Mega IPO Mania, Lessons From Bubbles, Private Credit Pressure, Fundamentals Ignored Again, Economy Beats Headlines, Fed's Real Message, Smarter Charitable Giving & More

You Didn’t Get SpaceX? Don’t Worry, There Are Other Mega IPOs Coming

You may feel like everyone got into SpaceX except you, and now you're wondering: Should I buy shares today? Is there something better coming next? The reality is that several other massive IPOs could be coming sooner than many investors realize. At the top of the list are OpenAI, with an estimated valuation of $852 billion, Anthropic, with an estimated valuation of $965 billion, Stripe, with an estimated valuation of $159 billion, and Databricks, with an estimated valuation of $134 billion.

Before you get too excited about these potential offerings, or beat yourself up for missing SpaceX, consider what the historical data tells us. Research examining 1,724 U.S. IPOs between 2011 and 2024 found that the average IPO gained approximately 23% on its first day of trading. However, over the following three years, those same IPOs underperformed the broader market by an average of 25 percentage points.

The study also found that since 1980, companies coming public with at least $100 million in annual sales and a price-to-sales ratio above 40 experienced an average decline of 45% from their first-day closing price.

For current SpaceX shareholders, there could still be a near-term catalyst. Under Nasdaq's fast-entry rules, newly public companies can become eligible for inclusion in the Nasdaq-100 after just 15 trading days. However, both the S&P 500 and the Dow Jones indexes currently maintain a 12-month waiting period before new companies become eligible for inclusion.

If your appetite for risk remains high, you'll likely have opportunities to speculate on OpenAI, Anthropic, Databricks, and other AI-related companies when they eventually go public.

But an interesting question remains: When these AI giants hit the public markets, will investors who bought SpaceX at the IPO decide to sell some of their shares and rotate into the next hot AI opportunity?

There are plenty of unanswered questions, which is exactly why we prefer not to invest based on hype, headlines, or fear of missing out. Instead, we focus on financial fundamentals, valuation, cash flow, and long-term business quality. Exciting stories can drive prices higher for a while, but over time, fundamentals tend to matter most.

What Can the Nifty Fifty and Tech Bubble Teach Us About Today's Market?

Every market cycle has a story. In the early 1970s it was the "Nifty Fifty." In the late 1990s it was the internet and technology boom. Today it is artificial intelligence.

The late 1990s we saw the technology boom where the internet was a revolutionary innovation that truly changed the world. Investors were correct about the technology but wrong about what they should pay for it. Companies with little revenue and no profits traded at astronomical valuations. The Nasdaq saw a five-fold increase between 1995 and early 2000.

When the bubble burst, the fallout was severe. The Nasdaq ultimately lost almost 80% of its value. Hundreds of companies disappeared. Even industry leaders such as Cisco, Intel, and Microsoft experienced stock declines of 50% to 90%. Many investors assumed technology would continue growing forever and overlooked the simple fact that stock prices had already discounted years of future success. After peaking in March 2000, it took over 15 years for the Nasdaq to reclaim its previous high in April 2015.

Often times I hear people say this time is different because unlike many internet companies in 2000, today's AI leaders are highly profitable businesses generating enormous cash flow. So, let’s take a look at the Nifty Fifty as another, maybe more similar example.

The Nifty Fifty era was built around the belief that a small group of dominant companies were so good that valuation no longer mattered. Investors piled into stocks such as Coca-Cola, IBM, Xerox, Polaroid, McDonald's, Sears and others. These companies were viewed as "one-decision stocks “buy them and never sell them. Investors would make excuses for the valuations because the businesses were strong. Through 1972, these firms averaged 22% annual earnings growth over the previous five-year period and had great profitability with an average return on equity over 22%. The problem was as enthusiasm grew, valuations expanded dramatically, with many trading at 40 to 60 times earnings despite an economy growing much slower.

Then reality arrived. The 1973-74 bear market combined with inflation, rising interest rates, and an economic recession caused many of these stocks to fall 50% to 80%. The S&P 500 fell over 14% in 1973 and more than 26% in 1974. Most of the companies survived and remained successful businesses, but investors who paid excessive prices often waited a decade or longer to earn satisfactory returns.

