Hemingway famously said bankruptcy happens slowly then suddenly. The collapse of his former home, Cuba, appears to be in the suddenly phase.

Tourism, which generated 8% of Cuba’s $30 billion GDP in better times and brought in hard currency, has fallen 48% year over year. Inflation is 15%. Two weeks ago, Cuba’s minister of energy and mines said the country had run out of fuel, because of the U.S. oil embargo, adding that Havana is frequently without power for up to 22 hours a day. The last oil shipment arrived in April, and a Russian tanker that had been headed for Cuba carrying 300,000 barrels — enough for three days — abruptly changed course. On social media, there are reports of sporadic protests breaking out in and around the capital. Safe drinking water is in short supply. Food has been scarce for months. The country’s healthcare system is breaking down. In sum, the U.S. is asphyxiating the Cuban people. As Cuban American historian Ada Ferrer told CNN’s Christiane Amanpour, “Survival is an open question.” But to paraphrase Cuban interventionist President John F. Kennedy, we shouldn’t be asking what additional pressure we can apply to Cuba, but what help we can provide its people?

Regime Change

In a rare direct message to the Cuban people, U.S. Secretary of State Marco Rubio offered a lifeline … with strings attached. “The only thing standing in the way of a better future are those who control your country,” Rubio said, predicating $100 million in aid on regime change. His message was timed to coincide with the announcement that the aircraft carrier Nimitz is heading toward the island, as well as the Justice Department’s decision to indict Raúl Castro, the country’s 94-year-old former president and de facto leader. The endgame script is similar to one the U.S. deployed against Venezuelan strongman Nicolás Maduro. But just in case there’s any ambiguity about the goal, President Trump has been saying the quiet part out loud since March. “I built this great military. I said, ‘You’ll never have to use it.’ ​But sometimes you have to use it. And Cuba is ​next, by the way.’” We’ve seen this movie before, and it doesn’t end well.

Soft Power

In his famous 16th century treatise The Prince, Niccolò Machiavelli asked whether it’s better for a leader to be loved or feared. “One should wish to be both,” he wrote, “but because it is difficult to unite them in one person, it is much safer to be feared than loved.” Today, “Machiavellian” is used to describe a ruthless style of politics where fear is the most valuable currency. But as Jeffrey Sonnenfeld, the senior associate dean for leadership studies at Yale’s School of Management, observed, many of today’s leaders miss the operative part of the diplomat’s famous quote. “What Machiavelli actually advised was that it is best to be both loved and feared,” Sonnenfeld wrote. “Only when that ideal is not possible … did Machiavelli suggest fear is a more reliable way to inspire discipline than bonds of love.” One of the many failings of the Trump administration is the false belief that America is incapable of inspiring fear and love simultaneously. Trump’s preference for instilling fear in other nations and his disdain for inspiring their love misses what makes America so great.

In 1990, just after the end of the Cold War, political scientist Joseph Nye popularized the term “soft power” to describe how state actors achieve their goals without using force, making threats, or paying bribes. According to Nye, a nation’s soft power resides in its culture and political values, plus its foreign policy to the extent that its peers see it as legitimate and having moral authority. “A country may obtain the outcomes it wants in world politics because other countries — admiring its values, emulating its example, aspiring to its level of prosperity and openness — want to follow it,” Nye wrote. “This soft power — getting others to want the outcomes that you want — co-opts people rather than coerces them.”

Nye’s concept explains the pincer move the U.S. successfully deployed against the Soviets during the Cold War. Our “hard power” included a nuclear arsenal with a rapid response capability measured in minutes, a military that peaked at 3.5 million people in uniform, and the willingness to engage in bloody proxy wars in Asia, Latin America, and the Middle East. Our soft power included foreign aid, Hollywood movies, rock & roll, Levi’s jeans, and middle-class prosperity. (See Nixon’s “Kitchen Debate” with Soviet Premier Nikita Khrushchev.) As Nye said in 2019, “The Berlin Wall collapsed not under an artillery barrage, but from hammers and bulldozers wielded by people whose minds had been affected by ideas that had penetrated the Iron Curtain over the preceding decades.”

The Alpha of Magnanimity

Our willingness and capacity to deliver violence against our enemies anywhere in the world is a significant asset, but American magnanimity is what makes the country unique among history’s greatest powers. During World War II, the U.S. sustained 400,000 dead and another 670,000 wounded. In the immediate aftermath of the war, the country provided emergency aid to its former enemies in Austria, Germany, and Japan. Then, in 1948, Congress passed legislation to fund the Marshall Plan — a $13.3 billion aid package ($180 billion adjusted for inflation) to rebuild 17 European nations, including West Germany. Separate from the Marshall Plan, the U.S. spent an estimated $2 billion ($25 billion adjusted for inflation) between 1946 and 1951 to rebuild Japan. We offered similar support to the Soviet Union and Eastern bloc, but were rebuffed. Regardless, America wrote checks when other victors would’ve demanded reparations.

In hindsight, it’s easy to discount U.S. magnanimity as Cold War pragmatism, but that misses the contribution of the American spirit and our capacity to forgive. Had American voters been consumed by hatred and xenophobia — understandable sentiments after years of war and sacrifice — the isolationism of the pre-war years might’ve returned. Instead, seven months after signing the Marshall Plan into law, Truman won reelection, suggesting that a significant number of American voters found space in their hearts and wallets for people who had been their enemies just three years prior. That selflessness helped install a global operating system financed by American capital, secured by the U.S. military, and held together by American generosity and kindness. Eight decades later, one of our most underrated assets remains our talent for turning enemies into allies. Similar to many relationships and brand equity, the current administration has taken a blow-torch of performative masculinity and stupidity to these assets.

Bridge to Cuba

Despite six decades of hostility, the infrastructure of American empathy and generosity to Cuba already exists. After the Obama administration loosened travel restrictions in 2016, 1.2 million Americans visited Cuba over two years, outstripping tourists from every other country. Of the 3 million Cubans in the U.S., 57% are immigrants with firsthand ties to their homeland. Cuban Americans are believed to send between $2 billion and $4 billion per year to their relatives back home, though exact numbers are difficult to come by because of U.S. restrictions on commerce with the island. Writing in Mother Jones about how her mom regularly sends care packages and money to relatives in Cuba, Laura Morel observed that exiled Cubans are keeping the nation alive. Formal channels also exist. The U.S. resumed aid to Cuba in 1990 after a 30-year Cold War hiatus, though the Trump administration effectively turned off the flow of economic support last year. The stockpile of U.S. bombs and threats is running low, but they aren’t needed for the island nation 90 miles off the coast of Florida. We’ve already established the lifeline. What we need to do is summon our soft power — the empathy and generosity that makes America uniquely American.

