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Austin Hankwitz
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- [00:57]
Austin Hankwitz
You are tuning in to the Rich Habits Radar, our Friday episode of the Rich Habits podcast, where every Friday morning we're coming at you with the biggest headlines impacting you and your money. This episode is brought to you by vcx, the public ticker for private tech. My name's Austin Hankwitz. I'm joined by my co host Robert Croak. And the three things sitting at the top of our Rich Habits Radar this week include SpaceX breaking all of Wall Street's rules to go public, Apple's new Siri A, and inflation coming in over 4% for the first time in three years. Be sure to stick around to the end where we're talking with Ron Santella, portfolio manager at Equable Shares. We cannot wait to have that conversation to get his professional opinion on all this volatility we've seen in the markets. So, Robert, let's jump into our first story.
- [01:47]
Robert Croak
Yes, our first story today is SpaceX breaking Wall Street's rules, and I mean all the rules as we film this on Thursday, June 11th is going public tomorrow, June 12th. And nothing about this IPO is normal. Let's start with the numbers. SpaceX priced its IPO at a fixed $135 per share. No range, no price discovery, no process, no buildup. It's a take it or leave it deal.
- [02:14]
Austin Hankwitz
And at that price, the company is valued at about $1.77 trillion, making it instantly one of the most top 10 most valuable companies on the planet. They're raising $75 billion, the largest IPO raise in stock market history. The stock trade on the NASDAQ under the ticker SPCX. Starting on Friday, June 12, SpaceX generated
- [02:36]
Robert Croak
$18.7 billion in revenue last year and recorded an operating loss of 4.2 billion. Among the nine current public trillion dollar companies, the smallest by revenue is Micron at 58 billion. And the least profitable is Tesla with a $3.8 billion in net income income. SpaceX is going public at a higher valuation than all but a handful of these companies on earth while still losing money.
- [03:03]
Austin Hankwitz
Now as we extrapolate a little bit about that business to understand how they actually make money, or I guess in this instance lose money. The Starlink broadband business is the revenue engine. That satellite Internet service Now has over 12 million subscribers around the world and growing very fast like there's a clear path to 100 million global subscribers. Their rocket launch business provides reliable cash flow. Their AI data center El Web Services is what people are calling it SpaceX. They just leased Colossus 1 facility over to Anthropic. And then there was some stuff about Google. So like that's interesting that gives the company now a narrative that touches every hot theme in the market at the moment. You got space exploration, you got AI infrastructure, and you have defense.
- [03:46]
Robert Croak
Lisa Buyer of Class V Group told CNBC the other day. It's not like investors are home doing their math. There's zero math that makes any sense here whatsoever. So we're going to keep following this and keep a close eye on it. And NASDAQ 100 rules were also revised to allow massive initial public offerings, these IPOs to enter the index after just 15 trading days instead of waiting for standard rebalancing periods. So that's another change that's happening right now as we lead into these IPOs. To trigger this fast track inclusion, SpaceX must maintain a ranking in the top 40 by market capitalization in its first week of trading to prevent index distortion. Low float mega IPOs using a specific multiplier. This means SpaceX's weight in the index will be amplified based on the massive overall valuation rather than just its limited tradable float in the beginning.
- [04:44]
Austin Hankwitz
This accelerated inclusion into the NASDAQ 100 now will force funds and ETFs like QQQ that are tracking the index to purchase billions of dollars worth of SpaceX shares within weeks. IPO, NASDAQ and you know, the Russell 2000 like they changed their eligibility parameters to fast track these, these big cool, massive fun IPOs. The S&P 500 rejected that. They said no way, we are not going to fast track anybody to join the S&P 500. You have to join us the old fashioned way. You got to be trading For X amount of months, you've got to be profitable like all these normal things. We're not changing the rules for anybody. So cheers to the S and P for holding their guns.
- [05:26]
Robert Croak
Yeah, it's a little bit of wild, wild west happening right now around SpaceX and these other IPOs, but the demand is off the charts. I don't know if I agree with the numbers, but SpaceX told investors it would stop taking orders on Wednesday, a full day early, to give its underwriters all day Thursday. To map out where the allocations actually land. The company wants retail investors to receive roughly 30% of the shares, which would be about $22.5 billion worth, which is three to six times the typical retail allocation for an IPO such as this. Char Schwab, Fidelity, Robinhood, SoFi and Morgan Stanley's E Trade are all listed as platforms that will make shares available immediately.
- [06:10]
Austin Hankwitz
And we just saw breaking news. According to Bloomberg, just retail investor demand, $100 billion of like straight up, I got the cash. I want this money for SpaceX stock. So this thing is crazy, oversubscribed. Everyone wants to buy this stock, which is a good time to take a deep breath usa as Robert says a little bit and take it slow. Now, the CEO of Infrastructure Capital Advisors told CNBC that SpaceX IPO is actually creating an overhang on the broader market. We talked about this, Robert, inside the Rich Habits Network a couple weeks ago. Investors are selling other positions to free up cash for this offering. So Robert, we kind of talked through the nuances, how they're breaking the rules. Kind of like a bull in the China shop here. But what does this mean for everyone listening and their money?
- [06:54]
Robert Croak
I think it means we're seeing volatility because liquidity has to come somewhere. And this is the biggest liquidity event in IPO history. And it matters whether you buy a single share or when 75 billion moves from investors pockets into a single stock in a single day, it creates ripple effects across the entire market. We've been talking about this in the network for a few weeks. So all of those big high flyers, the Microns, Nvidias and Intels, they're all going to take a little bit of ding because people are going to move profits from there into this SpaceX IPO. And the fact that investors are reportedly selling all of these other holdings to fund their SpaceX allocations explains part of the weakness we've seen in the tech sector sector over the past week or so. And it's not just the Broadcom sell off or The Iran headlines. It's capital reallocation ahead of the biggest offering ever.
