I read the Financial Times because of its sharp insights, witty prose, and the fact that they have writers with names like Robin Wigglesworth

More on the approaching SpaceX IPO scam. The definitive explainer remains the Patrick Boyle video that we discussed Monday, but if you prefer a legacy media newspaper article, the Financial Times has also been on top of this story.

What could end up being the biggest bagholder exercise of all time — the Operation Overlord of jamming retail investors with an overpriced IPO — is opening up on several early fronts.

 As Bloomberg puts it:

(Bloomberg) -- S&P Dow Jones Indices LLC is considering changes to rules governing how companies join the S&P 500 Index, a move that would potentially fast-track SpaceX’s entry after its IPO, people familiar with the matter said.

The rule change could mean that billionaire Elon Musk’s space transportation and satellite company would see a wave of billions of dollars in forced buying. Funds that track the index must buy newly added stocks, and roughly $24 trillion is tied to the S&P 500, according to Bloomberg Intelligence.

 The S&P 500 news comes on the heels of Nasdaq doing everything it can to help Musk screw over its index fund investors. 

From Reuters: 

 Under Nasdaq's "Fast Entry" rule, versions of which are being considered by some other indexes, a newly listed company would be eligible for accelerated inclusion on the Nasdaq ​100 in just under a month if its market capitalization ranks among the index's top 40 current members. SpaceX is seeking a valuation of around $1.75 trillion for the IPO, one ‌of the ⁠people said, which would make it the sixth-largest company by market value in the U.S., based on the latest share prices.

Back to Wigglesworth and the FT:

A quick reminder for those lucky enough not to have to follow this saga: A series of opaque fund-raisings and mergers have lifted the “value” of SpaceX to $1.25tn, and the company is said to be seeking to sell $50bn of shares in a 2026 IPO at a valuation of $1.75tn — despite estimated revenues of only $20bn-ish and probable losses now that it as absorbed the xAI “not-built-right” money furnace.

This is not a great look for Nasdaq, as some people have commented even more archly than us. [You should check out this link. An incredible read. -- MP] But at least Nasdaq has a primary listings business that would receive a huge boon from snatching a SpaceX IPO from its big rival, the New York Stock Exchange. Why on earth is S&P DJI also seemingly flirting with a rule-bending change to allow Elon Musk’s satellites-to-AI company a quick entry?

There are various entry requirements to ensure that the S&P 500 remains the gold standard of stock market benchmarks, and doesn’t allow just any random hot stock to jump in.

...

    However, the rules should be seen in totality. The requirements for a certain free-float, liquidity, and a 12-month stint as a public company are broadly designed to prevent immature, dicey and easily-distorted stocks from being dumped onto the public via investment funds that are measured against or track the S&P 500.

These rules are now more important than ever before. Back in the day, indices only sought to reflect the market. Today — with tens of trillions of dollars in passive investment strategies that slavishly follow them and active strategies that at least have to be “benchmark-aware” — people naturally seek to game benchmarks for their own purposes. 

Elon Musk is not a particularly bright man. His reputation as an intellect is largely a product of a press corps that was eager to create the myth of a real-life Tony Stark and of a society that can’t imagine rich people not being smart.

His tremendous success looks a lot like Donald Trump’s. Both men benefit from an unearned reputation for competence, a fanatical group of followers, a lack of shame, and tremendous good fortune, first coming to power in a time that tolerates blatant, large-scale scams and corruption.

Blah blah Ginger blah blah blah

The following quote comes from the distinguished computer scientist Yann LeCun, but I've heard others in the field say virtually the same thing. This trouble is it's wrong. Clearly, demonstrably wrong.

 We want [language] to be complicated because we think of it as uniquely human; it’s what makes us humans superior to other animals.

Not only is this an unsupported assertion presented as a self-evident fact, it is obviously contradicted by examples so widely known that all of us have seen them.

When presented with any signs of language use in animals or machines, the natural human tendency is to overestimate the underlying linguistic and reasoning processes. We've already talked about the Talking Tina effect, but a far more familiar example is that of dogs. These animals can learn to recognize specific words much in the way they can learn to recognize the sound of a can opener or of a leash being taken down from a hook.

Now ask yourself: which is far more likely to happen—will a dog owner overestimate or underestimate their pet’s level of comprehension? If these people wanted to think of language as “uniquely human,” they wouldn't be talking to their pets in full sentences and frequently insisting that the animals understand or even recognize more than a handful of words.

We'll call this the Ginger effect, referring to that great The Far Side cartoon.

The very act of anthropomorphizing undercuts our sense of superiority, and yet we do it all the damned time.

LeCun wrote this comment in 2012. It wasn't convincing then but the events of the years since have rendered it laughable. 

Not only have recent breakthroughs in Natural Language Processing confirmed the Ginger effect, they have taken it to startlingly high levels, often with disturbing implications. What we've learned recently is that not only are people ready, even eager, to accept the idea that a machine can use language, they also have a tendency to project upon these machines all sorts of human qualities such as intelligence, insight, empathy, and motivations.

Depending on your tolerance for anecdotal data, we have lots of well-documented cases of people forming relationships with chatbots that are so intense as to lead to severe depression, isolation, psychotic breaks, criminal acts, and even suicide. Admittedly, in absolute terms those numbers are still fairly small, but that's not the case with people using the technology as a substitute for personal and even romantic relationships. Those numbers are alarmingly high.