Open Hand

I don’t believe the U.S. will invade Cuba. One quagmire at a time is enough. In addition, Trump doesn’t see himself as a liberator, but as a dealmaker. That’s fine, but the best deals are win-win, not zero sum. Trump and Rubio have made their intentions clear: The deal they seek has to include regime change. Less clear is what regime change looks like in practice. As Brian Finucane, a senior adviser with the International Crisis Group and a former State Department lawyer, told PBS, Venezuela isn’t a good template for Cuba, as there isn’t an obvious successor to make a deal with.

Strangling Cuba until it collapses into chaos, or launching a cinematic special-ops mission to rendition a 94-year-old autocrat, isn’t a strategy. It’s a weapon of mass distraction from Epstein, ICE, inflation, Iran, the J6 terrorist immunization fund … The real move is magnanimity. America’s greatest returns on investment haven’t come from the barrel of a gun, but from the extension of an open hand. Imagine what $100 million in unconditional aid to the Cuban people could buy. Not regime change. Something better: goodwill, gratitude, and eventually a generation of Cubans who love America and associate it with their own prosperity, rather than an embargo. Empathy isn’t a sign of weakness. It’s the most ruthlessly effective weapon in the American arsenal.

Life is so rich,

P.S.

We’re doing it live. Join my Raging Moderates co-host Jessica Tarlov and Gen Z political analyst Aaron Parnas every Wednesday at 12 p.m. ET for our new live show: Raging Perspective. Watch a replay of the debut episode in all its unscripted, unfiltered, unedited glory here.

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Every Friday, we’ll break down the biggest stories shaping business, technology, politics, and culture — and connect the dots across the conversations happening throughout the Prof G universe.

This week, George breaks down why the bond market is suddenly sounding alarms and why it may be signaling something much bigger than inflation.

We discuss the economic fallout from the war in Iran, rising oil prices, growing fears around U.S. debt, and why investors are starting to worry that borrowing costs could stay higher for longer. Plus: China and Russia grow closer, SpaceX files for a massive IPO, and Gavin Newsom shares a deeply personal story about regret, leadership, and family.

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Back home, Governor Gavin Newsom (D-CA) says he’s prepared to fight Trump’s controversial $1.8B taxpayer-funded “Anti-Weaponization Fund” for January 6 defendants, while former judges and Capitol Police officers continue mounting legal challenges against it.

Scott and Jessica also look at the increasingly heated Texas Senate race, where Democrat James Talarico is embracing the attacks from coming from Trump-backed Republican nominee Ken Paxton, and turning them into campaign merchandise.

Meanwhile, Joe Biden is suing the Department of Justice to block …

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Just days after hosting Donald Trump, China’s leader, Xi Jinping, rolled out the red carpet again, this time for his Russian counterpart, Vladimir Putin. The meeting — Putin’s 25th visit to Beijing — focused on the Power of Siberia 2 pipeline, a long-stalled project that would more than double Russia’s gas exports to China.

The countries failed to clinch a deal on the 2,600-kilometer (1,616-mile) link between the gas fields of western Siberia and China’s industrial heartland — the Kremlin said they had reached a “general understanding.” But the bond between the two powers continues to deepen. Xi emphasized the importance of collaborating on energy and technology, including AI, declaring that bilateral relations are at “their highest level in history.”

While Russia’s economy remains heavily reliant on China, with gas sales to Europe largely cut off due to the war in Ukraine, the oil shortage triggered by the conflict in Iran has improved Russia’s hand as an energy supplier to China.

James’ Take: This is the axis of authoritarianism in action. Since Russia’s invasion of Ukraine in 2022, the country has moved closer to China diplomatically, economically — and militarily. This is the most consequential geopolitical shift we’ve seen over the last decade.

China was a U.S. rival before Russia invaded Ukraine. When you combine China and Russia, the second- and ninth-biggest economies in the world and two nuclear powers, you get a much more formidable adversary. Xi and Putin have issued increasingly explicit joint communiques in opposition to U.S. foreign policy, and they didn’t hold back in their latest statement. The two leaders condemned the “irresponsible” policies of the U.S. and warned of a return to “the law of the jungle,” clear references to American military action in Iran and Venezuela.

Turning to the pipeline, it would be a monster if it’s built. China would be the buyer of up to 50% of Russia’s exports of natural gas, equivalent to what Russia was sending to Europe before the war. And Western sanctions haven’t stopped the flow of Chinese goods into Russia.

Alice’s Take: The two leaders clearly have genuine respect for each other. While their bond has strengthened, so have the economic ties between their countries. Trade between China and Russia roughly doubled between 2020 and 2024, mainly driven by oil and gas. China has increased its imports of Russian oil by 35%, making Russia its largest single-country source of crude. Meanwhile, Chinese exports of semiconductors, vehicles, and “dual-use” components and materials are flowing into Russia. This is Kissinger’s nightmare: Russia and China moving toward each other rather than the U.S. getting closer to Russia and China individually.

The leaders may deeply admire each other. But the main factor stalling the project — which complements the existing Power of Siberia 1 project — is a disagreement over price. Reports suggest China is pushing for prices roughly half of what Russia was expecting. And China has the upper hand. Ultimately, there are limits to Xi and Putin’s “no limits partnership.”

China Cuts US Treasuries to Lowest Level Since 2008

The war in Iran has sparked a sell-off in U.S. Treasuries, with China and Japan leading the retreat as countries defend against the energy shock. China, which has gradually lowered its exposure to Treasuries in recent years, cut its holdings in March to the lowest level since 2008.

At the same time, the 30-year U.S. Treasury yield reached 5.2%, its highest level since 2007.

In addition to providing signals about the direction of the economy and inflation, these long-term yields are critical because they influence borrowing costs for mortgages and other loans. Yields of similar maturity bonds in Germany, Japan and other markets range between 3.5% and 6%. Goldman Sachs and other market watchers see a growing risk that rising bond yields, along with inflationary pressures and a slowing economy, could lead to a correction in stocks.

