SpaceX IPO Takes Off — And Elon Is Now A Trillionaire

28:21But he still needs that power. He still needs to have more than 80 % of the voting power of this company. And it's just striking the sense in which it is actually never enough for him. He has to continue to accumulate more and more wealth, more and more power. And any time that there are any norms placed on him, this is what usually happens. This is usually how voting power is divvied up when you go public, he has to reject them. He says, no, I'm not doing it unless I have total control over the entire thing. And let's just, I mean, a trillion dollars. We should just like put that into perspective because we're only a week away from normalizing that.

29:01You know, I've been seeing people on Twitter, mostly Twitter, but people on social media, basically getting excited for him that he's now a trillionaire. He posted some meme about how he's now a trillionaire. And I see a lot of people retweeting it and being like, let's go Elon. He crushed it, which is such a strange... I don't understand it, but it's some strange blend of sycophancy with this belief that you too will eventually become a trillionaire or he's kind of sticking it to the man in some way, even though he is now the man because he is literally worth a trillion dollars. I don't really know what the psychology is, but I know that we're about to normalize it.

29:42I just want to put this in a perspective, this makes Elon, now that this company's gone public, richer than the bottom 46 % of the entire world population combined. So he has more wealth than 3.8 billion people. And the Southern Hemisphere. Yes. That is crazy. And it's not socialist or communist to state that fact and to say, wow, that's a lot of power. That's a lot of money. But there's so much sensitivity about this issue. As soon as you bring it up, people go, oh, so what? You're a communist now? You just want to socialize everything? Seize the means? I mean, we just need to state the facts here.

30:26This guy's worth a trillion dollars. That's absurd. That's crazy. There's no way that that is going to be efficiently allocated throughout the markets. That, to me, doesn't say that the markets are working as they are intended. So I 100 % agree with your point. I have some other stuff in here that we can get into, but maybe I'll just pause there and see if you have any reactions. There's one of the greatest features of Americans is their optimism. Americans think they're going to be rich. And it enables them or encourages them to take risks, to move, to quit their jobs, go to where they think their human capital will be better used, do startups.

31:04It encourages them to make crazy investments. And as a result, we have one of the, you know, the most impressive economy in history. There's a real upside to that optimism. The downside is that everybody believes their lottery ticket is going to be a winner. Yeah. And you end up with a trillionaire while 40 % of American households have medical or dental debt. And it just strikes me that we've created this false flag or this false argument that you can't have this type of economic growth while having universal healthcare. Sure you can, but you have to fund it. And this rooting on, I think I can understand rooting on SpaceX.

31:50I can understand rooting on someone who makes extraordinary wealth. I guess what I would ask is, should that person be taxed at a progressive tax rate? And do we want a world in which so many people are having a difficult time making ends meet and one person who if they stack dollar bills or hundred dollar bills gets a third of the way to the moon and people say well that's a function of capitalism no it's not there's there's capitalist countries all over the world where you know kids don't you know one in five households don't have kids who are food insecure so i i actually you know where i land on this is one distinctive the offering, and you know my feelings about the manufacturer's scarcity, but on the social side of things, I think it's great that someone can make a trillion dollars.

32:41What bothers me is that they're not taxed at a decent rate, and we don't put the same safeguards or apply the same norms to them, thereby, again, reflecting, Elon Musk is probably going to decide who the next president is. I think we're naive to think that he doesn't have that power now. Yeah, I think that's right. I mean, it's one thing to play the game and make a lot of money playing the game, but it's a different thing to rig the game and make a lot of rigging it. And that seems to be what the direction we're headed, especially the extent to which these people like Elon appear to be buying our politics.

33:19I mean, we've seen how billionaire spending on political campaigns has just exploded ever since Citizens United. And it does result in these regulations, which makes it easier to make huge amounts of money particularly with this insider trading stuff, which is why I believe that that is probably the biggest issue that we're seeing in the current administration right now, is just the total collapse of investor protections and the increase of insider trading. One final point I just want to point out, related to the circular deal-making that we've described in the past, and this is very interesting, and our research assistant Dan Shallon pointed this out, and it's a really good point.

33:55After the S1 drop for SpaceX, they announced this deal with Google, where Google was going to buy$920 billion per month worth of AI compute from SpaceX. And a lot of people said, hey, SpaceX has a good business now. They're figuring it out. It was very strange, though, because we also have to recognize that Google owns 6 % of SpaceX. So once again, we have a situation where the investor is the customer at the same time. And so when you think about it at the current valuation, 100 times sales-ish, when you think about it that way, for every dollar that Google spends on SpaceX compute, they get about$6 back in shareholder value because they own 6 % of the company.

34:42Now, that already is like, that's weird. You're paying for something and then getting something in return in the form of higher returns for your shares. Here's where it gets weirder. Google will pay SpaceX$8 ,400 per GPU per month. Compare that to Anthropic, and their deal with Anthropic was announced within weeks of the Google deal. Compare that to the Anthropics deal with SpaceX. They're paying$3 ,800 per GPU per month. So Google is paying more than double what Anthropic, supposedly their competitor, is paying. And the deal was announced basically at the same time. And you have to wonder why.

