Iran, SpaceX, and a Nervous Bond Market | The Week

Ajouté : 2026-05-30

[00:00:01]Welcome to the week from Prop Media, where we break down what mattered and what it all means. I'm George Han and it's Friday, May 29th. This week, we take a look at why the bond market is panicking and why that panic has been a long time coming. War is pushing up oil prices, oil is feeding inflation fears, and inflation fears are pushing borrowing costs higher. Let's get into it.

[00:00:33]Let's start where the news started.

[00:00:35]Iran, day 88 of the war. On Tuesday's raging moderates, Scott had a fitting analogy for where things stand.

[00:00:44]>> Right after when I uh I was at Morgan Stanley and I was going to do a third year, I called the MD at Morgan Stanley who ran the LA office and said, "I'm quitting." and I got a backpack and I uh went to Europe and I was traveling around Europe and I met up I tracked down this woman who I was just enormously in love with and we spent about 3 weeks traveling around Europe and we were in Vienna and we thought let's go to Hungary. There is a point here and I'll get to it in about two hours.

[00:01:15]>> Um >> I got all the time in the world for a backpacking love story. This is so much better than nuclear dust. This will date me, but I went to the American Express office and cashed travelers check.

[00:01:26]>> I remember doing that with my parents.

[00:01:28]Yeah.

[00:01:28]>> And I had one of those fanny belts because we're also worried about having money stolen from us from these evil Europeans.

[00:01:34]>> And I got literally a stack a brick of force of Hungarian Florence. And so we're head to Pesh to Budapest. And I'd heard some sort of rumors or or murmurss of needing a visa. But we got on the train anyways. And they stop at Hungarian border and they come and they say, "Visa?" And I'm like, "No." And she and I look at each other. I'm like, "No." And they pull us off the train in the middle of the Hungarian forest and say, "You're on your own." And there's one cab driver there driving a lot, which is a, you know, the Russian equivalent of a Yugo. And because clearly this happens, there's always a couple of dumb Americans who don't get the visa. He's, we're in the middle of the forest. I'm thinking, "Okay, he's going to murder me." and you know uh rape my girlfriend one car and the guy and I see I say how much and he says I don't know whatever it was like 100 bucks or something and I'm like 90 and he looks at me and just smiles because he recognized at that point in the middle of the [ __ ] Hungarian forest at 11 p.m. and there's one way out of the Hungarian forest.

[00:02:40]>> I have no leverage. Trump is me in the Hungarian forest right now.

[00:02:45]>> There we go.

[00:02:47]loop.

[00:02:47]>> There we go. Closed loop. Because he never bothered to consult Congress and offended them. Because he never even signed up or even briefed European allies. Because he did not in any way coordinate anything around intelligence around the Straits of Hormuz, getting expats out of the Gulf, figuring out putting in place the right defense mechanisms.

[00:03:10]He has no [ __ ] cards. America wants him out. Iran knows America wants him out.

[00:03:18]>> The reported framework of ceasefire extension, Hormuz reopening, and resumed Iranian oil sales may sound like progress. Markets certainly treated it that way. Oil prices fell this week on hopes that shipping through the straight of Hormuz could normalize again, but the details remain murky and even the White House has disputed parts of this reporting. Scott and Jess call it like it is. an exit ramp dressed up as dealmaking.

[00:03:48]Trump declares a vague victory and leaves. Iran probably comes back stronger. And while the US is stuck in the forest, China has been inching closer and closer to Russia. Putin and she met in Beijing this month with new signs of energy and strategic cooperation. On China decode, James King reminded us that America's rivals are not watching this war as bystanders.

[00:04:16]They're watching for leverage. I think, you know, the big picture here is that what we're seeing is the axis of authoritarianism in action. This kind of bromance between Putin and C is really striking. Um, and I've been looking at the fact that since Russia's invasion of Ukraine, we've seen these two big powers draw together much much more closely.