It will take years of psychological and sociological research to definitively say what’s going on here, but there seems to be little doubt that many of these people—possibly most—believe on some level that they are in a relationship with some degree of emotional reciprocation with a computer.

Scientists, journalists, and pundits have spent a couple of years now on largely unproductive speculation about whether LLMs have displayed intelligence or emotions, when we should instead be talking about the far more immediate questions: what are the best applications, and what are the most worrying unexpected consequences of a massive step forward in computers’ ability to use and process language?

MAHAspital

Pretty good Saturday Night Live sketch. Rather typically, it starts out very strong, then falls into familiar bad habits, putting a hat on a hat (a phrase possibly coined by Mike Nichols) and falling back on cultural references passing for jokes.

It’s a little ironic that SNL started by satirizing this very style of humor with Chevy Chase’s Gerald Ford impersonation, which consisted of no attempt to capture voice or mannerisms, just falling down repeatedly. The show was making fun of those tired old variety show bits where someone would say something like, “Hey, it’s Ed Sullivan,” and the actor would walk out with his shoulders hunched, repeating the line “really big shoe.”

These days, that same tired old bit is usually the payoff for a sketch.

Of course, it should be noted that the weird, deconstructionist phase of SNL was very brief, arguably not even lasting as long as the original cast. For the remaining 45 or so years, the show has been mainly interesting as a cultural phenomenon, managing some clever bits and really funny moments but of more interest as a showcase for new talent and for what it told us about the zeitgeist of a particular season.

For that reason, it’s heartening to see the satire aimed at deserving targets.



 

I don’t know if any of the writers on SNL today are British comedy fans, but the sketch bears a strong resemblance to this classic from That Mitchell and Webb Look. 

Homeopathic A&E

Patrick Boyle lays out the ugly details of Elon Musk’s ultimate scam (perhaps in both senses of the word).

From the video description:

SpaceX is targeting a $1.75 trillion valuation for what could be the largest IPO in history. In this video, we examine how Elon Musk is folding a money-burning AI startup and a struggling social media platform into a rocket company to justify a price tag that defies financial gravity. From the engineering absurdity of "orbital data centers" and lunar railguns to the structural manipulation of the Nasdaq 100, we explore how low-float strategies and "fast-track" index inclusion rules are being used to turn passive 401(k) investors into exit liquidity for insiders. We look at the gap between EBITDA "vibes" and GAAP reality and the pivot from Mars to the Moon.

 

This is a slightly drier treatment than we’ve come to expect from Boyle. There are no laugh-out-loud lines or extended bits of exquisite Irish deadpan sarcasm. Boyle means business here, and his presentation is devastating.

Managing to be concise and yet in-depth, Boyle lays out the criminal absurdity of the entire thing: from the silliness of shooting data centers into orbit, to SpaceX’s suspect profitability, to the way Musk used the rubber-stamp board of directors to bail out his disastrous artificial intelligence company (currently losing a billion dollars a month), which he had previously used to bail out his even more disastrous purchase of Twitter (all of which echoed his first great scam and the basis of his fortune, leaving Tesla investors holding the bag for Solar City, but we really don't have time to dive that deep), to the various schemes and misrepresentations he is currently employing to get a trillion-dollar-plus market cap for SpaceX before the credit bubble and/or the artificial intelligence bubble pop.

The video is too pithy to summarize—just watch the damn thing—but I did want to highlight this one part.

Video transcript cleaned up by ChatGPT:

This all leads us to the question of how Elon Musk actually expects to get that $1.75 trillion price tag. The answer isn’t found in the physics of rockets, but instead in the physics of the stock market.

The most important thing to understand about this IPO is that SpaceX isn’t selling the whole company to the public. They’re likely only releasing a tiny float. The financial press is suggesting that just 5 to 10% of the total shares might be issued. By keeping the supply of stock artificially low while marketing it to every retail investor on the planet, this could create a supply squeeze before the opening bell even rings.

When everyone wants a piece of the future but there are only a few shares to go around, the price has only one way to go — and that’s up.

Craig Coben wrote about this low-float strategy a few years ago in the Financial Times, where he pointed out that a lot of recent tech IPOs had floated only a tiny number of shares — often between 7 and 10%, compared to the historical average of 20%. He used the example of Instacart, where only 8% of the shares were floated, and of those 60% went to cornerstone investors and 5% to friends and family. This left a tiny supply of shares to be traded, presumably to cultivate a sense of scarcity.

The real magic for SpaceX might happen with the index-inclusion trap. This isn’t just a lucky break for Elon Musk — it’s reported to be driven by a specific demand from him. According to Reuters, SpaceX made early inclusion in the NASDAQ-100 index a necessary condition for agreeing to list on the exchange. In response, the exchange is consulting on a new rule that would allow SpaceX to join the NASDAQ-100 after just 15 trading days, bypassing the year of price discovery required for every other company.

And it isn’t just the NASDAQ either. Bloomberg reports that S&P Dow Jones Indices is also considering historic rule changes to fast-track SpaceX into the S&P 500.

This is significant because there are roughly $24 trillion tied to that index. Maybe Elon can get on the phone to the people at Russell to see if he can get SpaceX classified as a value stock too.

If SpaceX is added to the S&P 500 and the NASDAQ-100, every passive investor will find themselves buying the stock at whatever price the supply squeeze has manufactured.

As veteran fund manager George Noble points out, the proposed five-times float multiplier used to determine its NASDAQ index weighting is “shameless structural manipulation.” It effectively turns every pension fund into exit liquidity for SpaceX insiders, where your retirement account is being forced to buy into a bubble designed by the seller.

