International Man: SpaceX appears poised to become the largest IPO in history, potentially coming public at a valuation far beyond anything we’ve seen in a traditional tech listing. What’s your overall take on this surge in mega-cap tech IPOs, and SpaceX in particular?

Doug Casey: Ever since I was a little kid, I’ve loved space, rockets, and science fiction. However, parts of SpaceX’s offering document read like a sci-fi novel. It’s pretty far out—as is the price of the offering.

That said, I applaud Elon’s successes, not least of which is SpaceX. But engineering success is not necessarily a predictor of stock market success. Remember the old saying: “High tech? Big wreck!” High-tech bubbles are often the final bell ringing at the top of the market.

As for SpaceX, the company is basically divided into three parts. One is SpaceX itself, which is about launching rockets; that part is mildly profitable, and I see a real future for it. The second part is Starlink, where they make significant money. I use it, and it’s great. But the bulk of their spending, use of funds, and losses is for AI. I want no part of it.

SpaceX is basically a conglomerate with three unrelated businesses. Might as well add on an airline, a screen door company, and maybe a submarine builder for diversification. Who cares if you’re raising megamillions?

The other two gigantic offerings coming soon, Anthropic and OpenAI, are pure bets on AI. Include me out.

So we’ve got three trillion-dollar IPOs coming out this summer. And as much as I love some aspects of AI, it’s pretty clear that this is beyond a bubble. It’s a super bubble. And I think I hear not just one, but a symphony of bells ringing at the top of this market.

Elon has a quirky sense of humor. Maybe, among the billion robots he expects to build, he will reincarnate that clunky robot from the old series “Lost in Space”. Just to warn us, “Danger, Will Robinson. Extreme Danger!” as we heard in almost every episode. Now would be a good time for its AI to look at the market and give us that retro-sounding verbal warning.

International Man: When you look at SpaceX, AI companies, and the broader wave of tech listings, do you see echoes of the late-1990s dot-com boom?

Doug Casey: Yes, and not just the dot-com boom. The 1920s stock market boom was loaded with the tech companies of the time—car manufacturers. There were hundreds of small automotive companies. They all went bust, leaving only GM, Ford, and Stellantis. FWIW, today they’re all managed by women, DEI hires, and people who hate cars. It’s the circle of hi-tech life.

RCA, Radio Corporation of America, was the Nvidia of its day, going 200-1 in the 20’s. The gigantic tech boom of the 60’s featured scores of meme stocks with suffixes like -onics or -ex. The public bought anything with a name that signaled technology. Pretty much like the late 1990s, when they bought anything ending in .com. We’re seeing a replay now, but with AI.

The trillions of dollars that the US government has created, via the Fed, have to go somewhere. The $2 trillion deficits the US government is running aren’t being sold to the public. They’re mostly bought by the Federal Reserve, which credits the US government with those dollars in commercial banks. Then the commercial banks lend and multiply them via the fractional reserve system. Tons of that newly created money goes into the stock market. Funny money is mostly responsible for the stock market boom, with its all-time high 40-1 P/E for the S&P.

The AI bubble, the center of the current stock market mania, may wind up as one of history’s great busts, like the Tulip Mania of 1637, the Mississippi and South Seas Bubbles of 1720, and the Roaring 20’s, among others. The fallout of manias and bubbles is always ugly.

There are hundreds of data centers being built, some of them with buildings that are scores of acres in size, full of servers, storage, and cooling equipment. Several will need 8 or 9 gigawatts of power, each. I’m not sure most people know that the typical nuclear power plant is about one gigawatt and costs $5-10 billion. The numbers are actually insane.

This is certainly the largest bubble in history, by an order of magnitude. Hundreds of billions and even trillions are being allocated to it—and that’s within the context of the Bubble Economy, which has been ongoing for a decade. I’ll wager most of these buildings, and their contents, will be write-offs. Strange artifacts that may yet be America’s answer to Egypt’s pyramids.

And what will be computed in these buildings? I’ll warrant it’s not about breakthroughs in science, technology, or mathematics. A lot will inevitably be used by the elite to exploit and control the plebs.

Here’s a risky and outrageous prediction: Data centers and most AI will prove totally uneconomic, a story with an unhappy ending for all concerned. I can hear their explanations now: “Well, it seemed like a good idea at the time…”

International Man: One of the more controversial aspects of the SpaceX IPO is that major index providers have reportedly changed or waived rules that previously protected passive investors.

S&P 500 index rules that required longer trading history and GAAP profitability are being waived, while Nasdaq and FTSE Russell have reportedly shortened their inclusion windows. What does that tell you about the state of today’s markets?

