Episode 64 was recorded at 7pm EST on Sunday 28th June.

Become a paid subscriber to get full show notes, the episode slide deck, and access the rest of my work. Paid subs also get access to my AI Capex Monitor real time website and my Whatsapp channel chat that includes a number of my subs as well as LPs and other professional investors where I share a morning summary of the markets, real time market color & analysis, random trades I put on that I find interesting, and great interaction with many other professional investors

Subscribe now

Episode Slide Deck

Read more

In Episode 63, Benny and the 🐿️ were joined by Robert Wu. Robert is the founder and CEO of BigOne Lab, an alternative data and research company backed by S&P Global, serving leading institutional and corporate clients around the world. Robert writes for the opinion section of the New York Times and also writes at Baiguan and China Translated newsletters on Substack.

The show was recorded at 8pm EST on Thursday 25th June, 2026.

Become a paid subscriber to get full show notes, the episode slide deck, and access the rest of my work. Paid subs also get access to my AI Capex Monitor real time website and my Whatsapp channel chat that includes a number of my subs as well as LPs and other professional investors where I share a morning summary of the markets, random trades I put on that I find interesting, and market color I get daily from my vast network of PM’s, traders, and brokers.

Subscribe now

Episode Slide Deck (Below Paywall)

Read more

This is the 2nd of 50 essays on Capital Misallocation^TM that I plan to publish and is the sequel to my last essay - The New Mississippi. If you have yet to read it here is the TLDR version: John Law invented modern monetary policy, inflated the first transatlantic bubble, and destroyed France’s middle class in the process. In that piece I laid out the historical analog betwen the infamous Scottish genius and our current version of Law - Elon Musk. This piece is about the other bubble of 1720, the one with better financial engineering and a more instructive villain. I explore the mechanics more rigorously and compare “The Other Bubble of 1720” to the broad equity market and specifically the SpaceX IPO - a deal that The Squirrel and I have covered at length on here as well as on our podcast Benny & The Squirrel. As any good trader would, I then explore what would falsify the argument and then close out the essay with a few thoughts and conclusions.

Enjoy!

Subscribe now

ACT 1:

THE LEDE: Master of the Universe, Fool of the Market

Every bubble needs a buyer who has no choice. Not a greedy one, not a stupid one necessarily, but a buyer whom the rules require to show up. In 1720, the most famous victim of that machine also happened to be the smartest man alive.

Sir Isaac Newton is historically regarded as one of the greatest minds ever bestoweed upon the human race, but even with all that intellectual horsepower he was sucked in and thoroughly ran over by “The Other Bubble of 1720” - the South Sea Bubble.

To Newton’s credit he got long shares of the South Sea Company (SSC) early and, importantly, near the inflection point at around £300 per share reportedly. Then he responsibily exited with a handsome profit and then walked away with an excellent trade - exactly as a rational calculating market participant is supposed to behave. He even reportedly told numerous people about exiting and then lectured them on how it was the correct move, which is the motivation of the video I created and included above. Again, Sir Isaac Newton was the smartest human in England at the time (David Hume, the only legit competitor for that title, was only nine years old) and, as you would expect, he played the game extremely well ... initially.

Unfortunately, just like many people today chasing memory stocks, the professor was unable to control his emotions and jealousy of watching others get rich. Then he watched his banker neighbor’s wealth double, he watched a duke’s triple, and then he watched a man who couldn’t do long division become richer than him by a factor of two in less than three months. Reportedly, the subscription lines for SSC shares stretched out the door and down the alley outside the exchange. Pamphlets were everywhere promoting the stock and the whisper network - what we would now call social media with better attire - was in unanimous agreement: SSC shares are “Up Only” to borrow a modern bubble phrase.

Seeing all his neighbors and friends making (perceived) life-changing wealth led him back to the price board on Exchange Alley only to watch the number that he had correctly walked away from go vertical (see Micron shares today) causing his FOMO to go vertical as well.

Newton re-entered the SSC trade in June 1720 somewhere north of £700 per share. The greatest mathematical mind of his generation, the man who invented calculus to explain the motion of planets, stood in a line and handed over an enormous amount of his hard-earned money because he simply was unable to stand watching his less intelligent peers get rich owning something he had already decided to leave on the table. According to John Craig in Newton at the Mint, Newton’s documented loss was £20,000, a meaningful portion of the wealth he accumulated over his lifetime. Although some subsequent historians have placed it lower it doesn’t change the facts on the sequence of events that have plagued so many market participants over time.

Sir Isaac Newton: Master of the Universe, Fool of the Market

As a quick detour, I want to point out that it’s not just non-professionals that let emotions take over their rational brains and buy at the height of financial bubbles. Stanley Druckenmiller, one of the greatest traders in history, bought $6 billion of tech stocks at the height of the internet bubble 26 years ago.

It makes you really wonder about what it is that drives humans mad during financial bubbles if one of the smartest mathematical minds in history and one of the best traders in history also succumbed to this behavior against their better judgement. We discussed Newton’s initial entry and early exit above but it should be noted that Druckenmiller actually had already lost $600m trying to short tech stocks on an initial $200m short. So clearly he knew it was irrational and sold early just like Newton. However, being a world class speculator, Stan sold shares in the hot securities of the day before buying whereas Newton just sold the shares he purchased early.

After over 20 years of participation in markets and trading, I believe that the skill that actually separates the best investors isn’t intellectual ability but, rather, the ability to harness their emotions. In essence, the traders who can handle the most pain & not put themselves into positions of weakness with poor liability structures (i.e. leverage & short-term funding) are the ones able to avoid these dramatic instances of capital loss. As we will discuss later, life and markets are non-ergodic and so avoiding the absorbing barrier of left tail events can lead to superior results even without ever achieving banner up years through the power of geometric compounding.

The historically revered genius that possessed the brain that gave us calculus never once talked about this financial tragedy of a decision publicly. The embarrassment of the position was worse than the money.

Three hundred years later, a different kind of forced buyer showed up. Similarly, it has no emotions at all.

ACT 2:

THE MECHANISM: The South Sea Company

The South Sea Company was not primarily a trading company. It was a financial instrument with a good story attached.

In 1711, England had a problem on its hands. The previous nine years of war against France had generated approximately £10 million in unfunded government debt: specifically, floating “short annuities” that The Crown owed to various holders but couldn’t cleanly service. Lord Treasurer Robert Harley needed to restructure the debt and, along with John Blunt, came up with an elegant solution. These two early financial engineers conjured up the idea of converting the annuities into equity in a newly chartered company, the South Sea Company, which received in exchange a monopoly on trade with Spanish South America.

An annuity, to be precise, is a fixed periodic payment: think a government bond that pays you £50 a year for a defined term. The annuity holders back in 1711 were receiving stable, predictable income from The Crown. Blunt’s offering converted legacy annuity holders’ income stream into an ownership stake in a commercial enterprise. Like with all convertible bonds, the conversion ratio mattered enormously given that it determined whether you were made whole, enriched, or quietly robbed. John Blunt set the ratio to benefit the SSC’s balance sheet, not the annuity holder - a move that bagholders have witnessed for the subsequent three centuries.

We will refer to this maneuver as Operation 1, and it is precisely the mechanism that this essay’s thesis depends on the most. The annuity holders did not choose to become shareholders as Parliament voted them into shares and the conversion was statutory with no opt-out clause. If you held a short annuity, you held SSC stock at whatever conversion ratio the directors had set and at whatever price the market assigned. This operation was one of the earliest debt-for-equity swaps in financial markets at scale in history.

This is the 1st Category of Forced Buyer: Statutory + Price-insensitive + No discretion.

Three Structurally Distinct Financial Operations

Operation 1 is the one that matters for the structural argument. Operation 2 and Operation 3 are the mechanics that drove the ensuing mania that, as discussed above, had such a strong siren call that it even seduced the father of classical mechanics to tragic loss. The annuity holders were something different: they were the original price-insensitive buyers, the ones whose conversion gave the SSC its initial market weight and its first artificial floor.

