Grey Value Management

𝗜𝗣𝗢𝘃𝗲𝗿𝗯𝗼𝗮𝗿𝗱?

Spencer Jakab shared some interesting observations in his letter today (I encourage you to get on his distribution list - link below).

It's a statistical fact that 𝗲𝘃𝗲𝗻 𝘄𝗵𝗲𝗻 𝗶𝘁 𝗰𝗼𝗺𝗲𝘀 𝘁𝗼 𝘁𝗵𝗲 𝗺𝗼𝘀𝘁 𝘁𝗿𝗮𝗻𝘀𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝘃𝗲 𝘁𝗲𝗰𝗵, 𝗮 𝗳𝗲𝘄 𝗼𝗳 𝘁𝗵𝗲 𝗲𝗿𝗮’𝘀 𝗵𝗶𝗴𝗵𝗳𝗹𝗶𝗲𝗿𝘀 𝗺𝗶𝗴𝗵𝘁 𝗯𝗲 𝘄𝗼𝗿𝘁𝗵 𝗼𝘄𝗻𝗶𝗻𝗴, 𝗯𝘂𝘁 𝗮𝗹𝗺𝗼𝘀𝘁 𝗰𝗲𝗿𝘁𝗮𝗶𝗻𝗹𝘆 𝗻𝗼𝘁 𝗺𝗼𝘀𝘁 𝗼𝗳 𝘁𝗵𝗲𝗺.

It's also a fact that 𝘁𝗵𝗲 𝘃𝗮𝘀𝘁 𝘀𝘂𝗺𝘀 𝗯𝗲𝗶𝗻𝗴 𝗶𝗻𝘃𝗲𝘀𝘁𝗲𝗱, 𝘄𝗵𝗶𝗰𝗵 𝗮𝗹𝗿𝗲𝗮𝗱𝘆 𝗲𝘅𝗰𝗲𝗲𝗱 𝘁𝗵𝗲 𝗿𝗮𝗶𝗹𝗿𝗼𝗮𝗱 𝗼𝗿 𝗶𝗻𝘁𝗲𝗿𝗻𝗲𝘁 𝗯𝗼𝗼𝗺𝘀, 𝗮𝘀𝘀𝘂𝗺𝗲 𝘀𝗮𝗹𝗲𝘀 𝗴𝗿𝗼𝘄𝘁𝗵 𝘂𝗻𝗹𝗶𝗸𝗲 𝗮𝗻𝘆𝘁𝗵𝗶𝗻𝗴 𝗶𝗻 𝗵𝗶𝘀𝘁𝗼𝗿𝘆.

OpenAI’s projection last year that its revenue would rise to $145 BN by 2029 requires compound annual growth of 108% for five years. That’s never happened before (based on a sample of almost 19,000 large companies).

Palantir Technologies, Broadcom, NVIDIA, Intel and Alphabet Inc. were among nearly 70 U.S.-listed companies that fetched a multiple of at least 10 times trailing revenue at the start of this week.

According to GMO, 𝗮𝘁 𝘁𝗵𝗲 𝗲𝗻𝗱 𝗼𝗳 𝗹𝗮𝘀𝘁 𝘆𝗲𝗮𝗿 𝗮 𝗵𝗶𝗴𝗵𝗲𝗿 𝘀𝗵𝗮𝗿𝗲 𝗼𝗳 𝘁𝗵𝗲 𝗨.𝗦. 𝗺𝗮𝗿𝗸𝗲𝘁 𝗳𝗲𝘁𝗰𝗵𝗲𝗱 𝗮𝗯𝗼𝘃𝗲 𝘁𝗵𝗲 𝟭𝟬-𝘁𝗶𝗺𝗲𝘀 𝘁𝗵𝗿𝗲𝘀𝗵𝗼𝗹𝗱 𝘁𝗵𝗮𝗻 𝗮𝘁 𝘁𝗵𝗲 𝗽𝗲𝗮𝗸 𝗼𝗳 𝘁𝗵𝗲 𝘁𝗲𝗰𝗵 𝗯𝘂𝗯𝗯𝗹𝗲.

Looking at the performance of stocks that traded above that threshold across 40 years, buying just that group would have left an investor with 80% less money than an S&P 500 index fund, taking inflation into account.

Here's the link to Spencer's article: https://trk.wsj.com/view/67364bcc111e4b664c0c2a48rgb19.1w5k/35e362e8

Sign up for Spencer's Markets A.M. newsletter here: https://www.wsj.com/newsletters/markets-am?mod=djemMarketsAM

SpaceX

𝗙𝗼𝗼𝗹𝘀 𝗥𝘂𝘀𝗵 𝗜𝗻?