- [07:47]
Austin Hankwitz
So you have to ask yourself this practical question now. Do you want to own a company valued at 1.77 trillion or even 2 trillion depending on where it opens? Right? Do you want to own a $2 trillion company that's losing money? The Starlink growth story is real again. Clear path to 100 million subscribers on that. That's going to be a ton of recurring revenue. Defense contracts are real. Like all of the money is real. I get that. But you are paying for 5, 10, 15 years of perfect execution by their management team 50, 60 times forwards. Revenue like that is unbelievable multiples. On the flip side, you go look at an undervalued Amazon or a beaten down Microsoft and you're like, why not just buy these companies instead? Now here is one thing that I definitely agree with. I was on an X space the other day and people were talking about, hey, if you get allocation in SpaceX at that 135 a share and it opens at 150, 160, 170, 180 a share, whatever it opens up as, you know, someone's saying, I don't care if you get blackballed, I don't care if they're not going to let you buy any more IPOs. Sell the stock, get your 40% return on your, you know, 20,000 or 30,000 you put in and like rock and roll. Congratulations. And I have that same mindset, Robert, if I can, if that is something that you might find yourself, maybe you're on one of these platforms and you got a 10 or 20,000 allocation in SpaceX and you got it at 135 a share and it opens up at 180. Again, we're filming this on Thursday, the day before it actually starts trading. So we don't know what it's trading at. But if it opens up at something pretty cool, take those profits, redistribute them elsewhere in your portfolio and then wait maybe a quarter or two of public financials, some earnings, things like that, some earnings calls, get to hear what's going on behind the scenes before you make a true bet on what this company is actually capable of.
- [09:28]
Robert Croak
Yeah, that's a great take, but I just feel the average retail investor, they're not the party guests, they're the party favor here. They're not going to be the ones seeing all this upside. Because like you said, most of the upside here is baked in years and years in advance. And that's based around perfect execution, as you alluded to. So that's really, really tricky. And that's why I've been telling people, be careful out there. Make sure you understand what you're doing and getting yourself into and really think through. Do you want to sell off all of these really good winners for something that's probably going to be very volatile over the next two, three quarters? And for me, the biggest takeaway today is this IPO window tells you something about where we're at in the market cycle. Companies go public when conditions are favorable and the fact that SpaceX, OpenAI and Anthropic are all racing to list simultaneously suggests these companies believe this might be as good as the window gets. That's not necessarily bearish, but it's definitely worth noticing. So when insiders are selling, you should
- [10:30]
Austin Hankwitz
at least ask why It's a great call out. We talked about that on the live stream we had earlier this week. Tuesday night inside the Rich Habits Network. I had brought up a chart that illustrated all the different IPOs over the last, let's call it 30 years. And it skyrocketed heading into the dot com bubble. But those were all just junk companies that added.com to their name, cashed in on what was exuberance and, you know, irresponsibility from investors and that was the bubble. Now we're seeing what I would argue is probably maybe early to middle endings of an IPO sort of cycle. Right. We've got SpaceX, Anthropic, OpenAI, we had Cerebras recently. There's still going to be Lambda, maybe there's going to be Fluid Stack, maybe there's going to be like there's a lot of AI IPO excitement still around the corner. So I think it's a great call out, Robert, of figuring out where we might be in this market cycle. Depending on who is going public, how much of their stock are they willing and happy to sell to retail investors here at whatever these valuations are? Now, Robert, let's jump to our second story, which is Apple's WWDC and announcing Siri AI. So on Monday, Apple held their annual worldwide developer conference, Tim Cook's last WWDC as CEO before he hands the reins over to chief John Ternus on September 1st. And the headline announcement of this conference was one that the company has been promising for years now, which is a genuine AI powered Siri.
- [11:53]
Robert Croak
Well, you know, I've been saying for a very long time that I think Apple's been really late to the party and has a lot of catching up to do not just in AI, but in design changes as well. So I think this is a good headline because Apple's finally rebranding the assistant as Siri AI and building on top of what they're calling the Apple foundation models developed in collaboration with Google. The Most advanced version, AFM Cloud Pro, runs on Nvidia's GPUs in Google's Cloud and is comparable to Google's Frontier Gemini models. Siri AI can now hold real conversations, understand personal context, work across apps, and even take agentic action like automatically fixing insecure passwords and everything else across other websites.
- [12:40]
Austin Hankwitz
Now here's what matters for investors though Apple, and we've all known this, they're a couple years behind with AI. When Apple first announced Apple Intelligence at WWDC 2024, it was supposed to be the company's answer to ChatGPT and Google's Gemini. But it wasn't ready. And it still Wasn't ready at WWDC 2025.
- [13:00]
Robert Croak
Now at WWDC 2026, the features are finally shipping. But Siri AI won't be available in Europe or China at launch due to these regulatory challenges. And you need the latest devices, the iPhone, Air, iPhone 17 Pro or M3 Max with at least 12 gigabytes of memory to access the most powerful on device features that we're talking about.
- [13:23]
Austin Hankwitz
Now I'm an Apple investor and I was really looking forward to a big wow moment that would justify this like AI narrative that people have been kind of excited about with Apple and I still think they're going to be a dark horse in this AI race. But what we got was a competence and maybe like incremental update that relies on Google's infrastructure for the most advanced capabilities. In a week where anthropic released their Fable 5 live model, OpenAI filed for IPO. Apple's AI just feels like it's still years behind. But with that said, there are some bright sides. So Robert, what does this mean for you and your money?
