July 24, 2026, Issue 31

Is it Really the Lettuce?

Well now, let’s review this issue really quickly. Cyclospora infections have broken out in at least 9 states and have hit at least 2,000 very unlucky people. The symptoms? There are the cramping and nausea, the vomiting, severe fatigue, low-grade fever, and of course my favorite; explosive diarrhea. And what we are hearing is that it seems to have come down to Iceberg lettuce. But um, Iceberg lettuce that traced back to Taco Bell? I gotta tell ya, dear readers, I have eaten at Taco Bell exactly one time in my life, and I landed up with each and every one of those symptoms. How about we let the lettuce off the hook?

Grave Miscalculations

I don’t know this for sure, but I firmly believe that if you asked Vladimir Putin on February 23, 2022, how long his planned invasion of Ukraine would take to achieve his goals, he would have probably said somewhere around 4-6 weeks. We are 4 and half years in, with no end in sight.
Similarly, Donald Trump gave a 4–6-week timeline on his planned bombing campaign of Iran. Now don’t get me wrong on this one. Iran has killed and tortured its citizens, and fund proxies like Hamas, Hezbollah, and the Houthies, so not exactly a peace-loving country. The unfortunate part of the mission, which FYI is in its 6th month, is that Iran has learned that they don’t even need a nuclear weapon to destroy the world…at least economically. All they need to do is disrupt tankers traveling through the Strait of Hormuz. This 21-mile-wide waterway is where 20 million barrels of oil per day passed on its way to various countries around the globe. Yup, 20 million barrels! That’s about 20-25% of the world’s seaborne oil trade. That amount dropped by 90% the minute that war started. The immediate result? Oil went from about $65 per barrel to $95. A gallon of gas went from around $2.75 to $4, immediately creating inflationary conditions around the world.
Leaders should never overestimate their power nor should they underestimate the opposition. Doing either could lead to many grave and unintended consequences.

When Great Earnings are not Enough

Avid readers of this newsletter (I know you’re out there), will know that for me, a stock is judged by only one thing; earnings. When are great earnings not enough? I will answer with a short story. I knew a guy who owned a great small business. He made FDA approved mattresses for hospitals. He only needed 4 employees, ran a lean operation, drew a 6-figure salary, and produced 6 figure profits every year. Then he bought a big, beautiful house. Then he bought a Porsche. The he bought another Porsche for his wife. Pretty soon, the business was gone along with the Porsches and the wife.
So here we have Alphabet, the parent company of Google. They just reported Q2 earnings from operations of $40.7B. This is a 30% increase year over year and does not include another $50B in paper profits from investments in Anthropic among others. By any metric, this was a fantastic quarter. How did the stock react? Down about 7% since the announcement. Why? They managed to have negative cash-flow of $5.9B due to spending like drunken sailors on AI infrastructure.
This is the big question of this earnings season. Will all the spending continue? There are those that would have you believe that the stock would have been punished harder had they said they were pulling back on spending. In fact, they said that capex will be an even more robust $200B for next year as well. Will all of the spending by all of these companies eventually lead to higher profits and margins? Or will it just turn out to be Porsches and a fancy house all over again?
We shall see in due time. For now, I am keeping the faith and considering a buy of a couple more shares of GOOG.

Follow the Money

Now the next big question. Where is all the money being spent? Companies like Nvidia, Intel, Micron, Lumentum, and many others should benefit from all of the bis spenders out there. Although Nvidia shares have not moved much over the last 6 months or so, I believe they are poised to pop. Micron is about 10% below our first purchase and 30% below where it traded after earnings. At $913, this stock seems too cheap. We will buy a couple more.
We have been trying to sell some winners like ACN and SBRA to raise some cash. We may also be losing patience with Nike. I love the shoes, but it seems like they just can’t get the China strategy right. They are changing their distribution chain again in that country, which accounts for a large percentage of sales. I will keep y’all up to date on that plan.
This cash will be deployed in another name as well. Erock Inc is a very small company that designs ans sells power systems to customers building out data centers. The stock came public a couple of months ago at $11, quickly ran up to $20, and is now back around $11. % analysts began coverage with buy rating and target prices of $20 and higher. I think this is a really nice under-the-radar play on AI where you could see a quick pop when they report their first earnings as a publicly traded company on August 11.

Thought of The Day

Mr. Trump clearly wants to see Canada win another Stanley Cup. What? Hear me out. With a 50% tariff on hockey sticks, kids in the States may be forced into soccer, the most boring, beautiful game in the world. With no young talent coming up in the USA, it’s a matter of time till a Canadian team hoists the Cup.
Thanks Donald!