35:25I think the answer is they're down to pay a ridiculous price because they are a shareholder and because they know that if they pay that amount, then they'll get it back. And so I think this is just more evidence of how these circular deals are distorting the AI economy. It's inflating the revenues of various companies. In this case, it's inflating SpaceX's revenues, if that is indeed what is happening. And at the same time, it's inflating the valuation, which simultaneously inflates Google's valuation. It's all getting a little bit weird. So I just thought that we should just point that out. Do you have any final quick words on SpaceX before we wrap this up?

36:10I hope he goes to Mars and then Houston says, this is an incredible step for mankind and then cuts off all communication from him. I don't know. So the question, rather than preaching, I think he asked people where are they actually putting their money? I haven't shorted a stock in a long time. And I don't think I'm going to short SpaceX because it's a meme stock. And I wouldn't recommend that to anybody because I shorted GameStop during the meme phenomena. And I shorted it at$400. And the next morning, it went to$600. And I was sitting there going, but it makes no sense. It's like the markets hold my beer on what makes sense or what doesn't, right?

36:50And fortunately, I had the capital to hold on and ended up making money. What I am considering doing is looking at all these other, I thought all these different AI and space companies were all going to trade up. I think there's a lot of crap out there. I think there's a lot of AI companies trading for a billion or three billion that are basically, I think there's that one food delivery thing that has these little robots. All Buds, the new AI company. Whatever it is, right? I think there's a lot of, for the first time, and again, not financial advisors, I'm getting a list of kind of a dozen companies that have benefited from this AI, you know, IPO mania.

37:29And I'm going to create a basket and do some long-dated puts, out-of-the-money puts. All right. Because this does feel, I am now confident saying, this absolutely feels like 99 again. I mean, this does feel. This changed the game. This SpaceX IPO changed the game for sure. 100%. Your thoughts, Ed? No, I think that's interesting. I personally won't because I'm afraid of shorting and I just think that it's such a difficult game to win. But I do want to see your basket and maybe I'll change my mind once you send it to me. We'll be right back after the break. and if you're enjoying the show, send it to a friend and please follow us on YouTube, Spotify or wherever you get your podcasts.

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42:11We're back with ProfG Markets. Inflation rose 4.2 % in May from a year ago, marking the highest reading in three years. Meanwhile, real wages fell for the second straight month, meaning Americans are once again seeing prices rise faster than their incomes. That puts even more pressure on the Federal Reserve ahead of Wednesday's interest rate decision. It'll be the first meeting with Kevin Walsh serving as governor, and investors are increasingly betting that the Fed may need to stay aggressive on Calci. The odds of a rate hike before 2027 have climbed to roughly 50 percent. And if you remember at the start of the year, the odds were in the single digits.

42:53So, Scott, this inflation report, we're up to 4.2%. I'll just point out that before we had the tariffs, essentially the inflation that Trump inherited was 2.3%. Then we put on the tariffs and it rises to 3 % within a year. And then we add this war in Iran on top of that and a strait that remains blockaded. and we keep on hearing about a deal, but then we also see that we're striking Iran, striking missiles in Iran. Trump is now saying that he wants to take Cog Island. And so you add that war on top of it, you add on the inflation in oil prices, and we are now at 4.2%. We are above 4%. We're more than two full percentage points above the Fed's target rate.

43:42There's a lot to say here about this inflation report. Where would you like to don't. So let's just, for a reference point, let's compare it to some other G7 countries or neighbors. Mexico, we're at 4.2. Mexico is at 3.9. The eurozone is at 3.2. Canada, our neighbor to the north, we put these ridiculous tariffs on. Despite that, and 70 % of their export market being to the U.S., their inflation is at 2.8. The U.K., 2.8. Japan, 1.4. And China, kind of our economic rival, their inflation, 1.2%. And the problem is, is that most people don't understand the power of compounding. So they hear 4.2 and they think, oh, that's nothing.

44:22My mortgage is 6%. My auto loan is 8%. My interest rate on my credit card is 15%. So just to do some math, if inflation were to stay like this and you had a baby, when that kid was ready to go to college, and that may sound like a long way away, but trust me, it goes faster than you think. Like, you know, see above, they're indifferent when you fly all the fucking way home and miss the next game. But anyway, all of a sudden, the tuition, if inflation were to just keep compounding the way it is now, and you had a baby, when that kid goes to, say, USC, where the tuition is$68 ,000, that means tuition is going to be$136 ,000.

45:01If we in academia don't continue to raise tuition faster than inflation, which we've done for the last 40 years, people have a tough time imagining anything in 18 years. So let's just go out. Your kid starts at USC as a freshman. If inflation were to continue going at 4.4%, that means a new car, which usually costs$49 ,000, by the time they graduate from college, it would be$60 ,000. People don't realize that this number may sound innocent. It's not. I think that's an important point, but it has a very big if in the statement, which is if this remains at above 4 % for the next several years. What I can tell you is most people do not think that that will happen.