Today's AI boom has similarities to both periods. Like the Nifty Fifty, investors are concentrating heavily in a small number of dominant companies. Like the tech bubble, there is widespread excitement surrounding a transformational technology that is likely to reshape entire industries.

However, history reminds us that even great companies can become poor investments when expectations become too optimistic. During every major market cycle, investors eventually discover the difference between a great business and a great stock.

The key lesson from both the Nifty Fifty and the dot-com era is that transformative technologies often live up to their promise. What investors frequently get wrong is the price they are willing to pay for that future growth.

AI may ultimately be every bit as revolutionary as investors believe. The bigger question is whether today's stock prices already reflect much of that future success. As we've learned from previous cycles, when expectations become too high, excellent results may not be enough to satisfy the market.

Private Credit Funds Are Facing High Redemption Requests Again This Quarter

For the first quarter of 2026, redemption requests in several private credit funds exceeded the industry-standard 5% quarterly redemption cap.

Second-quarter requests appear to be even higher. BlackRock's flagship private credit fund received redemption requests totaling 13.3% of fund assets, up from 9.3% in the first quarter. BlackRock has indicated it will continue to honor only up to 5% of redemption requests per quarter.

Blackstone is facing a similar situation. Investors requested redemptions equal to roughly 10% of fund assets, and the firm also appears committed to maintaining its 5% quarterly redemption limit.

Cliffwater may be facing the greatest pressure. Its $31 billion private credit fund received redemption requests totaling 17% of fund assets, far above the amount investors can currently withdraw and higher than the roughly 14% that was requested in Q1.

Private credit funds have been dealing with a number of challenges, including rising loan losses, fraud concerns, and significant exposure to software companies. Many software businesses are facing pressure as investors question how artificial intelligence could impact their future growth and profitability.

During BlackRock's last earnings call, CEO Larry Fink stated that institutional investors such as pension funds and insurance companies continue to allocate capital to private credit strategies. I don’t want to call the man a liar, but it does seem strange that with all the problems that private credit is having I would think institutional funds would also be pulling back from investing. One would expect at least some institutional investors to become more cautious as risks increase.

What concerns me most is the continued use of redemption gates. The longer funds limit withdrawals to 5% per quarter, the more investors may worry about liquidity. That concern can become self-reinforcing, leading more investors to submit redemption requests. If that happens, redemption demand could continue to rise in future quarters, creating additional pressure on the industry.

Investors Turn a Blind Eye to Fundamentals

For many years, successful investing was built on analyzing company fundamentals. Today, however, there is a growing trend toward speculation and gambling. Many investors simply do not seem to care about valuation or earnings and instead believe stocks will continue to go "to the moon."

Tesla is a good example. Three years ago, Wall Street analysts projected that Tesla would generate $163 billion in revenue by 2025. The actual figure came in far lower at $94.8 billion, more than 40% below expectations. Historically, missing growth expectations by such a wide margin would have been a major disappointment for investors. Yet Tesla shares have risen roughly 59% over the last three years despite falling well short of those revenue projections.

There are other signs of speculation throughout the market. Thirteen years ago, there were only 39 private companies valued at more than $1 billion. Today, there are over 800.

This trend highlights two important developments. First, private companies are staying private much longer, allowing early investors to capture a greater share of the value creation before public investors have an opportunity to participate. Second, investors are assigning much higher valuations to these businesses, many of which have little or no earnings and, in some cases, no positive cash flow at all.

Markets can remain driven by optimism for long periods of time, but eventually fundamentals matter. The challenge for investors is determining when sentiment and speculation have pushed prices too far ahead of reality.

Headlines Say Crisis, Economic Data Says Otherwise

The economy continues to show surprising resilience despite concerns surrounding higher energy prices and the conflict involving Iran.

Many investors expected consumers to pull back as gasoline prices surged and headlines focused on geopolitical risks. Instead, economic data suggests the U.S. consumer remains in good shape.

Retail sales in May rose 6.9% from the prior year, exceeding expectations and demonstrating that consumers are still willing to spend despite higher fuel costs. Even excluding gasoline stations, retail sales increased 5.4%, showing that spending strength was broad-based rather than simply a reflection of higher energy prices. Online sales, clothing purchases, restaurant spending, and other discretionary categories all contributed to the gains.