James’ Take: With a huge trade surplus, China has faced the challenge of figuring out where to invest dollar-denominated assets. The answer in the past was buying U.S. Treasuries. Now we’re seeing a sell-down that raises questions about the long-term dominance of the dollar. However, there are important caveats. Official figures may underestimate its actual footprint in U.S. debt markets, with centers such as Belgium seen as conduits for Chinese investment.

As for the renminbi, I believe it is likely to appreciate gradually over the coming years. China faces heat from Europe and the U.S. over its enormous trade surplus — which surged to a record of nearly $1.2 trillion last year — and it needs the currency to appreciate to buy more from abroad and address concerns about a growth model that’s increasingly hard to sustain.

Alice’s Take: You can’t overstate the importance of the 30-year yield. For those who have been screaming about a recession, this strengthens their case. As for the bond market, it matters more than the stock market. James Carville, the Democratic strategist, once famously said he’d like to be reincarnated as the bond market. “You can intimidate everybody,” he said. And don’t forget Trump cited the bond market in backing down from punishing tariffs.

For the first time since the 1990s, meanwhile, foreign central banks’ holdings of gold late last year surpassed holdings of Treasuries in their reserves amid questions about U.S. debt levels and America’s continuing role as the global hegemon.

In the past, China built up a foreign currency war chest, devaluing its own currency. Now we’re seeing a shift — a willingness to let the Chinese currency rise against the dollar. With the People’s Bank of China allowing a gradual appreciation, the currency at the end of last year crossed the level of Rmb7 to the dollar for the first time since 2023.

China Makes History With First Brain Implant for Commercial Use

In a world first, China in March approved a brain chip for commercial use in adults with spinal cord injuries. The green light for Neuracle’s brain-computer interface is an important step in the country’s bid to challenge American rivals such as Elon Musk’s Neuralink.

BCIs link a person’s brain to an external device or computer using sensors placed around or inside the head. In trials, Neuracle’s product helped patients improve their ability to hold and grab objects with their hands. The company is among startups developing technologies to allow people to control computers or other devices using only their minds. Neuralink is the most advanced in the U.S. after the FDA in 2022 initially rejected the company’s bid to test the technology in a clinical trial. A trial was eventually approved, and as of January the company had 21 participants enrolled in a study, according to a Scientific American report.

James’ Take: This sounds like science fiction. My mind immediately turns to Hollywood movies like the 1995 film Johnny Mnemonic, in which Keanu Reeves plays a data courier with an overloaded brain implant designed to store confidential information. But this is reality, and it’s amazing. We’re talking about a coin-sized brain implant, called Neo, that effectively reads the thoughts of a patient and sends the signals to a robotic glove that will grasp an object.

What’s also remarkable is how seriously the Chinese government is treating this technology. Not as fringe science. But as a strategic priority, backed by a 17-step government roadmap and $1.7 billion in funding. Another company, NeuroXess, which develops brain chips that enable communication between people and machines, reported that a paralyzed patient was able to control a computer cursor within five days of implantation, according to the Financial Times.

Alice’s Take: What strikes me is how the approval processes of the U.S. and China diverge. The FDA’s caution on Neuralink is understandable, but China has pulled ahead and moved into commercial terrain faster as the country seeks to build an ecosystem encompassing research, talent, and data. Elon Musk’s company is still in clinical trials.

The gap in timelines is not a fluke. China has identified brain-computer interface technology as a national strategic priority, published a 17-step roadmap to establish global leadership in the sector by 2030, and allocated $1.7 billion to fund breakthroughs.The next question is whether this emerging industry can export the technology to global markets in five to 10 years time.

James’ Prediction: Watch for multiple new licenses for technology linked to the brain in China within two to three years. NeuroXess will likely be among them, possibly this year or next.

Alice’s Prediction: The world’s second-largest economy faces headwinds in the second quarter following April data showing industrial output is slowing. GDP could grow by just 4.5% amid rising energy costs and cooling demand. In addition, trillions of five-year, fixed-term deposits opened during the Covid-19 pandemic unwind this year, and with yields on those accounts languishing at around 2%, compared with 5% in 2022, Chinese households will no doubt want to pursue better returns. That money will likely flow into the stock market and wealth management products, a catalyst that isn’t getting as much attention as it deserves.

They discuss California’s housing crisis, homelessness in Los Angeles and San Francisco, AI’s threat to white-collar jobs, wealth taxes, healthcare reform, and why Newsom believes Democrats are often perceived as “slow, weak, and ineffective.”

They also unpack Israel and Iran, the future of capitalism, masculinity, parenting, and the growing divide between the rich and everyone else.

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Jessica Tarlov and Aaron Parnas break down Texas Attorney General Ken Paxton’s victory over four-term Senator John Cornyn in one of the most closely watched Republican runoffs of the cycle.

They also discuss the state of the Trump administration following Tulsi Gabbard’s resignation as Director of National Intelligence. Plus: questions about Trump’s own health resurface after another physical examination at Walter Reed ahead of his 80th birthday, fueling renewed debate over transparency and presidential fitness.

On the Democratic side, early positioning for 2028 is already intensifying. Elizabeth Warren is reportedly emerging as a major behind-the-scenes power broker, while Alexandria Ocasio-Cortez continues taking steps that many see as signs of a future presidential run.

And finally: could Candace Owens evolve from internet personality into an actual political force?

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Back home, Senator Andy Kim (D-NJ) says he was pepper sprayed by federal agents during a protest outside an ICE detention facility in New Jersey, where detainees are reportedly on hunger strike over poor conditions and lack of medical care. Scott and Jessica check in on the latest public clash between ICE and protesters.

Plus: In his much publicized first encyclical, Pope Leo XIV issued a stark warning against AI, urging that the technology shouldn’t be concentrated in the hands of the wealthy few, should not be considered morally neutral, and warning that it could create “new…

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Rage is a dish best served live.

Starting May 27 (that’s tomorrow), we’re debuting an all-new, all-live show every Wednesday at 12 p.m. ET. My Raging Moderates co-host, Jessica Tarlov, is teaming up with Gen Z political phenom Aaron Parnas to give you Raging Perspective – unscripted, unfiltered, and unedited.

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Last Call

Last week, my Markets co-host Ed Elson debuted a keynote presentation exclusively for Prof G+ subscribers, only on Substack.

