After last Friday’s extreme move (More Than Rates Moving Markets) we had a relatively tame week with the S&P and Nasdaq both gaining around 0.7%, but neither getting back to their highs of the week, set on Tuesday. Yields drifted moderately lower on the week, primarily on the back of steep declines in the price of oil (though I do feel the need to point out the Jan 2027 WTI contract, which I’ve been focusing on, is still at $76.1, barely one dollar lower than where it closed last Friday – I remain in the higher for longer camp). Credit spreads remain firm and the asset class remains “boring” which is a good thing!
Now let’s address two bigger picture issues that have been taking up a lot of time during recent client calls and visits. Space and AI.
Space: The Now Frontier
Space: The Final Frontier still gives me the chills! The excitement of exploration! The IPO of SpaceX and all the discussion it has created has brought back that feeling.
A colony of 1 million people on Mars! I love the concept! I have 0 opinion on whether the number of shares that Musk gets for achieving that target is the right number, but I love having that concept out there.
Think big:! This concept floating around, and now documented into Wall Street, excites me. On the back of Artemis II and the planned lunar landings, there is a lot of potential for new discoveries.
On a more practical (or near-term outlook) it can lead to AI and Data Centers in space. New sources of energy and potentially other materials.
But there are also important National Security elements that are gaining more attention.
Many members of Academy’s Geopolitical Intelligence Group lament that we have been “soft” on space. That we have ignored the real dangers to national security by not focusing on space as much as we need to. While the Space Force was a step in the right direction, many argue that we are behind (some might argue woefully behind) where we should be in terms of ensuring that space is safe and our interests are protected!
At the simple and on the not controversial end of the spectrum, is “space junk.” The debris in orbit is increasing. While not currently posing a risk, it is something that should be addressed better than it has been.
What about GPS and communications? I’m not sure that I could walk to the corner store without using some map app. The working assumption that “no one is interested in disrupting GPS” may be naïve? While at least 95% of communication remains “terrestrial” (fiber optic cables, undersea cables, cell towers, etc.) space will become increasingly important to communications. While it might not be “mission critical” to protect the communications equipment in space today, it could be.
Who will control discoveries?
Let’s say we find some vital resources on the moon (seems the most likely “surprise” that could occur in the near future). Who will control that material?
- At best, the discoverer and those with the capabilities to take advantage of such material.
- At worst, might is right.
We expect this administration, and future administrations, will spend more on space to support National Security. This is a bipartisan issue as we think about the myriad of possibilities for space. Not just the good and altruistic possibilities, but also about the risk that some other country doesn’t share such a cooperative spirit about the future of space.
This is by no means, “closing the barn door after the horses have run out,” but it is something that deserves more serious attention and money going forward.
The national security elements are in addition to the commercial opportunities that will be funded as corporations rush to harness the potential!
If waking up to a $2.1 trillion market cap (and the first trillionaire) doesn’t motivate entrepreneurial and capitalistic spirits, then I should just give up this job, because it would go against everything I understand about capitalism!
Space may be the “final frontier” but it is also the “now” frontier, which is incredibly exciting!
Hellbound and Down 