Predicting 15 of the Past 4 Stock Market Crashes

I am referring, of course, to the current hand wringing over the price/equity (PE) ratio.

While the number is concerning, using this statistic as a a hard limit is on its face financially absurd.

Usually when numbers shoot higher on Wall Street, it is a reason for celebration.

That is not how Jonas Goltermann, the chief markets economist at Capital Economics, feels when he looks at one of the most feared charts on the stock market: the Shiller price-to-earnings (PE) ratio.

“That’s obviously a bit worrying,” he says after seeing the metric on track to end the month at its highest level since August 2000.

The Shiller PE ratio, a closely watched fear gauge on Wall Street, may sound esoteric, but it has become one of the most important numbers in the world – and one you should care about.

For all intents and purposes, it is the canary in the coal mine for global financial crashes.

To be clear, I do believe that we are headed to a crash, and that this crash is coming because the entire facade of our current financial market is a fraud. (The AI bubble)

What I do not believe is that this obsession with PE ratios is a useful diagnostic tool.

More History Rhyming

It looks like we are headed for a crackup in the private credit market. (archive link)

Strain is spreading across private credit portfolios, with some of the largest funds taking writedowns and warning about problem loans as the industry faces its biggest challenge in almost a decade.

The value of troubled loans held by some of the biggest private debt investors has reached levels last seen in 2017, when the industry was dealing with a hangover from an oil price crash, an FT analysis of figures from fixed-income data provider Solve has found.

Loans placed on non-accrual status by the 20 largest publicly traded business development companies (BDCs) — listed funds that invest in private credit loans — climbed to a median 2.8 per cent of their cost in the second quarter, up from 2 per cent at the end of March.

The non-accrual demarcation is one signal of stress in the private credit industry, indicating borrowers have either stopped making payments on their loans or that a fund believes a borrower may soon default on its obligations.

………

Listed vehicles managed by KKR and Blue Owl, as well as one run by Apollo Global known as MidCap Financial, were among the funds in which repayments outstripped new lending in the quarter, with executives at KKR pointing to limited dealmaking and its push to exit certain loans.

The firm’s listed fund, FS KKR Capital Corp, reported that 7.1 per cent of its loan book was troubled in the second quarter, a slight improvement from the prior quarter but still far above the industry average.

The figures underscore the challenge facing the private investment industry, which wagered heavily on private credit as a major source of growth as it looked to invest money for insurers, retirees and wealthy individuals.

………

But many executives across the $2tn asset class believe that the alarmism surrounding private credit’s troubles is overblown, with several blaming the media — including the FT — for the outflows weighing on the asset class.

They would say that it is just alarmism, their paychecks depend on their saying this. 

………

Much of the pain already seen has been centred on investments the funds helped finance between 2020 and 2021, when interest rates were near zero and private equity groups went on a buying binge while valuations were elevated.

Many of those companies are now struggling to service their debt as interest rates have climbed, with executives on earnings calls repeatedly pointing to that cohort as the source of trouble.

Yeah, this is econ f%$#ing 101.  When interest rates go up, loan payments go up. 

………

Mitchel Penn, an analyst at Oppenheimer, noted that the sell-off in BDC share prices meant funds were “priced for death”. His own research showed that on average over the past five years, funds in the bottom quartile were generating returns on equity below the yield on a 10-year Treasury.

“Underwriting wasn’t as good as it should have been,” he said. “They weren’t as picky.”

Gee, apart from that Mrs. Lincoln, how was the play? 

When You Are Too Corrupt for JP Morgan………

JPMorgan has terminated their relationship with the online gambling site Polymarket.

JPMorgan Chase terminated its banking relationship with Polymarket last year over regulatory concerns, underscoring escalating worries in the industry over fast-growing prediction platforms.

JPMorgan notified Polymarket that it needed to find a new bank in October, according to people familiar with the matter. Polymarket is now working with a new lender, the identity of which could not be confirmed. 

At the time, Polymarket was banned from allowing US customers to use its platform following a 2022 enforcement action by the Commodity Futures Trading Commission for operating an unregistered derivatives trading platform. 

The CFTC under the Trump administration allowed New York-based Polymarket to re-enter the US last year, though the agency has an ongoing investigation into the company, the FT reported in June.

Gambling is a great way to launder money, and has been shown with both Polymarket and Kalshi, it is an even better way to engage in insider trading. 