John Blunt, merchant, projector, and the most consequential financial architect of the early eighteenth century, understood something that Newton didn’t: the rule was the product. The trade monopoly was marketing. South American ports were mostly closed to British ships. In the nine years between the company’s founding and the 1720 mania, the SSC conducted almost no meaningful commerce with South America at all. What Blunt sold to Parliament was a mechanism: debt disappears into equity, and the company gets to set the terms. As Larry Neal documents in The Rise of Financial Capitalism (1990), the SSC’s real business model was the conversion arbitrage. The underlying asset was the government’s debt obligation. The story was just the story.

The share price wasn’t a reflection of business value. It was the input to the conversion formula. The company’s financial health depended on keeping the price up long enough to complete the conversion at favorable terms and exit.

The SSC was essentially a government-sponsored hedge fund that got to write its own rebalancing rules. What could go wrong?

ACT 3:

THE ERGODIC LENS: Physics of Financial Ruin

Flip a coin that pays +50% on heads and −40% on tails. Across 1,000 people who each flip once, the average looks positive. For one person flipping 1,000 times, the sequence converges to ruin: you’re multiplying, not averaging. The geometric return per flip is negative even though the arithmetic expected value is positive.

Ole Peters spent the better part of a decade at the Santa Fe Institute formalizing this distinction. He calls it ergodicity economics. The core insight: expected value calculations break when you can’t repeat the experiment. Peters published the framework in “Ergodicity Economics” (Nature Physics, 2019). Standard financial theory systematically mismeasures risk by treating non-repeatable bets as repeatable ones.

The ergodic question for any position: if you hold through the full cycle, do you get the ensemble average, or do you get the path? For most people, you get the path. The path includes the crash.

When I set out on first defining and then populating a list of the largest 50 instances of Capital Misallocation^TM, I immediatley realized I needed a way to measure them to put them on an apples to apples basis. I leaned heavily on Ole Peters work and thought immediately about my friend David Dredge, CIO of Convex Strategies, whom loves to discuss this topic with me at length. The traditional manner of measuring disaster is strictly on a dollar of damage basis. The issue with that historical comparions lose credibility and it says nothing about the percentage of the population that saw their lives hit the lower absorbing barrier of ruin due to the Capital Misallocation of that particular instance in space time. I settled on the scoring system and then ranked over 100 instances of modest to severe capital misallocation. I then recursively whittled down that list to 50 that you will be able to read about on here over the next 18-24 months. Below you will find a rough summary of the meaning of each score. Note that even though I used a linear 1 - 5 rank value system the reality is that in degree of damage the ruin inflicted rises in a very non linear rate especially as the Ergodic Score rises.

These scores reflect realized outcomes, not ex-ante probabilities. At the time of entry, most participants could not reliably distinguish their position from a more favorable one.

The architecture of that table is the point. Blunt scored 1 not because he was smarter than Newton in any abstract sense (Newton, by most measures, was the more capable mind). Blunt scored 1 because he designed a system that guaranteed his exit while others held the float. The intelligence that mattered wasn’t analytical. It was structural. He understood that being on the right side of the rule was more durable than being on the right side of the trade.

Newton’s £20,000 loss wasn’t irrationality. Dale et al. (2005) document that the market wasn’t obviously mispriced on ensemble metrics even at elevated prices. Newton’s problem wasn’t a miscalculation of the ensemble.

Sir Isaac’s problem was that he held a non-ergodic position through a non-repeatable event, and it was THE PATH that killed him.

ACT 4:

THE MODERN MACHINE: Inelastic Markets

SpaceX went public on June 12, 2026 at $135 per share, achieving a $1.77 trillion valuation on day one. The float was 555.6 million shares (approximately 4.2% of the 13.1 billion shares outstanding). The remaining 95.8% was locked.

Elon Musk holds approximately 6.1 billion shares (849 million Class A, 5.2 billion Class B, including restricted shares). His lockup expires one year after the IPO, June 2027 at the earliest, with no provisions for early release under any scenario the SpaceX 424B-4 prospectus contemplates. He retains approximately 82% of voting control through a dual-class structure with Class B shares carrying ten votes each. The company went public at a $1.77 trillion valuation with a structure that makes hostile action or forced dilution essentially impossible.

The lockup isn’t a single cliff. It’s structured as seven separate tranches releasing between August and December 2026. The largest single tranche (approximately 1.3 billion shares) corresponds to the Q3 earnings window. Before that, the float stays thin. The Squirrel kindly sent me the detailed lockup schedule that you see below so you don’t have to take my word.

The Nasdaq Fast Entry rule is where this becomes a mechanism rather than a story.

Standard index inclusion (S&P or Nasdaq adds a new constituent) involves a pre-announcement window of days to weeks. Passive funds accumulate over time. Arbitrageurs front-run the announcement, provide liquidity, absorb price impact. Imperfect, but it distributes the forced-buy pressure. The Tesla S&P 500 inclusion in September 2020, the last large comparable, generated approximately $50 billion in passive demand across a quarter with meaningful float and substantial short interest to absorb it. Note some of that short interest was from your author whom wishes he understood all these dynamics back before the inclusion. My friend, and former guest of Benny & The Squirrel, Mike Green observed on a recent episode of the Excess Returns podcast that the Tesla situation “pales in comparison” to what is implied within the SpaceX structure.

If you are interested in a deep discussion on The Inelastic Market Hypothesis and like a jovial high level financial markets conversation you should watch the episode of Benny & The Squirrel when we had Mike on as a guest.

The Nasdaq Fast Entry rule change collapses that window to 15 trading days from listing without either a seasoning period or a liquidity requirement. SpaceX’s market cap at $1.77 trillion exceeds the smallest Nasdaq-100 constituent by a margin that makes the question academic. The revised weighting methodology caps index weight at three times a security’s free-float-adjusted market capitalization which mechanically inflates index weight and mandatory purchase obligations beyond what the available float can absorb. As the SEC comment filed by Christon Khong (SR-NASDAQ-2026-004) argues, this structure treats a thinly floated stock as if it had a much larger tradable supply, “creating incentives for index inclusion strategies that may not align with long-term market quality.” Passive funds like QQQ are compelled to buy algorithmically, at whatever price the market presents, because the rule mandates them to do it not because they are excited about buying it at the valuation implied by the market price.

The QQQ ETF alone manages approximately $490 billion in assets as of June 2026. The full Nasdaq-100 ecosystem, which includes the QQQ plus every ETF, levered ETFs, mutual funds, and institutional mandates benchmarked to the index) is approximately $1.5

trillion. Even a modest weight assignment generates a forced-buy obligation measured in billions of dollars, aimed at a float of 555.6 million shares.

The Gabaix-Koijen inelastic markets framework estimates that $1 of passive inflow drives $5 – $8 of price impact due to inelastic supply. This means that every dollar of forced buying moves the price 5x - 8x more than expected in the elastic market framework most participants have been taught and operate with still to this day. When Mike was on our podcast he relayed to The Squirrel and me that he believes that inelasticity could be as high as 20:1 now. At a float this thin, that multiplier doesn’t compress as the supply math is explicit - passive demand heading into the inclusion window is approximately two times the available float. Two times. Before the first insider is even eligible to sell into it.

Green’s own formal research underscores why this is not merely a liquidity inconvenience but a structural fragility. In March 2026, Green, Hari Krishnan, and Stephan Sturm published an excellent paper titled “A Model for Passive That Breaks the Market.” In that paper they layout a CIR-based mathematical model demonstrating that once passive share crosses approximately 65% of equity ownership, index volatility increases at a cubic rate. If passive share rises above roughly 83–87% ownership, the authors predict that market stability breaks entirely even without any outflows. The model treats 83% as an outer bound, and Green himself estimates we are currently at approximately 55% passive by market share, gaining about 4% per year. The paper’s co-author Sturm presented it at HKUST under the title “Passive Fragility” and stated the conclusion plainly - “the major indices have a positive probability of hitting 0 before rebounding, over any finite time interval” once the threshold is crossed. SpaceX’s 4.2% float does not need to wait for that aggregate threshold. It arrives at the micro level on day one making it a single security where passive demand already exceeds available supply by a factor of two. The macro fragility Green and others model for the market as a whole is playing out on a miniature relative scale in a single name.