Those considering the SpaceX IPO consider the figures below, courtesy of Brent Donnelly of Spectra Markets.

They show the post-IPO performance of the companies listed by the indicated interval, with the final column (red box) providing the maximum drawdown experienced during the first 12 months of trading.

Note how many lauded companies got cut in half (or 𝘮𝘶𝘤𝘩 𝘮𝘰𝘳𝘦 - Robinhood dropped 90%).

𝗔 𝗧𝘀𝘂𝗻𝗮𝗺𝗶 𝗼𝗳 𝗦𝗽𝗲𝗰𝘂𝗹𝗮𝘁𝗶𝘃𝗲 𝗖𝗮𝘀𝗵 𝗙𝗹𝗼𝘄𝘀

Tsunamis initially pull water back from the shoreline because the water pulled offshore is what feeds the advancing destructive wave.

Per the first chart below, 𝗚𝗼𝗹𝗱𝗺𝗮𝗻 𝗦𝗮𝗰𝗵𝘀 𝗲𝘅𝗽𝗲𝗰𝘁𝘀 𝗹𝗮𝗿𝗴𝗲 𝗰𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀 𝘁𝗼 𝗿𝗮𝗶𝘀𝗲 𝗮 𝗿𝗲𝗰𝗼𝗿𝗱 $𝟮𝟮𝟱 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 𝗶𝗻 𝗜𝗣𝗢𝘀 𝘁𝗵𝗶𝘀 𝘆𝗲𝗮𝗿, 𝙖𝙡𝙢𝙤𝙨𝙩 𝙨𝙞𝙭 𝙩𝙞𝙢𝙚𝙨 𝙖𝙨 𝙢𝙪𝙘𝙝 𝙖𝙨 𝙡𝙖𝙨𝙩 𝙮𝙚𝙖𝙧.

𝗧𝗵𝗲𝘆 𝗲𝘅𝗽𝗲𝗰𝘁 𝘁𝗼𝘁𝗮𝗹 𝗶𝘀𝘀𝘂𝗮𝗻𝗰𝗲 (which includes follow-on offerings, SPACs, and convertible bonds) 𝘁𝗼 𝗵𝗶𝘁 $𝟲𝟳𝟱 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 𝗳𝗼𝗿 𝘁𝗵𝗲 𝘆𝗲𝗮𝗿.

𝙒𝙝𝙚𝙧𝙚 𝙬𝙞𝙡𝙡 𝙩𝙝𝙚 𝙢𝙤𝙣𝙚𝙮 𝙘𝙤𝙢𝙚 𝙛𝙧𝙤𝙢?

There are of course many sources of liquidity, but 𝗶𝘁 𝗺𝗮𝗸𝗲𝘀 𝘀𝗲𝗻𝘀𝗲 𝘁𝗵𝗮𝘁 𝗿𝗶𝘀𝗸-𝘀𝗲𝗲𝗸𝗶𝗻𝗴 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀 𝘄𝗼𝘂𝗹𝗱 𝗯𝗲 𝘄𝗶𝗹𝗹𝗶𝗻𝗴 𝘁𝗼 𝘀𝘄𝗮𝗽 𝗼𝗯𝗷𝗲𝗰𝘁𝗶𝘃𝗲𝗹𝘆 𝘄𝗼𝗿𝘁𝗵𝗹𝗲𝘀𝘀 𝗰𝗿𝘆𝗽𝘁𝗼 𝗳𝗼𝗿 𝘀𝗵𝗮𝗿𝗲𝘀 𝗼𝗳 𝗲𝘅𝘁𝗿𝗲𝗺𝗲𝗹𝘆 𝘀𝗽𝗲𝗰𝘂𝗹𝗮𝘁𝗶𝘃𝗲 𝘃𝗲𝗻𝘁𝘂𝗿𝗲𝘀 𝗳𝗼𝗰𝘂𝘀𝗲𝗱 𝗼𝗻 𝗔𝗜, 𝘀𝗽𝗮𝗰𝗲 𝘁𝗿𝗮𝘃𝗲𝗹, 𝗲𝘁𝗰.

𝗧𝗵𝗲 𝗹𝗮𝘁𝘁𝗲𝗿 𝗮𝗿𝗲 𝗮𝘁 𝗹𝗲𝗮𝘀𝘁 𝗽𝗿𝗼𝗯𝗮𝗯𝗹𝘆 𝘄𝗼𝗿𝘁𝗵 𝙨𝙤𝙢𝙚𝙩𝙝𝙞𝙣𝙜.