Whatever JPMorgan saw, it's worse than what is publicly known.

That ain't good. 

More History Rhyming

Home Sales

Home SupplyWhile much of the focus has been on the slow decline of commercial real estate, we are also seeing significant declines in single family home sales.

We need to remember that the 2008-2009 housing crash was not the result of home prices falling.  Instead it came from home price increases falling from 10-15% to just 5%, which prevented over-leveraged buyers from refinancing.

Sales of existing single-family homes fell by 1.9% in July from June, seasonally adjusted, the second month in a row of declines, to an annual rate of 3.69 million sales, sinking deeper into the mud at the bottom that sales have been in for four years, according to data by the National Association of Realtors today.

………

Supply of single-family homes rose to 4.6 months in July, the highest since the summer of 2016.

Supply is a function of inventory and sales – how much inventory there was at month-end in relationship to sales during the month. Sales sank deeper into the mud at the bottom, while inventories rose to 1.4 million single-family homes for sale.

While "regular" interest rates are high, real interest rates (regular interest rates - inflation) have actually remained quite low.

My prediction is that we are going to see a reckoning in the real estate markets sooner rather than later. 

Mom! History is Rhyming Again!

It looks like non-bank lenders are in the process of slowly collapsing.

Seems a lot like 2009.  Things move slowly, and then all at once. 

Private credit is showing increasing signs of stress, despite comments to the contrary from some of the largest fund managers that are trying to put a year of turmoil behind them.

Recent quarterly reports from funds overseen by the industry’s big players showed that loan health and investor returns are worsening, according to an analysis by The Wall Street Journal.

………

The percentage of defaulted loans in Blue Owl’s fund hit 2.8% in the second quarter, its highest level in at least five years. Nonperforming loans at the three other funds also hit five-year highs, exceeding levels reached in 2023 when the Federal Reserve hiked interest rates, squeezing the finances of corporate borrowers and triggering a wide stock and bond market selloff.

 Not only have the lessons of 1929 been forgotten, the lessons of 2009 have been forgotten.

I've Been Saying This for Years

For some time, I have argued that one of the ways to limit the damage that hedge funds and private equity can do is to reform bankruptcy laws to leave them on the hook for the consequences of their looting. (See here, here, here, here, here, here, and here, and this is only for the 2020s)

Nice to see that economist Dean Baker has reached the same conclusion.

The American Prospect had an excellent piece yesterday describing how taxpayers could end up being on the hook for bailing out bad loans to the AI industry even with no new actions by Congress or state legislatures. The mechanism is that life insurance companies have issued hundreds of billions of dollars of private loans to AI-related companies. (We can only speculate on the amount since many of the loans are issued by privately held companies, which don’t have to make detailed disclosures of holdings.) If these companies are unable to repay the loans, then one or more insurers could go bankrupt.

………

There is a simple way to reduce the likelihood of this sort of bailout on insurers’ bad AI investments. The bankruptcy laws can be changed to make private equity (PE) companies liable for the debts incurred by the companies they own and control. Senator Elizabeth Warren and Representative Mark Pocan proposed this change as part of their Stop Wall Street Looting Act in the last session of Congress.

This matters in the current context because many insurers have been bought by PE companies in recent years. While the insurers may be unable to repay their debts, the PE companies that own them may still have billions of dollars of assets.

Changing the law in this way not only prevents PE companies from walking away from the wreckage caused by the companies they drive into bankruptcy; it would also force the insurers they own to be more cautious with their lending. If the PE companies were themselves on the hook, they would discourage insurers from making too many high-risk loans.

Indubitably. 

Well, It's a Start

Capital One has announced that it has closed Trump Organization accounts due to patterns showing money laundering.

What?  You mean that a mobbed up real estate developer from New York City might be laundering money?

Pshaw! 

Capital One Financial hit back on Friday against a lawsuit over its ⁠decision to close the Trump ⁠Organization’s bank accounts ​years ago, stating that it did so after a review by anti-money-laundering experts.

The disclosure marks the first time a bank has formally tied money-laundering concerns to Donald Trump’s family business. Capital One is seeking to dismiss the case by casting doubt on claims of illegally debanking – or denying services on religious or political grounds – the Trump Organization.