The structure is the same. The forced buyers changed.

This is not an argument that I think SpaceX equity is worthless. It’s an argument that the price you pay when a rule forces someone to buy has nothing to do with what SpaceX is worth on a strictly fundamental basis.

The rocket is real. The rule is what sets the price.

Green’s recently explained to me on the phone that his analysis shows that passive flows alone are contributing approximately 18% per year in endogenous price appreciation to the largest U.S. equities — more than many of those stocks have actually appreciated over recent years. The implication is that fundamentals are not driving the marginal price. The flow is the actual price driver. In his 2020 white paper “Policy in a World of Pandemics, Social Media and Passive Investing,” Green wrote that these vehicles are “not passive investors”, they are mindless systematic active investors with zero interest in the fundamentals of the securities they purchase.”

John Blunt would have recognized the archetype immediately: a buyer that shows up because the rule says so, at whatever price the market presents, with no discretion and no exit clause.

If you look closer at the lockup table above you see that it’s structure confirms the supply math. The seven tranches that are scheduled to be unlocked in the final five months of 2026 release supply gradually, but into a float that was already architecturally insufficient for the passive demand queued behind it. The largest single release, ~1.3 billion shares around Q3 earnings, arrives after the initial passive inclusion wave has already set the price. Insiders selling into the first tranche are selling into a bid that government and SEC approved passive mandates have created. The people who need the exit in month six are selling into whatever is left.

Your retirement account is buying a ~$1.8 trillion company at a 4.2% float from the people who got in orders of magnitude lower.

The market is working exactly as designed.

ACT 4.5:

THE SIMULATION: Attempt to Falsify

I ran this analysis in an attempt to try to falsify the thesis. Note that I am aware of the shortcomings of a stateless ergodic analysis, especially funny considering I dedicated a whole section to non-ergodicity above but I think it was a worthwhile mental exercise nonetheless.

The model takes the variables listed below and then simply grinds them against each other until something breaks.

Key Variables

• passive index demand

• available float

• buyback supply

• lockup release schedules

The question at hand is fairly simple - “At what point does cumulative passive demand exceed the float available to absorb it?”.

That precise moment is akin to the Rubicon in that once you cross it, there is no turning back, or in this case there is no longer any active counterparty pricing shares against fundamentals.

Figure A Float Ratio Fan Chart:

Four scenario paths for demand/float ratio across a 12-month post-inclusion window.

Figure B Buyback Absorption:

Buyback-generated supply against passive demand inflow under each scenario.

The base case puts crunch probability at 12%. Demand hits 0.84x of available float at peak. GK price impact runs to +82%. That is the optimistic read. The stress scenario puts crunch probability at 53%, demand/float at 1.01x, peak price impact at +106%. In the liquidity crunch scenario those numbers become 76%, 1.14x, and +137%. The Garber bull case sits at the other end: 0% crunch probability, demand/float at 0.59x, price impact of +44%.

Then the model produced something I did not expect to be honest.

When you run the velocity comparison, the float depletion rate for the 1720 South Sea Company during the Subscription 1 and 2 phase (April 14 to late May 1720) was 0.124x per week. The 2026 liquidity crunch scenario generates a depletion rate of 0.1080x per week across months one through three post fast entry. That is an 87% structural match. Three hundred years apart with different instruments and markets. Yet, we find a similar rate of mechanical consumption.

Figure C Cumulative depletion paths:

Float depletion over the 12-month post-inclusion window under each scenario.

Figure D: SSC 1720 vs 2026 velocity comparison:

Float depletion rate match across 300 years of history.

The 2026 version is actually more extreme as the ratio of Demand-to-Float peaks at 1.40x vs 1.17x in 1720.

There is one place where the 1720 episode had an accidental advantage. The South Sea Company closed its transfer books on June 23, 1720 and this meant that zero shares changed hands legally for 60 days.

The forward price peaked at £1,050 during that freeze. When the books reopened August 22, the spot price had already fallen to £820. It was not policy. It was a clerical pause that gave the market a moment to find itself. The 2026 version has nothing like it. Lockup releases in months six and twelve add supply ($70B and $105B respectively) but passive demand never stops. No pause. No price discovery window. The machine keeps running.

Figure F: Scenario KPI dashboard:

Full output across all four scenarios.

The Garber scenario is in the model. It is the 0% crunch path with the demand/float ratio at 0.59x, no structural break. While it is definitely possible, we will explore what you have to believe for it to be true in ACT 5 below.

ACT 5:

THE COUNTERARGUMENT

Peter Garber’s Famous First Bubbles (2000) is the best steel-man argument that I found while doing research and think it deserves an honest hearing.

Garber’s core argument: SSC prices in 1720 weren’t obviously irrational.

The SSC held a real monopoly on South American trade. Investors in early 1720 had legitimate uncertainty about the extent of that monopoly: Spanish ports could theoretically open, Latin American silver was a genuine prize, the upside scenario was not zero. On available information, the subscription prices reflected plausible expected values, not mass delusion. The bubble, on this reading, was less about irrationality than about negative information arriving at a moment when highly leveraged buyers couldn’t absorb the drawdown.

The modern equivalent writes itself: SpaceX has real revenue, genuine Starlink cash flows, a defensible monopoly on cheap orbital access. The performance bonus trigger ($175.50 for 5 of 10 days, hit four times as of June 23, 2026) reflects market participants pricing real operational milestones. Passive buyers forced in at current prices may be buying something legitimately worth the price. Garber’s framework allows for it.

But scrutinize the “real revenue” case for the broader AI complex in which SpaceX is now embedded, and the circularity is hard to ignore. I mean look no further than the fact that over 50% of Google’s GAAP profits in its most recent quarter were tied directly to the price appreciation of its investment in Anthropic, which was a one-time unrealized gain on which the market was placing a forward multiple. Approximately twelve percent of the S&P 500’s aggregate earnings in the trailing twelve months derived from similar cross-investment markups among mega-cap tech companies. When Nvidia uses its stock to invest in CoreWeave, and CoreWeave must use that capital to purchase Nvidia GPUs, the revenue is real in exactly the same sense that the SSC’s share price was real: it exists, but it is endogenous to the structure that created it. Garber’s rationality defense works better when the underlying revenue is exogenous to the financial architecture. In 1720 and in 2026, a meaningful fraction of it is not.

I discussed the circular funding dynamic present today in The New Mississippi a little deeper but I have incredible models built that look at the funding using agent based modeling and have built out a circuit of flows in essence. Anyway, I will get deeper into that down the road. I will add a few good decks and html on the topic that I have been working on lately below the paywall.

Add the buyback counterargument. Gabaix-Koijen assume some supply-side elasticity exists. If enough insiders sell into the passive bid, price finds a level. Buyback programs can serve the same function: companies repurchase shares when prices are low, issue when they’re high. Supply isn’t fixed.

Both arguments are real. Neither survives the Ergodic Lens.

Garber’s rationality case operates at the ensemble level. The question isn’t whether the average investor across all possible futures comes out whole; it’s whether any given investor, holding a non-repeatable positiob through the cycle, gets that average. Newton wasn’t irrational either. Dale et al. (2005) make that point explicitly: the SSC wasn’t obviously mispriced on ensemble metrics at elevated prices. Newton still lost £20,000. Ensemble rationality provides zero comfort to the individual non-ergodic investor.

The buyback elasticity argument is conditional and procyclical: available when it’s not needed, unavailable precisely when it is. S&P 500 buybacks collapsed in Q1 2020, Q4 2022, and every prior recessionary quarter. The supply response Gabaix-Koijen assume turns off at exactly the moment passive demand stops expanding, which is exactly when you need the offset.

And the float math doesn’t yield to buyback elasticity as passive demand is approximately 2x the available float at inception. You can’t repurchase your way out of a 2:1 demand-to-supply mismatch before the first insider can legally sell.

The SSC parallel sharpens here. During Subscriptions 1 and 2, the insiders (Blunt included) were selling. Supply was flowing. When Subscription 4 launched in mid-1720, the directors were largely out. What remained in the float was held by Op. 1 annuity holders (no exit, statutory conversion) and Op. 2 retail speculators (leveraged via Op. 3 SSC loans). The insiders had distributed. The forced buyers held the float.