As Noble argues, the rules are being rewritten to benefit IPO issuers and early-stage insiders, and your capital is the tool being used to enrich them.

We’ve seen this movie before. In December 2020, Tesla was added to the S&P 500 after a massive run-up in price. Since the day of inclusion, Tesla has underperformed the broader index by more than 20%. The passive investors who were forced to buy in at a huge valuation right before sales started drying up became the bag holders, while the early insiders took their victory laps.

SpaceX may be an extraordinary engineering company, but it’s being sold to the public as a financial miracle at a price that, to me, is very difficult to explain.

This could be Musk's ultimate scam in terms of scale -- the potential payout here makes the mind reel -- but also in terms being his last chance to cash in on this level. There are signs (spelled out by Boyle and already familiar to anyone who has been following the story) that things are starting to dry up, Add to that the likely scrutiny of congressional hearings if the Democrats retake one or both houses in November. Remember Musk apparently immigrated here illegally, was already forced to step down as chairman of Tesla due to fraud charges, is actively funding far right extremists around the world, has extensive ties to Epstein, and has an AI company best known for  creating nonconsensual, sexualized images of undressed women and children. Retail investors may be the dumbest of dumb money, but presumably even they aren't stupid enough to bet on an aerospace company that can't get any government contracts. 

When it comes to agentic AI, a Newhart Airline is the best is the best case scenario.

In a previous post, I discussed the idea of a steam airplane (an impressive technology that still represented a soon to be abandoned dead end) and a Newhart airline (a genuine breakthrough prematurely commercialized).

The Wright brothers' plane was the very opposite of a dead-end technology. The basic principles and design choices were all completely sound, and you can trace a fairly direct line from those first models to the passenger planes and military aircraft of two or three decades later.

That said, for all the excitement, no serious person looked at this and said this is commercially viable technology. As with Edison’s phonograph, which had also shocked the world 30 years earlier, while virtually everyone recognized this as a breakthrough, it was also clear that the technology would have to evolve considerably before it could be rolled out for widespread business or military applications.

On his seminal album The Button-Down Mind, Bob Newhart imagined a conversation between the Wright brothers and a post-war era corporation trying to monetize their breakthrough. The humor of the monologue came partly from the absurdity of trying to stack multiple passengers on the wing of the Wright Flyer or making a coast-to-coast trip taking off and landing every 105 ft, but much of it also came from the banality and shortsightedness of 60s-era corporate culture in the face of a stunning, world-altering step forward. It’s a comparison that’s, if anything, even sharper in the age of venture capitalism.

...

Are [LLMs]  Newhart’s airline—a viable and important technology that isn’t ready yet to support the commercial applications that people are trying to impose on it?

 

It is too early to say how LLM-based AI will play out, but I feel confident in saying that LLM-based agents are not ready for prime time. 
 

Julie Bort writing for TechCrunch: 

The now-viral X post from Meta AI security researcher Summer Yue reads, at first, like satire. She told her OpenClaw AI agent to check her overstuffed email inbox and suggest what to delete or archive.  

The agent proceeded to run amok. It started deleting all her email in a “speed run” while ignoring her commands from her phone telling it to stop. 

“I had to RUN to my Mac mini like I was defusing a bomb,” she wrote, posting images of the ignored stop prompts as receipts.  

... 

But Yue’s post serves as a warning. As others on X noted, if an AI security researcher could run into this problem, what hope do mere mortals have? 

“Were you intentionally testing its guardrails or did you make a rookie mistake?” a software developer asked her on X.  

“Rookie mistake tbh,” she replied. She had been testing her agent with a smaller “toy” inbox, as she called it, and it had been running well on less important email. It had earned her trust, so she thought she’d let it loose on the real thing. 

Yue believes that the large amount of data in her real inbox “triggered compaction,” she wrote. Compaction happens when the context window — the running record of everything the AI has been told and has done in a session — grows too large, causing the agent to begin summarizing, compressing, and managing the conversation.  

At that point, the AI may skip over instructions that the human considers quite important.  

...

The point of the tale is that agents aimed at knowledge workers, at their current stage of development, are risky. People who say they are using them successfully are cobbling together methods to protect themselves.

One day, perhaps soon (by 2027? 2028?), they may be ready for widespread use. Goodness knows many of us would love help with email, grocery orders, and scheduling dentist appointments. But that day has not yet come. 

  And we haven't even gotten into prompt injection.

Old Sheldon

This is an extraordinary speech by Sheldon Whitehouse on the Senate floor a few days ago. It is largely free of rhetorical flourishes, is often dry, drags in places, and is long, but riveting nonetheless. I started it assuming that I would drop out after 10 or 15 minutes, but once I got into it, I was never really tempted to quit.

Whitehouse spent a little more than half his working life as a practicing attorney, and it shows. This is constructed like a highly effective closing argument after a long and complex trial, with every thread laid down for the jury leading to a damning conclusion.

Josh Marshall had a similarly positive reaction.

The speech runs almost an hour long. But it’s worth it. There’s so many details in the speech it defies easy summary. The best overview is to think of all the ways Donald Trump was and is connecting to the Russian government and the oligarch para-government. Whitehouse then shows that Jeff Epstein is right there at almost every point of contact. It’s a mix of old information, new investigating and a pretty close analysis of emails in the Epstein Files that wouldn’t really jump out at you on their own but become quite interesting when lined up with other outside information which places them in context.

