Hunt, Jason, and Mike walk the full 20-page Cash Flow Memo, from a shut shipping channel in the Strait of Hormuz to a tiny ophthalmology compounder, hunting for value in an elevated market.
The Cashflow Memo
Key Takeaways
* Energy desk: the Strait of Hormuz South Channel is effectively closed after Greek tanker owners pulled out following drone and missile strikes (two crew deaths), pushing Brent into the 90s and WTI into the low 80s; the deep backwardation says the market expects an Iran accommodation within days, and Hunt agrees one is likely by the weekend.
* Counterintuitive gas call: despite the data-center power narrative, gas-for-power demand is flat (down in ’25, barely up in ’26), so the ’27 gas strip sits near $3.40; LNG demand is robust, but capacity value is accruing to independent power producers (Constellation, Vistra, NRG), none of which are in the memo.
* Fiscal tripwire: defense is asking for ~$1.5T and the total deficit needs to hold near $1.5T or lower to avoid a capital-markets event (a failed Treasury auction) through ’26 and ’27; with interest at ~$1.15T and Social Security off-limits, Medicare and Medicaid (~$1.8T combined) are the only real lever.
* AI value migration: with open-source models (Kimi K3 and others) reaching rough parity, model economics commoditize and value accrues to infrastructure, which is why Amazon and Alphabet are the preferred AI-infra owners; on semis, TSMC’s ~$265B Arizona commitment (we don’t want to leave any food on the table) cements leading-edge pricing power, and the standing risk is under-capacity inviting an industry-funded replacement rather than pricing pressure.
* Healthcare value hunt: Jason prefers BioNTech over Moderna (more disciplined COVID-era spend, longer research runway) and Regeneron over Lilly (repriced for a post-blockbuster future, pipeline at a discount while Lilly rides the weight-loss hype); the team owns Vertex and Harrow, the latter compounding an ophthalmology sales-force edge by co-branding a topical anesthetic alongside EYLEA biosimilars.
Show Notes
[00:27] Exhibits B & C: Oil, Hormuz, and Backwardation The South Channel is effectively closed after Greek owners abandon it under drone and missile fire, lifting Brent into the 90s and WTI into the low 80s. The deep backwardation signals the market expects an Iran accommodation within days.
[04:44] Exhibit B: Why Natural Gas Is Stuck Gas-for-power demand is flat despite the data-center narrative, pinning the ’27 strip near $3.40. LNG demand is robust, but the seven-day capacity value is accruing to independent power producers outside the memo.
[07:00] Exhibit A: The Deficit and the $1.5T Line Defense is asking for roughly $1.5T, and the total deficit must hold near that level to avoid a failed Treasury auction through ’26 and ’27. With interest at ~$1.15T and Social Security untouchable, Medicare and Medicaid are the only real lever.
[08:54] Page 1: AI Infrastructure, Amazon and Alphabet As open-source models reach parity, model economics commoditize and value shifts to compute. Amazon leads infrastructure-as-a-service, with Alphabet closing the gap on Azure.
[11:42] Chinese Open-Source Models and Security Jason (ex-security) argues a model is just a list of weights, so a Chinese model can run safely in a US data center under the right terms of service. The Fable 5 data-capture change and the Hugging Face hack frame the regulatory-capture debate.
[15:39] Page 3: Nvidia and TSMC TSMC’s ~$265B Arizona buildout and don’t leave food on the table line put Intel and Samsung on notice. TSMC sets the leading-edge pace and commands a wafer premium; Nvidia still isn’t a big multiple.
[19:07] Pages 4-6: Media and Telecom Netflix keeps losing ground while Meta stays interesting. Telecom is destructive competition, T-Mobile carries the least debt and the highest multiple, and Starlink is a real threat.
[22:01] Pages 7-8: Payments and Retail Visa and MasterCard remain great businesses facing a software-style challenge; PayPal and Circle both earn on idle float. Lowe’s and Home Depot are a duopoly, Costco and Walmart look expensive.
[24:00] Page 13: Financials Hunt likes all five names. Interactive Brokers has the widest moat on the lowest cost base, and Moody’s is indispensable given the refinancing wall, though both trade rich.
[26:00] Page 14: Industrials Caterpillar at roughly 40x free cash flow rides the power-equipment and reshoring wave versus Deere near 20x, but swapping isn’t smart. TransDigm and Fastenal round out the compounders.
[28:00] Pages 15-19: Pharma BioNTech is the more disciplined cancer-vaccine bet over Moderna, and the team owns Vertex despite disliking big pharma’s treadmill. Regeneron is the value pick over an expensive, hype-driven Lilly.
[31:33] Page 20: Harrow’s Ophthalmology Playbook Harrow is early in commercializing a cluster of eye drugs, leveraging one sales force to co-brand a topical anesthetic with EYLEA biosimilars. Sub-blockbuster drugs are hard to market, which is exactly Harrow’s edge.
[33:52] Close: Software Next Week Next week is another full 20-page walk with a focus on software as an opportunity. Get the memo at telltales.us and join us in seven days.
Cashtags
$AAPL $ALC $AMZN $BNTX $CAT $CHTR $CMCSA $COST $DE $DISH $FAST $GNRC $GOOGL $GS $HD $HROW $IBKR $INTC $JPM $KMX $LLY $LOW $META $MRNA $MS $MSFT $NFLX $NVDA $PFE $PLTR $PYPL $REGN $SPOT $TDG $TGT $TMUS $TSLA $TSM $UNH $V $VRTX $VZ $WMT
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