45:44Most people on Wall Street do not think that would happen. If that did happen, it would be basically a gigantic disaster for the entire U.S. economy, especially if we see that the wage growth continues to be lower than the price growth. So I take your point, but there are a lot of big ifs there. And so I guess my question that I would follow up with to you is, do you believe that this is going to last? You said years. I don't. But if Trump had his way, we risk inflation go to 8 % to 12 % because he would vote to cut interest rate for a short-term bump in his popularity, which could create a panic buying and an upward spiral of inflation.

46:23I mean, it's not unthinkable to think inflation could go to 8 % or 10%. Fuck, it's not. I mean, inflation starts, the fear, the real panic is that people start thinking, I got to get rid of my cash because asset prices are going up so fast. So whenever people get cash in Argentina, they don't haul onto it. They either transition it to Bitcoin or they buy something. And to think that that can't happen here is to ignore what's happened with every fiat currency in history, that eventually the political pressure to print more money and not be fiscally responsible outweighs any see about fiscal responsibility and end up with too much money chasing too few products.

47:02So will it likely happen? No. Could it? Absolutely. And what people also don't recognize is that inflation is yet another transfer of wealth from earners to owners. Inflation has been out of control in Argentina since the end of World War II. But the same wealthy families are still wealthy because if you own land, if you own assets, I'm hedged against inflation because I own a bunch of real estate and I own a bunch of stocks. And as inflation goes up, so does the price of rent, so does the price of buying an iPhone. So my Apple shares in my house goes up in value. Who gets fucked is you and everyone else on this podcast whose wages do not keep pace with inflation.

47:45So again, inflation is especially difficult on earners versus owners, and it's yet another transfer of wealth emerged to owners, thereby increasing income inequality. And when you talk about dissatisfaction and anger, again, I love that basic premise that revolutions aren't started by people who are unemployed. It's started by people who are working two jobs and are still hungry. So inflation, the Fed's job, you know, Fed is to keep employment at a certain level or unemployment below a certain level and to ensure inflation never gets out of control. But that is the wrong order. They know that inflation is the thing that brings down nations, not unemployment.

48:26Yeah. I mean, just looking through some of the increases in prices here, I mean, obviously, airfares are way up 27 % year over year, gasoline, all types of gasoline up 41 % fuel oil up 59 % year over year. But it isn't just oil prices that are causing the harm here. I think as, I mean, there are some downstream effects and it's kind of this awful combination of the tariffs combined with the war blocking the Strait of Hormuz. So you've got non-alcoholic beverage prices up almost 6%, fruit and vegetable prices up more than 6%, and meat prices up 7.5%. So what we have here are exploding grocery prices, which, as you say, is really a tax on lower and middle income households in America.

49:16Generally speaking, the richest households aren't all that worried about the price of groceries going up. But it really eats at your purchasing power if you are in the lower quintile of earners. So that is a real problem. Um, I think the question, I mean, you say inflation could get to eight or nine percent. Like, I agree, but I think anything can happen in general. I think what we want to be doing and thinking about is what is the most likely scenario. I think that a lot of people believe or the sort of the consensus is that this is temporary and it's going to come down. and the reason for that belief is that they believe that Trump is going to resolve the issues in Iran and that we're going to come to some semblance of a deal with Iran and all of the oil that's being blocked up in the Strait of Hormuz is going to flow again and then prices are going to come back down.

50:11That is generally the consensus when you look at prices and also when I speak with people on Wall Street, when I speak with Wall Street analysts, when I speak with economists, like that is the general belief. I'd be curious to get your views and I know you have some updated views on Iran, which I find interesting. I'd want to hear from you, your thoughts on that. My view is we're nowhere close to being done here. And I've been saying this since it started. I mean, when he launched the attacks, he said Trump said that it was going to take four weeks. I think he then pushed it to maximum five weeks.

50:48As soon as this began, the first thing I did is I went back and I found that Donald Rumsfeld quote, saying that the Iraq war would be eight weeks and pointed out a very simple fact, which was that it was eight years. And then we had the same thing with Afghanistan, where they said it would be a few months and it ended up being two decades. So my view from the beginning was this is going to be way longer and way more drawn out than anyone would expect. Why? Because wars are extremely difficult and we have a very, very strong substantive track record of saying it's going to be this amount of time, and then it ends up being way, way longer.

51:26So as of today, we're into week 14. So we're in month three now. And still, we have this assumption, oh, it's going to resolve in some way. Trump's going to kind of figure it out, or he's going to taco on the wall, which I personally think is a lot more difficult to taco on warfare versus tariffs. I just don't see it happening. So this goes back to expectations for what inflation is going to look like over the long term, I think we're going to stick around here for a long time. And I can expand on that. But I want to hear from you and your views on what this means and what it'll look like going forward over the next few months.

52:02And then we can get into inflation expectations longer term. You made a compelling argument. You kind of broke down, loosely speaking, that we're at 4 % and we'd be at 2 % if it wasn't for the war in Iran and these tariffs. That literally our inflation is up from what is a target inflation rate of 2 % to 4 % based on self-inflicted injury. And as it relates to Iran, there's two concepts. The first is when officers are evaluating subordinates in terms of decisions, and they spend a lot of time, you know, analyzing decisions that were made, what they do is they say, it's not the outcome that determines whether the officer made the right decision.