[00:04:42]That includes diplomatically, economically, but also militarily. And that's why it really matters for the world. Um, I would say actually that the sort of closeness that we've seen between Russia and China since the Russian invasion of Ukraine is probably the most consequential geopolitical shift that we've seen in the world over the last decade. I mean, I know there are several competitors for that title, but this one is really big. On the one hand, we have a superpower, China. On the other, a big power, Russia. Their combined population is about 1.55 billion people. Vast territories. It's the second and the ninth largest economy. And both of these countries are nuclear weapons powers. It seems the markets are finally catching up to what the war has actually done to the economy. Last week, inflation fears sent bond yields to levels not seen since 2007.

[00:05:45]With the 30-year hitting 5.2%.

[00:05:49]The odds of a Fed rate hike before year end, which started the year below 10%, have now crossed 40%.

[00:06:00]The bond market is sounding an alarm that the stock market has been ignoring.

[00:06:04]On Monday's Profy Markets, Scott discussed what the downstream effects may start to look like. the bond market has stepped in and said, "Okay, with energy going up, uh, we have greater inflation, which is pushing bond yields up and increases the odds that the Fed will raise rates." Typically, when the bond market goes up, it draws market out money out of the equity market because people can get a better yield uh, with what they feel is a safer investment.

[00:06:32]And also, fewer deals get done because it gets more expensive to buy things. it gets more expensive. You know, everything in the economy, your your auto loan, your mortgage, your credit card goes up. And the yield on the 10-year Treasury kind of sets the bar for interest rates across the economy, right? And higher yields also increase the cost of servicing our debt. In 2026, you also spend a trillion dollars on interest payments. That's 88 billion a month, roughly what we spend on defense and education combined. And then the question is could this trickle down to software and AI who've taken out private credit loans? Private credit loans are typically floating rate. So what happens when the AI shell companies that are built on debt? what happens when their debt service costs go up and then they hit a bump in the road uh where their capex continues to go up but the revenues don't scale in line with their capex which according to the FT and everyone every other analysis I've read says it'll be nearly impossible for revenues to keep up with capex at AI companies. So you could have shavings of [ __ ] on a [ __ ] salad here, right? You could have costs go up, so consumers take their spending down, and then the companies that are are most levered or who have been tapping the credit markets uh see their costs explode while maybe registering a a decline in revenue growth that can't, you know, there's no way they can live up to their expectations. So, you know, we keep saying the deficit doesn't matter until it matters. It feels like that mattering may be may be starting.

[00:08:03]Ed explained why this time there doesn't seem to be an easy way out.

[00:08:08]>> The bond market was the adult in the room.

[00:08:10]>> Trump issued these tariffs. He came out with his stupid billboard in the in the garden and everyone freaked out. Stock market investors freaked out. Bond investors particularly freaked out where you saw the 10-year yield jumping more than 50 basis points in three days. It was the biggest three-day jump in more than two decades. It was it was huge.

[00:08:29]And Trump admits, "Oh, the bond market's freaking out here." And then he tacos and he puts the tariffs on pause. And the learning from that was, okay, the bond investors, the the the bond vigilantes, as they call them, they're the ones who are going to sort of steer uh Trump's sort of wacko policy in the right direction. If he starts to do things, they're going to have real serious consequences in the markets. So the question then becomes like is is the same going to happen in in the current situation? Will bond yields today change Trump's economic policy like he did with the tariffs? The trouble is the new policy is a war in Iran which is a lot more difficult to just turn off. I mean we've already spent I mean according to Pete Heg more than $25 billion on the war. That was a month ago that he said that. So it's probably a lot larger.

[00:09:27]Trump's already requested $1.5 trillion dollars for the defense budget for next year. We've already lost 13 lives, nearly 400 wounded. Many other lives have been lost. I mean, the costs here are a lot more significant and a lot more personal, a lot more sensitive. I'm just not sure that the bond markets have the power that they used to have. um which to me suggests that yields will only continue to rise, which increases the likelihood that all of those dominoes will fall in the way that we just laid out.