Doug Casey: It’s hard to believe, but there are 4750 ETFs (exchange-traded funds)—plus another 6800 open-end mutual funds. But there are only 2300 stocks on the NYSE, and about 4500 more on NASDAQ. This is symptomatic of a crazy over-financialized market. With rare exceptions, the public no longer buys individual stocks. They’re not securities analysts, diligently researching companies. They’re just gambling on whatever somebody has stuffed in some ETF.

It’s symptomatic of why Robinhood is such a popular brokerage.

Once upon a time, if you wanted to buy a stock, you needed an account with a broker, a warm body. You had to call them on the telephone to buy the stock, which slowed things down a bit, and perhaps interjected some caution. Now you just have to push a few buttons on your cell phone, as you would on a slot machine.

And it wasn’t long ago that there were few stock options traded, and those were traded over the counter, their quotes not even listed in the paper. The options market is now huge. Some “investors” buy options that will expire in one day.

Trillions of newly created dollars wind up in stocks and real estate. Both are in bubbles. And since real estate floats on a sea of debt, and interest rates are headed up, it’s in a special kind of trouble. Today’s markets are manic. And manic markets are dangerous.

International Man: If index funds are effectively forced to buy SpaceX near its IPO valuation, that means passive retirement money—401(k)s, pensions, and index-tracking funds—could become a major source of demand almost immediately. What’s your take on this?

Doug Casey: Once upon a time, the stock market was for raising capital for productive businesses. It helped you decide what a business was worth, and could hopefully find a buyer when you wanted to sell. But that’s all changed.

Few care about the prospects of an individual business anymore. It’s more like a gambling casino, especially since few buy companies for growth and dividends. What are the prospects that red will come up next on the roulette wheel? Funds and ETFs have become an aftermarket for insiders. That, I think, will be the case for SpaceX. It’s a sign that the stock market has been transformed into a moving paper fantasy.

You may recall the gyrations of GameStop, a failing company, with a large short position put on by sophisticated hedge funds. During the Great Covid Hysteria, it became a meme on the internet for Robinhood types, who took it from about $20 a share to $400. Billions were made and lost on both the long and short sides. Do you want to be involved in a volatile market where few have a clue about value, and anything can happen for totally unpredictable reasons?

I expect we’ll see lots of moves like that before the Greater Depression ends, and stability and prosperity return.

International Man: Bloomberg Intelligence had previously estimated that S&P 500 funds, along with Russell 1000 and Nasdaq 100 funds, might need to absorb a large portion of SpaceX’s float soon after its IPO. But it’s since been decided not to fast-track SpaceX into the S&P 500.

Could this create a self-reinforcing bubble where index inclusion itself drives the valuation higher, regardless of fundamentals? What’s the downside of something like this?

Doug Casey: The so-called Magnificent Seven alone constitute about 35% of the S&P 500. That kind of concentration is one more sign of a manic bubble. Index funds will have to buy SpaceX—and OpenAI and Anthropic—after they’re public and “season” for a few months. It’s a nice, if involuntary, support for a goofy valuation. I’m not sure Mom and Pop Buggins would sleep well if they knew where their retirement money was going.

I remain of the opinion that we’re at the edge of a precipice. As in past bubbles, the ’20s, the ’60s, and the late ’90s, markets tend to go hyper before they crash.

Right now, everybody and his dog thinks they know all about the stock market. They compare their profits at cocktail parties. Soon, I suspect, they’ll not only regret the stock market exists, but they’ll want to lynch anyone suspected of having been a broker, advisor, or—God forbid—a hedge fund manager.

Billionaires and centimillionaires are minted by the score from startups, even while the average guy can’t lay his hands on $500 for an emergency. And he’s thousands of dollars in debt from financing his car, college degree, house, and credit cards. A nasty reaction against the rich, especially billionaires, is inevitable.

The entire psychology of the country could change radically if—when—something bad happens to the stock market. Of course, Trump wants it pumped to even more unsustainable levels. You might win so much you’ll get tired of winning.

So what am I doing?

The average guy is completely uninvolved with mining and energy stocks. In 1980, the S&P 500 was about 30% in oil stocks. Today, it’s 4%, which is strange since oil is more important and its availability is more uncertain than ever. Mining stocks are barely a rounding error. Even though gold is around $4,300, the public is oblivious. One proof of that is that the premium on gold coins is close to its lowest level in history, almost nonexistent.

I like to be in places where few other people are. Even if the market melts down and resource stocks come down with it, I don’t think they’ll be hurt nearly as much as the average stock. I prefer being in a quiet backwater of the market. Not a beach that’s cheek by jowl with mobs of day trippers trying to outguess each other, hoping to make a buck before an oncoming tsunami washes them all away.

Editor’s note: Doug Casey warns that the US and the world are heading toward a serious crisis. In this new video presentation, he reveals how investors can prepare to survive and even thrive during an economic collapse. Click here to see it now.