Often Wrong, But Never in Doubt

A seasoned skeptic takes stock of a very unsettling Friday

Often Wrong, But Never in Doubt

A seasoned skeptic takes stock of a very unsettling Friday

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The headline above belongs to Doug Kass, one of the sharpest, cheekiest, most entertaining market observers I’ve had the pleasure of reading over the years. Doug claims it as his own. I’m borrowing it today because, if I’m being honest, it describes me pretty well right now. Often wrong. And lately? More than a little in doubt.

Today’s market environment is genuinely difficult to navigate. There is an almost absurd amount of capital chasing an almost absurd number of ideas, which makes finding real value, as opposed to the appearance of value, harder than it’s been in a long time. I continue to be amazed that equity markets have held up as well as they have. But Friday gave me pause. And it should give you pause too.

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Friday Was a Warning Shot. Whether Anyone Heeds It Is Another Question.

Last Friday, correlations went to one. The Nasdaq was down. The Dow was down. The S&P was down. Bitcoin was down. Gold was down. Silver was down. Bonds went down too. There was essentially no place to hide. Not a single asset class offered shelter.

That does not happen in healthy markets.

I’m not making a market call here. I want to be clear about that. I’m not an investment advisor or a wealth manager. But I will say this: when everything goes down together, that’s the market sending a message. Whether it was a one-day anomaly or the opening act of something uglier, I genuinely don’t know. What I do know is that the FOMO that has been driving this tape is extraordinarily vulnerable to a few more days like that one. And the leverage sitting underneath this market, margin loans, triple-levered ETFs, zero-day options, that’s the kindling. A spark or two and a lot of people are going to get hurt badly.

In prior posts I suggested that we faced the possibility of both a fat right tail and a fat left tail. The blow-off in AI and semiconductor names over the past several months? That was the right tail. The question now sitting on the table is whether Friday was the first flicker of the left.

Don’t know. Not predicting. Just asking.

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The SpaceX IPO: The Market’s Next Big Test

Over the next week or two, the single most important thing to watch, in my view, is the SpaceX IPO. At $75 billion, it will be the largest IPO in history. Every major bank on the Street except Jefferies is on the cover page. And the consensus view, held by what I’d estimate is 95% of market participants, is that the stock trades up sharply post-offering, driven in large part by forced index buying after both the Nasdaq and the Russell decided, somewhat remarkably, and in my opinion somewhat recklessly, to include SpaceX in their indices within days of the IPO.

I’ll give credit to S&P for exercising some institutional discipline and not going along. That kind of thoughtfulness may make the S&P 500 a more useful benchmark going forward than the QQQs or the Russell 2000. But that’s a conversation for another day.

Here’s my thought experiment: what happens if SpaceX breaks syndicate bid?

For those unfamiliar, syndicate bid is the price at which the underwriting banks stand in the aftermarket and support the stock at the issue price. It’s where they draw the line. If SpaceX trades down in the first day or two and can’t hold that level, if the syndicate bid breaks, I would argue you could see a cascade of left-tail events that virtually nobody has modeled. The near-universal assumption is that it trades up, driven by index flows. If that assumption turns out to be wrong, the reversal could be swift and painful.

I may be completely wrong. SpaceX may open up 20%, 30%, 40% because the whole world wants a piece of it and the prospectus promises an essentially infinite TAM in outer space. I’m aware of how that sounds and I’m aware that it might happen. But I’d encourage you to think carefully about what you own and how it might behave if it doesn’t.

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The New Equity Supply Problem Nobody Is Talking About

One more thing worth noting: we are entering a period of meaningfully increased equity supply.

Alphabet recently announced an $80 billion equity raise to fund its hyperscaler ambitions. Reports suggest Meta may sell tens of billions in stock. I would not be surprised to see other hyperscalers follow. As a board member at multiple companies over the years, I want to be clear: I think raising equity to fund long-duration, high-risk infrastructure investments is the right thing to do. It matches the duration and risk of the capital to the project. Better equity than debt.

But here’s the macro implication: for years, the net equity float in the U.S. market was shrinking. Buybacks were consuming more shares than issuance was creating. That tailwind may be reversing. If we are moving into a sustained period of higher net equity supply, SpaceX, OpenAI, Anthropic, hyperscaler secondaries, and whatever comes behind them, that’s a change in the market’s plumbing that deserves attention.

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A Thought Experiment on Terminal Value and AI Disruption

I want to close with something I read recently in a Substack piece by Chamath Palihapitiya that genuinely stopped me in my tracks, even though I’ll admit he’s not always someone I find myself nodding along with.

His point, roughly, was this: in an era of rapid AI-driven disruption, the terminal value in a DCF model, the component that typically accounts for the lion’s share of a company’s calculated intrinsic value, may be close to worthless. Why? Because you simply cannot know, with any reasonable confidence, what a company will look like in ten years. Who will have disrupted it? What will the competitive landscape look like? What products will even exist?

If you accept that premise, even partially, and you strip out or dramatically haircut the terminal value in your DCF models on large-cap tech names, what you’re left with is the near-term cash flows. And in many cases, those near-term cash flows, discounted appropriately, do not come close to justifying today’s prices.

I’m not saying tech stocks are going to fall 50% or 70%. I’m not making that prediction. But I am saying: wow. That’s a frame I hadn’t fully internalized before, and it’s making me rethink how I weight terminal value in my own analysis. If the future is genuinely harder to forecast than it’s ever been, we should be placing more emphasis on what a business earns in the next three to five years, and materially less on what we imagine it might earn in year ten.

That’s a significant reset in how to think about valuation, and I suspect most people haven’t done it yet.

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Where I Sit

I remain conservative. I am beginning to find a few names that look genuinely cheap and interesting, but I am picking away slowly, deliberately, and with both hands on the wheel. This is not the moment to be a hero.

Know what you own. Understand why you own it. And stay safe out there.

O BTW, LETS GO KNICKS!!!!!

— Manny Pearlman 📩 Pigs at the Trough

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Pigs at the Trough is published for informational and entertainment purposes only. Nothing herein constitutes investment advice. Past performance, including the author’s, is not indicative of future results.

Emanuel “Manny” Pearlman is a long-time investor and corporate director with over four decades of experience in capital markets, restructuring, and governance. “Pigs at the Trough” is his ongoing commentary on markets, incentives, and the often messy intersection of money and behavior.

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