52:42They go back and say, at that moment, given the information available, did the officer make the right decision? And going back to, so first off in Iran, you at the very beginning said, this is a quagmire, it's a bad idea, this will go longer than anyone expects. I said, I think this could be a good idea. You were right, I was wrong. And going back, the idea of toppling a wobbling regime, neutering the Navy, further defenestrating their missile capabilities, further staunching the flow of capital and resources to their proxies, I thought there was a real opportunity. And had we, I believe, signed up some European allies, done a better job of analyzing the threats to our Gulf neighbors, securing the Straits of Hormuz before they had an opportunity to start wreaking havoc there, and quite frankly, going in, having very strict, narrow military objectives, and then leaving, I still hold to the fact that there was an argument for this.

53:42Now, the second concept is what I call, or Hillary Clinton teaches a class, and one of the concepts is the dominion of failure. And that is, when you're in an argument with someone and you make a point, and then they come back aggressively at you, it's human nature to double down. And then once you double down on your argument, you're sort of invested and you're in too deep. And you keep, and you can, I don't know if this has ever happened to you, but you find yourself arguing a point and you're like, I don't even agree with what I'm saying, but it's too late, you've crossed the chasm, you've staked your reputation in that moment at dinner on whatever your point was, right?

54:17The problem is when you're supposed to be a leader, you're supposed to be able to have the maturity and be a fiduciary for other people's responsibility to basically not fall into the trap of the dominion of failure and go, you know what? I fucked up, I was wrong. And my intentions were good, but I was wrong. We need to change policy, A step back from the wrong direction is a step in the right direction. There is no getting around that anyone like myself that was supportive of military action in the beginning, based on how this has played out and the incredible incompetence and lack for coordination of our allies, lack of respect for briefing Congress, our inability to trust that Trump would understand anything about game theory and basically saying, I'm out of dodge, but you better do what I say as he's leaving, realizing that not only does he have no cards, but his cards are turned upside down and they can see our cards.

55:16This has been a fucking disaster. And anyone advocating for it has to, like myself, I remember having Freed Zakaria on, and Freed and I agreed that this was worth the risk. Looking back on how this has been executed, this has been a mistake of epic proportions. It has left us with literally no good options at this point. I understand the calls to withdraw immediately, take our licks. My attitude is at this point, it's quite frankly, it's hard to leave right now. And this is the quagmire because we're going to end up with less than nothing if we don't show a willingness to at least go some distance.

55:59At the same time, I understand the calls of like, let's just take our licks and get out. But just to summarize here, this has been an unmitigated disaster. And one of the unfortunate thing about our politics and our systems, and quite frankly, the public, is that the public appears to want leaders that will double down on something wrong rather than ever say, ever acknowledge, yeah, we think we made the right decision given the information we had at the time. It was the wrong decision and we're changing course. No politician ever gets rewarded for that type of maturity right now. And so what do we see?

56:36everyone just doubles down, doubles down, and goes further down into the dominion of failure. 100%. And this is what Trump's philosophy is all about. His slogan, or at least from reporting, and if you go watch the movie The Apprentice, you know this, his slogan is never admit defeat. The Roy Cohn method of communications. That was who we learned it from. And now it does appear that that philosophy is governing global geopolitics and as a result, the entire economy of America. and I think it's such an important and good point, this dominion of failure point, because, I mean, we should, I think it's such a respectable thing to change your mind and to decide and have the courage to say, I think actually there is a different path forward and I'm going to go back on my decision.

57:38I think that I was wrong. That is like a very, very difficult thing to say, especially today especially in a world of social media where everyone's tracking what everyone's saying and especially in a trump era of politics and it's something it's a lost art form that could literally be the erasure of trillions of dollars and could mean altering the life trajectory of millions of americans is our unwillingness to say specifically from the trump administration here to say I was wrong. He's never going to do it. And that is going to be such a problem. And again, to your point, this is why my belief is that this is going to go on a lot longer because he's never, I mean, he's unwilling to admit defeat on small issues.

58:30This is the most important, difficult issue in the world. Do we really believe that he's going to be okay with saying, actually, we're going to pull everyone out and we're going to call it a day and admit that we were wrong on this so that we didn't execute properly. I mean, maybe he'll try to do it and he'll lie about it and say, actually, it was a win for these reasons. And then the rest of us will know. But I mean, when you're dealing with troops on the ground, when you're dealing with missiles, when you're literally dealing with people's lives, it becomes very, very difficult to do that. And so my expectation, I don't think that he's going to make a deal with Iran or resolve it anytime soon, because I don't think that he is willing to reverse course.

59:11This is his entire principle. He never, ever wants to do this. So I think that the oil is going to remain blocked for the foreseeable future. I will note that when you look at the amount of oil that is blocked up right now, and this was research from the Institute of Energy Research, it comes out to around 6 % of global oil supply. So it's actually lower than you might expect. And the reason for that is, yes, the Middle East accounts for nearly a third of the global oil supply. But about a quarter of it takes alternative routes around the strait, which leaves around 20 % of it at risk, and a third of it currently is fully blocked.

