The collective Free Cash Flow of Apple, Microsoft, Amazon, Alphabet, Tesla and Meta stopped rising six quarters ago. Because these firms have had to ramp up their capital expenditures for the AI build-out, their combined annual FCF has fallen from $339 billion to $312.6bn.

The Price-to-Free Cash Flow ratio of the Mag 7 is 52.6. But their free cash flow is -0.7% YoY. They're telling us CapEx is going to ramp in 2026 too, so logic says this chart may stay negative for the foreseeable future. The market didn't like it in 2022 and I don't like it now.

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This week BTM- live from NYC with @SamuelRines @JeffWeniger was great to do the pod post holiday party. The Prof thinks the Fed really doesn’t know what will do in December -get your 🍿🍿🍿 Still we’re calling it a Healthy uncertainty https://t.co/ysji6yleoq

The Mag 7 goosed capital expenditures by 61.1% over the last year. At the same time, net cash flow from operating activities only grew 21.6%. Because these have diverged so starkly, the Mag 7's free cash flow growth has turned negative YoY. That also happened in 2022.

Here are the last dozen quarters or so.

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If Amazon's capital expenditures keep ramping like this, the company could go Free Cash Flow negative sometime soon, just as it did in late 2021. The company's market cap is $2.55 trillion, despite total free cash flow over the last 40 quarters summing to $114 billion.

I'll be covering markets with Janet this morning. They say they want to talk about some of the charts, so I guess that means we are doing the (temporary) fall from grace of Quality stocks, the trouble in FoodCos and so on. SiriusXM 132.

A $500,000 loan refinanced at 6% for 30 years has a monthly payment of $2,998. But if you push the interest rate up to 6.5% and do it for 50 years, the payment goes $179 lower, to $2,819 per month. Forget for a minute whether you are for or against the 50-year mortgage. Consider

If you make a basket of supermarket food companies (Campbell's, General Mills, Clorox and Conagra), their stocks have has lost to the S&P 500 by 38.9% per year for the last 3 years. This just broke the prior record, which was set when uh oh.

Plus Therapeutics announces a national coverage agreement with Humana for the novel CNSide® Cerebrospinal Fluid Tumor Cell Enumeration test for patients with metastatic CNS cancer. This brings the test’s total policy coverage to 67 million people in the U.S.

Last week the market achieved something last seen in 1999: the S&P 500 beat the S&P 500 Quality index by 11.5% over the prior six months. When this happened 26 years ago, the snapback was violent.

This chart for the private equity houses is clearly my biggest red flag. Carlyle (-23.8%), Blackstone (-22.8%) and KKR (-19.8%) have each been badly clipped while the S&P 500 chugs to new highs. This could be just a hiccup, but face it, the chart is scary.

South Korea, an AI-theme economy, continues to trade for <11x earnings, offering an earnings yield that is 6 percentage points above its bond yield. Tech is more than 1/3rd of the stock market, so the "no tech" excuse that hampers Europe does not work with the MSCI Korea index.

Silver is playing with $50/oz. from both the 1980 Hunt Brothers corner and the 2011 bull. But when we account for inflation, the Hunt Brothers ran silver up to $205.64 in today's dollars; 2011 was the equivalent of $70.49. From this perspective, silver has room to run.

The "junky" small cap Russell 2000 has beaten the small cap S&P 600 by 8.3% over the last 9 months, the widest performance gap since February 2000. The Russell 2000 has 29% of its market cap in unprofitable companies, while the S&P 600 has 16%.

Microsoft's operating cash flow has grown at a 15.7% annual rate over the last 4 years, but CapEx has grown at double that speed, +33.8% per year. The result: Free Cash Flow grew just 6.6% per year. For this, company trades at a Price-to-Free Cash Flow multiple of 48.5x.

The NFIB survey's "Planning to Increase Employment" minus "Planning to Decrease Employment" has risen for four consecutive months. This strikes me as a nice counterargument to the people who are 100% sure this labor market is ready to roll over.

The Fed will be cutting rates into 2026, so therefore inflation will head higher, right? It is quite possibly the opposite. Historically, when the path of Fed and ECB policy rates was lower, the path of inflation was also lower.

@JeffWeniger Asking rents are a lot lower due to the models not including incentives being advertised... Such as "2 Months Free," like in this article on the apartment glut in Bozeman, MT: This leasing agent says rents went from $2,200 down to $1,482 which is a -33% decline

It is hard to have a stagflation thesis with rent charts heading down. Kristi Noem says they have deported 527,000 people plus another 1.6 million who self-deported since Trump came in. I dunno. But I do know more people will be gone in 2026, then more people in 2027. I don't

Expensive gasoline causes recessions. Right now, gas is cheap. The price has fallen, while fuel economy and wages are up. Today, an hour of wages purchases enough gas to drive 267.3 miles, about double the 141.5 miles that could be purchased in the 2022 slowdown.