- [13:56]
Robert Croak
It means 2.2 billion active devices. That is what Apple has, that none of these AI native companies have 2.2 billion active devices. Distribution is Apple's moat. It has been forever. So they don't need to build the best AI model. They need to build an AI experience that's good enough and deeply integrated into the daily lives of their billions of iPhone users. That's the bet. That's what's going to win for them. And if Siri AI works well enough to keep users inside the Apple ecosystem, ordering food, managing Their calendars, handling email, fixing passwords. It generates enormous downstream value through services revenue, which already runs at over $100 billion annually.
- [14:42]
Austin Hankwitz
And Robert, if you go to wallstreetfavorites.com and you type in Apple, you will see that 61 different analysts are covering the stock with a median price target of $355 for the next 12 months, compared to the current price here of about 295. So Wall street definitely thinks there's about 20% upside still with the stock. Apple is not a hidden gem. No one's saying that it is. But it's a quality compounder to have in a portfolio. I've owned it for years now. And in an inflationary environment like what we've seen, all this geopolitical uncertainty, that kind of stability that, that, that keeps value in someone's portfolio. Now, the big takeaway, to Robert's point, is this AI strategy is a distribution play, not a technology leadership play. Anthropic OpenAI. They're the big tech names when it comes to these AI models. And if Apple can take some of that cool tech and share it with billions of people, more power to them. Distribution wins. In these consumer markets. The question is, is good enough AI on 2 billion devices worth more than the best AI in the world on, you know, 100 million devices? Hard to say.
- [15:46]
Robert Croak
I think that's the biggest call out. If they can pull this off and it's good enough because people still love Apple devices, then I think they'll do just fine. So, Austin, before we jump into our third story, support for this show comes from vcx, the public ticker for private tech. For generations, American companies have moved the world forward through their ingenuity and determination. And for generations, everyday Americans could be a part of that journey through perhaps the greatest innovation of all, the US Stock market.
- [16:15]
Austin Hankwitz
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Robert Croak
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- [16:51]
Austin Hankwitz
So visit getvcx.com for more information. That is getvcx.com carefully consider the investment material before investing, including objectives, risk, charges, and expenses. This and other information can be found in the fund's prospectus@getvcx.com this is a paid sponsorship. Robert let's round off the episode before we jump to our conversation with Ron Santella with our third and final story, which is the fact inflation is back to 4.2%. Can you believe it? This is unreal. Yeah, thumbs down for sure. On Wednesday, the Bureau of Labor Statistics reported that the Consumer Price Index rose half a percent in the month of May, putting the annual inflation rate at 4.2%, highest in three years. Holy smokes. For the third straight month, inflation has accelerated. We haven't seen a 4 handle on the CPI in three years and the timing could not be worse.
- [17:45]
Robert Croak
Energy prices also surged 3.3.9% for the month alone, putting the 12 month increase at a staggering 23.5%. The national average for regular gasoline is sitting at about $4.50 a gallon, driven almost entirely by the ongoing war in Iran and the blockage of the Strait of Hormuz.
- [18:04]
Austin Hankwitz
Food prices rose about 0.2%. Shelter costs, which actually make about a third of the CPI, climbed 0.3%, putting the annual rate there on shelter at 3.4. Airline fares jumped 2.7% in a single month. Another direct causal this energy passed through with higher jet fuel prices.
- [18:23]
Robert Croak
But Austin, here's where it gets interesting. Core CPI, which strips out food and energy, rose just 0.2% for the month and 2.9% annually. That number came in below the 0.3% consensus. Core commodities actually posted a 0.1% decline. Transportation services fell 0.6%. In other words, underneath the energy shock, inflation pressures are actually cool.
- [18:48]
Austin Hankwitz
Now there's a chief economist at Navy Federal Credit Union named Heather Long who, and I quote, says Americans are getting squeezed financially by inflation. That's back at a three year high. The frustration for many Americans is that so many of the basics are up right now. Gas, food, electricity, medical care, all clear pain points that are above 3%. Inflation ending the war in Iran will help to moderate inflation, but the worst is likely still to come for rising food prices and quote, unquote.
- [19:16]
Robert Croak
And then, literally hours after the CPI report dropped, President Trump escalated things further, warning that Iran will pay the price for not accepting a peace deal. This came just two days after Iran shot down a US Army Apache helicopter near the Strait of Hormuz on Monday, prompting the US to launch retaliatory strikes. Iran then attacked targets in Bahrain, Kuwait and Jordan. The two pilots were rescued, but the geopolitical temperature Just went up another notch. And so did the oil price crisis.
- [19:46]
Austin Hankwitz
Breaking news here, Robert. Hopefully this turns it down a notch. Trump just says he's canceling these Iran strikes. Wall Street Journal reports President Trump said he has canceled plan strikes on Iran after leadership and other parties negotiating a deal to end the conflict. Approved discussions and final points. Ongoing discussions have been brought to the highest level of Iranian leadership and approved. This is after we heard of him saying that he's going to strike them very hard. So I'm so over this. We got it. We don't got it. It's good, it's bad. We're at war. Psych. No, we're not. They shot us down. We're gonna get them. No, we're not. Like, dude, get out, get out of this. I'm, I'm done with this. I have no idea what's going on when it comes to any of this. All I want is inflation to come back down. And we just heard from bank of America's latest consumer checkpoint data. And this is showing that total card spend rose 5.1% in the month of May, strongest growth in nearly four years. But then the Washington Post reported this week that Americans are dipping into their savings to maintain that spending pace. So, so I just, I'm over this. I, I don't like this at all. I'm going to call my mom and tell her to come pick me up from the party.
