Episode 58 was recorded at 6pm EST on Sunday 7th June.
Reminder to join us on Thursday: Craig Coben (former Global Head of ECM, Bank of America) joins us 6 hours before SpaceX IPO opens for trading on Friday morning. SpaceX/Tesla merger Polymarket odds are still at at 5 cents…
Today’s Slides
Audio only version (for paid subscribers)
Pod Summary
Reverse De-Equitization & The Supply Thesis
Rupert frames the core issue: hyperscalers moving from internal cash flow → private debt → public debt → equity issuance to fund AI CapEx, completing the full capital structure cycle
Historical parallel drawn: Europe’s “de-equitization” post-2003 (buybacks, 401K flows, PE take-privates) drove US equity outperformance for 15 years — that tailwind is now at risk of reversing
The 1990s analog cited: it was secondary offerings (not IPOs) that caused supply-driven market problems; COVID-era SPACs and restructuring paper offers another cautionary historical parallel
The Signaling Problem: Why Are the Richest Selling? (Minute 3)
Core message: when Google, Meta, SpaceX/Elon are tapping equity markets, this is a signal, not just a supply event — the world’s richest companies are cashing out retail savings
IG credit market is maxed out on capacity; hyperscalers know tipping it would be catastrophic, so equity is the only remaining lever
The Friday jobs report gave a misleading “strong” headline (World Cup hires, birth/death adjustments) — Fed stays hawkish as a result
S&P Index Committee Decision & SpaceX IPO Demand (Minute 6)
S&P index committee refused to fast-track SpaceX and other AI IPOs into the index (unlike Nasdaq/Russell) — this removes ~$19 trillion of passive benchmark flows Elon was counting on
SpaceX IPO priced at $135 fixed offer; gray market showing only modest ~$170 pop; retail can get stock in “any size” — a bad sign
Roadshow anecdotes: JP Morgan event described as bizarre (Asteroids games, bomber jackets); Morgan Stanley ran a “theater event” — frothy atmosphere raising red flags
Gray market (HyperLiquid perpetual future) showing muted enthusiasm; caution urged on reading thin weekend markets as signal
Brief crypto tangent: Benny quit crypto trading in 2020/21 because the 24/7 nature was unsustainable
S&P Valuations at Historical Extremes (Minute 10)
WisdomTree data: over half the S&P trades above 10x forward sales — no historical precedent
Equal-weight S&P (RSP) has <10% exposure to >10x price-to-sales stocks; bulk of exposure is <4x forward price-to-sales
Trade idea: RSP (equal weight) vs. QQQ as a relative value trade — acknowledging 20 years of equal-weight underperformance but sees potential for violent re-rate; levered spread trade doesn’t need a huge move
AI ROI Shift: From Token Maxing to Cost Optimization (Minute 12)
Key inflection point observed: the market is moving from “token maxing” AI agent hype → AI ROI and cost routing optimization
Benny built an AI agent with a daily cost optimizer capping spend at 3 cents per task — this is what enterprise users will start doing
AI cloud cost opacity compared to “heli-skiing with richer friends” — the bill shock is coming for enterprises
Bitcoin: Head & Shoulders (”Classic Clean”) (Minute 15)
Bitcoin chart showing a near-perfect head and shoulders pattern
Double problem identified: (1) PBOC/BOJ/Fed global liquidity tightening; (2) no narrative — former miners have migrated to AI infrastructure
Novogratz’s Galaxy Digital pivoting to data centers (West Texas campus = half its value) signals crypto top-riders have jumped to AI infrastructure bubble
This feels like 2021 crypto mania repeating in AI infrastructure — same “bubble riders” (Novo and The Mooch) now in AI; the data center bubble thesis worth watching
Brent Crude: Long Position Initiated (Minute 18)
Rupert announces he took a large position at the front of the Brent crude curve last week — “enough was enough”
Goldman Sachs energy sentiment survey at time of purchase: more bearish than COVID lows — classic contrarian setup
Bull thesis: oil in the “wrong places,” 3–6 month product/crude shortages baked in; energy company earnings call transcripts showing 30–45 day inventory warnings
Bear counterpoint acknowledged: JJ (veteran NYMEX trader) is in the “world has plenty of oil” camp
Risk flagged: if energy rallies hard into July, it crushes everything else (reflationary shock)
The Four Horsemen Framework: Energy + Rates + Dollar (Minute 22)
Energy flagged as Horseman #1; rates picture described as completely changed
Dollar: Rupert is a medium/long-term dollar bear but has insurance against a dollar ripper; big bearish candle in the Euro noted
Benny is a “massive Euro bear,” holds December Euro puts now back in the money
Yen back above 160 — a 35-year technical line; Benny targets 200 if it breaks through
MOF interventions keep pushing it down but it re-emerges (beach ball analogy)
BOJ meeting in ~10–12 days: if forced to hike rates to even zero, it unwinds the global yen carry trade — massive FX vol risk
Japan banks: still the standout trade — yield curve steepening is “a gift”; valuation normalization has played out, now it’s an earnings growth story
Volatility: Nasdaq/S&P Vol Divergence (Minute 26)
Nasdaq vol / S&P vol ratio is “absolutely out of line” vs. Nasdaq/S&P price ratio — a dislocated market that must revert
25-delta skew also starting to turn — suggests the vol unwind is not done
Thursday/Friday’s Nasdaq -5% move burned off gamma inventory quickly (due to daily/weekly options), limiting gap-down follow-through Monday
Korea flagged as the “leader to watch” — massive leverage needs to be unwound
Friday generated $55bn of levered ETF supply forced to come to market — amplified the Nasdaq -5% move
Market not gapping down Monday despite Iran news = positive sign that leverage cleaned out on Friday
John Law / “The New Mississippi” Teaser (Minute 32)
Benny teasing his latest essay “The New Mississippi” — parallels between John Law (Scotsman who bankrupted Regency France via the Mississippi Company/Compagnie des Indes) and current AI/Silicon Valley state-capital fusion
Trump administration reportedly considering taking stakes in AI companies — government entering cap table of peak-valued assets is historically ominous
John Law anecdote: the word “millionaire” was coined during his bubble; SpaceX may introduce the first “trillionaire”
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