But that’s not why I’ve linked to it here. Instead, I want to highlight the Russian connection with respect to two companies—Palantir Technologies and SpaceX—and three individuals: Peter Thiel, Elon Musk, and Kimbal Musk.

Kimbal is often left out of this conversation, but he does serve on the boards of both Tesla, Inc. and SpaceX and has extensive access to the companies. He is also, as previously mentioned, extraordinarily intertwined with the saga of Jeffrey Epstein.

Add to that Elon’s extensive involvement with radical white nationalist groups in Europe, and you have the kind of stories that would normally rule out a high-security clearance—yet these companies have access to some of the most sensitive national security data imaginable.

Seems like something someone should look into.  

Sen. Whitehouse to uncover connections between Trump, Russia, and Epstein.

Strategic Airpower

We've recommended military historian and blogger Bret Devereaux before -- he's an exceptional writer and pretty much anything he posts is worth you time -- but this detailed (over 9,000 words) overview of the limits of Airpower from WWI to Ukraine might be the most timely piece of analysis you'll read about the war in Iran, despite being published in 2022.

Excerpts from Strategic Airpower 101

Before we dive in, we need to define what makes certain uses of airpower strategic because strategic airpower isn’t the only kind. The reason for the definition will emerge pretty quickly when we talk about origins, but let’s get it out of the way here: strategic airpower is the use of attack by air (read: bombing) to achieve ‘strategic effects.’ Now that formal definition is a bit tautological, but it becomes clarifying when we talk about what we mean by strategic effects; these are effects that aim to alter enemy policy or win the war on their own.

Put another way, if you use aircraft to attack enemy units in support of a ground operation (like an invasion), that would be tactical airpower; the airpower is a tactic that aims to win a battle which is still primarily a ground (or naval) battle. We often call this kind of airpower ‘close air support’ but not all tactical airpower is CAS. If you instead use airpower to shape ground operations – for instance by attacking infrastructure (like bridges or railroads) or by bombing enemy units to force them to stay put (often by forcing them to move only at night) – that’s operational airpower. The most common form of this kind of airpower is ‘interdiction’ bombing, which aims to slow down enemy ground movements so that friendly units can out-maneuver them in larger-scale sweeping movements.

By contrast strategic airpower aims to produce effects at the strategic (that is, top-most) level on its own. Sometimes that is quite blunt: strategic airpower aims to win the war on its own without reference to ground forces, or at least advance the ball on winning a conflict or achieving a desired end-state (that is, the airpower may not be the only thing producing strategic effects). Of course strategic effects can go beyond ‘winning the war’ – coercing or deterring another power are both strategic effects as well, forcing the enemy to redefine their strategy. That said, as we’ll see, this initially very expansive definition of strategic airpower really narrows quite quickly. Aircraft cannot generally hold ground, administer territory, build trust, establish institutions, or consolidate gains, so using airpower rapidly becomes a question of ‘what to bomb’ because delivering firepower is what those aircraft can do.

...

Now before we move forward, I think we want to unpack that vision just a bit, because there are actually quite a few assumptions there. First, Douhet is assuming that there will be no way to locate or intercept the bombers in the vastness of the sky, that they will be able to accurately navigate to and strike their targets (which are, in the event, major cities) and be able to carry sufficient explosive payloads to destroy those targets. But the largest assumption of all is that the application of explosives to cities would lead to collapsing civilian morale and peace; it was a wholly untested assumption, which was about to become an extremely well-tested assumption. But for Douhet’s theory to work, all of those assumptions in the chain – lack of interception, effective delivery of munitions, sufficient munitions to deliver and bombing triggering morale collapse – needed to be true. In the event, none of them were. 

 ...

That of course isn’t how it turned out. While the Luftwaffe initially began with attacks against shipping, progressing to attacks on airbases and air production, beginning in August 1940 the Luftwaffe began escalating attacks on civilian areas (the degree to which that was intentional remains contested). The British responded with bombing raids against Berlin, at which point Hitler and Göring retaliated with an intensive campaign of urban bombing which would become known as the ‘blitz.’ Hitler would claim these attacks were reprisals (Vergeltungsangriffen, ‘revenge attacks’) for the British bombing Berlin, which was frankly pretty rich hypocrisy coming from the fellow who had terror-bombed the Poles in 1939.⁴ But that progression brings an interesting distinction here between intentional strategies of using bombing to collapse morale and the reversion to civilian bombing as pure punishment. As we’ll see, it is a predictable human response when an effort is failing to attempt to punish the opponent for the temerity of not losing; this behavior is especially pronounced in personalistic dictatorships but certainly not restricted to them. Naturally bombing against civilian targets, since its introduction, has often been the means of this sort of punishment response; more broadly this kind of thing fits into the error of ‘emotive strategy,’ which we’ve discussed before.

... 

But perhaps most ominously for the theory, the Blitz didn’t seem to have meaningfully dampened British morale. Indeed, to the contrary – and get ready to hear this phrase a lot – being bombed hardened civilian will to resist. This hardly discredited the theory though, least of all among the British (or the soon-to-be-in-the-war Americans) who promptly decided to test it themselves.

...