Garber’s argument is elegant. Someone at the SSC investor relations desk was almost certainly making it in July 1720: trade monopoly upside, limited downside risk, diversified annuity holder base, management with demonstrated execution. By October the stock was at £170. Down 84% from the June peak. The argument for rationality at the ensemble level survived the crash entirely intact. It was of no use to the individual holders who couldn’t leave.

ACT 6

THE CLOSE: History Doesn’t Repeat, It Rhymes

Newton, after the collapse, reportedly said: “I can calculate the motions of heavenly bodies, but not the madness of people.” The attribution is widely repeated and not definitively sourceable; no contemporary record has been verified. Take it as attributed. The sentiment is accurate regardless.

The Bubble Act of 1720 is often described as regulatory reform after the fact. The timing is more precise: the Act passed in June 1720, during the mania, before the September collapse. It banned all joint-stock companies from operating without a royal charter, eliminating the SSC’s competitors while the SSC itself remained chartered and operating. Not an unwinding of the conversion. Not compensation for the annuity holders, statutorily converted into shareholders, who watched their position fall 84%. Not an audit of the directors’ exit timing. A law that protected the monopoly while it still had value, framed as public protection, passed while the architects were still in position.

Three hundred years later and the architecture most definitely rhymes. The SEC Fast Entry comment period for SR-NASDAQ-2026-004 is open. The best comment on file argues the rule “creates incentives for index inclusion strategies that may not align with long-term market quality.” A formulation that carefully survives a lot of future hearings.

The architects of the current structure are still holding their positions while the comment letters accumulate. The regulatory intervention, as in 1720, protects the mechanism while the mechanism is still running.

Newton thought he owned a share of British commerce. He owned a conversion formula.

Your 401(k) thinks it owns the Nasdaq-100. It owns a fire hose pointed at a float that was never designed to absorb it.

Cheers,

Benny

Subscribe to Capital Misallocation

Sources:

Peter Garber, “Famous First Bubbles” (2000).

Neal, L. “The Rise of Financial Capitalism” (1990).

Dale, Johnson & Sprague (2005), “Evidence of Irrational Behaviour During the South Sea Bubble,” The Economic History Review (PDF).

Temin & Voth (2004), “Riding the South Sea Bubble,” (PDF).

Frehen et al. (NBER w15332), “New Evidence on the First Financial Bubble” (PDF).

Neal, L. “The Micro-Foundations of the Early London Capital Market.” 1990. PDF (BoE transfer volume data, Table 1 — basis for Figure D velocity series)

CDMA Working Paper Series, University of St Andrews (2007). PDF (SSC subscription shares as % of total float — 10–15% estimate)

Smant, D. “South Sea Bubble 1720.” Link (Total shares outstanding: 212,012; peak market cap £164M)

Gabaix & Koijen, “In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis”.

Mike Green, Excess Returns Podcast (June 2026): full transcript. SEC comment SR-NASDAQ-2026-004: filing. SpaceX 424B4 Prospectus, June 12, 2026.

Ole Peters, “Ergodicity Economics,” Nature Physics (2019). Nasdaq-100 Index Methodology Update, effective May 1, 2026.

Michael Green, Hari P. Krishnan & Stephan Sturm, “A Model for Passive That Breaks the Market” (March 2026), circulating on SSRN.

Michael Green / Logica Capital Advisers, “Policy in a World of Pandemics, Social Media and Passive Investing” (2020).

Lasse Heje Pedersen, “Sharpening the Arithmetic of Active Management,” Financial Analysts Journal (2018).

Capital Misallocation, Monte Carlo Simulation Analysis (June 2026), N=10,000.

Image credits:

1. Hogarth engraving: public domain, Wikimedia Commons / Metropolitan Museum of Art.

2. Newton portrait: National Portrait Gallery, London (public domain). SpaceX launch: John Kraus / National Geographic. Nasdaq MarketSite: Nasdaq.com.

3. South Sea Stock Bubble Chart: Marc Faber, Author of Gloom, Boom, & Doom Report.

Read more

Benny & The Squirrel Ep. 62: “WANTED: AI ROI” was recorded at 6.45pm EST on Sunday 21st June.

Become a paid subscriber to get full show notes, Benny’s personal thoughts, the episode slide deck, and the rest of my work. Paid subs also get access to my real time chat where I share a morning summary of the markets, random trades I put on that I find interesting, and market color I get daily from my vast network of PM’s, traders, and brokers.

Subscribe now

Episode Slide Deck

Read more

In Episode 61, Benny and the 🐿️ were joined by Paul Krake, Founder of View from the Peak and former analyst and PM at major macro shops such as Caxton and Moore Capital. Paul’s new book, Growth Without You, hits the bookstands next month.

The show was recorded at 4pm EST on Wednesday 17th June, 2026.

Become a paid subscriber to get full show notes, the episode slide deck, and access the rest of my work. Paid subs also get access to my real time whatsapp channel chat that includes a number of my subs as well as LPs and other professional investors where I share a morning summary of the markets, random trades I put on that I find interesting, and market color I get daily from my vast network of PM’s, traders, and brokers.

Subscribe now

Episode Slide Deck (Below Paywall)

Read more

Episode 60 was recorded at 9.15pm EST on Sunday 14th June.

Become a paid subscriber to get full show notes, Benny’s personal thoughts, the episode slide deck, and the rest of my work. Paid subs also get access to my real time chat where I share a morning summary of the markets, random trades I put on that I find interesting, and market color I get daily from my vast network of PM’s, traders, and brokers.

Subscribe now

Episode Slide Deck

Read more

In Episode 59, Benny & The Squirrel welcome Craig Coben to the show to discuss the SpaceX IPO.

Craig is a veteran capital markets banker. After starting as an attorney at Sullivan and Cromwell, he transitioned into investment banking in the 1990s at Deutsche Morgan Grenfell. He joined Merrill Lynch in 2005 going on to run the EMEA and later Global Equity Capital Markets businesses of what we now all know as Bank of America.

Since retiring from the sell side 3 years ago, Craig has turned his skills to the keyboard where he has been writing really fantastic columns for the Financial Times’s Alphaville team as well as for Global Capital Magazine, where he is the resident agony aunt for frustrated sell siders.

The show was recorded at 2am EST on Friday 6th June.

Become a paid subscriber to get full show notes, Benny’s personal thoughts, the episode slide deck, and the rest of my work. Paid subs also get access to my real time chat where I share a morning summary of the markets, random trades I put on that I find interesting, and market color I get daily from my vast network of PM’s, traders, and brokers.

Subscribe now

Episode Slide Deck (Below Paywall)

Read more

Three hundred years ago, a Scottish gambler named John Law built a financial machine that bankrupted France and gave birth to the word “millionaire.” Over the last 25 years, Elon Musk has built a strikingly similar machine. Tomorrow night, twenty-one banks put their stamp of approval on the modern version - the SpaceX IPO.

Before we embark on this journey of exploring the Mississippi Bubble and how it relates to our modern situation, I would just like people to know that this will be the first of 50 essays I write on the topic of Capital Misallocation. We live in historic times and my original reasoning for choosing this name for my Substack and Twitter handles was to explore this topic. With the help of my new interns, aka AI agents, I have narrowed down the list of the Top 50 Episodes of Capital Misallocation ^TM that have occurred over the last 400 years. I will explore the philosophical and mathematical misperceptions and rehash these historical moments with an angle of trying to relate them to what we are living through today. I am happy to get back to writing as two decades of being a trader and PM on Wall Street distracted me from writing as much as I would have liked to over the years.

Benny & The Squirrel & SpaceX

If you are interested in detailed analysis of the SpaceX IPO, and I have covered the deal at length over the last two months on our podcast Benny & The Squirrel as well as on this site where we published two reports - “Spaced Out” in early April & “SpaceX: What Wall Street isn’t Telling You”.