Per the second chart, it feels like a crypto sell-off is already in motion.

Souring Bitcoin sentiment has triggered almost $1.5 billion in crypto liquidations over the past 24 hours, as the largest digital asset sank back to a two-month low.

The price of the token is down almost 50% from an all-time high of around $126,000 reached in October.

𝗛𝗼𝘄 𝗺𝘂𝗰𝗵 𝗰𝗮𝘀𝗵 𝘄𝗶𝗹𝗹 𝗳𝗹𝗼𝘄 𝗼𝘂𝘁 𝗼𝗳 𝗰𝗿𝘆𝗽𝘁𝗼 𝗮𝘀 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀 𝗹𝗼𝗼𝗸 𝘁𝗼 𝗿𝗶𝗱𝗲 𝘁𝗵𝗲 𝘄𝗮𝘃𝗲 𝗼𝗳 𝗜𝗣𝗢𝘀 𝗮𝗯𝗼𝘂𝘁 𝘁𝗼 𝗵𝗶𝘁 𝘁𝗵𝗲 𝗯𝗲𝗮𝗰𝗵?

Hard to say.

But we're moving to higher ground...

Read the article Matt Phillips wrote about IPOs for Axios here: https://www.axios.com/newsletters/axios-markets-d3c8e8e2-bde0-4052-a3c8-aa70bd463bae.html?stream=business

The Bloomberg article on crypto by David Pan and Suvashree Ghosh is here: https://www.bloomberg.com/news/articles/2026-06-02/bitcoin-tumbles-below-70-000-for-first-time-in-two-months?sref=1lDnBweI

$BTC

Grey Value Management, LLC is pleased to announce that we recently joined the International Corporate Governance Network (ICGN).

Established in 1995 and led by investors responsible for assets under management in excess of US $100 trillion, the ICGN is a non-profit entity that advances high standards of corporate governance and investor stewardship globally.

It's a fantastic organization that engages across a wide spectrum of issues, markets and geographies.

They recently published a letter to the SEC on Reg S-K, and have an upcoming US Working Group and Global Policy Committee exploring member views on semi-annual reporting.

On the other side of the globe, the ICGN just responded to the Japanese Ministry of Justice's interim draft of the Companies Act, as well as the FSA and TSE's consultation on draft revisions to the Corporate Governance Code.

As an active global investor, Grey Value Management depends upon robust coporate governance to exercise both its rights and responsibilities as owners.

We look forward to participating in the ICGN's efforts to promote and advance high standards of corporate governance.

If you would like to learn more, visit the ICGN's website here:
https://www.icgn.org/about/funding

You can find a list of current members here:
https://www.icgn.org/icgn-members

I just read James Grant's review of Liaquat Ahamed's "1873: The Rothschilds, the First Great Depression, and the Making of the Modern World" in the The Wall Street Journal.

Ahamed's “Lords of Finance: The Bankers Who Broke the World” was a fantastic read.

I'm willing to bet "1873" will be as well.

I just pre-ordered it on Amazon - the Kindle version is only $16.99 (see below).

𝗧𝗵𝗲 𝙍𝙚𝙖𝙡 𝗗𝗿𝗶𝘃𝗲𝗿 𝗼𝗳 𝗛𝗶𝗴𝗵𝗲𝗿 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗥𝗮𝘁𝗲𝘀

Bond investors may be logically worried about rising prices triggered by the Iran war, etc., but real yields - which strip out inflation - indicate that they are more concerned with other factors, including large public debt burdens, fallout from the AI investment boom, etc.

One important reason it matters if the latter have become the primary driver of longer-term borrowing costs:

𝗟𝗼𝗻𝗴-𝘁𝗲𝗿𝗺 𝘆𝗶𝗲𝗹𝗱𝘀 𝘄𝗶𝗹𝗹 𝗻𝗼𝘁 𝗳𝘂𝗹𝗹𝘆 𝗿𝗲𝘃𝗲𝗿𝘀𝗲 𝙚𝙫𝙚𝙣 𝙞𝙛 𝗶𝗻𝗳𝗹𝗮𝘁𝗶𝗼𝗻 𝗿𝗲𝘁𝗿𝗲𝗮𝘁𝘀, 𝗸𝗲𝗲𝗽𝗶𝗻𝗴 𝗺𝗮𝗿𝗸𝗲𝘁 𝗯𝗼𝗿𝗿𝗼𝘄𝗶𝗻𝗴 𝗰𝗼𝘀𝘁𝘀 𝗲𝗹𝗲𝘃𝗮𝘁𝗲𝗱 𝗮𝗿𝗼𝘂𝗻𝗱 𝗺𝘂𝗹𝘁𝗶𝘆𝗲𝗮𝗿 𝗵𝗶𝗴𝗵𝘀 𝗮𝗻𝗱 𝗺𝗮𝗶𝗻𝘁𝗮𝗶𝗻𝗶𝗻𝗴 𝗽𝗿𝗲𝘀𝘀𝘂𝗿𝗲 𝗼𝗻 𝗴𝗼𝘃𝗲𝗿𝗻𝗺𝗲𝗻𝘁𝘀 𝗮𝗻𝗱 𝗲𝗰𝗼𝗻𝗼𝗺𝗶𝗲𝘀.

Subtracting inflation-adjusted yields from nominal rates leaves real yields, arguably a more accurate measure of borrowing costs.

Per the figures below, 𝗿𝗶𝘀𝗶𝗻𝗴 𝗿𝗲𝗮𝗹 𝘆𝗶𝗲𝗹𝗱𝘀 𝗲𝘅𝗽𝗹𝗮𝗶𝗻𝘀 𝗺𝗼𝘀𝘁 𝗼𝗳 𝘁𝗵𝗲 𝗺𝗼𝘃𝗲 𝗵𝗶𝗴𝗵𝗲𝗿 𝗶𝗻 𝗼𝘃𝗲𝗿𝗮𝗹𝗹 𝘆𝗶𝗲𝗹𝗱𝘀 𝗶𝗻 𝘁𝗵𝗲 𝗨𝗦, 𝘄𝗵𝗶𝗹𝗲 𝗶𝗻𝗳𝗹𝗮𝘁𝗶𝗼𝗻 𝗶𝘀 𝘁𝗵𝗲 𝗺𝗮𝗷𝗼𝗿 𝗶𝗻𝗳𝗹𝘂𝗲𝗻𝗰𝗲 𝗶𝗻 𝗝𝗮𝗽𝗮𝗻 𝗮𝗻𝗱 𝗚𝗲𝗿𝗺𝗮𝗻𝘆.

It follows that even if the Strait of Hormuz is eventually opened, long-term rates could find themselves stranded at elevated levels.

For the full details, read the Bloomberg by Matthew Burgess and Masaki Kondo:
https://www.bloomberg.com/news/articles/2026-05-24/bond-strategists-warn-yields-to-stay-high-even-if-iran-war-ends?sref=1lDnBweI

𝗧𝗵𝗲 𝗩𝗶𝗲𝘄 𝗳𝗿𝗼𝗺 𝘁𝗵𝗲 𝗧𝗼𝗽...

According to BofA, asset allocators boosted their stock exposure to a net 50% overweight in May, from 13% last month.

The S&P 500 Index hit its latest record on May 14.

𝗙𝘂𝗻𝗱 𝗺𝗮𝗻𝗮𝗴𝗲𝗿𝘀 𝗮𝗿𝗲 𝗻𝗼𝘄 𝘁𝗵𝗲 𝗺𝗼𝘀𝘁 𝗼𝘃𝗲𝗿𝘄𝗲𝗶𝗴𝗵𝘁 𝗼𝗻 𝗲𝗾𝘂𝗶𝘁𝗶𝗲𝘀 𝘁𝗵𝗲𝘆 𝗵𝗮𝘃𝗲 𝗯𝗲𝗲𝗻 𝘀𝗶𝗻𝗰𝗲 𝗝𝗮𝗻𝘂𝗮𝗿𝘆 𝟮𝟬𝟮𝟮.

That's the top chart.

Note the bottom chart - the current Shiller PE Ratio (aka, the CAPE Ratio).

The BofA global survey was conducted May 8-14, and canvassed 170 participants with $461 BN in assets.

Much of the gains have been concentrated in chipmakers, pushing the Philadelphia Semiconductor Index almost 50% higher since the end of March.

A net 20% of American investors surveyed said they were overweight US equities, compared to a net 22% who were underweight before the war.

That's one of the sharpest rotations out of Europe and into the US on record in data going back to 1999.