The New Normal identified the most important – and least discussed – forces reshaping the global economy. Sample feedback from the Prof G+ community: “This should be mandatory viewing for everyone in Congress.”

The replay of The New Normal leaves Substack tomorrow. Watch now, or forever hold your peace.

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What Does a War Really Cost?

It’s been the question of the moment since Defense Secretary Pete Hegseth presented a $29 billion receipt to Congress last month.

Our latest Prof G+ Deep Dive breaks down why the “official” price tag of war almost always understates the real economic toll, ignoring the decades-long financial hangover of veteran care, inflation, debt interest, and opportunity cost that rarely makes it into the headline number.

I’m joined by Justin Wolfers, University of Michigan professor and author of Platypus Economics, to help unpack why estimating war costs is so difficult – and why governments routinely get it (very, very) wrong.

Learn why we can’t accept the numbers at face value, only for Prof G+ subscribers.

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The Week

We get it – we release a lot of content.

Enter The Week from Prof G Media, the latest addition to The Prof G Pod lineup. Every Friday, we curate the highlight reel of our most incisive takes across business, tech, politics, and culture, and catch you up on what you missed.

Hosted by George Hahn, the voice behind the No Mercy / No Malice pod, The Week will make you smarter in under 15 minutes. Watch the latest below, and let us know what you think.

Watch The Week

Looking forward to seeing many of you tomorrow in San Francisco, our first stop on the Prof G Markets live tour.

Life is so rich,

Scott

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Something new is coming … The (real) brains behind Prof G Media are bringing you Extra Credit, dropping next week. School might be out, but we’re still in session. Stay tuned.

P.P.S.

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In this Prof G+ Deep Dive, Scott breaks down why the official price tag of war almost always understates the real economic cost — from military spending and replacement weapons to veteran care, inflation, debt interest, and the decades-long consequences that rarely make it into the headline number.

Then, Scott speaks with economist Justin Wolfers to unpack why estimating war costs is so difficult, why governments routinely get it wrong, and what Americans should understand before accepting any number at face value.

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The go-public may also make Elon Musk the first trillionaire, pushing his net worth to roughly 3.6% of the GDP of the U.S. (the richest American ever). At $2 trillion, SpaceX would be the seventh-most valuable company in the world, more valuable than Meta, Walmart, JPMorgan, and even Tesla.

That’s why I was anxious to read SpaceX’s IPO filing, the first real look into the company’s financial statements, which finally dropped late last week. At 277 pages, the document is longer than The Great Gatsby and The Catcher in the Rye. And while not as captivating, it might be more consequential than either of those novels, as the words on the page will be the determinant of trillions of dollars.

This post is an examination of the SpaceX filing. To be blunt: It’s a trainwreck. Unserious, empty, hallucinatory, and borderline dishonest. I’m not exaggerating when I tell you I was shocked to see what I saw. So let’s get into it.

Hopeium

The trouble starts at the very beginning of the document. After eighteen images of rockets in space, we learn that the company’s mission is “to extend the light of consciousness to the stars.” To accomplish this, the company plans to advance humanity “to Kardashev Type II status,” which is defined in the document as “a civilization that harnesses the full energy output of its local star.” Only a few pages in and it’s already starting to feel like an ayahuasca trip.

We soon learn that psychedelic language is part-and-parcel of the pitch. “The light of consciousness” (sounds like WeWork’s old slogan?) is mentioned ten different times in the document. Meanwhile “human augmentation” is mentioned eleven times, and “first principles,” twenty-seven times. AI gets a mind-boggling 1,251 mentions — more features than the word “Jesus” gets in the Bible.

SpaceX-stasy

Once you arrive at the financials you start to realize what the language is overcompensating for: awful numbers. The company generated $4.7 billion in Q1 2026, up only 15% from the year before (very low for an “AI company”). It also lost $4.3 billion, up 700% from the year before. That means the company is spending roughly twice as much as it makes (and on pace to explode those losses even more), while growing its topline six times slower than Nvidia and two times slower than my own podcast. There’s no getting around it — these numbers are terrible.

But it gets worse when you compare those numbers to last year’s. Revenue grew 33% in 2025, meaning the business has actually started to decelerate. Meanwhile net losses came in at $4.9 billion, so the company is on track to lose four times more money than it did last year. I’ll put it simply: slowing revenue + skyrocketing expenses = not good.

Pricing Problems

I’d have no problem with SpaceX’s sh*tty financials if they were reflected in the valuation — but they’re not. The stock is set to be priced at 107 times sales, which would make it one of the most expensive stocks in history. (The most expensive stock in the S&P 500 is Palantir, which trades at 64 times sales). It will be twice as valuable than Walmart while generating less revenue than Macy’s.

Maybe this is just the nature of blockbuster IPOs? No. Compared to previous go-publics, SpaceX’s valuation falls nothing short of insane. Meta went public at 28 times sales with 88% revenue growth. Google went public at 10 times sales with 234% growth. Put another way, SpaceX is growing seven times slower while asking for a multiple ten times higher. Pass me the crack pipe.

Ke-TAM-ine

How did they reach such a stupid valuation? With stupid financial projections. SpaceX claims to have “identified the largest actional total addressable market (“TAM”) in human history,” worth (wait for it) $28.5 trillion. That’s larger than the GDP of Europe or China. If this sounds dumb to you that’s because it is.

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It gets even dumber when you learn the company attributes less than $2 trillion of that TAM to space and satellites. Isn’t this a space company? Where’s that $26 trillion coming from? I’m asking the question but you already know the answer. Two letters: AI.

AI-huasca

AI is where this business comes off the rails. While other parts of the business make sense, — such as connectivity (i.e. satellites), which generated more than a billion dollars in profits last quarter — SpaceX’s AI unit is essentially a giant sinkhole. The segment generated less than a billion dollars last quarter while spending more than three billion. Total AI losses for Q1 2026? $2.5 billion. That’s in addition to a ridiculous quarterly AI CapEx bill that came out to $7.7 billion. #MoneyFurnace.

Strangely, the AI unit was not part of the company until a few months ago, when SpaceX acquired Elon’s other startup xAI for an implied $250 billion. Why purchase this seemingly bad business? Because it spices up the sales pitch. SpaceX can now be sold not just as a “space company,” but also an “AI company.” It allows the company to increase its “TAM” by $26 trillion while expanding its multiple. In fact, the filing mentions AI 23 times more than space. This is an intentional sleight of hand trick to make it seem like the core business (building rockets) isn’t the core business.