………

Capital One has never accused the Trump Organization of money laundering. ​But Friday’s filing argues that “documents and Plaintiffs’ own ‌allegations make clear that Capital One closed ‌Plaintiffs’ accounts for anti-money laundering (‘AML’) reasons.

“The closures were the result of months of analysis and a careful review by ‌Capital One’s AML team in accordance with bank policies and regulatory guidance.”

Capital One gave notice of its plans to close more than 300 Trump-affiliated bank accounts in March 2021.

300 accounts?!?!!?  

Nope, no money laundering there.

………

“The transaction patterns identified by Capital One are among the types of activity flagged by federal banking guidance,” the filing said.

Gee, ya think?

Fed Stands Pat

The Federal Reserve held its benchmark interest steady today, but in a sign of growing concerns about inflation three members of the Board of Governors voted to hike rates, which is the most public split on the board in about a decade.

Also, the bond vigilantes were unimpressed:

The Federal Reserve on Wednesday kept interest rates unchanged despite growing divisions among policymakers to more directly tackle inflation after five years of overshooting the central bank’s 2 percent target.

The Fed voted 9-3 to maintain rates at 3.5 to 3.75 percent, a level that has been in place since January. Beth M. Hammack of the Federal Reserve Bank of Cleveland, Neel Kashkari of the Minneapolis Fed and Lorie K. Logan of the Dallas Fed dissented, voting instead for a quarter-point increase.

The divisions underscore the tough spot the Fed and its chairman, Kevin M. Warsh find themselves in as they grapple with new sources of price pressures that are threatening to compound an already complicated and longstanding inflation problem.

………

As Mr. Warsh spoke, longer dated Treasury yields rose sharply, with the 30-year bond closing in on its May peak of 5.2 percent. That was the highest level since 2007. The rise in the 30-year Treasury yield suggests some worry about Mr. Warsh’s ability to tackle inflation in the long run.

History Rhyming

We are seeing the financial merry go ground slowing down.

First, we have banks starting to call in loans from hedge funds as a result of concerns about the possible collapse of the AI bubble.

Wall Street banks have demanded more collateral from hedge funds in recent weeks as a rout in AI stocks accelerates and triggers heavy losses across several popular strategies.

Banks asked funds whose holdings are heavily concentrated in certain industries to provide additional collateral to keep their existing levels of leverage, according to four people familiar with the matter.

The collateral demands highlight the mounting fears on Wall Street about the scale and speed of the sell-off in AI stocks over the past fortnight, which has upended a rally in a sector favoured by many funds.

……… 

Banks build in protections when lending to hedge funds to make sure they do not incur losses in case the market turns negative. 

Meanwhile, on a slightly more personal scale, we are seeing a spike in the level of margin debt on the New York Stock Exchange.

When people start buying stocks with borrowed money at rates not seen since the dot-com bubble, someone usually gets hurt. Deutsche Bank is now waving the yellow flag.

The bank’s credit strategists, led by Steve Caprio, published a warning on July 24 that US margin debt has crossed the $1 trillion mark as of June 2025. That’s not just a round number for headlines. As a share of GDP, margin debt has now surpassed levels seen during the late-1990s tech mania and is closing in on the 2021 all-time high. 

The numbers behind the warning

Here’s what caught Deutsche Bank’s attention: NYSE margin debt jumped 18.5% from April to June 2025. That two-month sprint ranks as the fifth-fastest increase since 1998, a period that includes some of the most memorable market blowups in modern history.

Finally, and I'm going to quote the hed, "The bond market hasn’t been this calm since the dot-com bust and the financial crisis. History warns of a rude awakening." 

The spreads between high and low quality debt is shrinking, which tends to happen before a crash.

For all the current economic and geopolitical turmoil, the U.S. bond market is remarkably sanguine about the risks of a U.S. economic recession, even after oil’s big price jump.

To appreciate the bond market’s seemingly unconcerned behavior, consider the high-yield bond spread, which represents the additional compensation bond investors demand for incurring the extra risk that high-yield (“junk”) bonds represent relative to U.S. Treasurys.

The junk spread rises along with the risk of recession, when issuers of high-yield bonds become less likely to be able to repay, and it falls when the risk of an economic downturn is lower.

At the end of June, when a barrel of Brent crude was selling for $73, the junk spread stood at 2.75 percentage points. Currently, with Brent crude near $100 per barrel, the spread stands at 2.68 points. While a 7-basis-point decline is not in itself particularly meaningful, it is highly significant in light of the increased likelihood of economic distress to which the higher oil price leads.