Overall then, the promise of strategic airpower, that it could win wars entirely or primarily from the skies, turns out so far to have been largely a mirage; in about 80 years of testing the theory, strategic bombing has yet to produce a clear example where it worked as intended. Instead, strategic airpower must be one of the most thoroughly tested doctrines in modern warfare and it has failed nearly every test. In particular, Douhet’s supposition that strategic bombing of civilian centers could force a favorable end to a conflict without the need to occupy territory or engage in significant ground warfare appears to be entirely unsupportable.¹⁰ Nuclear weapons do not seem, so far, to have actually changed this; nuclear deterrence does not aim at ‘will’ in the Clausewitzian sense (drink!) but rather on altering the calculus of leaders and politicians through the threat of annihilation. In the event of an actual conflict, the public’s desire not to be nuked – which would be the key target in a Douhet-style morale bombing campaign – appears to factor very little into actual decision-making. No one checks the polls before intentionally embarking on nuclear war or in the minutes a leader might have to deliberate on ordering a second-strike.

 

BTFD

 I have been meaning to give this thread a rest. We've written about it quite a bit, and it's a bit off topic for the blog. But then we got yet another iteration—perhaps even more dramatic than before—along with a new column from Allison Morrow on the subject.

Plus, I actually thought of something else I wanted to say about this.

Here's how things looked Monday morning before the markets opened.

 

And here's how they looked after they closed.

From Allison Morrow's newsletter: 

Investors have long viewed the prolonged closure of the Strait of Hormuz as a “tail risk” event — the kind of thing that was highly unlikely to happen but would be so catastrophic that you can’t afford to be unprepared for it. As black swans go, Hormuz closing for weeks or months would be an economic disaster on par with a global pandemic.

 

The nightmare scenario may be upon us, with the caveat that “nightmares” are relative.

 

Maritime traffic in the narrow waterway between Iran and Oman has ground to a halt since the US and Israel began attacking Iran on Feb 28. While there is no physical blockade in the strait, Iran has threatened to attack any vessels moving through it, and insurers have yanked their war-risk policies, leaving hundreds of tankers in limbo. An estimated 20% of world oil supply has been disrupted, my colleague Matt Egan writes. If that trend continues, the risks of a global recession compound. The war has already effectively wiped out the “spare capacity” that typically serves as a shock absorber in energy markets.

 

It’s not just oil supplies at risk: the Gulf is also one of the world’s top suppliers of nitrogen fertilizers that are essential for agriculture around the world.

 

... 

 

There are two major factors behind this pattern of selling in the morning and then getting a grip in the afternoon:

 

1. Equity traders are holding out hope for a swift resolution, confident that the US — a net oil exporter — can weather a short-lived shock better than most, and
2. They are buying the [expletive] dip, in meme parlance.

To be sure, stocks have fallen over the prospect of a longer Mideast conflict. But the S&P 500, the broadest gauge of US stocks, fell only about 2% last week, even as oil shot up 36% and an unexpectedly awful February jobs report raised concerns about the labor market. The index is still up about 20% from a year ago.

 

Investors have become conditioned to a trend in which morning selloffs attract bargain-hunters who swoop in and spark afternoon rallies. This strategy of “buying the dip” (of BTFD, for the extremely online retail crowd) has been a popular and fairly reliable trade for the better part of the past five years. Virtually every economic shock of 2025 — including Trump’s tariffs and a handful of surprise pullbacks in the tech sector — was followed by a rally, reinforcing a sense that there’s no point panicking.

 

It’s less of a stock market downturn, and more of a sale on stocks, goes the thinking.

 

“We’ve got this black swan event, and US stock markets have barely flinched because people are more focused on buying dips and not missing rallies than they are about existential concerns about risk,” Steve Sosnick, chief strategist at Interactive Brokers, told me. “The ‘fear of missing out’ is labeled as fear, but it’s really greed… I would argue, in terms of investor behavior, there’s still plenty of greed out there relative to fear.”

 

Of course, buying the dip works great until it doesn’t, and what comes next is entirely out of any investors’ hands.

 

It's true that the major economies are less dependent on Middle Eastern oil than they were fifty years ago, but this is still bad, with the chances of inflation or recession—or both—increasing every day.

While it's not a perfect mechanism by any stretch of the imagination—voters are notorious for blaming politicians for economic factors beyond their control—the understanding that recession, and probably even more to the point inflation, can force a party out of power is generally a good thing for democracy.

Of course, the economy is not the stock market, and the stock market is not the economy, but a market crash does generally indicate either that something is going wrong or that something that has been wrong for a while has just come to the surface.

To the extent that unthinkingly buying the dip keeps markets from pricing in bad news and disastrous policies, it undermines one of the few forms of feedback that Donald Trump has actually responded to in his second term. That's not the biggest of our worries, but it's not helping.

 

Buying the Dip

 

 

We have an explanation—or at least a credible hypothesis from a trustworthy source—about why the market under Donald Trump II always shrugs off even the worst news within 24 to 48 hours (at least so far).

From Matt Levine’s newsletter:

But that is famously no longer true, these days, in the stock market. Retail investors now love buying when the market crashes. The Wall Street Journal reports:

War in the Middle East. Artificial-intelligence jitters. A “SaaS-pocalypse” that wiped billions in value from software stocks. Whatever fresh shocks have rippled through markets, individual investors have fallen back on the same strategy: buy, buy, buy. 

Fears of economic disruption from AI and the conflict with Iran have sent stocks on a roller-coaster ride in recent weeks—but the everyday traders who play an increasingly pivotal role on Wall Street have remained the market’s most loyal buyers. February was one of the strongest months for retail buying since the meme-stock frenzy of 2021, according to a report from Citadel Securities, and the fifth-biggest month on record.