EBITDon’t

Elon stans will argue SpaceX is profitable on an EBITDA-basis, which is true. The problem, however, is in the D and the A. While EBITDA can make sense for evaluating companies with low capital expenditures, it makes no sense for a company that builds rockets. The depreciation and amortization costs at SpaceX are gigantic — stripping them out in your financial analysis makes no sense whatsoever.

Exit Liquidity

So who will actually buy this thing? Management believes retail is the answer. SpaceX is reserving 30% of its shares for retail investors, three times larger than the average IPO. The expectation is that die-hard Musk fans will buy the stock no matter what — a bet on the “dumb money.”

The other big buyer will likely be you. Elon negotiated a “fast entry” deal with Nasdaq so that SpaceX will be automatically included in the blue-chip index. That means billions of dollars of passive money will automatically flow into the company as soon as it lists. In other words, if you own the Nasdaq, you’re about to own SpaceX.

Return To Earth

If we apply comparable market multiples to each of SpaceX’s three business lines (space, connectivity, and AI), we arrive at a sum of parts valuation of $550 billion. That would be a reasonable valuation of SpaceX. However, it’s roughly 75% less than the target.

The only way to get yourself mentally to $2 trillion is to believe that every possible sci-fi objective will be achieved, from data centers in space to asteroid mining to building cities on Mars. Once you’ve done that, you then have to convince yourself that each of those endeavors will also make money. There’s optimism, and then there’s delusion. As Patrick Boyle told us on the pod last week, SpaceX is more a science experiment than a business.

It’s a shame because I used to like this company. I’m fascinated by space travel and I believe we owe it to ourselves to better understand the universe. But there’s a time and a place for childlike wonder, and valuing companies is not that place.

Needless to say I won’t be buying the SpaceX IPO. Not until it returns to earth.

See you next week,

Ed

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They also explore the deepening China-Russia alliance, mounting pressure on the U.S. dollar, and whether China is beginning to pull ahead in the global race for technological dominance.

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But that narrative is an illusion fed to throngs of pro-Trump influencers who are blind to the reality on the ground.

For one thing, while Trump is picking off his enemies, he still needs them to pass legislation, and he may end up with fewer allies next year. More importantly, a large share of GOP voters are unhappy and don’t trust this administration. And while the Republicans in Congress are too afraid to say it in public, new reporting says they’re getting antsy.

The good news for now is that it puts Trump’s worst ideas at risk, including the outrageous $1.8 billion “anti-weaponization” fund announced this week and his billion-dollar White House ballroom. And as we approach November, it could make him less powerful than ever.

Happy Memorial Day. This Wednesday, May 27 at 12pm ET, Jessica and Aaron Parnas debut Raging Perspective, a new weekly livestream for all our Substack subscribers. It’s the politics you know and love from Raging Moderates with nothing held back, and it’s interactive! Submit your questions in the comments section below that you’d like answered live on the show.

Trump controls the primaries…

Trump has an iron grip on GOP primary voters. In more than 100 U.S. Senate, House, and gubernatorial races held so far this year, candidates he endorsed have won 100% of the time. Yes, Trump endorses in many uncompetitive races to pad his percentages, but it’s his highest endorsement success rate in a midterm election. He’s lost a handful of state legislative races, mainly in Indiana, but overall, the Trump endorsement machine is firing on all cylinders.

His hold over primary voters is so strong that he can use them to oust antagonists, as we’ve seen in two high-profile races this month. It began in mid-May after Trump endorsed a rival to Sen. Bill Cassidy, one of the seven Republicans who voted to convict Trump in his February 2021 impeachment trial. Cassidy ended up in third place in his primary, taking just under a quarter of the total votes. Then, last week, it was libertarian Rep. Thomas Massie’s turn. Trump endorsed challenger Ed Gallrein in Kentucky’s 4th district, who beat Massie by 10 points, in a race that saw $32 million in ad spending.

Republican congresspeople stay in line with Trump because they know the fate that awaits them if they speak out. That is truer now than ever before.

…but he’s unleashed the outcasts

The problem with using primaries to defeat your enemies is that they’re still in office until the election cycle is complete. Even with 53 seats and a VP to break ties, Trump doesn’t have a MAGA majority in the Senate.

• Mavericks: First, there’s Sens. Murkowski and Collins, who also voted to convict Trump and like their independent reputations.

• Retirees: Sens. McConnell and Tillis are no sure thing either. McConnell slammed Trump’s 1776 fund this week, calling it an “utterly stupid, morally wrong” slush fund, and Tillis said it was “beyond the pale.”

• Ousted: Right after he lost his primary, Cassidy also slammed the slush fund, and flipped to support limiting Trump’s war powers in the Senate.

• Another libertarian in Kentucky: Massie wasn’t the only anti-war headache from Kentucky. Senate stalwart Rand Paul also voted to limit Trump’s war powers and has been a consistent critic on Iran.

Put that together, and Trump only has up to 47 votes for his worst ideas. And that’s before the midterms, where he’ll need to hold on to seats in Ohio and Texas, among others, to keep steady.

Republican voters are starting to doubt him

The MAGA crowd loves to dismiss people like Tillis and Cassidy – and even McConnell! – as a group of rejects who are out of step with Republican voters.

The polls tell a different story. On the defining issues of the midterms, a significant share of GOP voters is expressing dissatisfaction with the president. In the latest Fox News Poll, 1 in 5 Republicans said they disapproved of Trump’s performance. On foreign policy, it’s 1 in 4 GOP voters. On inflation, it’s just ticked over to a majority. Primary voters might still be with him, but the wider Republican base is not.

We already know that Republicans face a turnout issue during the midterms, so this is a liability. Some of these voters will “come home” to the GOP, but these are big numbers. They’re worse among independents and moderates, who Trump and the Republicans relied on to win in 2024.

Fox also asked about whether the assassination attempt against Trump in April was real or staged, and 10% of Republicans said they thought it was the latter.

Trump seems willing to let his voters leave. It’s not just the revenge tour stuff – though the fund and the ballroom will prove to be unpopular – but the deeply unpopular big ticket items, especially tariffs and Iran. As Democrats come to accept that Biden and Harris were flawed, they should welcome these potential new voters with open arms.