59:46My expectation is that that amount will remain blocked for the foreseeable future. So my view is I don't think we're going to hit 8%, 9%, 10 % inflation like we did in 2022. But I do think that inflation is going to continue to rise for two reasons. One, I think these oil prices that we have already seen, they still need time to funnel through the rest of the economy. And two, I think as this goes on, you're going to see higher oil price expectations, which will lead to higher oil prices outright. And so I don't know if you remember, but my prediction earlier in the year was that we would hit 4.5 % inflation by the end of the year.

1:00:23A lot of people said that I had Trump derangement syndrome for saying that. Well, now we're at 4.2%. And I think it's, I'm pretty confident that that prediction is going to come true. I will now update that prediction, given what we're seeing today. I think we will hit probably at least 5 % inflation, but more importantly, I think we'll remain there for at least six months. I think that this is going to be extremely drawn out, extremely problematic. There are then all the other implications that come as a result of that. For example, rate hikes. I think rate hikes are inevitable. Markets seem to think it's a coin flip.

1:01:01I don't see any world in which you don't raise rates at this point, especially with the unemployment data, which came in better than expected, which means that the Fed has one target now, which is inflation. And two, landslide victory for the Democrats at the midterms. I just think this price thing is such a problem for so many Americans. They're so angry about it. They were already so angry about it. And I think that they understand that there is one person that is responsible for all of it. As you said, self-inflicted injuries. And that one person is Donald Trump. And that's going to be their message, their moment to send that message to Trump, to send that message to the Republican Party.

1:01:39And I do think it's going to be a landslide. What that will mean for markets, I'm not so sure. I haven't quite thought that far in the future. But there is a very, very scary sequence of events that I think you can pretty much game out. And we'll see. But that's where I stand on it at the moment. we'll be right back and for a recap of everything prof g media covered last week check out our new podcast of the week over on the prof g pod feed

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1:04:45We're back with Prof G Markets. The World Cup is finally here. Over the next six weeks, millions of fans will travel across North America to watch the world's most popular sporting event. But before a single trophy is lifted, one thing has already grabbed the headlines, and that is ticket prices. The cheapest seats for the final at MetLife Stadium are selling for more than$7 ,000 in several U.S. host cities. the cheapest tickets for the tournament's later rounds cost more than the average monthly mortgage payment. So, Scott, we got to just acknowledge how excited we are about the World Cup, of course.

1:05:25But this has been a really interesting issue here. You've said that FIFA is one of the most corrupt organizations in the world, which I 100 % agree with. I think many people would agree with that too. And now it's sort of on display what they're doing to get and make the most amount of money as possible. And some would say kind of grifting people who are attending the cup. I'll just give you some numbers here. FIFA expects to generate$3 billion in ticket revenue this year. That's compared to$900 million at the last World Cup. So they've increased their revenue by 230%. adjusted for inflation ticket prices are up roughly a thousand percent since the last time the u.s hosted the world cup in 1994 ticketing historically accounts for around 10 of world cup revenue this year it will account for 27 and the average resale ticket price today for the world cup is more than one thousand dollars there are many questions as to why prices are up so much um and one of the big reasons which i'd love to get into here is that FIFA, for the first time ever, is employing dynamic pricing.

1:06:33And what does that mean? They used to sell tickets at a fixed price, but now they are changing it, and they're basically algorithmically adjusting the price based on supply and demand dynamics. That's one thing. And then two, they're also launching their own resale platform where they sell all of the tickets, and then if you want to resell your ticket, you can go on FIFA's website, and you can resell your ticket, and FIFA will take a 15 % cut from the buyer and the seller on every sale. So some really interesting pricing strategies here. This dynamic pricing thing has also become a huge political issue.

1:07:09So much to get into here. I will start with your thoughts on FIFA's pricing strategy and what you make of it. If you look at FIFA as an organization, they have the right to price tickets and there's two sides of the trade. If you don't want to pay the money, then don't go to the World Cup. This will be my fourth World Cup. I was at Qatar, where tickets were a quarter the price that they are now. Before that, I was in Moscow, or Russia, Moscow and St. Petersburg, I don't remember. And I went to the 1994 World Cup in the U.S. And every time I go, or every World Cup, I take my boys, I take a ton of pictures, and it's a nice marker of time.

1:07:43I'm absolutely going to go this time. I make a very good living. And the tickets to the final in New York, where I was really excited about, and I want to go, I went to the final the last two times, where the cheaper ones, the$7 ,000 ones, as far as I know when I checked, are sold out. The good seats, like there's three categories, tier one, tier two, and tier three. Tier one seats to the final, granted, not everyone has a birthright nor should go to the final. They're$38 ,000. And just to give you a sense for that, when I last, the first time I went to the World Cup in 1994, an average ticket cost$58, and the most expensive ticket for the final was$475.

1:08:27So if you adjust it, you say, well, Scott, what about inflation? Okay, that's$131 average, and the most expensive ticket inflation adjusted in 1994 was$1 ,000,$1 ,069. Now it's$38 ,000. What it represents more than anything, it's distinctive whether you think FIFA is corrupt or not, fine, they get to do what they want in terms of dynamic pricing. It's that the 1%, who goes to the World Cup? Super fans and the 1%, because it is expensive. To go, you know, to fly to Monterey or Mexico or Vancouver to see a soccer game, that's a luxury item. And the reality is the 1%, and you can even argue the 10%, have garnered all of the gains.