And on Monday, as major indexes slid in early trading during the first session since the conflict’s outbreak, individual investors poured $2.2 billion into stocks and exchange-traded funds, according to analysts at JPMorgan Chase. Stocks finished almost flat. Dip-buyers also helped pare Tuesday’s early drop.

This is an interesting stock market story: Are retail investors the ultimate value investors in the stock market? Does the constant retail buy-the-dip bid insulate the market against volatility? If you are a professional equity investor or market maker or options trader, are your models evolving because markets now can’t go down much before retail investors flood in and push them back up? Just a strange new way to think about stock markets, that passionate individual investors prevent crashes. 

I’m a bit surprised that retail investors have the money to move the markets like this, but I have to admit I’m not that knowledgeable on this subject, and my intuition doesn’t count for much. The increased power of retail could also reflect the fact that lots of smart money has been heading either overseas or to safer havens like Gold. The Dow Jones Industrial Average, NASDAQ Composite, and S&P 500 of 2026 belong to the people who chose to remain.

Part of the charm of Levine’s writing is his irreverent framing. This can occasionally tip over into the overly cute, which may be happening here. I assume describing the Robinhood crowd as the new value investors is meant to be at least a touch ironic and maybe openly sarcastic. The joke here is that retail investors—particularly in the age of HODL—are the absolute antithesis of a Warren Buffett. These are the people who brought us the meme stock and who, rather than seeking out low price-to-earnings ratios, embraced companies like Tesla, Inc. even after their sales collapsed. Buying the dip does have some occasional, superficial relationship to the strategy of value investing, but the similarities are coincidental. Robinhood retail is an investing philosophy based far less on Benjamin Graham’s fundamentals than on the 300.

What Is Value Investing?

Value investors believe that the market overreacts to good and bad news, resulting in stock price movements that don't correspond to a company's long-term fundamentals. The overreaction offers an opportunity to profit by purchasing stocks at discounted prices.

Warren Buffett is probably the best-known value investor today, but there are many others, including Benjamin Graham (Buffett's professor and mentor), David Dodd, Charlie Munger (Buffet's business partner), Christopher Browne (another Graham student), and billionaire hedge-fund manager, Seth Klarman.

(Seriously, these HODL/diamond-hands people are deeply weird.)

More importantly, I have real issues with the idea that retail investors are in any meaningful sense preventing crashes. Having markets shrug off bad news simply seems to mean that they are failing to price it in. That would seem merely to defer crashes, letting the market become increasingly unmoored from actual value until reality comes slamming down.

Keep in mind that what you’re reading here (excluding direct quotations) is the most ill-informed of opinions, so if you know something about markets and investing and you’ve caught me saying something that sounds stupid, you’re probably right—so please let me know in the comments section.

That said, it seems like a bad idea to trust our collective 401(k)s to these guys: 

 

Bit of a spoiler with the Silicon Valley clip, but it's a great gag

While I am by no means a fan of focus groups, I'm probably not quite as negative on the subject as most of the readers of this blog, for at least a couple of reasons.

First, I believe it's always a good idea to actually listen to your customers, even in a deeply flawed forum, and second, I have seen some spectacularly bad quantitative analysis, and what's worse, I have seen high-level executives credulously gobble it up.

I get the sense that management consultants can lie a bit more effectively with graphs and figures than with quotes and video clips, but that could just be because I know how to lie more effectively with the former rather than the latter.

Regardless, here are a couple of my favorite fictional treatments of the topic.

Little Caesars



 

Silicon Valley

And to think of all the fun we made of Rumsfeld for known unknowns -- mostly trivial items for the penultimatepost of the week

Marco Rubio: "We went proactively in a defensive way"

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— Aaron Rupar (@atrupar.com) March 2, 2026 at 2:34 PM

Being wrong is bad enough, but it's the "BREAKING" that gives it that "DEWEY DEFEATS TRUMAN" flair.

In retrospect, using Speedy Gonzales cartoons in the training data...

Callers to Washington state’s driver’s license agency who select automated service in Spanish are instead hearing an AI voice speaking English with a strong Spanish accent.

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— The Associated Press (@apnews.com) February 27, 2026 at 9:30 AM

Another sportscaster turned politician, but sadly falling short of the Sarah Palin standard. 

Callers to Washington state’s driver’s license agency who select automated service in Spanish are instead hearing an AI voice speaking English with a strong Spanish accent.

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— The Associated Press (@apnews.com) February 27, 2026 at 9:30 AM

Credit where credit is due, the Iranian leader looked really good for someone 126 years old.

Mullin: We are not wanting regime change, but the person that's leading this effort is the ayatollah. Remember in 1979, when he came to power, he was saying that he wanted to be a nuclear Iran

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— Acyn (@acyn.bsky.social) February 25, 2026 at 6:28 PM

On a quiet night, if you listen carefully, you can hear Edsel Ford laughing.

Fewer than 39,000 Cybertrucks were sold in 2024, and just over 20,000 found homes in 2025.

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— Ars Technica (@arstechnica.com) February 20, 2026 at 10:40 AM

No one should engage in this kind of behavior. But probably especially if your last name is Dingus. www.theguardian.com/us-news/2026...

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— Josh Marshall (@joshtpm.bsky.social) February 21, 2026 at 5:24 PM

 

And finally, even my powers of sarcasm have their limits.

