MONDAY MARKET UPDATE

Welcome back to Profits & Insights.

It has been a week of reckoning for the founders who defined the last tech bubble. Caroline Ellison (FTX) has been quietly moved to community confinement, and Elizabeth Holmes (Theranos) is seeing her sentence reduced.

In markets, patterns often come in threes. With two major fraud figures making headlines for their exits, speculators are naturally asking who is next. Sam Bankman-Fried is the obvious candidate, but crypto watchers are keeping a close eye on Do Kwon's sentencing. It is a grim reminder that during euphoric cycles, due diligence is the only thing standing between an investor and a total loss.

-Nathan Reed
Defensive Income

A 6.6% YIELD IN THE GROCERY AISLE

Eggs

The Setup

In a market obsessed with chips and software, Cal-Maine Foods offers a refreshing dose of tangible value. The largest U.S. egg producer just posted record earnings, with EPS jumping 35% and operating cash flow doubling.

The Bull Case

  • Vertical Integration: They control the entire supply chain, protecting margins from input cost volatility.
  • Premium Shift: Consumers are trading up. Specialty eggs (organic, cage-free) now make up 36% of sales, driving higher margins.
  • Cash Flow: The company is paying a massive 6.6% dividend yield, supported by a pristine, unlevered balance sheet.

The Risk

Avian flu is always the black swan (no pun intended) in this sector. However, for income-focused investors looking for a defensive hedge against tech volatility, this is a "boring" stock that pays you to own it.

Tech Strategy

JPMORGAN'S "FULL-STACK" AI WINNERS

Scales favoring apps over chips.

The Shift

The "AI trade" is narrowing. Investors are no longer buying everything with "AI" in the ticker; they are demanding quality. JPMorgan believes the next phase of the rally will be defined by companies that can actually monetize the technology.

The Top Picks

  • Alphabet: JPMorgan calls this a "full-stack" winner. From custom silicon to the Gemini model and YouTube distribution, they own every layer of the value chain.
  • Amazon: AWS capacity is set to double by 2027. The cloud infrastructure build-out is far from over.
  • DoorDash & Spotify: These are the "quiet" AI winners. They aren't building models; they are using AI to optimize logistics and recommendations, driving direct revenue leverage.

My Take

I agree with the focus on application over infrastructure. The "picks and shovels" trade (Nvidia) has been great, but the sustainable value will accrue to the platforms that use those chips to sell more products.

Healthcare Economics

THE "HIDDEN" FEES IN YOUR PRESCRIPTION

Hand reaching for pills.

A new Wall Street Journal report highlights a structural issue in healthcare that investors should understand: the opaque world of Pharmacy Benefit Managers (PBMs). Companies like CVS and Cigna act as middlemen, collecting rebates that often incentivize higher list prices for drugs.

The Pivot

Cigna is launching a "rebate-free" model, claiming to pass savings directly to patients. However, analysts are skeptical. The fees are likely just changing names, shifting from "rebates" to "administrative fees."

Investor Angle

This regulatory scrutiny is a long-term overhang for the PBM sector. While they generate massive cash flow, the political risk is rising. I would be cautious with these names until the regulatory picture clears.