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Chapter 1: What is the significance of SpaceX's share lock-up period?
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On today's show, we'll unpack an uncertain economy. We will, yes, talk about SpaceX. And here's a left field question. Would you trust AI to sell your house? From American Public Media, this is Marketplace. In New York, I'm Kristen Schwab in for Kyra's doll. It's Friday, June 12th, and it's good to be here with you.
It's been another week of not really knowing where the war is heading, which means it's been another week of not really knowing where the economy is heading. But as we always do on Fridays, we're going to take some time to try and sort it all out. Katherine Rampell is at MS Now in the Bulwark. Courtney Brown is at Axios. Hey, guys.
Chapter 2: How do early investors and employees benefit from the lock-up period?
Hey, happy weekend. Happy weekend. Before we get to that, though, let's start here. Catherine, we've got a Fed meeting next week, and it's notably Kevin Warsh's first as the new Fed chair. Do you have any predictions on what will happen?
Oh, you know, he has his work cut out for him because he clearly got the job, at least in part, because Donald Trump was expecting him to cut interest rates. Certainly the president said that that was going to be a litmus test before he had chosen. Mr. Warsh, the new chair.
And now it is becoming increasingly difficult for Kevin Warsh to deliver on that promise or at least expectation, given where we have seen the recent set of inflation prints with CPI and PPI, among others, much hotter than the Fed would like, even when you strip out things like energy prices. which is obviously driving a lot of the growth.
And if you look at where markets are expecting things to go, markets are not expecting any rate cuts in the near or even medium term. Instead, the first move, the first change from current levels that they expect would be probably at the end of the year. And that would be a rate hike. So I think Kevin Walsh's real challenge is how does he manage expectations?
Chapter 3: What challenges does the new Fed chair face in managing interest rates?
He has talked in the past about how he doesn't think that there should be as much forward guidance coming from the Fed for the markets. But how is he going to manage expectations for the White House? That's a much bigger challenge.
Yeah, Courtney, so we might not see any movement next week. But I am wondering what you'll be paying close attention to to get an understanding of how Walsh may handle the economy.
I am so curious how he's going to interact with the reporters in the room. You might remember a small moment from his confirmation hearing that he kind of suggested he wasn't so into doing these press conferences after every Fed meeting, which that is a tradition that Powell started. So in the broadest sense, you know, how much color is he going to give the us.
Just like Catherine was saying, there is almost like a mini revolt underway at the Fed. We saw at the last Fed press conference, a group of Fed presidents say, I'm going to dissent. I want the policy language to be more even handed. Because right now, as it is, the policy language suggests that the next move could be a rate cut. And
As Catherine was saying, Fed officials don't necessarily agree that will be the case, right?
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Chapter 4: Why is inflation currently a concern for the economy?
So what happens to that language? Does it get changed? And when Fed Chair Warsh approaches the group of reporters, is he going to take us inside the meeting in a way that maybe Powell did? Will he tell us about some of the conversation in the room? And not to get too meta, but will he continue doing these press conferences? That's one question I have.
Katherine, you know, you referenced the producer price index that came in this week that was hot and the consumer price index, mostly because of rising energy costs. I'm wondering if you think the Fed thinks this is just a one-time spike and maybe different question if you think it's a one-time spike.
That's really the gazillion dollar question, right? Historically, the Fed has said that they would look through what happens with energy prices. I mean, that's the reason why they focus on so-called core inflation, because energy prices are very volatile, as are food prices.
This time around, you could imagine that it may not be worth so-called the look through in the sense that it could be a very sustained increase in energy prices and energy prices feed through to the costs of other goods. So we'll push up, we'll place upward pressure on lots of other things consumers buy. There's also the potential interaction between what's happened with
Tariffs raising costs, raising prices, and the Iran war, you know, Strait of Hormuz, energy shock, other commodity shock, kind of creating this one-two punch that could potentially happen.
