Finance

Bond Markets Are Now Battlefields

Published

4 months ago

February 6, 2026

As the Greenland crisis came to a head in the days before Davos, Europeans sought tools that could be reforged as weapons against the Trump administration. On Jan. 18, Deutsche Bank’s global head of foreign exchange research, George Saravelos, warned clients in a note that “Europe owns Greenland, it also owns a lot of [U.S.] treasuries,” and that the EU might escalate the conflict with a “weaponization of capital” by reducing private and public holdings of U.S. debt instruments.

U.S. Treasury Secretary Scott Bessent reported later that week that Deutsche Bank no longer stood behind the analyst’s report, but Saravelos was far from the only financial analyst to discuss the idea. Within days, a few European pension funds eliminated or greatly reduced their holdings of U.S. Treasurys and—perhaps as a result—U.S. language about European strength became considerably less aggressive.

It’s unclear how much of an impact Europe’s moves had on the White House backing off. But it poses a number of questions: Can Europe take advantage of weaponized interdependence to wage financial warfare against the United States? How big are the obstacles in the way, and how much impact can such moves have?

Financial flows and financial policy are instruments of coercive power. There is some evidence of financial flows putting pressure on the United States last year; in the wake of his triumphant declaration of mass tariffs in April, movement away from Treasurys reportedly persuaded President Donald Trump to partly change course.

However, this seems to have been an organic, unplanned development and a short-lived one.

Despite the precipitous fall of the dollar, and lively discussion over the past year of the United States losing its reserve currency status, the evidence points to mundane concerns about inflation and policy uncertainty leading to a slow reallocation of investment from the United States to other countries rather than any kind of coordinated response. Expert observers have asked if it is even possible for Europe to do anything further given its active trade with the United States, its smaller markets, and its interdependence. The Financial Times’s Alphaville blog summarized the idea of weaponization as “implausible.”

Yet the potential is there. History can be instructive. The state weaponization of finance feels new but, in fact, is centuries old. In the last decades of the 19th century, European governments—particularly France and Germany—aggressively used finance to advance their interests. The subservience of finance to diplomacy was considered natural; to propose otherwise could be dismissed as “financial pacifism.” At a critical moment in conflict with Russia, German Chancellor Otto von Bismarck banned the Reichsbank from accepting Russian securities as collateral. After the Franco-Prussian War an “official but tacit ban” was used to prevent French investors from putting any money into Germany.

How might similar action look today?

The main battlefield for weaponization is markets for sovereign debt—Treasurys on the U.S. side and the mix of national and European Union-level debt instruments on the European side. If Carl von Clausewitz had been a banker instead of a general, he would have pointed to these instruments as the “center of gravity” of any coercive financial operations. Here, the United States has a distinct advantage: Treasurys are the core market of international finance—large, very deep, very liquid. They form the backbone of world financial flows, a major channel of supply and demand for local markets everywhere.

Virtually all national financial markets are tied to the U.S. Treasury market, and it greatly eases the U.S. ability to borrow. This makes it a potentially powerful target for European pressure but also, at best, a delicate one—it is very difficult to launch pressure that does not boomerang back against the EU. Much of EU ownership of Treasurys is also in private hands.

Despite all this, European governments still have the means to go on the offensive. Finance is notoriously sensitive to the arbitrage opportunities created by regulation, such that leading textbooks on the industry include extensive discussion of loophole mining. (This may also explain why lawyers can now earn more than bankers on Wall Street.) If clever bureaucrats at the European Central Bank and EU and elsewhere created the right loopholes, then European funds could move accordingly. Instead of banning use of Treasurys as collateral à la Bismarck, slight adjustments of their risk weight or tax impact under EU or national law should do the trick. There are great technical and political challenges, but it is absolutely doable.

On a defensive basis, Europe can improve its financial position by further developing common EU debt, building on the large-scale Next Generation EU issuance during the COVID-19 pandemic. In December, EU leaders agreed to raise 90 billion euros ($106.3 billion) for Ukrainian defense, and further steps are very much under discussion. The political and technical challenges to full development of common debt options are obviously enormous, requiring the historically unprecedented establishment of a large, stable market for supranational debt.

EU common debt tends to trade at a discount relative to comparable national debt, showing investors’ concerns. However, the potential payoffs are significant. In addition to facilitating EU-wide defense planning and creating a clear substitute for the Treasurys market, a strong common debt market could create a new and more powerful backbone to European finance, investment, and economic growth.

None of the above analysis should be viewed as prescriptive; by far the best path forward is a negotiated return to the rules-based order as opposed to a collapse into the full anarchy of unrestrained interstate competition. Unfortunately, the Trump administration seems committed to an aggressive policy that puts that order in peril. From at least the Napoleonic wars to the end of World War II, national interests regularly hijacked international markets, pushing them away from their idealized Economics 101 role as mechanisms of price discovery and efficient allocation into channels of pressure and coercion.

In an effort to bottle up these destructive spirits, the Franklin Roosevelt administration—with the assistance of economist John Maynard Keynes—used the United States’ status as the most powerful surviving state to implement the Bretton Woods system of financial and political controls. The success of the Bretton Woods project can be measured in part by how many of the tactics of the previous eras have been forgotten.