The backrooms are getting antsy

Finally, while Republican congresspeople know better than to complain about Trump in public, they’re starting to speak up privately. Politico reported this week that in GOP backrooms, congresspeople are starting to “squirm” about Trump’s revenge tour. A meeting between senators with Attorney General Blanche this week about the “weaponization” fund went poorly; and it’s likely that they’ll remove the billion dollars Trump wants for his ballroom from a new bill.

This is still the Trump Party. The problem is that a surprising number of Republican voters aren’t happy with it. Knowing they’re about to face that electorate, GOP congresspeople are growing more anxious about their fate. When you look at those factors together, Trump doesn’t seem so powerful anymore.

80%

Women account for 80% of all fiction sales in the U.S., U.K., and Canada.

1. SpaceX filed to go public; the numbers are ugly

2. Bond yields just hit a 19-year high. Why does that matter?

3. What the $300 million Vox sale says about the future of media

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Starlink Is a Great Business. SpaceX Is Asking You To Ignore Everything Else

One of the most anticipated IPOs in years is finally happening. SpaceX officially filed to go public last week, giving investors their first detailed look at the company’s financials ahead of its planned June 12 debut.

The company is looking to raise at least $75 billion at a valuation of up to $2 trillion, which would make it the largest IPO in history.

SpaceX made $18.7 billion in revenue in 2025, up 33% from the previous year. But losses have ballooned from a profit of $791 million in 2024 to a loss of $4.94 billion last year.

The company’s new AI division is to blame. Out of SpaceX’s nearly $21 billion in capex spending last year, $12.7 billion went to building out data centers for xAI — that’s more than the company spent building rockets or satellites.

Sixty percent of SpaceX’s revenue comes from Starlink, its satellite internet business that now has more than 10 million subscribers. Its core rocket launching business accounted for 22% of total revenues.

SpaceX’s target valuation is hard to square with the reality of its financial statement. At $1.75 trillion, the low end of the target, SpaceX would trade at 94x sales. To understand how high that is, Palantir has the highest trailing P/S multiple in the S&P 500 — and it trades at 67x sales.

If investors take the sum of the three business lines — space, connectivity, and AI — and assume that each segment will command a multiple that is twice as high as competitors, the sum of those parts equals about $1 trillion.

So how are SpaceX’s bankers explaining the target $1.75 trillion valuation? By telling investors that the company’s total addressable market (TAM) is the size of the entire U.S. economy — $28 trillion. That target market includes an estimated $22.7 trillion in revenue from enterprise applications. That is 30x larger than the entire existing enterprise software market.

• It also assumes that every single household in the world will start using Starlink for WiFi.

The implied growth is so ambitious that SpaceX is targeting a valuation higher than Meta, Broadcom, and Berkshire Hathaway — while having lower revenues than Macy’s.

SpaceX’s governance is also unusual. Elon Musk, who will likely become the world’s first trillionaire after the IPO, will be CEO, CTO, and chairman of the board. With 85% of total voting power, Musk essentially cannot be fired without his own consent.

This feels like an amazing company with bags of sh*t strapped onto it.

Start with the S-1, which reads like an ayahuasca trip. The first 14 pages are pictures of rockets. A direct quote from the filing: “We do not want humans to have the same fate as dinosaurs.” Well, thank God you’re here.

Here’s the reality: Starlink is genuinely excellent — $3.3 billion in revenue in a single quarter, $1.2 billion in operating income, a 36% margin, no serious competitor. If that were the whole company, it would be one of the great businesses of our era.

But stapled onto that rocket ship is xAI, which is — clinically speaking — a money furnace.

This valuation doesn’t hold up against the IPO comparables. When Meta went public, it was growing 88% and traded at 28x trailing revenue. Google was growing 240% and traded at 10x. Saudi Aramco — not exactly a growth darling — traded at 5x trailing revenue and was actually growing faster than SpaceX is today.

Most IPOs allocate between 5% and 10% of shares to retail investors. SpaceX is making as much as 30% of shares available to retail investors through Robinhood, Charles Schwab, and Fidelity.

Musk isn’t doing this out of the goodness of his heart. He knows that the only way SpaceX gets to this valuation is if it becomes a meme stock. He’s betting that the same retail investors who have stanned Tesla will buy SpaceX shares at any cost.

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Bond Markets Are Flashing Red, and This Time, Trump Can’t Tweet His Way Out

Inflation fears drove the yield on 30-year Treasurys to the highest level since 2007 last week, and 10-year notes hit a 15-month peak of 4.613%.

Surging yields weren’t just an American story: The average 10-year yield across the Group of Seven (G7) nations (Canada, France, Germany, Italy, Japan, United Kingdom, and the United States) hit the highest since 2004.

Why is this happening? Conflict in the Middle East is driving prices higher, and when inflation rises, bond yields rise. Inflation also increases the likelihood that the Federal Reserve will have to hike interest rates — which will only push bond yields higher.

• On Kalshi, the odds of a Fed rate hike before year-end have climbed from 15% a month ago, to above 42% last week. At the beginning of the year, investors were expecting rate cuts.

Gas prices are up 45% year over year, and there’s still no end in sight for the Iran war. President Trump has now promised that it is almost over on 28 separate days since the war began; but without any real progress, his assurances have become … less reassuring.

Higher yields don’t just impact bond investors; they can have a significant impact on the equity market and consumers. This is because the 10-year Treasury yield serves as a benchmark for lending rates across the economy. So, when Treasury yields rise, banks charge higher interest rates on mortgages, student loans, car loans, and business loans.

A bond yield is the annual return you earn based on the price you pay for the bond. If you buy a 10‑year bond for $100 and its yield is 5%, you earn $5 per year for 10 years. Bond yields and bond prices move in opposite directions: when prices go up, yields go down, and vice versa.

Three main factors cause bond yields to move: recession risk, inflation, and expectations of Fed rate cuts or hikes.

• If investors believe the economy is headed for a recession, there’s more demand for bonds (they’re safer than stocks), and that demand pushes prices up and yields down.

• If investors believe the economy is going to experience higher inflation, they’re going to demand a higher yield to compensate for the loss of purchasing power over time.

If investors believe the Fed is going to keep interest rates high for the next few years (because inflation is sticky), they’re going to demand higher yields.