- [20:50]
Robert Croak
Well, I guess the way to look at it is the personal savings rate has been declining and credit card usage is rising. The Fed's own Beige Book reported last week noted increased credit card usage, fewer retail visits and stronger demand for necessities. So these are sobering signals for an economy that's been sustained by consumer spending for a long Austin, that's a lot. We got wars, we got this, we got inflation, we got all these crazy things. Break it down for everyone. What does this mean for you and your money?
- [21:23]
Austin Hankwitz
Here's what I'm doing. I'm watching what The Fed does. June 16th and 17th, right? Are they going to raise rates? Are they going to cut rates or they keep rates the same. New chair Chairman Kevin Warsh can't cut rates, obviously because we have a 4.2% headline print on this, on this inflation. But he also knows that this is not, not demand driven inflation like the COVID induced bubble was back in 2021 when inflation went rampant. Then it's a supply shock from geopolitical issues. Raising rates isn't going to bring down gas prices. It's only going to crush the consumer even harder, who, according to bank of America, is already dipping into their savings to keep their spending going. For your portfolio, you want to own companies that can pass through higher costs without losing their customers. Costco, not Dollar General, Visa, not some random fintech company burning cash. If you go look up Costco right now, actually on Wall Street Favorites.com they're covered by 36 analysts on Wall street and the price Target is at $1150 a share. It's not a cheap stock. We're not saying that. But I've owned Costco for years, Robert, and I'm excited to hold on to this one and hopefully it helps me stabilize my portfolio as all this volatility ripples through.
- [22:34]
Robert Croak
Yeah, the biggest takeaway for me is the US Economy is caught between an energy shock, IT control and a consumer that's still spending but running out of that cushion every month. This continues, the margins get thinner and thinner. If the Hermoz situation resolves, headline inflation drops fast and WARSH gets room to maneuver. If it doesn't, we're looking at a 4% plus inflation rate through the summer with a Fed that's simply stuck. So don't make financial decisions based on rate cuts that haven't happened yet.
- [23:04]
Austin Hankwitz
Could not agree more on that one. And I think that's a great time here to bring Ron Santella onto the episode. As a reminder, RO is the portfolio manager of equable shares and he's got a great product HG we'll definitely talk about that. But he's also been on Wall street for like 30 years. He's worked with the biggest and the baddest. And getting his perspective, in my opinion, is incredibly important. Ron, thanks so much again for joining us on this episode of the Rich Habits Radar.
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Ron Santella
Great to be here today, guys. Robert, nice to see you. Austin, thanks for having me.
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Austin Hankwitz
Yeah, man, happy you're here. So something literally like right before we started recording, you were talking about things important. Important. You know, I had just broke some news while we were recording about Trump canceling these U.S. you know, strikes on Iran and the talks are getting approved, like all these things. But then you were saying, yeah, we live in such like a news driven environment that people forget sometimes that there's larger trends happening all around us that we need to be more focused on. So maybe elaborate on that for those
- [24:04]
Ron Santella
of us in the market. Rob, Robert, Austin, you're students in the market. You watch the markets. Both are important. Just look over the last week. The jobs number last Friday was real. It certainly affected the bond market and the stock market. There's been tension in the Middle east for now over a hundred days. It's affected the price of oil. There's been a lot of sort of fits and starts about whether it's going to stop or not stop. But the headline today is showing people that we could be there. And the bond market, the oil market, the equity markets are all responding to the news. But I think when one looks at these, these day to day events, they step back and say, is my portfolio prepared not just for the short term, but for the long term. What are the longer term trends? How do I ride through this volatility and what themes am I investing in? I'm a big fan of thematic investing. I think it's much easier to pick a theme than pick an individual stock. So we're experiencing the day to day and you're seeing the same thing that I'm seeing.
- [24:59]
Austin Hankwitz
Yeah, I completely agree. I'm the same way. I think Robert is as well here. Right. We've been talking about something called secular growth trends. Right. Which are these things that are taking place behind the scenes that, that have compounded annual growth rates in the double digits that just. It's going to be here. One of the, my favorite secular growth trends that I've been investing in now since 2020 is cybersecurity. Right. Think Palo Alto Networks and CrowdStrike and a little bit of Fortnet and things like that. Cloudflare. Right. And so these names continue to do well. And I think with the rise of AI, cybersecurity is only getting more important. But, but no, I could not agree more. And I think it's really important to have sort of, of that when in doubt, zoom out mentality. Right, sure.
- [25:39]
Ron Santella
I've always been a big fan of, of I try and identify secular trends and investing in the long term. I think what we're seeing in the current market is something in between. You know, historically we've had the classic cyclical stocks. Autos would be a good example of that. And then we've had stocks that just have long term secular trends. Something that might play into the aging demographics. Healthcare for example. But now we're hearing that term quite a bit. We're in a super sector cycle. So some of the industries that historically reviewed as being cyclical, for example semiconductors we now talk about, are they possibly in a super cycle. And that may be true and it probably speaks to why we've seen the kind of appreciation in that sector in that segment of the market this year.
- [26:17]
Austin Hankwitz
Where do you think? Because Today's the day. SpaceX iPodOS. Where do you think SpaceX fits in super cycles? Secular growth trends like, you know, we were just talking about it before. Right. Space exploration, AI, hardware, infrastructure, defense. Right. It seems like they're doing a really good job of getting investors excited about touching all the hot narratives at the moment right now. Do you think these are durable Trends?