Tomorrow evening, after the close, a syndicate of underwriters full of gentlemen, whom modestly resemble a younger version of The Squirrel, will gather physically, or more likely over a zoom call with at least one person who should be on mute who forgot to hit the button, and set the final price on 556 million shares of Space Exploration Technologies Corporation. The deal price is set to be $175 - implying a $75 billion equity raise and an implied valuation of $1.75 trilllion.

On that same evening of the deal consummation, The Squirrel and I will be hosting an episode of our podcast - Benny & The Squirrel - with former Bank of America ECM deal captain Craig Coben. Craig will be just another of the many guests on the podcast who joined us from a third continent for the show proving that Benny & The Squirrel have definitively solved “The 3 Body Problem” of podcasting. In all seriousnous, it will be a blast to record on the evening of the largest IPO in history with two former major bank equity capital markets deal captains. Then Friday morning, many hours after all of us finished the show, the ticker SPCX will go live on the Nasdaq completing the largest and most controversial IPO in history.

I want to be clear about the magnitude of this deal, because “largest IPO in history” has lost its punch over the years I have been in the game. Saudi Aramco - a company that pumps the literal lifeblood of industrial civilization out of the ground at a cost of about three dollars a barrel - completed a deal that raised $29 billion in 2019. Now lets compare that to SpaceX, which is raising 2.5 Aramcos in this capital raise to fund, among other things than the $25b bridge loan repayment, data centers in outer space - so sexy that it almost makes me want to pay 100x revenue for that paper!

The Squirrel & I have chatted and are confident that the financial press will spend Friday debating the first-day pop. I would like to spend a little of your time today pondering a different question. Namely - what kind of object is this that is coming into our orbit up close and personal?

A Trip Back to the Early 18th Century

To answer the question posited above, join me on a trip to the summer of 1719, when the most valuable real estate in Europe was a muddy alley in Paris called the Rue Quincampoix.

That particular location wasn’t valuable for what was physically on it but for what was happening on it. From dawn until well past dark the street was packed shoulder-to-shoulder with dukes, merchants, soldiers and servants, all of them screaming prices at each other for shares in one company. Legend has it that an enterprising hunchback supposedly made a small fortune renting his back out as a writing desk so traders could sign contracts faster - a story that remains, 300 years on, one of the most pure expressions of “picks-and-shovels” investing in recorded history. It was so insane that there are stories of a coachman getting rich enough to hire two coachmen, one of them kept to himself. Men who were broke and destitute in April were buying châteaux by October. France didn’t have a word for what was happening to its citizenry, so it’s citizens created one that is so ubiquitous today that is hard to imagine life without the term.

Millionaire

The company was the Mississippi Company. The man who built it was a Scottish gambler, a convicted murderer, and a self-taught monetary genius named John Law. For about eighteen months Law was effectively the richest and most powerful private citizen on Earth. He ran France’s central bank and France’s largest corporation at the same time, which means that he controlled both the money and the thing the money was used to buy - namely a claim on the “Mississippi Company”. Law had effectively talked a bankrupt empire into handing him the keys to the treasury.

By the end of 1720 it all crumbled and his short-lived empire became a pile of rubble. Law fled France in the dead of night apparently with one decent diamond but effectively broke, yet one step ahead of a mob that wanted him dead. The trauma was so deep France refused to use the word banque near its financial institutions for the better part of two centuries. John Law died in Venice nine years later in 1729, broke yet still playing cards - a true gambler to the end.

I bring this up because we are witnessing the modern day John Law run the experiment once again at a scale that would have made John Law dizzy. And, thanks to Elon, in this particular spot in space time our society has even coined an upgraded term for extreme wealth that can only be sufficiently described using a power law framework.

Trillionaire

The Thesis: Not a Bubble. A System

Let’s be clear on something right from the start so I don’t lose readers who come in with a bias on the modern John Law.

I am NOT saying Elon Musk is a fraud. He’s a once in a generation entrepeneur whom, I believe, will hold a permanent place in the history books.

John Law was NOT a fraud either. In fact, Law was in fact a legitimately brilliant monetary theorist whose ideas got vindicated centuries later.

I’m NOT saying AI is fake.

I’m NOT saying SpaceX doesn’t launch real rockets. I’m NOT calling any of this a con. Just needed to get that out of the way to shake off all the Elon loving trolls.

What I’m saying is structural. The current AI and space boom going on at the moment, and specifically the Musk empire sitting right in the middle of it, isn’t just another tech bubble like the dot-com boom. That bubble was more akin to a thousand small fires of retail enthusiasm all residing within the same vacinity.

In comparison, today’s version resembles something older and meaner - a System. A system that is a self-reinforcing machine where private corporate ambition fuses with sovereign state power and circular financing to manufacture the appearance of growth. If you are a mechanical engineer or a tourist in studying systems then you know that systems have signatures. They have to keep fueling the machine and expanding to survive. Confusing recycled capital for real revenue is a hallmark trait of this particular system that Law & Musk mastered. Systems end differently than bubbles do as bubbles eventually burst and sting the participants with some momentary pain. When systems ultimately unwind they take pieces of the monetary system of that particular point in space time down with them. For example, France didn’t just lose money in 1720, it lost the ability to have banks or even muster the ability to say the word banque. I mean not to unlike how housing or shale or railroads became pariahs in the aftermath of their respective bubbles to be fair.

We know how this movie ends. We’ve seen it. We just don’t know what minute we’re on, however, just as when we watch great films, we hope it never ends. No matter what you think about Elon or Trump, it is hard to deny that this has diminished the need for fiction as we seem to be living in the most entertaining period of time in history.

So let me walk you through the parallel step by step.

Once you see it, like The Squirrel in this video, you won’t be able to unsee It.

ACT ONE

The Visionary Outsider

The son of a goldsmith, John Law was born in Edinburgh in 1671. For those who weren’t paying attention during 17th century French history class, a son of a goldsmith was effectively the same as being the son of Jamie Dimon, or a lesser version of a banker, in that goldsmiths held deposits and issued paper receipts, the prededecessor of fiat money, against those deposits. Although I couldn’t find the exact moment credited to his epiphany, I did learn that there was a moment in Law’s childhood when he aborbed the single most dangerous idea in finance - that paper receipts circulate whether or not anyone checks the vault.

By his twenties, Law had compressed several lifetimes of trouble all into one : he killed a man named Beau Wilson in a duel over a woman, he was sentenced to hang, he escaped prison prior to judgement, and then he escaped from the land of fine whiskey and bolted to the continent that we now refer to as Europe.

Law wasn’t really a gambler though. He was a theorist who happened to gamble. In his head he was building something: the heretical idea that nations should ditch gold-backed money and run their economies on paper currency managed by a central bank. Credit, not metal, was the fuel.

For its time this was nuts. Karl Marx later described Law as having “the pleasant character mixture of swindler and prophet.” Alfred Marshall called him “a reckless, and unbalanced, but most fascinating genius.” Both were right. That’s the thing about this archetype. The swindler and the prophet aren’t two different people. They’re the same person. You only find out which one you were dealing with at the end.

Law shopped his system to anyone who’d listen. Scotland passed. England passed. The Duke of Savoy passed. Louis XIV passed. The most important monetary thinker in Europe couldn’t get a single sovereign to pick up the phone.

Hold that image, and look at the other guy.

Elon Musk got to America by way of South Africa and Canada, carrying his own heresies: cars should be electric, rockets should be reusable, machines could think. He had his own thing with the authorities — tangled with the SEC, settled the funding-secured tweet, paid twenty million dollars and gave up his Tesla chairmanship. Depending on who you asked he was a once-in-a-generation genius or a dangerous huckster. And he, too, was right enough times that the sheer force of his conviction became gravity. Capital bent toward it.

Here’s what matters. Both men sold themselves as the cure for a sick country. Law was going to fix France’s post-war debt with financial alchemy. Musk was going to fix America’s bureaucratic flab and tech complacency with radical efficiency and frontier swagger. And both of them understood the single most important move in the playbook:

You can’t build a System alone. You need a sovereign patron willing to hand you power no private citizen should ever have.

Law found his sovereign in the form of Philippe II, Duke of Orléans and Regent of France. Philippe II was a man desperate enough to dodge national bankruptcy that he was willing to try anything, including giving the keys to the castle to a brilliant persuasive “genius” gambler. Not too unsimilar to today.