Housing is also showing signs of stabilization. Pending home sales, which measure signed contracts on existing homes, rose 3.8% in May to the highest level in six months. The increase was well above economist expectations and marked a 4.8% improvement from a year ago.

What makes these numbers particularly impressive is that they occurred while mortgage rates remained above 6% and energy prices were elevated because of Middle East tensions. Buyers and consumers appear to be adapting to a higher-rate environment rather than waiting indefinitely for lower borrowing costs.

This does not mean there are no risks. Higher energy prices act like a tax on consumers, and housing affordability remains a challenge. However, the latest retail sales and housing data suggest the economy is far from rolling over.

For investors, this is another reminder that economic fundamentals often matter more than headlines. While markets may focus on wars, oil prices, and geopolitical uncertainty, consumers are still spending, homes are still being purchased, and the economy continues to move forward.

The Most Important Part of the Fed Meeting Wasn't the Rate Decision

The Federal Reserve's June meeting marked one of the biggest shifts in Fed communication and leadership in decades.

As expected, the Fed left interest rates unchanged at 3.50%-3.75%, but the details beneath the surface were far more important.

For the first time since 1951, a former Fed chair will remain on the Board after stepping down as chairman. Jerome Powell's decision to stay on as a governor creates an unusual dynamic as new Chairman Kevin Warsh begins reshaping the institution. Historically, outgoing Fed chairs have typically left the Board when their chairmanship ended.

Warsh wasted little time signaling change.

The Fed announced five new task forces that will review key aspects of monetary policy and Federal Reserve operations, including inflation frameworks, the Fed’s balance sheet, its reliance on data sources, and productivity and jobs and the impact of artificial intelligence and other transformative technologies. The reviews are expected to produce recommendations later this year and could shape how the Fed operates for years to come.

Perhaps the most noticeable change was the Fed statement itself. The policy statement was significantly shortened and went from above 300 words recorded in recent meetings to around 130 wors. It also removed much of the forward-looking language that investors had grown accustomed to under previous leadership. Language that suggested a bias toward future rate cuts was eliminated, reflecting a more data-dependent and less guidance-driven approach.

The updated projections were also more hawkish than many expected. Nine of the 18 policymakers who submitted forecasts now expect at least one rate hike before year-end, while the other nine see rates remaining unchanged or moving lower. The result is a Fed that appears deeply divided on the path forward as inflation remains above target.

Another major headline came from Warsh himself. Only 18 of the Fed's 19 policymakers submitted a forecast in the quarterly dot plot, with Warsh confirming that he did not provide one. As a long-time critic of forward guidance, Warsh appears to be signaling that the Fed may gradually move away from one of Wall Street's most closely watched communication tools.

Half of the committee is worried inflation remains too high and believes rates may need to move higher. The other half sees little need for additional tightening. This sets the stage for Warsh’s hope for a “family fight” as he believes more disagreement will lead to a better discussion so the Fed can finally deliver on price stability. While the rate decision itself was unanimous, the projections revealed a growing divide beneath the surface.

The takeaway is clear: while rates didn't move, the Federal Reserve did. A shorter statement, less forward guidance, a chairman who won't publish his own rate forecast, five new policy task forces, and a committee split down the middle on the direction of rates all point to a Federal Reserve that looks very different than it did just a few months ago.

The era of predictable Fed communication may be ending, and markets will have to adjust.

Financial Planning: Give More, Pay Less with Appreciated Stock

One of the most tax-efficient ways to support a favorite charity or church is by donating appreciated stock instead of cash. When stock that has been held for more than one year is gifted directly to a qualified charity, the charity receives the full market value of the shares and can sell them without paying tax because it is a tax-exempt organization.

The donor generally receives the same charitable income tax deduction they would have received had they donated cash, while also avoiding the realization of any capital gain. For example, if someone is considering donating either $50,000 of cash or $50,000 of appreciated stock, the charity receives the same economic benefit in either case, $50,000 that can be used to further its mission. Likewise, the donor generally receives the same $50,000 itemized charitable deduction.