In addition, we shouldn’t forget that oil’s recent spike comes on top of a private-credit market that has already been struggling. In its recent report on the state of private markets in 2026, MSCI writes that this market is facing problems even deeper than previously known: “Among loans in private-credit funds, 15.7% have been marked below 80% of principal — a rough threshold for distress — and more than 10% are now marked below 50% — a level typically associated with deep distress or risk of restructuring.”

MSCI’s report reflected the state of private markets at the end of 2025’s third quarter, the latest period for which data were available. Since then, conditions in the private-credit market have deteriorated even more, but the junk spread has narrowed rather than widened — to 2.68 percentage points from 2.80. 

Moreover, as you can see from the chart above, the junk spread is now lower than at any time since immediately prior to the 2008 global financial crisis. The only other time since 1997 that the spread was lower than today came near the top of the dot-com bubble. We don’t need to be reminded what happened after that. 

We are in for interesting times. 

Bummer

A federal judge has stayed the Minnesota law banning predictions markets.

This is temporary, so Minnesoto might still prevail, but the injunction is disappointing.

The bookies Kalshi and Polymarket, along with the Trump DoJ claimed that these were swaps, not betting.

It's not a surprise that Trump is a big supporter of this sort of gambling.  He and his family are deep into the so-called "Prediction Markets",  Also, there is compelling evidence that members of his administration are using the markets to insider trade.

Corruption is as corruption does.

As I have noted for well over a decade, swaps are basically just betting, not insurance, which should have been banned via a legal framework dating back to the Marine Insurance Act of 1746, which prevented people from doing the equivalent of getting paid for burning down their neighbors house.

A federal judge on Monday blocked a Minnesota state law that would ban prediction markets days before it was set to go into effect, siding with a federal financial regulator and two companies that had sued to stop it.

In May, Minnesota became the first state to pass a law making it a felony for most prediction markets to locally operate and advertise. The Commodity Futures Trading Commission, a federal agency that oversees prediction markets, and the markets Kalshi and Polymarket sued, arguing that the platforms can be regulated only at the federal level.

On Monday, Judge Kate M. Menendez of the U.S. District Court for the District of Minnesota granted a preliminary injunction to halt the law from going into effect on Saturday, finding that the companies faced a threat of irreparable harm. The law will remain on hold until a final ruling is made in the case.

………

The agency has faced criticism for making what appear to be favorable decisions for prediction markets with ties to the Trump family. Donald Trump Jr. advises Kalshi and Polymarket, and he backs Polymarket financially.

President Trump has posted on Truth Social that the agency, not states, must have “exclusive authority” over prediction markets.

 

This Applies to the US as Well

One possible reason for the EU underperforming is that the European Union and its member nations have structured their economies and societies to favor rent seeking over productive activity.

In addition to increasing inequality, rent seeking uses the power of the state to favor the already wealthy, it also crowds out productive activity, because the former is more lucrative.

To be fair, there is also the energy increases resulting from the cut off of cheap Russian natural gas as well.

Why is Europe falling behind in investment and growth compared with the US, let alone China and India?  In a new report, Labour Squeezed, Investment Stalled – the renowned economist Mariana Mazzucato and a team at the UCL Institute for Innovation and Public Purpose, financed by the European Trade Union Federation (SETU), reckon that the EU’s declining competitiveness is not the result of too much regulation or the lack of cheap credit as mainstream economists and Mario Draghi is his report for the EU Commission argued. 

Instead it is due to “falling investment and productivity caused by the hoarding of profits and higher payments to shareholders and CEOs rather than reinvested in production, innovation and good jobs”. The decline is the result of an emergence of a “capitalism of rent” in Europe, where income is increasingly captured not by producing anything, but by owning assets, financial positions and market power, and charging for access to them. Mazzucato concludes that Europe must switch from “an economy based on value extraction to one based on value creation”.

Mazzucato and and the IIPP show that headline profits have stayed healthy even as profitability in production have declined since 2000.  They claim that’s because profits have been captured through ‘financialisation’ ie non-financial corporations are increasingly make more money through financial investment rather than in production. In study of over 300 EU corporations, they find that around one in six firms surveyed now draw more than 10 percent of earnings from financial rather than productive activity. 

