Ka-boom?

In three trading days investors pushed SpaceX shares higher by a ridiculous amount. They opened at $135 as Elon Musk let the cowboys in, rushed to $218 in a couple of days, then settled back to $194 as I write this. Down 4% in the last hour.

So the stock gained 60%. It dropped 11%. And the company still doesn’t make money. It may never. There’s speculation Musk could use the windfall profits from SPCX (he owns 42% of it) to buy the rest of Tesla. That company currently has a market capitalization of about $1.3 trillion. The rocket job was worth almost $3 trillion at one point this week. The numbers are unreal.

By the way, Tesla earned $15 billion in profit in 2023, which has dropped now to $3.8 billion. Facing dire competition from Chinese EV makers, Musk has been shifting Tesla more into robotics and AI. SpaceX is also basing most of its delusional profit goals on AI, forecasting a trillion in revenues in just four years by putting major data centres in space.

Nobody’s ever done that. Experts think it’s lunacy. But investors keep shoveling their wealth into Elon’s pockets.

What’s next?

Nobody knows. Soon we’ll be trying to parse IPOs from OpenAI and Anthropic and asking the same question. Artificial intelligence is now part of our everyday world, but trying to price the unknown is, well, gambling.

Would my portfolio manager buddies buy SpaceX for your RRSP?

Not a chance.

Would we be comfortable with people owning an ETF that contained a modest dose of Musk and AI?

Of course. Ditto for the tech stocks which have come to largely power the S&P 500 and account for the bulk of growth in the American economy.

But many thoughtful investors have serious questions. Like Blog Dog Greg, in Ottawa.

“The power of the index is real.  But I wonder if a case can be made for indexes that remove froth,” he says.  “For example the mag 7 plus space x seems set up to fail as a bubble.  What I mean is there are real gems mixed with insanity.  Case in point…

– AI is real but it is certainly not the whole economy.  It will take way longer to adopt then current biz plans envision.  Barriers to entry are lower than thought as demonstrated by china inc.

– The exposure in Nvidia or many of the pure AI plays is so wild, the financing so circular, and the finances so over leveraged that we are certainly in a bubble.  A case can be made that an index without them will outperform once the inevitable correction comes.

 -Space x will soon be in the index.  A great launch and satellite company.  An empty shell in xAI valued at 10X the real company … this is a sure loser.  Nobody in my tech community uses their models for example.

= Meta is crap.  Their only new idea since they stole the idea for Facebook, the meta verse, is a money furnace and failure.

– Some mag 7 are a dream like Amazon, apple, etc.  money makers with sane businesses.  These are keepers.”

Greg wonders about the feasibility of building an index, “that is defensive without the crazy”. You would still own Amazon or Google but be rid of flighty Nividia and crazy Elon.

Good points by Greg. Wrong conclusion. There is little doubt many tech-based enterprises have nosebleed valuations, will experience increased volatility, are badly regulated and recklessly, incestually financed. It’s also obvious SpaceX is the new GameStop with huge potential to blow up. Then again, Musk is Musk. He now has billions and billions and billions more to play worth. He is the Edison of our time.

It’s possible to buy funds with little or no tech exposure. If you want to build your own, you’ll need far more money than most people possess, and the time to manage hundreds of holdings. The better choice is to own the whole S&P as well as the Nasdaq and the TSX, comprising about two-thirds of the equity portion of a portfolio. The rest should be international. Round it out with 25% bond ETFs, 13% or so in preferreds and 5% REITs. That’s balance and diversification.

Then relax. Rebalance once a year. Let it ride.

Will one of these tech giants flame out?

Maybe. Meta sure seems to have lost its way. But the beauty of owning the 500 largest companies in the largest economy in the world is that you have 499 others in your stable. And here – the very dawn of the AI age – none of us can know with certainty who will emerge as the dominant players. A quarter century ago, in the dot-com era, people loved AOL, Nortel and Netscape. (Kids – ask your grandpa.)

SpaceX is flaky, risky, nebulous, sexy and irresistible. Like BreX but without jungles, bugs and gold.

Everybody chill.

About the picture: “Hi Garth, Sage knows about the good life and has comfortable nap just about every afternoon,: writes David in Ontario. “Not a care in the world.  Have enjoyed your blog over the years and marvel at your fortitude.”

To be in touch or send apicture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/06/17/ka-boom-2/