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Chapter 5: How does the job market look for recent college graduates?
dislocate or unanchor expectations. And that's really what the Fed is hoping to avoid. That's the real way that this could feed into trend inflation is if everybody looks around and says, well, you know what? I'm really worried that my suppliers are going to raise prices. I might as well preemptively raise my own prices. Or I'm really worried that my employees are going to demand higher wages.
Therefore, I'm going to raise prices. And it can all feed on itself. So that's really the longer term concern. If this were just a one-time shock and the shock eventually reverses itself and you don't have all of that other psychology working its way through the markets, then sure, the Fed should just ignore it and go on its way without potentially contemplating rate hikes.
But we saw the ECB this week decide that they were concerned enough about rising prices. Again, largely linked to these disruptions from the war, that they were going to raise their own interest rates. And so the real question is when, if and when, presumably when, other central banks, including the Federal Reserve, may follow suit for similar reasons.
You know, something different about this spike in inflation, Courtney, that you wrote about this week is that rising prices are actually outpacing wages, which is the opposite of what happened during the pandemic.
Chapter 6: What factors make Birmingham an attractive city for young professionals?
How important, Courtney, do you think that bullet point is and what does it tell us about inflation?
I think it helps explain why consumers are so – they feel so pained by what's going on. Not only are prices at the pump rising really quickly and that's a very salient price in the economy that consumers will feel immediately. because of the war. Overall, inflation is outpacing whatever gains they're getting in their paycheck. So in real terms, they're essentially getting a pay cut.
And there's a bunch of different ways to measure wage growth. But if you look at average hourly earnings, which comes out in the jobs report, and you compare it to CPI, I mean, yeah, there's a big gulf opening up.
We had some reporting this week that showed that when you look at real wage growth since President Trump took office, they've essentially, all of the gains that we've seen have essentially been wiped out. So in the span of four months, wiping out a year plus of wage gains, and that's really
meaningful, not only because of the pain that consumers are feeling, but because, you know, this wage measure we're talking about, this is the one that the Trump administration this time last year was touting as a sign that their agenda was working.
And so now that the opposite is the case, you got to ask if there are questions inside the White House worrying about what the consumer impact will be. Do they pull back on spending things of that nature?
We will find out.
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Chapter 7: How did an AI chatbot assist in selling a house?
Courtney Brown is at Axios. Catherine Rampell is at MSNOW and The Bulwark. Thanks, you two, and have a good weekend. Thanks, Kristen. Thank you. Wall Street today, SpaceX may be a deal with Iran. What's not to love? We'll have the details when we do the numbers. As if you haven't already heard, SpaceX went public today. Shares started at an offering price of $135 and closed at just above $161.
Anyone can now own a piece of Elon Musk's rocket company, but not everyone can sell their shares yet. Marketplace's Sabri Beneshor has more on why early investors, the ones who stand to make the most, are locked out of cashing out, at least for now.
The people who bought stock in SpaceX today are not the only ones who own a piece of that company. Not even close. There's a whole long line of people who got there first.
Chapter 8: What financial outcomes did the guest achieve by using AI in the selling process?
People who had the stock before it was public.
Lise Beyer is founder of IPO advisory firm Class 5 Group. So like Elon Musk, obviously, owned shares of the company before anyone else did. He actually owns 42% of all SpaceX shares. There's also venture capital firms, early investors, also employees get shares as part of their pay.
There are an awful lot of early investors in SpaceX who have made unimaginable returns in short periods of time.
A lot of them would probably love to sell on day one of trading to make a lot of money. That would look really bad. Say management is selling the shares. That's not cool. Don't they believe in the company, right? John Pennett is a partner at consulting firm Eisner Amper.
Not only would it freak out new investors to see the old investors and higher ups suddenly selling, it would also just take some of the air out of the whole entire IPO. everybody starts to sell, which then starts putting a lot of downward pressure on the stock price. Not to mention, insiders selling their shares on day one would kind of invite insider trading.
Jay Ritter is director of the IPO initiative at the University of Florida.
When a company is going public, Insiders in particular typically have some information that outside investors might not be aware of.
So for all of these reasons, the OG investors are contractually not allowed to sell their shares at first. It's called a lockup period.
commonly 180 days.
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