Elon Musk followed Law’s lead and found his sovereign in the form of Donald Trump.

ACT TWO

When the Gamekeeper Becomes the Poacher

Here’s where the structure stops being a vibe and starts being mechanical.

In 1716 Law launched the Banque Générale, a private bank licensed to issue paper notes. In 1717 he founded the Mississippi Company, with a monopoly on French Louisiana. Then he started consolidating, and he did not stop. By 1719 he’d swallowed every other French colonial trading company. He took over tax collection. He took over the royal mint. He absorbed the national debt itself, swapping it into shares of his own company. In January 1720 the Regent appointed him Controller-General of Finances, which at the time was the most powerful financial office in France and is akin to being a central banker or treasury secretary in today’s world.

By early 1720 John Law personally controlled the money supply (his bank, by then nationalized as the Banque Royale) and the primary asset the money was being used to buy (his own company’s stock). He was the central banker and the CEO at the same time. He set the price of money and he sold the thing you bought with it.

The conflict of interest wasn’t a bug in the system. It was the System.

Elon Musk’s version of this dynamic is messier and more modern, but the bones are the same. By early 2025 he’s sitting on a truly impressive collection of assets - Tesla, SpaceX, xAI, X, Neuralink, the Boring Company. Then Trump installs him as head of the Department of Government Efficiency, or commonly referred to as DOGE in a play on the crypto token. The kicker is the access Musk was granted on this appointment such as access to unclassified federal records, government IT systems, and a perch overlooking the exact regulations and contracts flowing back to his own companies.

The Economic Policy Institute did the math in 2025 and reported a doubling in federal contracts to Musk’s various companies. Elon has now publicly admitted advising the President on tariff policy that directly benefited Tesla. In addition, he stood in front of the White House to talk up the stock price of Tesla. And, he was actually the guy who oversaw agencies that were cutting multi-billion-dollar checks to the company going public tomorrow - SpaceX.

Gamekeeper and poacher. Regulator and regulated. One guy, both chairs.

Three hundred years apart. Same impossible seat.

Controller-General of Finances, c. 2025. Bring your child to apex-hubris day

ACT THREE: PART ONE

The Engine That Eats its Own Tail

If the merger of state and private power is the Body of the System, circular financing is the bloodstream. This is the part everyone underrates because it looks like growth right up until it looks like a crater.

Here’s how Law’s loop worked. The Banque Royale handed out loans at a friendly 2% to ordinary speculators. The speculators used the borrowed money to buy Mississippi Company stock. The company itself also bought its own shares, financed by loans from the same bank. Price went up. Higher price justified more lending, which financed more buying, which pushed the price higher. In February 1720 the bank just printed 300 million livres for the express purpose of buying Mississippi shares.

The money was eating its own tail just like an ouroboros.

The “revenue” was, in big part, the System recycling its own capital and calling the echo a heartbeat.

Now lets look at 2026. Three loops, because if you only know one of them you’ll let yourself off the hook too easily.

Loop One: Nvidia

Nvidia sells GPUs to AI companies and then also turns around invests in those same AI companies. It is well obvserved by many commentators and market participants on NVDA’s role in funding Coreweave - a large buyer of its GPUs over the last couple years. NVDA was an early investor, it anchored its IPO to get it across the finish line, and funded its loan last year when the market was unwilling driving its CDS spreads down from 900bps to the current 500bps level. In addition, a few other examples include a reported $100 billion commitment to OpenAI and a multi-billion-dollar stake in xAI. The recipient companies of the money use the cash to buy more Nvidia chips and then Nvidia books the chip purchases as revenue. The revenue lifts the stock which then acts as collateral to funds more investments in the customers and enrich the owners and employees.

Loop Two: The Hyperscalers

Microsoft and Oracle buy enormous quantities of Nvidia chips, rent the compute to AI startups, and invest in those same startups whose “revenue” is, in meaningful part, the cloud spending those investors handed them in the first place. The cloud giants then report that spending as roaring customer demand. Google and Amazon do this as well with Anthropic committing to enormous cloud commitments and buying Google’s TPUs. The funny thing about the Google/Anthropic arrangement is that Google’s equity stake actually represented almost half of its record Q1’26 earnings due to simple “Gain on Sale” accounting.

Loop Three: The Intra-Empire Loop

This is the one that should make the hair on your neck stand up, because it’s the purest Law parallel. As we noted on Benny & The Squirrel, the SpaceX S-1 noted that Tesla put $2 billion into xAI. xAI bought $430 million of Tesla Megapacks. SpaceX then absorbed xAI entirely. The combined entity is now marching toward an IPO whose valuation will be used to validate every internal price set along the way. Money moving from Musk’s left pocket to his right pocket, and the market applauding the bulge.

This isn’t a conspiracy theory. Every one of those transactions is in public reporting. It isn’t secret. It’s structural. Soros named it decades ago: reflexivity. The feedback loop where prices don’t just reflect reality, they bend it. A rising valuation validates the investment that pushes the valuation higher, which draws the capital that lifts it again. Going up, reflexivity looks like vision. Problem is, the same machinery runs in reverse — and structures don’t care whether you believe in them.

So how fragile is it?

Look at the spread between what’s going out and what’s coming in currently. Consensus estimates have the AI sector deploying around $750 billion in 2026 and $1.1 trillion in 2027 in capex in against roughly $60 billion in revenue, which is roughly a 12:1 burn and requires the hamster wheel to keep spinning faster to try to catch one of Elon’s rockets and hit escape velocity. You can quibble with the exact figures but every hard number points in the same direction. Hyperscaler capex has exhausted its aggregate operating cash flow resulting in these names hitting the debt markets. And the bond market noticed resulting in these firms seeing their credit spreads materially widen. In fact, ORCL is essentially junk debt now in price if not in rating….yet. Then we saw last week Google do only its 3rd equity offering in history for a total of $80 billion only to be followed by META announcing a large $20 billion raise on Friday. For the first time in almost 35 years, the free cash flow at the largest tech companies on Earth is going negative. That’s the quiet sound of lenders pricing in the chance some of this doesn’t pay off - my advice is to keep a close eye on the credit market as we proceed on this circular funding credit fueled capex bonanza.

Minsky had a label for an enterprise that needs fresh capital every quarter just to stay current on the bets it already made. He called it a Ponzi unit. He didn’t mean fraud; instead, he meant a borrower whose own cash flow can’t cover its obligations and survives only by raising more. His darker point was that whole system drifts from hedge to speculative to Ponzi over the course of a long boom, and the drift is nearly invisible from the inside, because right up until the end everything still looks like it’s working.

Stability breeds instability. The calmer it looks, the more risk is piling up under the floorboards.

The spending is real. The data centers are made of actual concrete and silicon. But the revenue that’s supposed to justify it remains, to borrow a phrase, perpetually next year as we discussed in length in the last episode of Benny & The Squirrel.

ACT THREE: PART TWO

The Silver That Wasn’t There

Every System needs a story about the asset under it and for Law that story was silver. The Mississippi Company was supposedly sitting on the untapped mineral wealth of French Louisiana with endless silver waiting to be dug out and shipped home. The promotional engravings showed a paradise of riches. Investors weren’t buying a company. They were buying a promise about a continent most of them would never see.

There was, of course, no silver. Not in any quantity that mattered. The whole valuation rested on the future extraction of an asset nobody had bothered to verify existed.

Now here’s where I have to be careful, because this is exactly the spot where lazy analogies go to die and as mentioned earlier I don’t want to step into the territory of calling Musk a fraud. He has pushed the envelope and even redrawn the boundaries but has yet to be condemned a fraudster on the level of John Law.

AI is Not Louisiana Silver

Most important caveat in the whole essay. Bolded so nobody can accuse me of skipping it as I am confident that LLMs work, image generators work, and coding assistants are genuinely transforming software development right now. The technology is real and it creates real value. Anyone telling you it’s all smoke is selling you something too.

But the question was never “is there value here?”

The question is “is the value proportionate to the capital being thrown at it and is there a true economic model here?”