The difference is that if the stock was originally purchased for $20,000, donating the shares allows the donor to avoid recognizing the $30,000 capital gain. If the donor still wants to own the investment, they can use the cash that otherwise would have been donated to repurchase the shares, effectively increasing their cost basis from $20,000 to $50,000 and reducing future taxable gains.

The Mind-Blowing Reality of $1 Trillion

These days, $1 trillion gets thrown around a lot more than it did just a few years ago. We now have companies with market capitalizations measured in trillions of dollars, U.S. government debt is around $40 trillion, and Elon Musk became the world's first trillionaire.

But how do you actually comprehend what $1 trillion really is? Let's put it into perspective using time. One million seconds is about 12 days. One billion seconds takes you back to 1994. One trillion seconds? You would have to go back roughly 31,700 years. This would be long before recorded history, when humans were still living in the Stone Age.

Still hard to visualize? Let's use pennies. If you stacked 1 million pennies on top of each other, the stack would reach nearly a mile high. A stack of 1 billion pennies would stretch about 1,000 miles into the sky. That's roughly the distance from San Diego to Amarillo, Texas.

So how high would 1 trillion pennies reach? If you guessed the moon, you're close. A stack of 1 trillion pennies would reach the moon and back twice.

The next time you hear someone talk about $1 trillion, you'll have a better sense of just how enormous that number really is.

Sleep Number Bed Has Run Out of Air

I was disappointed to see last week that Sleep Number, the company behind the popular Sleep Number bed, announced plans to file for bankruptcy. The stock now trades at just $0.23 per share.

I have owned a Sleep Number bed for many years and have been very happy with it. One of the features I like most is the ability to adjust the firmness of the mattress to exactly where I want it. Another advantage is durability as it seems to last forever. Unlike traditional mattresses that rely on foam, which can wear out over time, the Sleep Number bed uses adjustable air chambers that allow you to make the mattress as soft or as firm as you prefer.

We owned the company in our portfolio years ago, and eventually sold our position when it became overvalued based on our analysis.

People often wonder why we spend so much time analyzing a company's balance sheet, and Sleep Number is a perfect example of why it matters. Ten years ago, the company had total liabilities of approximately $296 million. Today, that figure has ballooned to $1.3 billion, ultimately contributing to its bankruptcy filing. The stock has fallen from a high of $142 just five years ago to only $0.39 last Friday.

There has been some speculation that Sleep Country Canada may acquire Sleep Number for approximately $415 million. However, at this point, the company remains in the bankruptcy process. Management has stated that stores will remain open and continue operating during normal business hours.

I don't believe I'll need another mattress in my lifetime, but I would certainly be disappointed if I eventually had to switch back to a traditional mattress.

Do you get sticker shock when ordering a chicken dinner at a restaurant?

For nearly 70 years, chicken has traditionally been the less expensive option when dining out. Consumers have generally accepted rising beef prices, but many still view chicken as the budget-friendly alternative and are surprised when they see a chicken entrée priced at $35 to $40.

If you go back to the 1950s, before the expansion of industrial farming, chicken and beef were priced much closer together than they are today. Now, when you see a $40 chicken dinner on a restaurant menu, you may think to yourself, "That's ridiculous. I can go to Costco and buy an entire rotisserie chicken for $4.99."

The reason is that Costco's rotisserie chickens are a loss leader designed to get customers into the warehouse. Have you ever seen someone leave Costco with only a chicken in their cart? Probably not. Once you're inside, it's hard not to notice other items you want, and before you know it, you've spent far more than $4.99.

When you order chicken at a restaurant, you're not just paying for the chicken itself. You're paying for the chef who prepares it, the server who brings it to your table, and the many other employees involved in creating your dining experience. Labor costs have increased significantly over the last five years, and it's not just wages. Restaurants must also cover payroll taxes, health insurance, workers' compensation, and numerous other expenses.

On top of that, commercial rents have risen dramatically in many areas, and those costs must be built into menu prices if restaurants hope to remain profitable.

The next time you order a nice chicken dinner at a restaurant, remember that you're paying for much more than just the chicken.