- [26:44]
Ron Santella
I think SpaceX is the classic poster child for go big or go home. Something that really stands out in their file. And their S. Their S1 filing is the size of their addressable market, the numbers 28 and a half trip trillion that they list in that document. So they're aiming to really go after some very large markets. For me, I think SpaceX is representative of maybe something much more important, which is innovation is really the key to growth. And we're living in a time that I've never experienced in my 40 years in a market. Sure, none of us have. Or whether it's AI, robotics, autonomous driving, medical technology, biotechnology, defense technology, the advances are unbelievable. And the rate of growth is even improving over time. SpaceX to me, is right in the middle of that, what it's going after. And by definition there'll be risk in that. They all won't be winners in that portfolio.
- [27:39]
Austin Hankwitz
Right.
- [27:40]
Ron Santella
But I think SpaceX is a company that's coming public at slightly less than $2 trillion. And I think the people who believe are going to see a company much bigger than that a decade from now.
- [27:50]
Austin Hankwitz
I like that take.
- [27:51]
Robert Croak
Yeah, I think so too. But I also want to say Austin and I both have SpaceX exposure, our venture portfolios. But how does this $1.75 trillion public valuation, how does that change the math for these early private investors? And then also touch on what that looks like at IPO for people that are trying to get a piece. Because I've been saying all along, you know, and Austin mentioned it earlier in this episode, a lot of this valuation and it's going to go up dramatically, I feel is already baked in. And I feel like he has to get a lot of things right for SpaceX for it to really be worth this. But touch on that a little bit of how this works for this valuation for the early private investors.
- [28:33]
Ron Santella
I think there's a couple things to address there, Robert. Number one, there's a Musk premium here for sure. And I think we would all agree, and your listeners know that Musk is a unicorn using traditional metrics and valuation tools to value Tesla or SpaceX probably fall down at some level. So you're backing on who Jamie Dimon called the Thomas Edison of our age to deliver many future promises. I think for the early investors it puts you in an interesting spot because it depends how early you were, of course, but this is going to be probably the greatest wealth creation IPO ever. Going to create millionaires and billionaires. And so there'll be some people who never had that kind of money before to say what do I do? Do I want to continue to have the bulk of my net worth in a single stock stock or do I want to, or do I want to diversify? So I don't have a clear answer on what that means for the individual because it's a very personal choice. What I do know is there's an army of wealth advisors who are very excited to go meet some of these SpaceX shareholders. And I can tell you just from our own experience, we, we talk to dozens of advisors a week, branch managers, senior management of Wall street firms. Uniformly they tell me they've never seen something like this, but before.
- [29:45]
Austin Hankwitz
Yeah, that's interesting. So I wonder because I, I think I might have seen a article with like the Wall Street Journal or somewhere else where this like girl in her mid to late twenties is going to become a millionaire because she's worked at SpaceX for the last half decade and you know, she was doing some engineer work and you know she was doing her thing and, and she decided to take 10% of her salary in stock and, and so she's just been, you know, kind of piling it up there and because of this IPO, she's going to be a millionaire in her 20s which like congratulations. I think that's incredible. I love it when companies, that's one appreciate about, about SpaceX is like I love it when companies are willing and able and happy to give equity to their, to their employees and give them some liquidity when they want it as well with these sort of tender offerings. But I didn't really think about that Robert, in the sense of like, I think it'd be foolish for this woman to keep. I would imagine it's probably 90 of her net worth here just in SpaceX stock. Like she's probably gonna, you know, thoughtfully diversify into index funds and other different things. Do you have any perspective on, on maybe like who some of the biggest benefic of that maybe capital reallocation might be.
- [30:51]
Ron Santella
That story's interesting, Austin, because it just hits me on something I've noticed over my career, which is real wealth is created through concentration. Preserving wealth is Usually done through diversification. I think that's going to be the challenge for people that are paper wealthy overnight is when do they make that leap from having that concentrated bet to diversifying their wealth. Right. And again, that's a very personal choice, depending on one's age, risk tolerance, tolerance, their liquidity, things of that nature. I think by definition people in SpaceX are looking for new frontiers. I think they're looking for emerging technologies. I wouldn't be surprised if some of that money finds its way into some of the IPOs we see coming. The rest this year Anthropic has filed for an IPO. You know, ChatGPT's parent has filed for an IPO. We'll have other AI support infrastructure companies come to the market. Market. I, I would make a bet that you'll see a portion and perhaps a large portion of those proceeds go into those type of companies.
- [31:51]
Austin Hankwitz
That makes sense.
- [31:52]
Robert Croak
So staying on SpaceX, you take all these early investors, all these employees that are now going to be multi millionaires, you factor in the lockup period for most of these people, which I'm guessing is going to be six months probably. So when you look and factor all that in after the ipo, after what we believe will be some volatility, because people are going to take profits, where do you see it going in the future? Because I believe there is a world down the road. I don't know what that timeline is based on, how much he pulls off of all of these lofty expectations. But do you see SpaceX, whatever it turns into, being a six, $8 trillion company in the next two to three years, or is it much further out?
- [32:37]
Ron Santella
I think it's easy for me, Robert, to make a prediction about what the value can be. I think the pieces are there for SpaceX to be, be a 6, 7, 8 and perhaps a 10 trillion dollar plus company over time. And part of that is Elon Musk has a demonstrated history of providing value to his shareholders. So this is not completely pie in the sky. I think trying to pinpoint that time is difficult. And if somebody said, Ron, do you expect this to happen in three years? Take the over or under? I'll take the over on that. I think there will be bumps in the ring road. I think some of these businesses are going to be capital intensive, very capital intensive. They tend to take longer than one thinks. So without giving an exact date for me, it's more than three years.
