Reading · Graham’s Newsletter

As the saying goes, there are decades where nothing happens; and there are weeks where decades happen. In the last couple of weeks, we saw three events happen that could have major consequences for both markets as well as the economy.

With Kevin Warsh, taking over, the Federal Reserve has completely flipped the entire outlook for the US economy, inflation, and your money to the point where we could see a complete reversal.
SpaceX had the largest IPO ever in history, and the market is euphoric. In a single day, Elon Musk’s net worth grew by more than Warren Buffett earned in his lifetime. But the history of tech IPOs tells a very different story that you need to know as an investor.
Bitcoin has fallen 40% from its all-time high. Many are blaming it on an unexpected move by Michael Saylor.

Let’s take a look at what these changes are that could go into effect as soon as next month, how they impact the market, and how this affects your money and investments. The decisions you make now could determine whether you keep your money safe or get left behind.

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The first thing on the Fed’s priority list is to stop the Inflation boogeyman.

Though prices were steadily trending down, over the last few months, inflation has returned to a 3-year high with CPI coming in at a whopping 4.2% increase, year-over-year.

Almost all of this comes down to one source: Energy. This has nearly doubled in the last 6 months as a result of the conflict throughout the Middle East.

Apart from this, PPI (Producer Price Index) came in significantly worse than expected, at 6.5% over the last year, the highest since November 2022. This is what businesses pay before it ever reaches you, and this cost will eventually be passed on to consumers. This puts the Fed in a tight spot: If oil keeps rising, inflation goes back up, and the Fed might be forced to raise rates just to stop prices from spiraling out of control. But if oil falls, they’re going to have to wait and see for months before making their next move – because the moment a deal falls through, oil jumps back up.

But the bad news is that, as of today, the market is pretty much confirming that unless something breaks, they’re probably not cutting rates anytime soon. Speaking of which, the market has been caught up with something entirely different…

As SpaceX stock started trading, I was literally glued to my phone. It was incredible to witness how the price was rocketing up in minutes. This was a record-breaking IPO. However, there are some important things you need to know before getting in on the ground floor of a trade like this.

First, do IPOs make money on average?

One analysis looked at every $1 billion+ tech company that went public since 2010. On the surface, returns look incredible. The average IPO company was up 248% in just 5 years. However, the catch is that the average is almost entirely due to a handful of massive winners – including Shopify and Palantir, which both increased by thousands of percent – so when you take those out, the median tech IPO was actually down 7.4% six months after first trading, and still down 3.5% a full year later!

CWB Research@CWB_Research

HISTORICAL RETURNS FOR MAJOR TECH IPOS (2010 to June 2026) Amidst the $SPCX IPO frenzy, I spent some time today digging into historical returns for $1B+ technology companies which IPO'd post-2010. RETURNS Here are the mean (equal-weighted average) returns for specific time

10:46 PM · Jun 12, 2026 · 283 Views

3 Likes

In fact, 52% of $1B+ tech IPOs were trading below their initial offering price a year later. If you zoom out to include every single IPO since 1980 (over 9000 stocks), the data shows that if you buy at the first day close, you tend to underperform the market by about 20% over the next 3 years.

Now, forget the average, let’s look at SpaceX specifically. The reason companies like Shopify and Palantir produced such large returns was that they IPO-ed small, between $2b and $10b, and then they grew into $100 billion dollar market giants, giving investors incredible returns. But SpaceX is already trading at $2 Trillion. From here on, a 30x return seems extremely unlikely because all the “easy money” was made privately years ago, and there might be less room for exponential growth now.

Now, this isn’t to say you should bet against Elon Musk.

He’s generally proved everyone wrong, and his companies have the potential to outperform all metrics that came before, so I’m not suggesting you should short his stock. But buying into the hype usually doesn’t produce above-market returns, and it’s important to remember that as existing shareholders offload their shares (over the next 6 months or so), things tend to cool off.

There’s a narrative that the record-breaking SpaceX IPO is a signal of the market top in the middle of an AI bubble, and that private investors are using this as a way to cash out at the top. Two arguments for this according to Yahoo Finance:

Bursts of giant, money-losing IPOs have often clustered near market peaks. SpaceX fits that profile.
The S&P500’s PE ratio now sits near 40, a level only touched once before, during the dot-com bubble. All this time, free cash flow has dropped to record lows.

Bank of America, Citi, Barclays, and Goldman Sachs all concur, issuing warnings of their own. However, the same Bank of America checklist had hit 70% back in Feb 2025, when the S&P500 was sitting at 6,144. If you had panic-sold back then, you would have missed the market climbing another 20% higher.