As the past month shows, these tactics and their destructive side effects are reemerging as the order collapses. Once again, bond markets are now battlefields.

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Finance

Robinhood Is Becoming a Full-Service Financial Platform. Is the Stock a Buy? | The Motley Fool

Published

7 hours ago

June 20, 2026

Press Room

Robinhood Is Becoming a Full-Service Financial Platform. Is the Stock a Buy? | The Motley Fool

Founded in 2013, Robinhood (HOOD +2.80%) changed the brokerage industry with its free trading model. Today, the broker’s product lineup has expanded well beyond stocks to include products like cryptocurrencies and prediction markets. With a focus on smaller investors, Robinhood is living up to its goal to “democratize finance for all.” But is becoming a full-service financial platform enough to make the stock a buy?

Robinhood is growing quickly

Although it was founded in 2013, Robinhood didn’t go public until 2021. In its first earnings release in the second quarter of that year, it had $102 billion in custody. In the first quarter of 2026, roughly five years later, that figure had grown to $307 billion, and it is now called total platform assets, given the broadening of the company’s business. The company has rapidly become a major player in the finance industry, building off its early success in attracting younger traders interested in stocks.

Image source: Getty Images.

There’s no question that management deserves a great deal of credit for what Robinhood has achieved. But that alone doesn’t make the stock worth buying. Notably, Robinhood is being afforded a premium valuation, with a price-to-earnings ratio of 45x, compared to P/Es of 39x for Interactive Brokers (IBKR +0.96%) and 18x for Charles Schwab (SCHW 2.97%). A growth investor may be able to justify Robinhood’s valuation, but a value investor likely wouldn’t be interested.

What’s going on with Robinhood’s customer base?

There’s another issue to consider here as well. With a focus on new investors, Robinhood may be taking on more risk than its long-established peers, such as Charles Schwab. This potential risk was highlighted in Robinhood’s solid first quarter 2026 results. Risk-taking is the big issue.

While Robinhood’s transaction-based revenue jumped 7% year-over-year in the quarter, that growth was largely driven by prediction markets, which boosted “other” revenue by 320%. Cryptocurrency-related revenue, however, fell by 47%. This is notable because it suggests that aggressive investors shifted to what is the current hot trading idea.

Today’s Change

(2.80%) $2.95

Current Price

$108.15

Key Data Points

Market Cap

$97B

Day’s Range

$103.46 – $109.08

52wk Range

$63.52 – $153.86

Volume

39.5M

Avg Vol

31.1M

Gross Margin

94.92%

The problem is that Robinhood has never lived through a deep market downturn, such as the dot-com crash or the bear market associated with the Great Recession. Until it has, it is hard to know what its customers will do when every market seems to be heading lower, and losses are piling up. In other words, what will its customers do when there’s no new hot investment idea to jump on? There is a very real possibility that fear drives less experienced investors to get out of the market and stay out. Risk-averse investors will likely want to wait for Robinhood to be stress-tested before buying it.

Robinhood is not a bad company, but it is still quite young

None of this is meant to suggest that Robinhood is a bad company. It has done incredible things in a very short period of time. But that short period of time is a problem because the vast majority of it has been good for the stock market and investing. Robinhood’s stock is expensive, and the company has yet to face a deep, prolonged market downturn. Only the most aggressive growth investors will likely be interested in it for now.

Charles Schwab is an advertising partner of Motley Fool Money. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Interactive Brokers Group. The Motley Fool recommends Charles Schwab and recommends the following options: long January 2027 $43.75 calls on Interactive Brokers Group, short January 2027 $46.25 calls on Interactive Brokers Group, and short June 2026 $97.50 calls on Charles Schwab. The Motley Fool has a disclosure policy.

Finance

Personal Finance: SpaceX IPO bends the rules | Chattanooga Times Free Press

Published

17 hours ago

June 20, 2026

Press Room

Personal Finance: SpaceX IPO bends the rules | Chattanooga Times Free Press

Elon Musk made history again this month with the largest public offering of a company in the history of the known universe. Space Exploration Technologies, better known as SpaceX, began trading June 12 on the Nasdaq exchange under the ticker symbol SPCX. In the first three days, the stock soared by 50%, blasting the rocketeer past Amazon into fifth place among America’s largest companies.

While the public liftoff was impressive for its size and the hype surrounding it, what truly set this transaction apart was how Musk used his leverage to succeed in changing the rules during the final countdown and advance his own interest at the expense of shareholders.

Space Exploration Technologies is a truly intriguing collection of assets with a history of big accomplishments and even bigger ambitions. At its core is Starlink, a profitable satellite internet and data transmission operation. In the offering document, Musk imagines a network of massive orbiting data centers, which is not entirely crazy and is likely to face less political opposition from nearby residents.