- [33:24]
Robert Croak
Okay, that's fair. Yeah, I appreciate it. And I was just curious where your head's at because I do believe we see it get to 8 trillion in, in years, not in a couple years. Five, six, seven years maybe, maybe. So I think long term it's going to be a really good investment. I've just been very wary of telling people to try and jump in at the IPO because I just think that a lot of the value is already baked in. So that's my take on it and I'm glad you kind of agree in the timeline and the, the later valuation down the road.
- [33:54]
Ron Santella
I think two, I think two technical sides of the ipo, which, which one has been talked about and one, not so much, is we will see demand coming from the index fund funds. The QS will be the first at it. They've gone out, they waived their normal mandatory waiting time. But this will be added to the other indices over time. So there will be buyers of that. For those that put value on corporate governance, I don't believe SpaceX meets the test for that. As we know, Elon Musk is controlling over 80% of the voice vote for the company. It's not unprecedented. We saw that in the case of Facebook, we saw it in the case of Google. But the market is not usually a fan of super voting dual share classes. I think that speaks to his following and frankly the trust that people have in Elon Musk to deliver value over time.
- [34:49]
Austin Hankwitz
Now, talking about things that have also doubled, inflation just printed 4.2% on Wednesday. What's your take on that? It's a three year high. You know, how is the Fed going to have to respond to this, especially now, is it's very clear that the inflation we've experienced with energy specifically is not a demand side but more of a supply side.
- [35:13]
Ron Santella
So inflation numbers are too high. And why the recent numbers may have been in line with expectations. Expectations are too high. And that's what the Fed is going to be looking at next week. Now, for those who are looking at those numbers, we've talked about this several times in the show. We have the headline number, we have the core number. So one looks at inflation x energy and food, it's a little bit of a different picture there. Right. I think Kevin Warsh has an interesting situation ahead of him when it comes to inflation because it's recent history. When Jerome Powell talked about the transitory nature of inflation back during the pandemic. Pandemic. And it's why they did not act that aggressively in 21, which in 22 led to the highest rate of inflation in 40 years. And so as we're Sitting here with inflation that have been elevated now for quite a while. Fed has to look at that carefully and what their steps are going to be. Something we discussed on the last episode that I was on Austin and Robert, is the Fed has a dual mandate. Their job is to help support, support full employment and also to help support price stability. I believe the recent labor numbers have given the Fed cover to really focus more on controlling inflation.
- [36:28]
Austin Hankwitz
Yeah, I know, you're right. They certainly have. And I guess the real question is, are these labor numbers real? Because I feel like a lot of 2022 and 2023, you know, we saw all these like, exciting big labor numbers and they were revised lower to essentially net and zero growth. And so it's like, you know, when it comes to these labor, labor numbers, like, yes, that's really cool to see, but we'll, we'll see how that like continues to shake out something. I want to share my screen real quick and get your, your take on this, Ron, is this really cool chart that I had found. I think I saw it on X, but it's the market performance during the initial first year whenever a new chair or a Fed chairman jumps in here, chairperson rather. And so during Jerome Powell's first year, right, 12 months, the stock market was about four and a half percent. But during that same period time, the markets fell about 19, max drawdown. And so the median drawdown in that first 12 months is 13 and a half percent, despite about a 10% return in the markets. And so I think this is important for us to talk about here because it sort of sets expectations for some of these investors. You know, you get like a new Fed chairman or, you know, chairperson, whatever you want to say, there is rocking and rolling, like we should all get excited or things are going to change away, whatever. But the market doesn't like uncertainty. The market doesn't like knowing that someone who's not been making decisions for the last couple years now, you know, someone's news coming in, they get to make different decisions and who knows what the type of decisions are. And you know, June 16, June 17, that's going to be a great time for us to get some insight into Kevin Warsh's perspective on what he thinks these rates are going to be. I think I saw in Polymarket there's a 60, 70% chance now of a rate higher hike in 2026. So it's, it's all over the place. But I want to get your reaction to this chart on screen.
- [38:15]
Ron Santella
We actually spoke about this this morning internally we had, we had a discussion, we actually had a panel discussion with some, some wealth advisors regarding this. It, it raises a bigger question to me actually, Austin, because I think you're right. When the, when a new Fed chair comes in, it presents some uncertainty about policy. I do think Warsh is a little bit different in that he was a governor for a while. He's written white papers on how he stands. So he's not coming as a completely unknown commodity. What's not known is how the, how the overall committee will come together with him and how they'll work together. Some dissents recently, as you know, with some of the recent votes. But for us, the larger question is not just the Fed, but when you look at the second half of the year, which starts next month, what type of risk are out there for the investor? The Fed is one of them. The midterm elections are not another. That's coming out expectations for earnings growth. We're coming off a very solid start to the year for earnings growth. People will be looking to see will that continue. Right. And so I think when you look at the Fed, you should narrow as a yes, this may create some uncertainty, but one should also think about what other things are out there the rest of the year that could create some volatility in this market and how do you protect yourself in those volatile periods.
- [39:28]
Robert Croak
I love this, Ron, and I want to bring up something. You led right into it. Actually. The 10 year just hit 4.53% and Fidelity said yields have broken out of their established trading range. So in your opinion, what is the bond market telling us that the stock market isn't given all of these conditions? I've never seen you mentioned this earlier. I've never seen a market with so much knee jerk reaction because of headlines day to day. What are your thoughts on this? With the 10 year being at 4.53%,
- [40:00]
Ron Santella
the bond market is looking at what we're talking about, Robert. They're seeing the inflation numbers and we look at the stock market and some of these dramatic moves we had. Yesterday the dow was down 900 points plus. Today it's rallying back strong. But when one looks at Friday's bond market action and you look at the two year jump, 11 basis points, that's a big move. And so to me the 2 year is as important as a 10 year with something we discussed in the past because the two year is essentially that forward fund rate and I believe the Fed focuses on that. But I think when it comes to the 10 year, the bond market and Stock market are saying they're not quite aligned right now. Something has to give there in terms of that yield or level the stock market.