[00:09:57]>> We'll be right back after the break.

[00:10:02]>> Support for the show comes from IMA.

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[00:12:31]Welcome back. While economists are trying to price the true cost of a war, Wall Street is busy pricing something else entirely. SpaceX filed to go public this week. Target valuation $2 trillion.

[00:12:49]That would make it the seventh most valuable company in the world, more valuable than Meta, Berkshire Hathaway, and Broadcombined on revenues lower than Macy's.

[00:13:05]On Monday's ProfG Markets, Ed ran the comparables.

[00:13:08]>> And let's just look at what that valuation actually means. We know that they generated $19 billion or a little less than that in 2025. So this means that this company is valued at $ 106 times sales. Just want to compare this to Nvidia. By the way, their Q1 revenue, which was $4.7 billion, the revenue was grew 15%.

[00:13:31]So this company is the next hot company.

[00:13:33]It's growing at 15%. And it's valued at 106 times sales. Let's compare it to Nvidia. Nvidia just reported their earnings. They grew their revenues by 85%.

[00:13:44]They generated $ 58 billion in net income. That's GAAP net income up 211% year-over-year. They are trading at less than 22 times sales. So the multiple there is a 5x difference in that multiple despite the fact that Nvidia is growing more than five times as fast as SpaceX and also it's generating billions of dollars in in in in cash flows. This is a losing money business.

[00:14:17]>> Scott went on record with his predictions for Musk's IPO. This is where he thinks it's headed.

[00:14:22]>> Oh god, I'm going to hate this one. This thing does not price at $2 trillion. At some point, people have got to put the crack pipe down. I think this thing is a $600 billion company. If you look at generously at the wind up of all of it, I think they're going to have to cut back on the on the capbacks at XAI. I I wouldn't be surprised if they end up closing that thing down at some point.

[00:14:42]Um, yeah, I think that's I think a safe bet is that within 6 to 12 months, it's sub a trillion dollars. And after a week of war, markets, and great power politics, the most human moment came from Thursday's conversations episode with Gavin Newsome. Almost 8 years as governor of California, the fourth largest economy in the world. But the moment that stayed with us, wasn't about policy. You know, I was that was all about me and I was just dealing with my own insecurities, my own anxieties. put a mask on and uh you know tried to be what I thought I needed to be. Um but my face was starting to grow into it. I was becoming someone I wasn't and I wasn't present. I wasn't there for my mom, wasn't there for my sister and the people that mattered most. And it took a phone call from my mom, which you're referring to in a book where she left a voice message that says everything. Talk about a young man was never around. She had to leave a voice message um saying that her last day in life was a few days later on a Thursday where she was going to do assisted suicide. She was in so much pain because of advanced cancer and uh and she just left the message saying well if you want to see me before then um it will be my last day and it was such a wakeup call and you know you don't get it over there then no doovers here man you know don't dream of back to dream of regret I don't want to dream regretting and you know I I sat there with her last breath and you know it was a tough moment being there with her holding her hands um and till she took her last breath and you know I still didn't have the courage to say what I said to her after she passed away. And I stood there 30 minutes sitting there with my hand my head on her stomach um just saying all the things that I wish I could have said and had the courage and guts to say um before she passed. And um you know I don't wish that on anybody.

[00:16:35]And so you want to be a man, you want to be a son, you want to be a leader, then you know, man up and uh be a partner, uh be a caregiver, um be other people oriented. Um it's not just about you. And um you know, it it came for me a little bit later than it should have. Um but um I hope and pray for others it doesn't for them.

[00:16:57]>> We'll be back next Friday with a fresh edition of the week from Prof Media breaking down what mattered and what it all means. Until then, we'll see you around the ProfG Universe.