our

UK listeners, I'm sure, will love it too. My prediction goes back to the SpaceX story. I think we're going to uncover something very ugly with these Wall Street analyst reports. I'm not saying I'm not indicting anyone or accusing anyone of anything, but if I had to make a prediction, I think it would be that we will see a situation similar to what we saw with the Henry Blogger case. I think we're going to uncover that some very funky stuff has been happening with these price targets,

specifically for SpaceX. Patrick, this was wonderful. Thank you so much. Really appreciate your time. Patrick is a professor at King's College, London, and a portfolio manager with more than 20, years of experience at hedge funds, investment banks, and private wealth management firms. He is also the author of several books on finance and hosts the podcast, Patrick Boyle on

finance, which I highly recommend should all go check it out. We really appreciate your time, Patrick. Thank you for having me on. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carty. Our research team is Dan Chalon, Kristen O'Donohue, and Mia Silverio. Jake McPherson is our social producer, Drew Burroughs is our technical director, and Catherine Dillon is our executive producer. Thank you for listening to Profi Markets from ProfiMedia. If you liked what you heard, give us a follow and tune in tomorrow for a fresh take on the markets.