A year ago, the bond market was the adult in the room. Trump dropped his tariffs after the 10-year yield jumped more than 50 basis points in three days — the biggest three-day move in over two decades.

The question now is whether the same mechanism works with Iran. And the honest answer is probably not. We’ve already spent north of $25 billion, lost 13 lives, nearly 400 wounded. Trump’s already requested $1.5 trillion for next year’s defense budget. This isn’t a tariff you can pause with a tweet.

The difference between now and last year is that the escape hatch is gone, and that’s what makes this potentially more dangerous — not just economically, but structurally.

When interest rates go up, the first casualty is speculation, and right now, the market is basically all speculation — 75% of S&P gains have come from AI companies.

Here’s the thing about growth stocks: These companies aren’t making much money today. The entire bet is that in five or 10 years, they’ll be generating Microsoft-level revenue. But that future revenue is only valuable if you can translate it back to what it’s worth right now. And that’s where interest rates come in.

Higher rates and higher inflation make future money worth less — and growth stocks are essentially just a pile of future money. So when interest rates spike, their valuations get cut in half.

But here’s the thing — and this is why capitalism is such a gorgeous organism — rate spikes are painful because they’re supposed to be. It’s the economy destroying excess and repricing risk. It’s the cold shower we’ve all needed to take for a while.

Why Did James Murdoch Buy Half of Vox Media?

There’s a shake-up happening in the media industry. James Murdoch is acquiring the Vox Media Podcast Network, along with New York magazine and the Vox news site, in a deal reportedly worth around $300 million.

The sale reflects the realities of the changing media landscape. Google’s AI overviews are cutting off traffic to digital media outlets, and, at the same time, consumers increasingly favor podcasts and video formats. The result is that organic search traffic has plummeted for written publications. Vox’s properties that are primarily text-based, including The Verge, Popsugar, and SB Nation, are not included in the deal.

Media executives have been frank about the impact of AI overviews going forward. The Atlantic’s CEO, Nicholas Thompson, told staff to assume Google traffic would “drop toward zero.”

Podcasts are a different story. Last year, podcast advertising grew nearly 18% and 55% of Americans reported watching or listening to a podcast monthly. That’s up from 17% in 2015.

Vox’s podcasts, which generated about $80 million in revenues last year and together have almost 15 million subscribers on YouTube, were a major driver of the deal.

The Vox Media Podcast Network sells advertising for Pivot and Prof G Media’s pods.

New York magazine is a trophy asset. It punches above its weight — it’s like the HBO of magazines. But at the end of the day it’s a magazine business. It’s like the New York Jets: Nobody makes money owning it, but there’s always someone who wants to.

James Murdoch seems genuinely civic-minded, so part of the draw was probably the cultural influence and the ability to punch out stories that actually matter.

I’ve said this before: Billionaire Republicans buy football teams. Billionaire Democrats buy media properties.

The crown jewel, though, is the podcast business. That’s what Murdoch actually wanted.

SpaceX does not price at $2 trillion. This thing is a $600 billion company.

1. Tech Bros Are Going to Etiquette School

2. What Jeff Bezos Got Wrong About Billionaire Taxes

3. Why IPO Mania Could Signal the Top of the Market

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Every Friday, we’ll break down the biggest stories shaping business, technology, politics, and culture — and connect the dots across the conversations happening throughout the Prof G universe.

This week, George Hahn unpacks what happens when rules stop applying equally. We discuss presidential stock trades, political accountability, wealth taxes, China’s shifting leverage over America, and why wars cost more than governments admit.

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In Davos, Canadian Prime Minister Mark Carney had a warning for nations that have relied on the U.S.-led world order that provided (relative) peace and prosperity for eight decades. “If we’re not at the table,” he said, “we’re on the menu.” Heading home after last week’s summit with Chinese President Xi Jinping, President Trump made clear that whether Taiwan was at the table or on the menu was entirely his call. “I don’t talk about those things,” Trump said, referring to a private conversation in which Xi asked whether the U.S. would use military force to defend Taiwan. “There’s only one person that knows that — you know who it is? Me. I’m the only person.” But the question isn’t whether Trump will stand by the U.S. commitment to an independent Taiwan — breaking faith with our allies is a feature of his administration, not a bug — it’s how much he needs to be given to look the other way. A: Significantly less than Xi was previously prepared to pay.

Quid Pro Quo

The conventional wisdom was that China was preparing to invade Taiwan in the next few years, but that’s shifted. The most recent U.S. intelligence assessment, in March, concluded, “Chinese leaders do not currently plan to execute an invasion of Taiwan in 2027, nor do they have a fixed timeline for achieving unification.” Seeing Iran and Ukraine deploy asymmetric warfare against opponents with superior firepower may have given China’s hawks pause. Also, not a single member of the Chinese military has combat experience.

Meanwhile, the Tracking People’s Daily newsletter, analyzing 7,000 official Chinese statements since 2021, noted that Beijing had softened its rhetoric from Biden to Trump, despite the trade war. Biden was seen as a systemic threat who was determined to “encircle and suppress” China, according to Tracking People’s Daily, while Beijing views “Trump’s transactionalism [as] something [it] understands and can work with.” I believe Xi made a deal with Trump: Look the other way on Taiwan, and in exchange Beijing will purchase enough Trump meme coins to make him wealthier than the CEOs who accompanied him at the summit. One sign of a deal: Trump said he would withhold a $14 billion arms package from Taiwan, without receiving any concessions.

If Xi bribing Trump sounds implausible, consider the record. Trump has enriched himself and his family by $4 billion in his first year back in office. Citizens for Responsibility and Ethics in Washington, a corruption watchdog, flagged examples of Trump conflating personal business with U.S. interests in Brazil, Indonesia, Serbia, Syria, and Vietnam. Several months after Qatar gifted Trump a $400 million plane to replace Air Force One, Trump issued an executive order to provide Qatar a U.S. security guarantee with conditions similar to NATO’s Article 5. Probably just a coincidence. But wait … there’s more. Justin Sun dodged an SEC lawsuit alleging securities fraud after announcing he’d purchased $75 million worth of the Trump family’s World Liberty Financial coins. According to Bloomberg, 19 of the top 25 wallets that purchased Trump meme coins to secure a dinner date with the president were owned by foreign nationals. And for those with the means to erase their criminal record, Trump reportedly commands low-seven figures for a pardon.