And there the echoes of 1720 get loud. xAI, now folded into SpaceX at a quarter-trillion-dollar valuation, generated something like $250 million in revenue over its last six reported months all while losing $2.5 billion. A company valued at $250 billion, doing a quarter-billion in revenue, torching ten times that in losses. OpenAI, brushing up against $300 billion, is burning capital at a clip that would have impressed the Rue Quincampoix. And study after study keeps finding that the overwhelming majority of enterprise AI deployments produce no measurable impact on the bottom line. In the last two weeks KPMG and Bain have come out with studies showing this and everyone has heard about the Uber COO talking about how the company blew its token budget in 3-4 months. The potential for a pause in spending from the enterprise is a real risk.

The silver is real this time. I’ll grant you that. But it just may not be sitting where the prospectus says it is and the mine may cost more to run than the ore is worth.

ACT THREE: PART THREE

The Fracture

Here’s the part I couldn’t have written a year ago. A year ago this was a prediction. Now it’s a description.

The Mississippi System died in stages, and the stages matter. By spring 1720 the machine had become a perpetual-motion fantasy, it needed an endless drip of new money just to hold the share price still. On May 21, 1720 the government issued a decree cutting the value of banknotes in half and announcing staged reductions in the stock price. It was supposed to be a controlled landing. It was not controlled. The streets that had been full of speculators filled instead with people trying to get their money out. Bank runs. Food prices up sixty percent. An outbreak of plague layered on top, because why not. By December Law was finished — stripped of his office and fleeing the country he had briefly owned, with nothing to his name.

Now watch the modern sequence. It rhymes with eerie precision.

In May 2025, Musk hit the legal ceiling on his government role as special government employees are capped at 130 days a year and stepped back from DOGE. Within days the sovereign-private alliance that anchored the entire System detonated in public. Musk looked at Trump’s signature “One Big Beautiful Bill,” the centerpiece of the administration’s agenda, and called it a “disgusting abomination.” Trump said he was “very disappointed.” Musk threatened to start his own political party. The bromance that reshaped Washington imploded into a social-media knife fight in real time.

DOGE was supposed to run until July 4, 2026, the country’s 250th birthday but instead quietly died eight months early. By November 2025 the OPM director was telling reporters it “simply doesn’t exist” as a centralized entity. The pitch was $2 trillion in cuts but the reported results came in at a disappointing $215 billion - an order of magnitude miss.

The modern Controller-General had been dismissed. Not by royal decree this time. By political gravity. Same outcome, different mechanism.

But here is where Musk diverges from Law, and where the story gets genuinely dangerous. Law had nothing left when his government job blew up. Musk responded by consolidating his private empire and aiming it at the public markets.

In February 2026, SpaceX absorbed xAI, which had already absorbed X. It was structured as a triangular merger, a clever bit of engineering designed to wall SpaceX off from xAI’s mounting legal problems.

And now comes the peak. SpaceX is preparing to go public tomorrow in what looks like it will be the largest IPO in human history.

Let me put that valuation in human terms because The Squirrel and I already have put out the numbers in detail on our podcast and in two reports. They are asking the public market to value a combined entity at a number larger than the entire annual economic output of every country on Earth except about ten.

In the Mississippi story, Law’s appointment as Controller-General in January 1720 was the apex. Maximum hubris. Four months before the decree that broke everything.

The SpaceX IPO is the appointment as Controller-General. It’s the System reaching for maximum extension, asking the public to ratify a valuation the private market manufactured for itself.

If the market says yes and it trades well tomorrow, then some of the risk transfers from the insiders to the public shareholders. The secondary share selling will be what will be really interesting to watch as we proceed.

If it says no, either tomorrow or over the course of the rest of the year, then the unwind starts

Where this analogy breaks (and why I’m telling you)

I don’t trust anyone who sells you a historical parallel without showing you where it cracks. Law controlled the literal money supply. Musk does not. The Banque Royale printed livres on command. The Fed is, on paper, independent. So the modern equivalent of money-printing isn’t one lever, it’s distributed across private-market valuations that bootstrap themselves through circular investment, venture capital that marks assets to model instead of to market, and stock prices that double as collateral for the next round of borrowing. Same effect with artificial liquidity holding up artificial prices, but you can’t kill it or save it with a single decree. Which, honestly, might make it harder to stop, not easier.

Tesla is a real, profitable, operating business.

The Mississippi Company had no meaningful revenue whereas Tesla sells almost a hundred billion dollars a year of actual cars and batteries and services. The Law parallel is sharpest on the private side of the Musk empire with the merry-go-round of intercompany transactions. Tesla is the public-market anchor Law never had, and it’s why this is a story about a part of the empire, not the whole man.

The strongest bull case is stronger than most bears will admit.

Here’s the best argument against everything I just wrote, stated as forcefully as its proponents do. Unlike the dot-coms, today’s hyperscalers are largely paying for this out of their own pockets until now so we need to see just how much leverage they are truly willing to take on to go after this global market share race.

Bulls like to point to the strong earnings companies are reporting and that are so responsibly funding the buildout are themselves, in part, are the end product of the recycled output of the loops discussed above. When Nvidia’s investment in a customer comes back as Nvidia’s revenue, that revenue becomes the earnings that “prudently” pay for the next wave of capex. The discipline is real on the surface and circular underneath. When the money is both the loan and the deposit, the ledger always balances. Right up until the day someone insists on being paid in something other than more ledger.

The ending is probably a repricing, not a zero. The Mississippi Company had no asset, so when confidence broke the price went to the floor. True binary. The AI complex almost certainly reprices instead a violent downward adjustment toward valuations that reflect actual cash generation rather than projected dominance. That can still annihilate anyone who bought the top. But it’s a haircut with a chainsaw, not a beheading.

The Doctor’s Cure

In 1752, three decades after the wreckage, David Hume sat down to think about what Law had done to France. He wrote a warning I have not been able to get out of my head:

…when the nation becomes heartily sick of their debts, and is cruelly oppressed by them, some daring projector may arise with visionary schemes for their discharge. And as public credit will begin, by that time, to be a little frail, the least touch will destroy it, as happened in France during the regency; and in this manner it will die of the doctor.

That’s the whole thing. It will die of the doctor.

Hume’s point wasn’t that the doctor was a quack. The danger was precisely that the doctor was brilliant — brilliant enough to be trusted with the diagnosis and the cure, and self-interested enough to profit from the treatment. Law diagnosed France correctly. His prescription contained ideas that became the foundation of modern finance. He just administered them at a lethal dose, with no safeguards, while getting rich off the patient.

Musk has diagnosed real problems too. The government really is bloated. AI really does require capital formation at a scale we’ve never attempted. Space infrastructure really will reshape the next century of geopolitics. None of that is fantasy.

The question for 2026 was never whether Elon Musk is a genius. The question is whether a System built on circular financing, opaque private valuations, and the fusion of state and corporate power can survive its first real contact with the cold scrutiny of public markets.

Law got his answer on May 21, 1720.

Musk may get his sometime after mid-June, when the SpaceX S-1 finally opens the books — and we all find out, together, how much silver is actually in the ground.

What I’m watching

I’m not in the business of telling you what to do with your money. But I’ll tell you exactly what’s on my screen, and you can draw your own map.

Tomorrow night’s print. Pricing above $135 on heavy oversubscription means demand is being rationed at the top of the range — peak-confidence behavior. The January 1720 appointment ceremony, with a bell.

The first-week retail flow. Whether the 30% retail allocation holds or flips. The Rue Quincampoix was loudest in its final winter.

Lockups and Form 4s. Law’s bankers converted to gold quietly. Insider filings are louder than they were in 1720. Read them.

Index fast-entry. The inclusion announcement, whenever it comes, is the forced-conversion edict. The passive bid it triggers is the last structural buyer of size. After the index buys, ask: who’s left?

Hyperscaler capex language. The first earnings call where one of them swaps “acceleration” for “optimization” is the first crack in the concrete.

Oracle’s financing calendar, CoreWeave, and the neocloud complex. The weakest, most leveraged links in the circular chain — and the credit market, which has been clearing its throat since September, is the adult in this room. Spreads doubling is how bond investors say “we’ve read about 1720” without alarming anyone.