1:09:08And that's why you've seen, no one likes to talk about it, but inflation at high-end hotels has gone crazy. Yeah, rich people inflation. If you have an asset that appeals to rich people and you can create a sense of scarcity, your pricing power is out of control because, one, the rich have exploded their wealth, right? Two, there's a change in zeitgeist where people realize rich people are generally older. They just got through COVID and they're like, I'm going to be dead soon. Why wouldn't I pay$38 ,000 to go to the World Cup? I'm going to be dead soon and I have money. Why wouldn't I? So you have this kind of YOLO versus massive demand from people, from the rich who have a lot more money.

1:09:52And then you have FIFA, who's made the following strategic choice, and they get to make this choice. Traditionally, they have priced their tickets below the market price because 80 to 90 percent of the revenues come from TV. and essentially the fans in the stadium were a feature of creating electricity that would come through the TV screen. And so they would save tickets in the less aspirational places for all the Croatians that actually got on a fucking plane and came to Qatar because seeing those crazy Croatians in the semifinals of the World Cup, I can't tell you how much electricity they brought to the game.

1:10:34And that did come through on the TV. So what they've decided to say, because here's the bottom line, anyone buying those$38 ,000 tickets, they're not going to paint their faces. They're just not. They're going to be like Trump at the Knicks game. They're going to fall asleep halfway through and then they're going to leave in the third quarter. They're going to be wearing suits and sucking down Pimms cups and saying, what an interesting game. The atmosphere is awesome. And like, who is this Ronald O character? I mean, these are not fans. These are people who get invited by corporations, right? Yes.

1:11:07And so you're substituting what FIFA's done is they've made a choice. We're going to go out to the efficient frontier. We're going to take every dollar off the table, and we're going to sacrifice vibe. Easy for me to say, but I don't think that's what a nonprofit should be doing and what is kind of the beautiful game. I think they should be getting – I mean, so for example, rock bands do a really good job of this. What they do is they say, if you sign up to be a super fan – so I think I'm an official fan of Empire of the Sun. And they go out initially to Empire of the Sun fans and say, we've reserved a certain number of tickets for you because they want hardcore fans in the audience for the vibe.

1:11:44So this is, anyways, a long-winded way of saying trade. FIFA has made a strategic decision to trade off vibe that used to come through the TV where they get most of the revenues to maximize ticket revenue. I hope they get stuck with a lot of tickets. I know that's a terrible thing to say, but similar to F1 in Vegas, where they vastly overestimated demand and sold 40 % of capacity, I'd kind of like to see them eat crow a little bit here. I think they'll just drop the prices and probably sell out. Well, here's the thing. They've already sold out on the first round. They've sold all of their tickets.

1:12:17I mean, there was the headline that you might have seen that there are almost 180 ,000 tickets that are still yet to be sold, which, by the way, is true. But they've yet to be resold. What we've seen happen is that FIFA crushed it in terms of navigating supply and demand dynamics. And some people are saying they artificially sort of misconstrued what the demand would look like. They sold all of those tickets. And now there are 180 ,000 tickets that other people who have already bought those original tickets are trying to now resale. And so the resale price has fallen 20 % over the past month. But the most important point here is that that doesn't matter for FIFA very much because they already sold the ticket.

1:12:59Now what's going to happen is because they have their resale portal, they're going to sell it twice. And they're going to take the 15 % cut of whatever that now discounted ticket price is. But FIFA is going to be fine from this perspective. So in terms of how they've navigated extracting the most amount of profits possible from this system, they've really done a good job here. They have crushed it for their bottom line. The question now is, which parts of this were legal? Which parts of this do we think should be illegal if they're not currently illegal? And now we're seeing a lot of investigations into FIFA.

1:13:36So there were 69 Congress members that signed a letter to Gianni Infantino, who's the president of FIFA, and they were criticizing his pricing strategy. They said that it was, quote, the most financially exclusionary and inaccessible World Cup to date. That doesn't really hold that much water. So they're just complaining so that they can kind of impress their constituents. But we have seen attorneys general in New York and in New Jersey and in Texas who are opening investigations into FIFA's pricing strategy. Texas is investigating whether they violated the Texas Deceptive Trade Practices Act.

1:14:09And the concerns that they cite are opaque pricing, artificial scarcity, and dynamic pricing that quietly raises rates. All of that, to me, sounds super valid. It sounds like that is exactly the kind of strategy that they... It's also what the airlines do. That's the thing. And Infantino said, well, if this is the problem with me, then this is a problem across the rest of America. And so this is why I think this is a really important story here, because this dynamic pricing thing is becoming a huge political issue now, not just in the world of sports, but across everything. grocery stores is now the big concern because a lot of these grocery stores like Target and Walmart and Whole Foods, they're all experimenting with these digital price labels, which allows them to adjust the price instantaneously.