But all of that is nothing compared to the shakedown he perpetrated on American taxpayers with a $10 billion lawsuit alleging the IRS had failed to keep private the tax returns Trump once promised to release. This week the DOJ announced a settlement in the form of a $1.776 billion fund to compensate Trump allies, including January 6 insurrectionists.

The Real Money

Of course, the real money is in market manipulation, from suspicious puts placed just before tariff announcements to oil bets made minutes before Trump announced a ceasefire with Iran. Trading on inside information is a bipartisan tradition, but Trump’s transgressions are orders of magnitude more brazen and profitable than anything we’ve seen. It took Nancy Pelosi four decades in Congress to amass $130 million in the stock market. Trump recently disclosed 3,700 stock trades from the first quarter of this year valued somewhere between $220 million and $750 million. We need investigations and prosecutions. However, the Supreme Court immunized the president, and he promised to grant preemptive pardons to everyone “within 200 feet of the Oval Office.” Besides, there isn’t anyone to bring the case, as Trump has gutted the DOJ, SEC, IRS and other agencies responsible for rooting out financial corruption.

Repatriation

China doesn’t need to fire a shot to repatriate Taiwan. According to a Bloomberg analysis, a conflict over Taiwan would cost the world economy an estimated $10.6 trillion, roughly 10% of global GDP, in the first year alone. By comparison, the OECD predicts the Iran war will slow global GDP growth from 2.9% to 2.6% in 2026 and from 3.0% to 2.5% in 2027. Taiwan is the digital economy’s carotid artery, but, more important if you’re Xi, it has deep economic ties to China. An estimated 80% of Taiwan’s businesses are linked to China. Despite Taiwan’s recent efforts to disconnect from the mainland, China remains its second-largest trading partner, behind only the U.S., with exports accounting for 20% to 25% of GDP. Meanwhile, China has a history of deploying economic coercion. Between 2010 and 2022 the Mercator Institute for China Studies documented 123 instances of economic coercion from the PRC. It has also executed a multidecade campaign to isolate Taiwan in diplomatic terms, reducing the number of countries that officially recognize the island nation to 12. Add on cyberattacks, espionage, and disinformation, and Xi doesn’t need a D-Day-style assault. China’s “soft invasion” has already made inroads and will continue to advance until Taiwan capitulates.

Checkmate

Taiwan’s most valuable company, TSMC, controls 72% of the global foundry market, producing chips for AMD, Apple, Nvidia, and Qualcomm. The company also produces 90% of the world’s most advanced chips. Taiwan’s dominance isn’t an accident, but the result of a state policy to leverage chipmaking for national security purposes. In 2001, journalist Craig Addison coined the term “Silicon Shield” to describe how Taiwan’s chipmaking monopoly resulted in a de facto U.S. defense commitment, even though we dropped our recognition of Taiwan in 1979 in order to normalize relations with China. Two decades later, there’s a crack in the Silicon Shield. “The single biggest threat to the world economy, the single biggest point of single failure, is that 97% [sic] of the high-end chips are made in Taiwan,” Treasury Secretary Scott Bessent said in January at Davos. “If that island were blockaded [or] that capacity were destroyed, it would be an economic apocalypse.” Another way of putting that: If push comes to shove, the U.S. and the rest of the world would likely choose stability over Taiwan’s sovereignty.

Actually, we might not have a choice, considering how drones have disrupted warfare. China produced 2.5x the number of drones we produced in 2025, but as Noah Smith observed this week, “Drones use lithium-ion batteries and rare earth electric motors, both of which are almost entirely manufactured in China.” Currently, China controls 60% to 70% of rare earth mining and 90% of the global processing capacity. As Deng Xiaoping famously said in 1992, “The Middle East has oil, China has rare earths.” Adding chipmaking to its economic arsenal would give China unilateral power to tax the global economy, as well as leverage over other nations that far exceeds the $1 trillion it deployed to fund infrastructure projects around the world via its Belt and Road initiative.

Thucydides Trap

In his 2017 book, Destined for War, former U.S. Assistant Secretary of Defense Graham Allison wrote, “When a rising power threatens to displace a ruling power, alarm bells should sound: danger ahead. As a rapidly ascending China challenges America’s accustomed predominance, these two nations risk falling into a deadly trap first identified by the ancient Greek historian Thucydides.” At their summit, Xi asked Trump whether the two nations could avoid the Thucydides trap and “forge a new paradigm for major-power relations?” Trump registered the insult — the implication of U.S. decline — but blamed Biden and insisted that the U.S. is the “hottest nation anywhere in the world.”

Future historians will likely have trouble gauging Xi’s skill. On the one hand, he’s a serious statesman. On the other hand, his opposite number is Donald Trump. Regardless, the Chinese see blood in the water, even if American leadership won’t acknowledge we appear to be committing superpower suicide. In January, a Beijing think tank published a report called “Thank Trump,” which concluded that tariffs, attacks on allies, anti-immigration policies, and the president’s war against American institutions have strengthened China while weakening the U.S. Citing polarization, government dysfunction, and “Latin American-style instability,” the report’s authors labeled Trump an “accelerator of American political decay.” A decade ago, our priority was to manage the Thucydides trap such that we maintained our leadership of the rules-based world order, avoided conflict, and increased global prosperity. Today, we’re riding shotgun with a president who never met an American interest he didn’t seek to monetize. Superpowers don’t die when adversaries breach the gates. They die when the people inside start auctioning off the gates.

Memorial Day

I write often about what we’re losing by dismantling the rules-based order, less often about the cost of building it in the first place. It’s Memorial Day weekend in the U.S. — a holiday meant to honor those who died serving our country, though most Americans observe it by barbecuing, drinking, and shopping. Pulling down the U.S.-led order robs our children of their future, but it also demeans the memory of American sons and daughters who gave what Lincoln called the last full measure of devotion. Shame on Trump. Shame on his enablers. And shame on us if we fail to pull the country off of Trump’s auction block.

Life is so rich,

P.S.

My Prof G Markets co-host Ed Elson was live on Substack this week sharing “The New Normal,” his presentation about the forces shaping the global economy. Ed’s talk is available exclusively to Prof G + members for one week and one week only. Say no to FOMO by saying yes to a Prof G + membership. Upgrade here.