SpaceX also includes the familiar rocket launch enterprise and an artificial intelligence startup called xAI with its Grok AI assistant. While private investors and Starlink have provided operating cash flows to fund the space operations, SpaceX needs substantial additional funding to support its galactic expansion plans. That requires selling shares of this privately held company to the public in an initial public offering.

The process involves a syndicate of investment banks that facilitates the sale of shares held by the company’s founders or private investors at a specific price, the proceeds of which allow early investors to cash out and provide a large injection of capital. Once the shares are sold to public buyers, they change hands on a market exchange at a price determined by supply and demand.

The prospect of the largest initial offering ever ignited a frenzy of interest. It also allowed Elon Musk to leverage the buzz of a monster IPO to convince Wall Street to bend the rules.

To win the listing, the Nasdaq stock exchange agreed to substantial waivers of its own listing rules. While new companies must typically wait at least three months before they become eligible for inclusion in the popular Nasdaq 100 index, Nasdaq jettisoned this “seasoning” period and allowed SpaceX to enter the index after only 15 days. This tech-heavy index serves as the benchmark for over $1.4 trillion in fund assets that will now be required to sell other holdings to make room for SpaceX in their portfolios. Estimates range from $8 to $15 billion in forced purchases that will create artificial demand for the stock. It also means that many passive investors in retirement funds will end up owning the stock, like it or not.

Nasdaq also waived its own liquidity rules. Ordinarily, at least 10% of the company’s shares must be offered to the public, called the “float,” or percentage, of the total stock value that trades publicly. SpaceX floated only 4.3% of its stock, with private shareholders retaining 95.7%. Using some arithmetic legerdemain, Nasdaq created a “multiplier,” triple-counting the float for companies in the top 40 by total market value. Presumably for firms whose founders’ initials are E.M.

To its credit, S&P Global Inc. considered but ultimately refused to loosen its own standards for joining the S&P 500 index, concerned about the potential reputational damage. The S&P 500 is the benchmark for $20 trillion in assets and opted to retain its 12-month seasoning period as well as a four-quarter profitability hurdle. SpaceX may one day dock with the S&P 500, but the countdown has not started.

Aside from eliciting waivers and exceptions for index inclusion, SpaceX massively advantages its visionary but mercurial founder. In its surprisingly entertaining prospectus, the company boosted Musk’s control far beyond his ownership stake. The shares issued to the public are called Class A shares, and each carries one vote on matters of corporate governance. However, Musk’s stake resides in so-called Class B shares, each with 10 votes, giving Musk 84% voting control.

There are a few other little gems. The prospectus requires that any disputes between shareholders and the company must be settled privately through arbitration. Lawsuits, including the type of class action suits that tend to hold management’s feet to the fire, are expressly prohibited. And speaking of fire, Musk may only be fired by himself.

Some of these more restrictive provisions have been used before. For instance, in its initial offering, Google essentially pioneered the idea of multiple share classes that vested voting control with the founders. SpaceX propels contempt for shareholder rights into a higher orbit.

Separate from the structural disadvantage to public shareholders is the question of valuation. SpaceX lost nearly $5 billion in 2025 and another $4 billion just last quarter. The initial offering of loss-making companies is hardly new, especially in technologically emerging fields. SpaceX has reached the stratosphere.

With no profits to measure, a useful metric is the ratio of the total value of all the company’s stock divided by last year’s revenues, called the price to sales ratio. When the unprofitable Amazon went public in 1996, its total market value was three times its 1995 sales. Google’s 2004 offering priced at 15 times sales, Facebook at a hefty 28 times, and even Musk’s own Tesla launched at a multiple of 15 times sales. SpaceX cleared the tower at an otherworldly 95 times sales, soaring to 130 by the end of day two as the frenzy intensified. During the first full trading day, it comprised 75% of all stock purchases by individual investors. In the prospectus, Musk expatiates on his plan to colonize Mars. He’s halfway there.

There is no precedent for a public offering of this size, with such a long and speculative arc toward profitability and so few shareholder protections. SpaceX is a pure play wager on a precocious space cadet with interstellar aspirations astride a solid rocket booster. Enjoy the ride.

Christopher A. Hopkins, CFA, is a co-founder of Apogee Wealth Partners in Chattanooga.

Finance

Financial adviser warns, ‘stay away from the hype’ of an IPO

Published

1 day ago

June 20, 2026

Press Room

Financial adviser warns, ‘stay away from the hype’ of an IPO

BURLINGTON, Vt. (WCAX) – Initial public offerings, better known as IPOs, may seem like big investment opportunities, but a financial adviser is warning they could be a risky addition to your portfolio.

Dan Cunningham of the investment management company One Day in July, said he recommends that people stay away when a company starts selling initial shares on the stock market.

Most recently, Elon Musk’s SpaceX became the biggest IPO ever, but Cunningham said people shouldn’t get caught up in the hoopla.

“They generate a lot of excitement, but when you look at long term results, IPOs have not been a good investment. So we really try to encourage people to stay away from the hype. You are really betting on the future and taking an enormous amount of risk by buying IPO shares in many cases,” Cunningham said.

According to Cunningham, the good news is that, over the long term, the market and most retirement funds that mirror it will balance out.