- [40:43]
Robert Croak
Yeah, I really like that take Ron, I believe and agree with you 100% here that you know, they're just not acting in alignment. And I think that's okay right now until the markets settle down a little bit more.
- [40:55]
Austin Hankwitz
I want to go back to earnings though, because you had shared that earnings are really important. What's been your take on Q1 earnings so far? And do you think that this earnings momentum is going to continue in the back half of 2026? And the reason I asked specifically going to share my screen again. For all you guys listening, you should go pick up your phone and look at it or watch us on YouTube or Spotify. But this chart does a really good job. It illustrates that since 1995 there have only been six calendar years where the S&P 500 grew earnings by over 20. Right. 95, 0304, 2010, 2018 and 2021, all of those years. But 2018 ended up with the S P up double digit returns. I think 2026 is going to be another year of that here. You know, S p is up 8% plus year to date. So how important is earnings right now as it relates to driving a lot of this stock market appreciation? Because to me, me, I think it's everything. I mean, yeah, we've seen some volatility, right? Last Friday we saw the, the NASDAQ have the worst day. And I don't know how many. I think it was like, you know, October or something last year, maybe 14 months. Actually it was the worst day in like 14 months. And then the S and P had the worst day since like October of 25. But a lot of that had to do with the Fed's expectations and rate cuts and jobs and things like that. And of course a little bit of Broadcom here and there. But I have a feeling that the markets are kind of shrugging off the war. I got a feeling the markets are really trying to say, like, okay, I don't care about that. We care about earnings. And what's your take on that?
- [42:30]
Ron Santella
To me, earnings are everything. I think ultimately strong economy creates the backdrop for strong earnings and earnings drive stocks. It's not much more complicated. But I do think we're in a market where there's been a record amount of dispersion. So when you look at the market, one is to find what is that market for them. If you're in energy this year You've done well. If you're in semiconductors, you've done even better. If you're in financials you could be down for the year. So one has to look at how their portfolio was allocated. But ultimately earnings drive stock prices for sure. I think that, I think the next derivative is the earnings momentum. We've been in a market where the momentum of earnings itself has increased. I think in the future people will look to see how that momentum is going. Can the market continue to grow at that pace? Pace, I think two interesting stories with earnings are two well known companies. If you look at Dell Computer's recent earnings they blew through the numbers and are at a pace I haven't seen for a company covered that well by analysts in a long time. Stock was up I believe 35% on the news but to me it was interesting. Even their legacy business did extraordinary. And this is a company that I was invested in back in 1993 and I'm watching it just, it's like a growth company. And then I watched Oracle yesterday come out and they beat their numbers at least they beat their headline numbers but the market looked at their capex and looked at their additional financing needs at least for a day. It doesn't like the news. And so I think it's easy that earnings drive stocks but I also think for investors you have to really know what you're invested in and make sure you're following those individual stories.
- [44:09]
Austin Hankwitz
Now something an observation we've seen on wallstreetfavorites.com recently is that, and we just did this back test over the, I think like four months or five months companies that have market caps above 100 billion returned 13 and a half percent over the last four or five months compared to companies sub 100 billion all the way down to like 10 billion. Market cap have been basically flat. And so do you think this mega cap, mega market cap momentum concentration is a feature of this current market we're in or is it a warning sign or like how should investors be thinking about the mega cap companies driving a lot of these returns right now?
- [44:48]
Ron Santella
So two things come to me through yesterday the equal weight index was actually slightly had the S&P 500. So we are seeing some breadth to the market. And even, even on a day like Friday which was, it was a notable down day, we saw some stocks like consumer staples actually rally that day. So market concentration in these names that are growing, that are, that are in excess of 100 billion, I think it's both, I think one has to recognize over the short term that these are momentum stocks, these are crowded trades and by definition there will be volatility. So when you see the semiconductor index up close to 90% for the year and then drop 12% in a week, that should be expected. On the other hand, if you have conviction in the theme and you have conviction in the investment you made, you ride through those periods. And as long as the fundamentals stay strong and support the that these companies should continue to grow. So I think two things can be true at the same time.
- [45:48]
Austin Hankwitz
You had mentioned the equal weight S and P. I'm sure there's people listening to the show right now that has RSP that have VOO and qqq and they're looking at the volatility we experienced last Friday and at the start of this week. And now, you know, it's Thursday when we film this and the markets just jumped one and a half percent because of the, you know, what happened with Trump. And so you pair that with fed uncertainty, whatever, IPOs all over the place. Walk us through how Hedg is built to handle exactly this type of environment.
- [46:18]
Ron Santella
We think Hedg is designed to handle any environment. I think this type of environment does shine a brighter light on what we do, but this should be part of a portfolio in this environment, in any environment. I'll walk you through the reasons why a we're a big believer in not timing the market, stay invested in the market. And something we discussed on this show more than once is you can miss a handful of days over the last 10 years, 20 years, and you can lose a large percentage of your, of your gains. So when one chooses to invest in high growth names, and one is, we're talking about SpaceX today. This is how you create wealth. But to ride through those periods when you have market declines of 10, 12, 15% percent, hedge is going to be a bright spot in those periods. So for example, if one looked through yesterday, you would see the S&P 500 was down about 4% month to date. Hedge was unchanged for the month. So that gives one a little bit more stability in the portfolio and I think it allows you to ride that emotional roller coaster that may come from some of those moves that go like this in other parts of your portfolio. That to me that's just having an intelligent long term investment plan. I also want to point out that when markets do rise, we've delivered double digit returns in 23, 24, 25. The S&P was up double digits all three of those years. Hedge was up double digits so we think it's suitable for any investor. It should be part of an overall portfolio allocation plan. I completely agree.