I think that the framing in the last paragraph is particularly important.

Stating that financial activity is not a productive activity is true, even if financial activity can aid in productive activity by allocating capital to business that need it.

Finance, as well as IP driven activity are profitable because they are fundamentally parasitic in nature when taken to extremes. 

It's why they are so hard to fight, they have excess profits that can be redirected to bribery in various forms to support their businesses. 

Partying Like It's 2008

The Wisconsin PSC just through a major monkey-wrench into Oracle's plans to build a data center there when it announced that because of its recent downgrade by S&P to BBB-, the roach motel of software companies will have to post a $7,000,000,000.00 bond in order to be hooked into the grid.

It is refreshing to see that a billionaire cannot buy his way into regulatory forbearance somewhere. 

Oracle says that it could face more than $100 million a year in financing costs to guarantee the power commitments behind a nearly 1 GW datacenter campus it is developing in Wisconsin with Vantage and OpenAI.

Local regulators have refused to revisit a decision that they say protects existing customers and improves public transparency around the energy-related needs of datacenters.

Oracle's plans to build the Lighthouse Campus datacenter in Port Washington are supported by local utility We Energies. The campus is expected to require nearly a gigawatt of power.

The Public Service Commission (PSC) of Wisconsin, an energy regulator, told the Financial Times it had "declined to take action" on a petition seeking to reopen or overturn its earlier decision.

In April, the PSC considered We Energies' application for Very Large Customer (VLC) and Bespoke Resources Tariff status around the datacenter. Among the modifications to improve the tariff was a revision "to address the risk of transmission cost shifting from dataCenter customers to existing customers."

In an affidavit supporting the joint petition to reopen or rehear the decision, Oracle explained that if the decision was not modified, it would have to post security in a cash deposit or a letter of credit.

"Based on our current projections, we anticipate that, under the current mandated requirements, we will ultimately be required to post financial security, likely in the form of a letter of credit in an amount exceeding $7 billion, at an annual cost that could exceed $100 million," the document said.

To qualify for an exemption, Oracle would have to meet several tests, including maintaining ratings of at least A- from S&P and A3 from Moody's. At the time of the PSC decision, S&P rated Oracle BBB, but downgraded it to BBB- earlier this month.

"We estimate that OpenAI makes up roughly half of the $638 billion in (Oracle's) remaining performance obligations (RPO)," S&P said. "OpenAI's ability to meet its contractual obligations and raise external financing will be contingent upon AI tailwinds continuing and its models being market leaders. If OpenAI were unable to pay Oracle, we believe Oracle could be left with massive datacenter leases that it might be unable to exit or have to re-lease to new tenants under less-favorable terms."

………

In September last year, Oracle's valuation rocketed after it boasted $455 billion in RPOs, $300 billion of which turned out to be for OpenAI.

In the period since, Oracle has raised debt to fund its datacenter building program and has negative free cash flow.

S&P said Oracle's capex guidance had risen to between $90 billion and $95 billion for fiscal 2027, which started in June, up from an earlier forecast of $60 billion. For the same period, S&P forecasts negative free operating cash flow of $42 billion, worse than its previous estimate of negative $24 billion.

Yes, this does remind me of early 2008.  We are seeing signs of the credit markets slowly freezing up.

It's only going to get worse. 

It's Bank Failure Friday!!!

Today was kind of busy, with the 3rd commercial bank failure of the year, Kentland Federal Savings and Loan Association of Kentland, IN, and the 6th credit union failure of the year, WeDevelopment Federal Credit Union of Kansas City, Missouri.

I'm not sure if this is the start of something, or just a blip.

Here is the  Full FDIC list, and here is the Full NCUA list, and the direct link for this year.

Look! A (Shadow) Bank Run!

That's a bank run When redemption requests from a private credit fund exceed 15% in a quarter, that's a bank run.

Apollo, and I would assume Cliffwater, and probably HPS and Blackstone are experiencing a run on their assets. (See graph)

To the degree that anyone is saying that it is not a bank run, particularly since Apollo is restricting redemptions, they are lying.

Investor redemption requests at Apollo’s flagship retail private credit fund surged to 17 per cent of the vehicle’s value in the second quarter, underscoring fears of falling returns and rising stress in debt markets.