𝗧𝗵𝗲 𝗺𝗮𝗿𝗸𝗲𝘁 𝗺𝗮𝘆 𝗰𝗹𝗶𝗺𝗯 𝗵𝗶𝗴𝗵𝗲𝗿 𝗳𝗿𝗼𝗺 𝗵𝗲𝗿𝗲, 𝗯𝘂𝘁 𝘁𝗵𝗮𝘁 𝗱𝗼𝗲𝘀𝗻'𝘁 𝗺𝗮𝗸𝗲 𝗰𝘂𝗿𝗿𝗲𝗻𝘁 𝘃𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻𝘀 𝗮𝗻𝘆 𝗹𝗲𝘀𝘀 𝘀𝘁𝗿𝗮𝘁𝗼𝘀𝗽𝗵𝗲𝗿𝗶𝗰...

Stats from this fine article by Levin Stamm: https://www.bloomberg.com/news/articles/2026-05-19/fund-managers-boost-stock-allocations-by-a-record-in-bofa-poll?sref=1lDnBweI

𝗜𝘁 𝘄𝗼𝘂𝗹𝗱 𝗮𝗽𝗽𝗲𝗮𝗿 𝘁𝗵𝗮𝘁 𝗟𝗜𝗩 𝗚𝗼𝗹𝗳 𝗶𝘀 𝗻𝗼𝘄 (𝘄𝗮𝗶𝘁 𝗳𝗼𝗿 𝗶𝘁)... 𝘿𝙚𝙖𝙙.

Someone had to say it.

𝗪𝗵𝗮𝘁 𝗛𝗮𝗽𝗽𝗲𝗻𝘀 𝗪𝗵𝗲𝗻 𝘁𝗵𝗲 𝗙𝗹𝗼𝘄𝘀 𝗥𝗲𝘃𝗲𝗿𝘀𝗲?

The S&P 500 Index has surged about 16% from its March low, supported by robust earnings, corporate buybacks and heavy buying from retail investors.

But the fundamentals are catalyzing froth, and what happens when the flows reverse course?

While retail and institutional investors have piled into stocks, the market looks significantly more crowded than it did just six weeks ago.

Just 27% of the benchmark’s constituents have outperformed the index over the past 30 trading days.

And higher long-end rates are beginning to create competition for equities again.

“𝗣𝗮𝘀𝘀𝗶𝘃𝗲 𝗶𝗻𝗳𝗹𝗼𝘄𝘀, 𝗯𝘂𝘆𝗯𝗮𝗰𝗸𝘀, 𝗿𝗲𝘁𝗮𝗶𝗹 𝗽𝗮𝗿𝘁𝗶𝗰𝗶𝗽𝗮𝘁𝗶𝗼𝗻, 𝗮𝗻𝗱 𝗹𝗲𝘃𝗲𝗿𝗲𝗱 𝗘𝗧𝗙 𝗲𝘅𝗽𝗼𝘀𝘂𝗿𝗲 𝗵𝗮𝘃𝗲 𝗮𝗹𝗹 𝗮𝗰𝗰𝗲𝗹𝗲𝗿𝗮𝘁𝗲𝗱 𝗮𝗹𝗼𝗻𝗴𝘀𝗶𝗱𝗲 𝘁𝗵𝗲 𝗿𝗮𝗹𝗹𝘆, 𝗯𝘂𝘁 𝗺𝗮𝗻𝘆 𝗼𝗳 𝘁𝗵𝗲𝘀𝗲 𝘀𝗮𝗺𝗲 𝗳𝗹𝗼𝘄𝘀 𝗻𝗼𝘄 𝗹𝗲𝗮𝘃𝗲 𝘁𝗵𝗲 𝗺𝗮𝗿𝗸𝗲𝘁 𝗶𝗻𝗰𝗿𝗲𝗮𝘀𝗶𝗻𝗴𝗹𝘆 𝘃𝘂𝗹𝗻𝗲𝗿𝗮𝗯𝗹𝗲 𝘁𝗼 𝗮 𝘀𝗵𝗼𝗿𝘁-𝘁𝗲𝗿𝗺 𝘂𝗻𝘄𝗶𝗻𝗱 𝗶𝗳 𝗺𝗼𝗺𝗲𝗻𝘁𝘂𝗺 𝗯𝗲𝗴𝗶𝗻𝘀 𝘁𝗼 𝘀𝘁𝗮𝗹𝗹.”

Read the full article by Michael Msika and Natalia Kniazhevich here: https://www.bloomberg.com/news/articles/2026-05-18/citadel-securities-rubner-sees-risk-of-flow-unwind-in-us-stocks?sref=1lDnBweI