- [47:51]
Austin Hankwitz
I have it in my portfolio. Robert has it in his. And as we think about, about, you know, percent allocation, talk to me a little bit more. I'm not trying to put you on the spot of like, put this exact amount, like, whatever, but I want to just like, get your perspective on, like, how a new investor that might be saying, okay, maybe I'm not cut out for this 4.2% decline in the NASDAQ on a whim, or maybe I'm not cut out for this, you know, two and a half percent decline that we experienced earlier this week. And this, the jump up, all this stuff. And, you know, how should they be thinking about portfolio allocation? We've heard about the Trinity study, the 6040 when it comes to retirement. How does this maybe compare to that? Is that something that is just completely separate? Like, how should someone that's brand new thinking about allocating to some hedg kind of construct a portfolio knowing that this is a core component of it?
- [48:38]
Ron Santella
Well, one construction portfolio. I think two things are important. I think one should be looking long term. And to me, long term is three to five years plus. That should be the starting point. I think the second thing is one should anticipate there will be volatility in the the market, and you're going to have drawdowns of 10, 20, and sometimes more than that, 30% in the market. So you want to make sure when that happens, A, you can ride through that, and B, you probably want some liquidity so you can take advantage to buy additional securities if you want to. So when we look at a hedge, we believe that a hedge should be at least 10% of one's allocation, really up to 20 or 25%. And the reason is, let's just take the month, let's take this month, the month of June. We're outperforming the market by quite a bit. If you're less than 10%, that's not really going to be meaningful in the overall scheme of what you're trying to accomplish. So without knowing the rest of somebody's portfolio, Austin, because it'll be different for each portfolio, for us, that zone is sort of more than 10% and probably up to 20 or 25%. For a hedging strategy, your portfolio, in this case, HEDG, our ETF, no, I
- [49:45]
Austin Hankwitz
think that's a great, great breakdown. And again, when people think hedging, they normally think about, like, buying Put options. But the difference is buying put options eventually go to zero. Like the value of those disappear. And sure, if you time the markets correctly and you're able to buy your puts and you know, do things like that. Right? Shorting a stock, able to do that correctly. Yeah, it works, right? But I can't do it correctly. I can't time the markets. 99 of people can't. You mentioned, you know, timing the markets doesn't make sense. Dollar cost averaging, you know, spending more time in the markets than anything is what does make sense. And so Hedg, in my opinion, solves that problem of having a, a hedge in a portfolio that you don't have to move in and out of or try or do anything. It's just that permanent thing and it does its job.
- [50:26]
Ron Santella
Right?
- [50:26]
Austin Hankwitz
I mean, you just mentioned here, month to date, in the month of June, you guys are outperforming the S and P dramatically. And when the markets are up and when your puts are going to zero, right. HDG is going up with it. And so that's what's really what you guys are building. So I really appreciate you walking us through that again.
- [50:40]
Ron Santella
Just, just a follow up on what you just said. Awesome that you hit on something that's been important to me, my career. I started trading options on the Chicago Board Option Exchange back in the mid-80s. Over the last couple decades, I still cannot figure out how to time when to buy puts and when not to buy puts or when to buy calls is very difficult for investors. That's why when we structured this product, we did not want people just to buy puts and watch the premium erode instead. When you buy hedge, our static rate of return, if the market doesn't move tends to be double digits north to 10%. So you'll get paid to wait in a fund like this in hedge versus going out and buying puts.
- [51:16]
Robert Croak
I love it. We talk all the time and we can end on this time in the market versus trying to time the market, I think is one of the best phrases in finance to get people to understand nobody can time it. Not AI, not the best funds. It's just all about being in the market long term. So, Ron, thank you for stopping by. You always bring so much wisdom to our audience and we really appreciate it. Make sure all of you guys check out H E D G. Very, very cool for your portfolio. Ron, thank you for stopping by.
- [51:48]
Ron Santella
Great to be here. Thank you. Robert, thank you.
- [51:50]
Austin Hankwitz
You Austin, another top tier conversation with a top tier Wall street veteran, Ron Santella. Again, go check out Hedg really, really cool product that they built over there. And we're super glad and just proud to have Ron on the show to give his take on all things stock market, economy, bond market, SpaceX, IPO, everything. It's so cool to have someone like that that wants to join us on these episodes. And, you know, it's, it's conversations we're already having with people. I think that's what's so fun about the show, Robert, is we have these conversations with these industry experts, but the show, the Rich Habits podcast, and now the Rich Habits Radar has allowed us to take those conversations that we have behind closed doors or over email or over the phone or over a zoom call and now publish them online for everyone to see. And so that we're super grateful to have awesome people like Ron joining us. If you enjoyed this episode of the Rich Habits Radar, please go check out Wall street favorites dot com. That is the nicest thing you can do for us at the moment. Showing us some support over there would be incredible. And of course consider joining the Rich Habits Network, which is our community for our biggest fans. We just uploaded our ninth video course in there, Robert. Ninth video course. It's like 9, 10, 12 hours of video coursework. All investing and personal finance and small business ownership and, you know, automating your money and retirement and taxes. Like all these really fun things. They're all over there. Seven day free trial. Literally completely free. Go trial. The Rich Habits Network. Stick around if you like it. And we're so grateful to have a hundred thousand you come back every week. Thank you so much and we'll see you on Monday.
- [53:37]
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