The firm’s $15bn Apollo Debt Solutions fund pitched to wealthy individual investors reported roughly $2.4bn of withdrawal requests in the most recent period. The fund met less than 30 per cent of the withdrawals it faced in the quarter, capping redemptions at 5 per cent of the value of the vehicle.

The Apollo fund, which has an investment portfolio worth nearly $26bn, had been hit with withdrawal requests of 11 per cent in the first quarter.

The rising withdrawal requests at the fund signal that the broader investor exodus from private credit has not abated, even as public markets have rallied and a sell-off in loans to private equity-backed software companies has moderated.

The funds have been a significant fundraising source for private investment groups, offering lucrative fees for the asset managers. However, private credit has faced scrutiny over its lending to the software industry, given the risks companies face from advances in AI.

Investors have sought to pull nearly $15bn from nine major funds tracked by the FT in the second quarter. The funds, which manage roughly $200bn across their investment portfolios, have met less than 40 per cent of the withdrawal requests.

………

The Apollo fund, like most of the vehicles operated by its competitors, is relying on a gating mechanism that allows the investment manager to restrict redemptions when they eclipse a 5 per cent threshold.

I'm waiting for lawsuits from the investors in these funds, sooner rather than later.

This sounds a lot like 2008, or 1929. 

Not Gonna Happen

Still, it is heartening that the Senate Armed Services Committee has Added a provision to the national defense authorization act that would require Pentagon pre-approval before engaging in stock buybacks or paying dividends.

Even if this were to make it into the final bill, the Pentagon would never enforce it.

Just look at the fate of the march in rights in the Bayh-Dole Act of 1980.  The have never been used.

Still it is nice that the problem has been identified. 

The Senate Armed Services Committee approved a must-pass bill with a provision that could bar some defense contractors from executing stock buybacks or paying dividends unless they have Defense Department approval.

The measure, an annual bill known as the National Defense Authorization Act, was approved 18-9 in a closed-door committee meeting last week. The stock buyback provision’s inclusion in the committee’s bill greatly increases its chances of becoming law and sets up a potential sea change in how the Pentagon interacts with some of the country’s largest businesses.

.........

The provision in the bill, Section 815, specifically would prohibit the Pentagon from entering into contracts with contractors unless the contractor agrees in writing not to “purchase an equity security of such entity, or any parent entity of such entity, that is listed on a national securities exchange” or “pay dividends or make any other capital distribution with respect to the equity securities of the entity.”

The provision would take effect June 15, 2027. The defense secretary could agree to waive the limitation if the contractor provides a “qualifying defense investment plan.”

114%

That is how overpriced the SpaceX IPO is according to a Morningstar analysis reported by that Commie rag the Financial Times. (They ain't called th, Pink Paper," for nothing.)

My guess is that even an analysis stating that IPO is overvalued by 114% will be shown by reality to be over optimistic.

………

Their headline findings are:

• The stock’s probably worth $63 per share, a 53 per cent discount to the $135 issue price.
• SpaceX probably has an addressable market of about $129bn, rather than the $1.6tn claimed in its S-1 filing.
• In a (metaphorical) moonshot scenario, where SpaceX pioneers orbital data centres and captures 20 per cent of AI computing capacity by 2040, the company would be worth $1.97tn, or $154 per share.
• Morningstar assigns only a 7 per cent per cent chance of the moonshot scenario happening.
• For Starlink, Morningstar estimates the global market to be worth about $129bn, which is rather less SpaceX’s estimate of $1.6tn. “[T]echnical constraints and unit economics limit the business primarily to lower-density markets,” it says.
• Here’s a link to the full note on SpaceX valuation, and here’s its note on Starlink market sizing. Space cadets and attached bankers, do please tell us in the comments what Morningstar gets wrong.

Look out below.

Bummer of a Birthmark, Elon

Unlike Nasdaq and a number of other stock indices,  S&P will not be waiving its rules for inclusion into its S&P 500 index for the SpaceX IPO.

These requirements are:

• Last quarter earnings and the sum of the last four quarterly earnings must both be positive.
• Annual trade volume must meet or exceed the market cap.
• 12 months have passed since the initial public offering.
  US-based. The company trades on a US exchange, a plurality of its assets are US-based, and the headquarters are in the US
• The company must be a corporation that issues common stock. It cannot have multiple share structures.
• Unadjusted market cap is at least $8.2 billion.
• The IWF is at least .10.

