Latest / Inflation and Your Money with Fexingo: Protecting Purchasing Power and Beating Inflation / Why SpaceX IPO Is Reshaping Inflation Hedges
Transcript
- Lucas: So gold is down more than two percent over the past five days, and the big headline out of the IPO market is SpaceX going public with a record-setting valuation. Luna, I think those two things are actually connected in a way most investors haven't wrapped their heads around. Luna: I have to admit, when I first saw gold dropping and SpaceX raising seventy-five billion dollars, my brain didn't link them. But I'm guessing you're about to explain why they should be linked. Lucas: Exactly. The traditional inflation-hedging narrative has been pretty simple for decades: when people fear inflation, they buy gold. And gold has had a great run — it's still above four thousand dollars an ounce. But what we're seeing now is a shift in what investors consider 'hard' assets. Luna: You're saying SpaceX is competing with gold for the same inflation-fear dollars? Lucas: In a way, yes. Look at the data: the ten-year breakeven inflation rate has actually ticked down to two point two nine percent from two point three four percent just a week ago. So inflation expectations are easing slightly. But gold is still falling. Meanwhile, SpaceX is expected to debut with a market cap above two trillion dollars. That's a massive gravitational pull on capital. Luna: And the S&P 500 already made its bet — we saw that CNBC headline about the index pricing in SpaceX. But for the average listener, what does that actually mean? Lucas: It means that institutional investors, the ones who move markets, are treating SpaceX as a kind of inflation-proof asset. Why? Because its revenue streams are tied to launch contracts and Starlink subscriptions — both have pricing power. SpaceX can raise prices with inflation, and it operates in a sector with huge barriers to entry. That's the kind of moat that, historically, made gold a hedge. Luna: So instead of buying a commodity that just sits there, you're buying a business that can actively pass on higher costs. That's a different kind of inflation protection. Lucas: Right. And the market is pricing that in. Look at the divergence between gold itself and gold miners. The GDX, which holds mining stocks, is actually up two percent over the past five days, even while GLD — the gold ETF — is down two and a half percent. That's the market saying: the companies that extract gold have more value than the metal right now. Similarly, SpaceX is a company that extracts value from space. Luna: Interesting. So the mining stocks are up because their operational leverage works in an inflationary environment, but the metal itself is suffering from competition from this new narrative asset. Lucas: Exactly. And it's not just SpaceX. The entire IPO pipeline is full of companies with pricing power — tech, infrastructure, defense. But SpaceX is the poster child because it's so large and so visible. The retail allocation was cut to the low twenties percent range, which tells you that institutions are clamoring for shares. They see it as a core holding, not a speculative bet. Luna: For our listeners who are trying to protect their purchasing power, does this mean they should sell their gold and buy SpaceX? Or is it more nuanced? Lucas: It's nuanced. Gold still has a role as portfolio insurance — it's liquid, it's a store of value in crises. But the idea that the only inflation hedge is gold or TIPS is outdated. SpaceX, and companies like it, offer inflation protection plus growth. The catch is that you're taking on equity risk. If the space economy hits a downturn, SpaceX shares could fall much faster than gold. Luna: So it's a trade-off: you get a potential double-digit return but with higher volatility, versus gold which just sits there. Lucas: Exactly. And the data backs that up. The small-cap index, the Russell 2000, is up three point three percent over the past five days. That's a sign that risk appetite is returning. Investors are rotating out of safe havens like gold and into growth assets. The IPO is just the most visible symptom of that rotation. Luna: I want to drill into the retail allocation issue. SpaceX cut retail to the low twenties. That means the average person trying to buy in on day one got a lot less than they wanted. How does that affect the inflation-hedging story? Lucas: It means that the institutions are betting big on this being a long-term inflation hedge, while retail investors are left scrambling. But the good news is that you don't need to buy the IPO to get exposure. The S&P 500 is already pricing in SpaceX — index funds will eventually hold it. And you can buy other companies with similar pricing power: defense contractors, satellite operators, even some tech stocks. Luna: So the listener's takeaway might be: don't chase the IPO, but do rethink your inflation-hedging strategy. Gold alone isn't enough anymore. Lucas: That's exactly right. The world is changing. Inflation is sticky — CPI came in at three hundred thirty-four for May, up from three thirty-two point four one. Core CPI is even higher. But the tools to fight it are expanding. SpaceX is just the most dramatic example. Luna: If today's episode helped you think about your portfolio in a new way, that's exactly what we're here for. And the reason we can keep doing this ad-free is because of listeners like you. If you found value, you can support the show at buy me a coffee dot com slash fexingo. It's a simple way to keep these conversations going. Lucas: Yeah, and it genuinely makes a difference. Every contribution helps us dig deeper into topics like this one. So thanks for considering it. Luna: Alright, back to the numbers. One thing I want to circle back to is the ten-year breakeven inflation rate dropping. If inflation expectations are falling, why is gold still down? Shouldn't lower expectations be bad for gold? Lucas: You'd think so, but it's more about the opportunity cost. Lower breakevens mean the market thinks the Fed might cut rates sooner. That's actually good for growth stocks, not for gold. Gold thrives on fear and uncertainty. Right now, the market is pricing in a relatively stable inflation environment — not deflation, but not runaway inflation either. That's a sweet spot for equities. Luna: So the narrative is shifting from 'protect against inflation' to 'invest in growth that outpaces inflation.' And SpaceX is the poster child for that. Lucas: Exactly. And the data supports it. The Fed funds rate is flat at three point six two percent. The interest on reserve balances is three point six five. So the Fed is on hold. In that environment, cash is yielding around three point six percent, but inflation is running above that. So you have to take some risk to maintain purchasing power. Luna: And that risk is what drives capital into IPOs like SpaceX. It's a bet on future cash flows, not just a store of value. Lucas: Right. And one more data point: the Dow is up zero point eight percent over the past five days, the S&P is up zero point three, but the Nasdaq is actually down zero point two. So the big tech names are a bit sluggish. The money is flowing into new names, not the old guard. Luna: Which brings us back to the listener's portfolio. If you're a typical buy and hold investor, how do you adjust without chasing IPOs? Lucas: You don't have to chase. Look at your existing holdings: do they have pricing power? Can they raise prices when costs go up? If not, consider adding some exposure through sector ETFs — aerospace and defense, infrastructure, even some technology with recurring revenue. The key is diversification across inflation-resistant business models, not just asset classes. Luna: And remember, gold miners are up two percent this week while gold is down. That's a signal that the market is valuing the operational leverage. So if you want gold exposure, maybe the miners are a better bet right now. Lucas: Good point. The GDX is up, the GLD is down. That's a classic divergence. It could be a short-term trade, but it also reflects a structural shift. Investors are demanding cash flow, not just a shiny rock. Luna: Alright, so to wrap up: SpaceX is changing the inflation-hedging playbook. Gold isn't dead, but it has competition. And the smart move is to think about which companies can grow their earnings faster than inflation. Lucas: Exactly. And that's the conversation we'll keep having. Next time, we'll look at how the Fed's next move — or lack thereof — affects these dynamics. Thanks for listening.