That’s why, now more than ever, you need to be careful with your money, avoid blindly chasing the hype, and make sure you’re positioned for both sides. But before we summarize the blueprint for what to do, there’s one asset that has been behaving rather strangely:

If you’re a Bitcoin holder, there’s no way to sugarcoat it — it’s been a rough ride. Over the last year, Bitcoin is down almost 40% from the all-time high of $124,000, and, even in the last month, it’s fallen back down another 20% to its lowest point in over a year. Why?

A lot of the headlines want to pin the blame on one person: Michael Saylor. Saylor runs Strategy, which is now the largest corporate holder of Bitcoin in the world, holding more than 4% of the entire supply! So the entire market is exposed to the actions of one company, and to some extent, one person who’s built his entire reputation around “never selling.” However, on June 1st, it was disclosed that his company did end up selling 32 Bitcoin for the first time since 2022.

After this was made public, the entire market began to sell off.

Now, this doesn’t make sense on the surface. Selling 32 bitcoin out of 844,000 is basically nothing. But one person put it perfectly:

BitQuant@BitQua

Saylor buys 2,000-20,000 Bitcoin a week and no one cares. One day he’ll sell just 200 Bitcoin, and the entire market will crash on that news 😂

The ₿itcoin Therapist @TheBTCTherapist

JUST IN: Strategy has acquired 2,932 Bitcoin for $264.1 million dollars and now holds a total of 712,647 BTC. Michael Saylor is unstoppable.

2:48 PM · Jan 26, 2026 · 200K Views

73 Replies · 86 Reposts · 2.64K Likes

Now, this isn’t just driven by sentiment. Strategy accumulates Bitcoin by issuing stock in their company. But to entice people to buy the stock, they’re paying out a 12% dividend yield. But how can they afford to pay it? Well, if Bitcoin keeps going up, they keep raising more money, which they use to pay the dividend while also buying more Bitcoin. But if the value starts falling, they either have to issue more stock to raise money – which dilutes shareholders – or they sell Bitcoin to pay out their expenses.

This could one day lead to a “death spiral” where Saylor is forced to sell Bitcoin to make the payments, causing the price to fall, forcing him to sell even more Bitcoin, and so on… In his defense, he claims this (and he did buy more Bitcoin after selling):

Michael Saylor@saylor

Our BTC Breakeven ARR is ~2.05%. If Bitcoin grows faster than that over time, we can cover our dividends indefinitely without issuing new $MSTR shares. Track it in real time on our site. $STRC

6:01 PM · Apr 12, 2026 · 958K Views

472 Replies · 929 Reposts · 9.98K Likes

But the risk still remains, and it’s worth noting. The real reason Bitcoin is falling, however, might be less dramatic. A lot of the “Crypto Money” that is now chasing AI stocks and IPOs. Bitcoin has underperformed for the last 5 years, so people have grown tired of it, and are investing their money elsewhere in what seem like more promising ventures.

Until people get excited again, we’re likely to see choppy performance for the foreseeable future:

Galaxy Research just reported that Bitcoin may not have bottomed yet, with a base case that it could fall to between $40,000 and $46,000 by late this year.
Standard Chartered thinks the bottom is already in at around $59,000.

Despite all of this, Galaxy believes Bitcoin will hit $250,000 by the end of 2027.

Now, let’s wrap it up looking at what the Fed has in store for the future:

A few days back, Kevin Warsh officially gave his first speech as chair of the Federal Reserve. Just like Jerome Powell, he reiterated that they were committed to fighting inflation while protecting the broader economy. Maybe it was just a crazy coincidence, but right before this meeting, a peace agreement was reached with Iran, which gives the Federal Reserve some room to cut rates again when inflation eventually begins to subside.

Right now, looking at the market, they’re probably not cutting rates anytime soon. But starting in 2027, the goal is that inflation is back under control. Then the Federal Reserve can resume cutting rates and pump the market full of more money.

According to the latest “Summary of Economic Projections,” which predicts where they expect rates and the economy to move over the next few years, they expect interest rates to increase a little in 2026 before falling back down in 2027 and again in 2028. They also expect inflation to remain elevated at 3.6% throughout 2026 before falling again.

One of the ways we can tell where the market is headed is with a “dot plot” where each voting member gives the public full transparency as to what they think is best for the economy. But Kevin Warsh wants to get rid of the dot plot entirely. His vision for the Fed is that it should signal less and do more, giving us all zero guidance going forward.

Even if he is able to accomplish this, each member can still vote independently. Kevin Warsh cannot lower interest rates unilaterally without persuading the others, not to mention, Jerome Powell is still on the board. It’s unlikely that anything substantial changes until he completely steps away, although there are rumors that since Kevin Warsh is Trump’s pick, he’ll use it to create far-reaching change at the Fed.

What do you think? Will we see a fundamental change in how the Fed operates?

The New Federal Reserve and the SpaceX IPO

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