Nvidia’s growth rate. The entire loop is load-bearing on one line item. The day it decelerates, the echo stops sounding like a heartbeat.

And then the big one — the modern May 21st. This is the one that haunts me, because Law’s fatal act wasn’t the inflation. It was the honest edict: the moment the architect acknowledged the gap between paper and reality and proposed an orderly schedule for closing it. Confidence is a thing you have until you ask whether you have it. So if you ever see the modern System’s principals propose a controlled deflation, a guided markdown, a “recalibration of expectations” with a timeline attached then I advise that you do not admire the responsibility but rather Run for the Exits.

One last thing about the vocabulary, because languages keep better books than banks do. French coined millionnaire in 1719, at the top, because the old words couldn’t describe what was happening to people’s net worth. English has trillionaire typeset and waiting for Friday’s close. But French gained a second word from the episode, and it’s the one that lasted: agioteur, speculator, manipulator of paper, which became one of the dirtiest words in the language for the next century, hurled at financiers right up through the Revolution, when several gentlemen who’d worn it met the national razor. The vocabulary of euphoria gets coined at the top. The vocabulary of blame gets coined on the way down, and it has a much longer shelf life.

Tomorrow night they set the price. John Law would have understood every line of the term sheet, admired the retail allocation, envied the index plumbing, and asked only one question and it was the same one he failed to answer in time:

What happens to a System when it stops growing?

He found out in eleven months.

We trade Friday.

Subscribe now

First time here? I am a guy who has been on the buy side of the street for over 2 decades who has worked as an analyst at the largest asset manager in the world down to having my own shop trading special situations and macro to now having a volatility fund and being partners with a bunch of great people in various media and technology ventures. But now I am about to embark on the original mission of this substack blog - to chronicle and analyze historical episodes of Capital Misallocation ^TM - where the money’s going that shouldn’t be, what the implications are on a time weighted basis not just an ensemble average basis, and what happens when the music stops. We believe that markets and systems are non-egodic processes and that everything in society obeys power laws as they are just pieces of a larger complex adaptive system.

Subscribe and the next one shows up in your inbox. If you’d rather hear me and the Squirrel argue this out loud, the show’s on YouTube — @Benny_Squirrel.

If you are interested in real time trading insights and institutional level information flow then become a paid subscriber as I run a chat on here but really over Whatsapp and share all my thoughts, curiousities, trade ideas, and rants on there for paying subs.

Nothing here is investment advice, contact your financial advisor before making investment decisions and make sure you do your own work.

SLIDE DECKS BELOW PAYWALL:

The New Mississippi

The AI Circular Infinity Engine

Read more

In Episode 57: Ameesh Agarwal (CIO, University Place Asset Management) joins Benny and the 🐿️ to dissect the economics of AI data center investing. His firm underwrites the base infrastructure layer — shell, power, and location — avoiding GPU exposure due to uncertain 4–7 year depreciation cycles and negative unit economics.

We discussed the short case against Coreweave (CRWV) in depth.

The show was recorded at 6pm EST on Wednesday 3rd June, 2026.

Become a paid subscriber to get full show notes, Benny’s personal thoughts, the episode slide deck, and the rest of my work. Paid subs also get access to my real time chat where I share a morning summary of the markets, random trades I put on that I find interesting, and market color I get daily from my vast network of PM’s, traders, and brokers.

Subscribe now

Episode Slide Deck

Read more

Episode 56 was recorded at 5.45pm EST on Sunday 31st May.

I am not able to publish paywalled commentary on a billing pause - so for the next 3 weeks, enjoy the show notes for free! Pod summary, show slides and audio edition are downloadable below.

Become a paid subscriber to get full show notes, Benny’s personal thoughts, the episode slide deck, and the rest of my work. Paid subs also get access to my real time chat where I share a morning summary of the markets, random trades I put on that I find interesting, and market color I get daily from my vast network of PM’s, traders, and brokers.

Subscribe now

Episode Slide Deck

Read more

In Episode 54, we welcome Michael De Clercq to the podcast. Michael is the CEO and founder of China Performance Group and someone “who has forgotten more about China than a lot of people will ever know”, having been doing business in China since the late 1970s.

Michael has just launched a Substack on China and Geopolitics. As you will be able to tell from our conversation, I have a hunch that Michael’s thoughts will become essential reading. Sign up here 👇:

Reflections on China and Geopolitics

Insights and reflections on China, global supply chains, trade, and geopolitics from five decades of firsthand operational experience inside China.

By Michael De Clercq

The show was recorded at 7pm EST on Thursday 28th May.

Become a paid subscriber to get full show notes, Benny’s personal thoughts, the episode slide deck, and the rest of my work. Paid subs also get access to my real time chat where I share a morning summary of the markets, random trades I put on that I find interesting, and market color I get daily from my vast network of PM’s, traders, and brokers.

Subscribe now

Episode Slide Deck

Read more

Read more

Read more

Show was recorded at 6.45pm EST on Sunday 17th May, 2026.

Become a paid subscriber to get full show notes, Benny’s personal thoughts, the episode slide deck, and the rest of my work. Paid subs also get access to my real time chat where I share a morning summary of the markets, random trades I put on that I find interesting, and market color I get daily from my vast network of PM’s, traders, and brokers.

Read more

In Episode 51, Benny & The Squirrel welcome Larry McDonald to the show. Larry is the Founder of Bear Traps Report and bestselling author of A Colossal Failure of Common Sense and How to Listen when Markets Speak. You can find Larry on Twitter @ConvertBond or email him at info@thebeartrapsreport.com.

The show was recorded at 4pm EST (4am in Hong Kong - thanks Larry!) on Wednesday 13th May.

Become a paid subscriber to get full show notes, Benny’s personal thoughts, the episode slide deck, and the rest of my work. Paid subs also get access to my real time chat where I share a morning summary of the markets, random trades I put on that I find interesting, and market color I get daily from my vast network of PM’s, traders, and brokers.

Read more

The 50th Episode show was recorded at 6pm EST on Sunday 10th May, 2026.

Read more

In Episode 49, Benny & The Squirrel welcome Brent Donnelly to the show. Brent is President of Spectra Markets and author of AM/FX and the Friday Speedrun. Brent’s 3rd book, Alpha Trader 2: Outside the Box will be available on May 22nd. The first 2 were bangers - this one is more targeted towards professional traders.

The show was recorded at 6pm EST on Thursday 7th May.

Become a paid subscriber to get full show notes, Benny’s personal thoughts, the episode slide deck, and the rest of my work. Paid subs also get access to my real time chat where I share a morning summary of the markets, random trades I put on that I find interesting, and market color I get daily from my vast network of PM’s, traders, and brokers.

Read more

Show was recorded at 7.20pm EST on Sunday 3rd May, 2026. Make sure you join us on Thursday. We have Brent Donnelly coming on to chat about FX and his new book - Alpha Trader 2.

Read more

In Episode 47, Benny & The Squirrel welcome Adam Peck to the show. Adam is CIO at Riverwater Partners in Milwaukee and he has managed small cap funds with a value oriented strategy for two decades since he finished grad school with Benny, as they were classmates, and somehow survived that pain gauntlet. Connect with Adam on LinkedIn or check out his writings on his firm’s website linked above.

The show was recorded at 8pm EST on Thursday 30th April.

Become a paid subscriber to get full show notes, Benny’s personal thoughts, the episode slide deck, and the rest of my work. Paid subs also get access to my real time chat where I share a morning summary of the markets, random trades I put on that I find interesting, and market color I get daily from my vast network of PM’s, traders, and brokers.

Read more

The “Unmissable Sunday Show” was recorded at 6.20pm EST on Sunday 26th April, 2026. The B&S Composite Fragility Security Index analysis deck is included below for all paying subs in addition to the slide deck from the show.

Become a paid subscriber to get full show notes, Benny’s personal thoughts, the episode slide deck, and the rest of my work. Paid subs also get access to my real time chat where I share a morning summary of the markets, random trades I put on that I find interesting, and market color I get daily from my vast network of PM’s, traders, and brokers.

Read more