With a $75 billion IPO on a $1.75 trillion (IWF=0.04) it means that SpaceX would not qualify for inclusion for well over a year.

The company fulfills only one of the requirements for a listing. 

Considering the large number of funds that either in whole or in part invest in the S&P 500 as an index fund, this means that about $14 billion in forced purchase of the stock will not occur. 

So about 20% of guaranteed demand for the IPO won't be there.

Despite an expected record-breaking IPO, SpaceX will still have to follow the rules and wait at least a year before it’s added to the S&P 500, the benchmark behind many Americans’ retirement funds

S&P Dow Jones Indices announced Thursday that it is keeping its eligibility rules intact for the S&P 500 and several other major indexes. Indexes are benchmarks that track specific slices of the stock market. The best known is the S&P 500, which tracks 500 of the largest publicly traded companies in the United States.

Many index funds and exchange-traded funds (ETFs) hold stocks that mirror these benchmarks in an effort to replicate their performance. These funds are a key part of many 401(k)s, pension funds, and retirement accounts.

………

Other index providers, including Nasdaq and FTSE Russell, have already changed their rules to allow companies like SpaceX to join some of their indexes sooner.

But the S&P 500 remains the most widely tracked equity benchmark in the world. Roughly $7.5 trillion in passively managed funds follow it, Bloomberg reports.

If SpaceX had been fast-tracked into the index, it would have resulted in about $14 billion in forced passive buying of the company’s stock, according to an estimate by Bloomberg Intelligence.

How dare they interfere with Elon Musk's God given right to commit stock fraud.

It's Bank Failure Friday!!!

We another credit union failure, the 5th (sort of) the year, Beverly Hills City Employees Federal Credit Union of Beverly Hills, California.

If this sounds familiar, that is because it is.  It was conserved on 22 January, and on Tuesday it was merged with Nuvision Federal Credit Union.  I'm calling it number 6 of the year, but it could be just an extensions of the 2nd closure of the year, or you could call this an additional ½ credit union closure.

Thoroughly confused now? 

Anyway, here is the Full NCUA list, and the direct link for this year.

Of Course He Did

Remember serial (and surreal) fraudster and former Congressman George Santos?

Well, he is back in the news, because he announced that he would be attending the State of the Union address and then bet that he would not be there on Kalshi, and then did not show up.

George Santos may be the latest individual caught trading on insider information in a prediction market.

According to NPR, the U.S. Department of Justice (DOJ) is examining whether the former New York congressman placed bets on Kalshi using nonpublic details about his own plans. The market in question centered on whether Santos would attend President Donald Trump’s State of the Union address in February.

In the days leading up to the State of the Union address, Santos posted a video on X stating he would appear in the event. That public confirmation pushed the odds of his attendance on Kalshi close to 75% the night before the event, drawing millions of dollars in wagers across related markets. Santos did not show up to the State of the Union address, however. During the speech he posted on X that he was watching from an airport television instead. The odds on his attendance collapsed shortly afterward.

The first thing learned (more accurately re-learned) is that George Santos is a cheap bunco artist.

The second thing learned is that this is a feature, and not a bug of the, "Prediction markets." 

Replacing Low Value Human Capital

Bill Winters, CEO of Standard Chartered Bank, used that phrase to describe the 8,000 people that he plans to replace with AI.

After his odious utterance, he tried to walk it back.

Hopefully, he won't be able to do so, and he will spend the rest of his life living in fear and paying for bodyguards.

AI has emboldened CEOs to make all kinds of smug declarations that betray their contempt for lowly human laborers.

But Bill Winters, the CEO of the British multinational bank Standard Chartered, said something so viscerally off-putting that he’s now gone into full damage control mode to get the heat off his back.

On Wednesday, he wrote an internal memo to employees attempting to explain away his remark that he would be firing thousands of workers and replacing the company’s “lower-value human capital” with AI.

Yes, you heard that right: “lower-value human capital.” And it clearly didn’t go over well.

“Many of you will have seen media coverage following the investor event in Hong Kong, particularly the reporting around automation, AI, and workforce changes,” Winters said in the memo, per The Wall Street Journal. “I know this may be unsettling when reduced to simple headlines or a quote out of context.”

No, it's not a matter of context.  You told your truth and revealed yourself to be a psychopath.