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The most important charts and themes in markets and investing…
1) Free Cash Flow Is King
a) Google ($GOOGL) earned a stunning $112 billion in Q2, the highest quarterly net income for any company in history.
But its stock fell 7% the day after its earnings report.
Why?
AI spending concerns, with Google’s free cash flow turning negative (-$6 billion) for the first time in company history.
Google’s quarterly spending on Property & Equipment (AI Infrastructure) has doubled over the past year to $44.9 billion. They now expect capex for the year of $195-$205 billion, up from last quarter’s forecast of $180-$190 billion.
b) Tesla’s ($TSLA) stock fell 15% after reporting a decline in free cash flow (-$1.1 billion) for the first time in over two years. The culprit? Rising capital expenditures, which increased 142% YoY to $5.8 billion.
c) Apple ($AAPL) has generated $129 billion in free cash flow over the past year while Oracle has burned $24 billion.
Their stocks have followed the fundamentals:
Apple is up 56% over the past year, trading at an all-time high.
Oracle is down 52% over the past year, trading at a multi-year low.
Investors are starting to draw a line on AI spending.
Apple’s discipline is being rewarded. Oracle’s overspending is being punished.
In the AI race, bigger capex isn’t always better.
2) The SpaceX IPO Lesson
$98 billion of Google’s $112 billion net income (87%) came from historic markups in its equity investments (mainly SpaceX & Anthropic).
But these are unrealized gains. What happens if these investments start moving in the opposite direct? Shareholders will see the reverse effect, with a hit to net income.
We’re only a month into the 3rd quarter, but if the current trend holds, we’ll soon see exactly that.
Why?
SpaceX ($SPCX) is suffering the same fate as so many major IPOs before it: a euphoric debut, unrealistic expectations, and a painful reality check.
From its peak on June 16, it has experienced an over 50% drawdown.
The lesson: great companies can still be bad investments at the wrong price. Chasing the hot IPO is not a prudent investment strategy.
3) Too Big to Fail?
10 Years ago, JPMorgan had a lower market cap than Wells Fargo.
Today, its market cap of $937 billion is higher than its 3 largest competitors (BofA, Wells Fargo, Citigroup) combined.
JPMorgan’s net income has grown from $24 billion to $65 billion over the last 10 years. It’s become the largest and most profitable bank in the world.
Too big to fail? We’re way past that.
4) The Low Inflation Lie
The resumption of hostilities in Iran has effectively closed the Strait of Hormuz once more, with shipments grinding to a halt.
That’s pushed the price at the pump back up to $4.11 per gallon, which is 38% higher than where it stood at the start of the War.
The longer commodity prices remain elevated, the greater the inflationary burden on US consumers.
The 30-Year US Treasury Yield ended last week at 5.17%, its highest weekly close since July 2007.
The Federal Reserve and Federal Government continue to spin the lie of low inflation while the bond market reveals the truth.
6) Has Obesity Peaked?
The rise of GLP-1 weight-loss drugs may be starting to show up in the data. US obesity has declined from a 2022 peak of 39.9% to 36.4%, while the share of Americans currently using GLP-1 medications has jumped from 3% in 2024 to 11% in 2026.
Investors are clearly betting this trend has a long runway, helping propel Eli Lilly’s market value above $1.1 trillion. That’s a 12x increase over the past decade, making Lilly the most valuable health care company in the world.
7) A Few Interesting Stats…
a) A record $348.5 billion is now trapped in US buyout funds at least a decade old, 3.5x the 2015 level and more than 100x 2005 levels. Private equity’s biggest problem isn’t raising money – it’s returning it.
b) The US Strategic Petroleum Reserve is now at its lowest level since March 1983. Over the past 5 years we’ve seen a drawdown of 310 million barrels, a 50% decline.
c) 17 of the 30 worst-performing stocks in the S&P 500 this year are software and related services companies. Investors are betting that AI will be an existential threat to this industry.
d) Miami, Florida is the strongest buyer’s market in America with home sellers outnumbering homebuyers by 140%.
e) IBM’s -25% decline in a single trading day (July 14) was the biggest ever for the 115-year-old company and a 15-sigma event. That basically means it should not have happened even once in the history of the universe. But it did, and given enough time it will happen again, because financial markets don’t follow a normal distribution.
And that’s it for this week. Thanks for reading!
Every week I do a video breaking down the most important charts and themes in markets and investing. Subscribe to our YouTube channel HERE for the latest content.
Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. Read our full disclosures here.
PakarPBN
A Private Blog Network (PBN) is a collection of websites that are controlled by a single individual or organization and used primarily to build backlinks to a “money site” in order to influence its ranking in search engines such as Google. The core idea behind a PBN is based on the importance of backlinks in Google’s ranking algorithm. Since Google views backlinks as signals of authority and trust, some website owners attempt to artificially create these signals through a controlled network of sites.
In a typical PBN setup, the owner acquires expired or aged domains that already have existing authority, backlinks, and history. These domains are rebuilt with new content and hosted separately, often using different IP addresses, hosting providers, themes, and ownership details to make them appear unrelated. Within the content published on these sites, links are strategically placed that point to the main website the owner wants to rank higher. By doing this, the owner attempts to pass link equity (also known as “link juice”) from the PBN sites to the target website.
The purpose of a PBN is to give the impression that the target website is naturally earning links from multiple independent sources. If done effectively, this can temporarily improve keyword rankings, increase organic visibility, and drive more traffic from search results.