If nothing else, the image of Wall Street investors as extras from Oliver! was worth the price of admission -- updated

Following up on yesterday's post, here's Allison Morrow's actually informed take:

After more or less shrugging at the conflict Monday, stocks tumbled Tuesday, with the Dow down 1,200 before dip-buyers moved in. The Dow ended the day down 400 points, or 0.8%.  The S&P 500, which had been down 2.5% ended down 0.9%. The Nasdaq fell just over 1%.

 

Part of the problem for investors is the Trump administration’s murky timeline. Defense Secretary Pete Hegseth on Monday declared that this conflict “is not endless” like the Iraq War. But he also refused to offer details about an exit strategy, telling reporters he “would never hang a time frame” on the operation. 

 

President Donald Trump initially floated four to five weeks, then added that “whatever the time is, it's OK, whatever it takes.” Trump has also refused to rule out a boots-on-the-ground invasion. 

 

“The view of a short war been upended,” Thierry Wizman, global FX and rates strategist at Macquarie Group, said in a note.

 

Another problem for markets: Wars tend to be inflationary. (See: Oil prices surging as transit through the Strait of Hormuz has all but ground to a halt.) Higher inflation makes central banks less likely to cut interest rates, which means the prospect of the Fed doing two rate cuts this year is now in doubt. And that’s a certified bummer for investors who’ve been staring at the Fed's dot plot like a bunch of children Dickensian orphans eyeing a vat of porridge. Please, sir, may we have some more?

I don't believe the panic/denial cycle can go on forever. Eventually the markets are almost certain to run into news that can't be shrugged away. I 'm just nervous about what that news might look like.  

 UPDATE: Rule 2 remains unchallenged. 

 

 

We just point out the patterns; we don't try to explain them.

Once again, we’ve seen the two defining rules of markets in 2025 and 2026 (so far):

1. There is no jump scare so trivial and obviously absurd that it can’t panic investors, as long as it invokes the proper boogeymen.

Recent case in point: [discussed here and here.]

Allison Morrow of CNN: 

I put “report” in quotes because this 7,000-word screed amounted to little more than AI fan fiction — a dystopian thought experiment imagining a scenario in which AI is so successful it actually contracts economic growth and drives US unemployment rate to more than 10% by 2028. It went viral in a similar way as Matt Shumer’s similarly long-winded “Something Big Is Happening” blog post earlier this month, with people who are incentivized to make AI scary sharing it in “see I told you so” posts as if they were Prometheus bringing fire to the people. (I’ll get into this a bit more later this week, but suffice to say memos of this genre tend to have some blindspots, both substantive and stylistic). 

 

I could have spent my day debunking or otherwise making sense of the Citrini report but I — and I can’t stress this enough — did not want to. Instead, I’ll share some of the reactions from people much smarter than I am. 

 Matt Levine of Bloomberg:

I was writing specifically about a tiny company that had pivoted from karaoke to AI logistics and announced a disruptive AI logistics thing. (“I would probably be more inclined to be skeptical that this particular company is gonna be the one to disrupt the industry,” said an analyst, but added that someone probably will.) But of course you don’t even have to run the company that announces the disruptive thing. At this point, simply saying, publicly, “hey I think AI will disrupt _____,” for some company or industry or whatever, has a decent chance of driving down the price of _____. The market is really jumpy!

Obviously in all of these things it helps for your announcement to be well-written, well-reasoned and generally jazzy. But I have never seen a market where it has been so easy for an activist short to have a big impact. Like I feel like you could go on financial television today and say a company’s name, pause meaningfully, say “AI,” pause meaningfully, and walk off, and the company’s stock would drop 10%. Try it!  “DoorDash. AI. [grim nod].”

 

2. No matter how big the threat, or how serious the damage it can do to the economy and long-term corporate profits, investors will forget about it in less than forty-eight hours.

A very partial list includes:

Tariffs;

Attacks on the Fed;

Devastating the agricultural and construction workforce;

The kind of increasingly erratic behavior from a chief executive that ought to terrify investors;

And now a war that will almost certainly disrupt world trade, possibly for months to come.

 

Which brings us to Monday. 

If you would have checked premarket trading a few hours before the opening bell that morning, you would have seen all of the major indices down a little short of two points. 

Had you checked back later that day, you would have seen this:

 There is, of course, an upper (or should it be lower?) bound to the magnitude of badness that can be shrugged off, but I have a feeling we'll be getting to that later. 

The prediction market thread got very relevant very quickly.

Whether you're talking about the temptation to rig a traffic light or find a way to effectively sell government secrets, the potential to misuse these markets is huge.  

In case you were wondering, Polymarket had yet another spate of likely inside traders betting that the US would strike Iran by February 28. Per the due diligence investigation service Bubblemaps, the wallets used were created 24 hours earlier. The Pentagon Pizza Index has been replaced.

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— Matthew Sheffield (@matthew.flux.community) February 28, 2026 at 5:26 PM

“.. this is more or less offering a proxy market on assassination,” Amanda Fischer, a former chief of staff at the Securities and Exchange Commission, wrote on X .. @wsj.com www.wsj.com/world/middle...

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— Carl Quintanilla (@carlquintanilla.bsky.social) March 1, 2026 at 10:15 AM

It’s insane this is legal. People around Trump are profiting off war and death. I’m introducing legislation ASAP to ban this.

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— Chris Murphy (@chrismurphyct.bsky.social) February 28, 2026 at 6:09 PM

Emily Nicolle writing for Bloomberg:

As US and Israeli bombs fell on Iran this weekend, bettors on Polymarket — where $529 million was traded on contracts tied to the timing of the strikes — were cashing in. Almost immediately, blockchain sleuths began hunting for unusual patterns in recent bets.