1:14:57And they're now employing that strategy. And all of these state legislatures across the U.S. are now thinking, do we need to fundamentally rethink the way that we regulate dynamic and instantaneous pricing? Because with AI, with algorithms, you can essentially just jack up the prices, even based on your personal consumer data. I mean, you could essentially realize that there's a rich person who walked into the store. Let's change the price because we know that they will be down to pay more. Really interesting regulatory questions here emerging. And it's almost as if the World Cup is kind of the case study for this larger economic debate.

1:15:36I'm convinced a grocery store could dynamically raise the price of a box of tampons to 40 bucks if it's a dude buying them. Because it's like, yeah, that's fine. Put it in the bag. I'm on out. Go ahead. Go ahead. But what you're talking about is most service contractors walk into a home. If it's a nice home, I mean, not that they shouldn't do this. What do you think their price estimate is when they walk into a multimillion dollar home to hang curtains or do landscaping? There's dynamic pricing everywhere. The story that's been underreported, I like to talk a lot about brand management. When I went to the World Cup in Russia, first off, you're supposed to get a visa to go to Russia.

1:16:15Even back then, we had very tense relationships with Russia. And you know what they said? They said, take a picture of you with your ticket. That's your visa. Take a picture with you next to your ticket, and we send you a visa. And I'm telling you, they were, I don't know if they threatened to imprison people or not, or they're just a very friendly people. You could not go 50 feet without someone saying, Welcome to St. Petersburg. Where are you from? And it was such a great, and they handled it so well. And it was such a great event. The nation of Qatar, I'm not a big fan of Qatar. $14 billion in international funding to U.S.

1:16:50universities. Four have come from Qatar. I think it's a very important question. What do they want in exchange? I had an amazing time in Doha, And it couldn't have been better produced, better managed. And I have warm feelings or less cold feelings towards Qatar. We are harassing incredibly well-respected football officials from Somali and turning them back to Istanbul. We are pulling bullshit on Iranian managers and not granting them visas. I mean, we are acting like just such assholes. While the world's eyes are on us and people, again, this administration fails to realize soft power is the real power here, how people feel about you.

1:17:42And I think a lot of people are just saying, fuck it. Do I really want to go to a nation that does people? When I went to Russia, people said, aren't you worried? Isn't it dangerous? I have never felt safer. You could just tell word came down. Treat tourists like they're, you know, treat them really well. And I imagine a guitar, if you've ever fucked with a tourist, you might not be heard from again. And instead, in the U.S., we've decided, oh, no, let's start harassing people at the border, including really esteemed football officials. People, you know, on teams and coaches and players from nations where we are at, not war, at military action, whatever you want to call it.

1:18:25these moves, 98 % of people in the world are never going to come to America. 90 % of them are never going to be an American. So their decision to send their kids to a school here to invest in U.S. stocks, to maybe alert the embassy about a terrorist cell they've heard is being formed here that has plans to harm us or our troops, all of those things come down to How do people feel about the American brand? And it used to be the strongest brand in the world. Yeah, they're obnoxious. Yeah, they're aggressive. But their heart's in the right place. And we are losing. Big butt there. But we are losing that goodwill through just.

1:19:08Anyways, I'm beside myself and saving$38 ,000. And by the way, it's reflected in prices. If you look at the airfare prices, which have obviously gone way up in combination with gas prices and also the World Cup, the prices that are exploding aren't the transatlantic prices to the host cities. The prices that are exploding are the domestic flights between different host cities. That's interesting. So what we're seeing there is it's the Americans are going to be showing up. And it might be that we see a lot less of the foreigners showing up for many of the reasons that you point out. So just one final point, just thinking about the economic impacts of this World Cup.

1:19:49And I think it's going to be enormous. Like we saw that in the recent jobs report that leisure and hospitality services exploded and really carried that number. A lot of people think it's because of the World Cup and all the jobs that it might create. But then there are also the costs. I mentioned the airfare prices, also the hotel prices in the host cities that have really, really skyrocketed up 80 % year over year in 13 of those locations. But then also really interesting transportation costs, specifically public transportation costs. So a New Jersey transit ticket from Penn Station to MetLife, it usually costs about$13 for the World Cup.

1:20:26They hiked it up to$150. They got a lot of pushback and they reduced it back down to around 100. But this has become a real problem for a lot of people. We're seeing it in a lot of cities. And a lot of people are now thinking and talking about, genuinely, about walking to the stadium as opposed to taking public transportation. And this was a clip that we saw on our social media feeds. This was a guy who was talking about this strategy. Let's play this clip and get your reaction. Is it possible to just walk from New York City to MetLife Stadium in New Jersey? I'm going to find out. So I went on Google Maps and I found a route that was 11 miles long and would only take four and a half hours to walk.

1:21:04But it was all on sidewalks. So I grabbed a pair of shoes that turns out had no art support and headed off across the George Washington Bridge, which is the only way to get from Manhattan into New Jersey. This is the only walkable bridge across the Hackensack River. And given that you can't park at MetLife Stadium and the shuttle bus is going to be$80 round trip, I think a lot of fans are going to try to make this slog. So affordability is now such a problem that we're going to walk along the highway to get to MetLife from New York City to MetLife Stadium. What do you make of this, Scott? When my dad got divorced for the third or fourth time, he was living alone in Ocala, Florida on a mattress.