Six accounts on Polymarket made around $1 million in profit by betting on the US to strike Iran by Feb. 28, according to analytics firm Bubblemaps SA. The accounts were all freshly created in February and had only ever placed bets on when US strikes might occur. Some of their shares were purchased, in some cases at roughly a dime apiece, hours before the first explosions were reported in Tehran.

These are the hallmarks that blockchain analysts associate with insider trading in prediction markets, an industry without widespread oversight and no agreed-upon methodology for distinguishing luck from leaks — and they’re far from conclusive on their own. Similar patterns suggested that an insider made a big profit betting on the ouster of Venezuela’s Nicolás Maduro in January, and have also been used to identify several other cases of alleged insider trading.

...

Kalshi Inc., a Commodity Futures Trading Commission-regulated rival, said Saturday it does not offer markets that settle on death. In the event of Khamenei’s death, it said it would resolve its contract based on the last price offered. Kalshi’s CEO Tarek Mansour later said on X that the platform would reimburse all trading fees from such bets.

Polymarket’s main trading platform is situated offshore and does not accept US-based customers, placing it outside the CFTC’s oversight. The company has argued that its contracts provide valuable data because they crowdsource information in volatile situations and help the public gauge risk, especially when conventional reporting lags.

Sidenote:

The Supreme Leader insisted on not taking special security measures even though he knew the attacks were about to start and was killed in his home. He wanted to die this way. The concept of martyrdom is an extremely potent, galvanizing force in Shia and Iranian culture.

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— Ali Ahmadi (@aliahmadi.bsky.social) March 1, 2026 at 2:42 AM

‪Ahmadi‬ continues.

There were def people in Washington who advised Trump not to do this, basically saying, "hes 90, hes had cancer twice, hes going to die soon anyway. Dont make him a martyr for the cause". He didnt listen. 

The very fact that this article calls to mind a Roald Dahl short story is probably a red flag

 Victor Tangermann writing for Futurism.

 New Platform Lets You Gamble on CCTV Footage

Thanks to the rise of sports betting and prediction markets, gambling has turned from an activity sequestered to casinos and scratch tickets into something that practically anybody with an internet connection can dive into headfirst — something that has experts warning of a surge in gambling addiction, especially among young, impressionable minds.

Platforms like Polymarket mean that gamblers are no longer limited to betting their hard-earned cash on red or black during a game of roulette or mindlessly pulling the lever of a slot machine — now they can bet on whether Jesus Christ will return before the long-awaited release of the video game “GTA VI,” or by what date the United States will strike Iran.

And now, a new gambling game called Rush Hour CCTV on the crypto casino platform Roobet is taking the phenomenon to an even more ludicrous conclusion. As casino publication Win.gg points out, gamblers there are betting on how many cars, trucks, buses, motorcycles, or pedestrians are crossing a specific point within a predetermined time period on a street in live, licensed CCTV footage being streamed from big cities, including Tokyo, Bangkok, New York, and London.

It may sound banal — and it many ways it is — but instead of relying on traditional random number generator mechanics (RNG) that determine the outcome in slot machines, the new game relies on the real world instead.

The game is deceptively simple. Each round kicks off with a simple message: “How many vehicles?”

Gamblers can then bet on how many vehicles will cross a point within the next 55 seconds. They can also give a range as an answer, which will give a significantly lower payout than guessing the exact number.

 

 The rest of the article focuses appropriately on the rise of gambling and gambling addiction, particularly among young men, but there’s another issue worth noting. (For more on that, check out this USA Today article.)

Whenever you can bet on something, there’s a temptation to try to rig the outcome. The best-known example is the almost universally condemned practice of fixing sporting events. As far as I can tell, even among the wackiest libertarians, there’s no great push to legalize point-shaving or to allow jockeys to bet against their own horses. Even compared to other forms of cheating, throwing a game—or even simply making sure your team doesn’t cover the spread—is seen as especially unacceptable.

But just to play devil’s advocate, isn’t this level of social opprobrium a bit excessive given the actual social harm? Sports, despite all the mythology we build up around them, are fundamentally trivial. Historically, the primary victims of things like point-shaving schemes have been people who were engaging in the generally illegal activity of sports betting. Yes, the winners were even less sympathetic—professional gamblers and organized crime—but we’re not exactly talking about bilking widows and orphans out of their life savings here.

We can certainly be impressed by the skill and dedication of a performer. We can appreciate the aesthetics of a great athlete (Muhammad Ali, Wayne Gretzky, my personal choice, fourth-quarter Joe Montana). But we could make a similar case for almost any form of entertainment. It’s not unheard of for an actor who is pissed off at the producers of a film to deliver a bad performance, but I’ve never heard of anyone suggesting they should be banned for life from the movies.

When, however, you start betting on real-life events, the potential consequences of rigging the outcomes can get very big very quickly. I can think of lots of ways to guarantee low traffic at a given intersection at a given time. None of them are things we would like people doing.

Roald Dahl explored this idea—and the possibility of its unintended consequences—in his classic short story “A Dip in the Pool.” It’s well worth checking out. You can find it in many anthologies online, including the Internet Archive, or you can check out one of the adaptations. It was filmed for Alfred Hitchcock Presents, starring Keenan Wynn (though that version does not appear to be streaming). If you don’t mind ’80s videotape cinematography, I’ve embedded a version from Tales of the Unexpected starring the fine character actor Jack Weston.