1:21:43And he got half the furniture in the divorce. And he had a little one bedroom and there was furniture everywhere. Like he couldn't move around. Like there was furniture stacked on furniture. And he was using as a blanket my NFL sleeping bag from when I was eight years old. and I hadn't seen him in a while. I was excited to see him and he's like, let's go grab a few drinks.

1:22:12He's like, we're going to be responsible. We don't want to drink and drive. We're going to walk. I'm like, we're walking? I'm like, let's just take a cab, dad. He's like, no, no, no, no, no. We walked three miles to the local Red Onion to drink with some of the most unfortunate people and then walk home to where my dad went to sleep under my NFL sleeping bag from when I was eight. And I literally thought to myself, God, I just, I'm so impressed. He's like not really depressed right now. And I remember thinking, you know, I was like 22, 23 at the time. I remember thinking, what's, I need to think about this.

1:22:56What series of bad decisions led my father to walking three miles from the Red Onion after two for one night back to his apartment that was jammed. It was jammed full of furniture. He wasn't willing to give up in the divorce. Oh, God. I mean, I mean. It is truly insane. Things got better, though, when he decided to move in with three other guys who were all prison guards at the local Ocala Penitentiary. I'm like, you know when you realize your dad, your dad doesn't make great decisions all the time? Yeah, mile two on the way to the Red Onion. Do you have a question? Did you have a question? I'm like, hey, I don't know if we like maybe we shouldn't do it.

1:23:49Like, what do you kind of just go with it? No, I don't know. I should have. I didn't. I didn't see. Like, my dad was not. I could tell my dad was not doing well. I don't know if he. Fortunately, my dad was too self-absorbed and non-thoughtful to really recognize in a sober fashion the life he was leading. Like, he just, thank God he did not have Instagram.

1:24:15But I remember I was working in investment banking at Morgan Stanley and living a semi-fabulous life in New York for a 23-year-old. And I remember going to Ocala, Florida and thinking, Jesus Christ. Anyways, Ed, anyways, don't, study hard, don't do drugs, don't get divorced four times. Yeah, exactly. I think probably the final message is, don't walk to MetLife Stadium from New York City. I mean, if you're - Yeah, I don't think that's a good idea. Yeah, I'm not sure. Not sure that that is worth it. Okay, let's take a look at the week ahead, Scott. We will see the import price index and US retail sales for May.

1:24:54All eyes will be on Kevin Walsh for the Fed's next interest rate decision. It will be his first time delivering the address as Fed chair. Do you have any predictions? We are about to see the biggest manufactured scarcity, which will result in a non-price or a price disparity between price and value, the likes of which we have never seen. We are going to see the greatest transfer of wealth from consumers to an investment since crypto, and it's based on manufactured scarcity. And I believe what happened was the following. Musk said, you know what? I own 40 % of this company. If it goes up 20 % more based on non-natural demand by being put in the NASDAQ 100, that takes the value from$2.2 trillion to$2.4 trillion.

1:25:43That's an incremental$400 billion. I own 40%. I'm going to get$160 billion if I can get a waiver here. So wouldn't Musk be stupid not to call the president and say, hey, why wouldn't you let great American retail investors have access to one of the great American companies? Call your buddy Pahal. And by the way, if you can see your way clear to, I don't know, getting us in the NASDAQ 100, like unlike any other firm previously in history, I might take, say, one or two percent of my incremental gains from this gaming of the system and apply it towards midterm elections, which I'm allowed to do because of Citizens United.

1:26:18Wouldn't Musk be stupid not to put pressure or bribe the president to take his stock up 20 percent, resulting in an incremental$160 billion in wealth creation through the manufactured scarcity that is occurring right now, courtesy of a corrupt SEC and president? Where's the prediction? The prediction is Musk is going to spend more on the midterms than any individual has spent on any election. Got it. Okay, yeah. Yeah, I think that, yeah, it's an interesting prediction. Just to follow up on that, agreed on the artificial scarcity and the artificial demand. But I think what we're about to see is one of the largest selling events in market history over the next six months.

1:27:00I think everyone who got the allocation knows that this price is ridiculous for SpaceX. I think they need to figure out a way to sell as much of this stock as possible once they have taken their returns and gotten their pop. of whatever it might be. And so I think that SpaceX stock will be cut in half over the next six months. That's my first prediction. Second prediction, I said it before, I think inflation reaches 5%, and I think it is sustained around that level for at least six months as well. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carty.

1:27:40Our research team is Dan Shalon, Isabella Kinsel, Kristen O'Donoghue, and Mia Silverio. Jake McPherson is our social producer. Drew Burrows is our technical director. And Catherine Dillon is our executive producer. Thank you for listening to Prof. G Markets from Prof. G Media. If you liked what you heard, give us a follow and tune in tomorrow for a fresh take on the markets.

1:28:02Lifetimes

1:28:09You have me In kind reunion

1:28:20As the world turns

1:28:25And the dark flies

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