Hey Everyone, seven meetings in the last 2 days (small business owners never sleep🤣), so I wanted to get out as much as I could today in between all the admin.

2 Bits of Great News For The Economy

The government shutdown continues, BUT we may reopen this week, assuming the continuing resolution the Senate advanced on Sunday night passes the House.

So this is good news, the shutdown likely ends by Friday, according to the betting markets (Thursday consensus actually).

The Congressional Budget Office estimates that each week of a shutdown results in 95% temporary and 0.25% weaker GDP growth.

So the most significant short-term risk to recession will soon be off the table (according to the betting markets at least).

The other major economic news could be that the Supreme Court is about to strike down tariffs.

As we discussed last week, this would set tariffs back to 2.5% (from 15%) and also require an estimated $140 billion in rebates to companies that have paid tariffs so far.

In other words, this year’s already strong EPS growth would get a boost —and, most excitedly for the economy,

Every 2 weeks, the Yale Budget Lab publishes a report on the latest tariff news and updates its economic model of the potential effects.

I’m a bit disappointed by the IEEPA news potentially being a smaller stimulus to the economy than expected; however, the effects on the economy next quarter could swing 0.6% which is still really good.

The tax cuts and Fed cuts are expected to boost GDP by 0.6% next year, so that IEEPA invalidation would turn a potential 1.1% headwind (peak May 2026 impact) into a minor boost.

That’s still a 0.6% swing above current headwinds, thus creating a 1.2% fiscal stimulus going into next year—a year when 6 hyperscalers have announced plans for around $1 trillion in AI spending.

What does the GDP growth potential look like next year without the 1.1% headwind of tariffs?

If the headwind is reduced by about 0.6% then we have:

GNG Research GPD Model For 2026

• 1.8% baseline growth (Fed, CBO, economist consensus)

• -0.5% tariff headwind (IEEPA invalidation)

• 0.6% taxes + rate cuts

• 3.3% AI boost ($1 trillion on $30 trillion economy)

• Total headwinds: -0.5%

• Total Tailwinds: 3.9%

• Potential GDP growth: 5.2%

• 4.4% to 6.0% range of expected GDP growth

Even without the invalidation, we're looking at around 3.8% likely low-end growth next year.

That's better than the 3.5% average of the 1990s!.

What A REAL Bubble Looks Like

I love collecting charts from the leading minds in finance, and one of those is Charlie Bilello’s “This Week In Charts”.

Palantir is undoubtedly an incredible business, growing at around 65% per year, with $5 billion in sales, a vast moat, and recurring revenue. But at 100X sales and a 242X FORWARD PE ratio, it is pricing in perfection.

A big reason for Palantir’s market cap is the passionate, meme-stock-like following the CEO, Alex Karp, has built. It’s similar to how Tesla’s sharebase is not just people who are grateful to Elon for financial success (like Nvidia shareholders are to Jensen Huang) but believe in his vision for the world so passionately that they are willing to pay 242X forward earnings, or 2X the peak Cisco tech bubble peak in March 2000.

If Palantir becomes a $1 trillion company (which is likely at some point), that’s a 2X from here. And it might take 5 years.

By 2027, sales are expected to approach $9 billion, and ARR might reach $10 billion.

For PLTR to become a $1 trillion stock, it would need to achieve $10 billion in sales in 2027 (51.7% CAGR in sales growth) AND still trade at 100X sales 3 years from now.

Is that possible? Maybe…in the age of AI, I shall not call anything that doesn’t defy the laws of physics impossible.😉

But look at the potential returns for PLTR investors over those 3 years IF the company does achieve almost 4X sales growth.

• 2X over 3 years is 26% CAGR.

• IF the company can grow at a 52% CAGR for 3 years vs a 50% CAGR consensus

• AND keep trading at 100X SALES in 3 years.

Is that possible? In the age of AI, is there a likely future bubble for many AI stocks? Sure. BUT keep in mind that if today investors are willing to pay 100X sales for a company they think can 4X sales over 3 years, then in 3 years, you kind of have to assume that investors will still be willing to do that.

In other words, PLTR will have to be at $10 billion in sales AND have a realistic chance of reaching $40 billion in sales by 2030.

If the 100 P/S ratio ever contracts, the returns could evaporate.

This is what the Tech Bubble Looked Like At The Peak: S&P 50% Historically Overvalued.

PLTR Is 242X FORWARD PE

Pfizer at 92X earnings? JNJ at 41? Coke at 43?! Now that was a mania, people! 🤣😉

What A Bubble Is Not: Giant Numbers

$5 Trillion!? THIS MUST BE A BUBBLE! Up 335X In 10 Years! 79% CAGR!

No Matter How Big The Numbers: If The Fundamentals Justify Them, It IS NOT A Bubble

Nvidia is up 9X since the launch of ChatGPT. And free cash flow is up 19X, and EPS is up almost 20X.

Up 9X And The PE Is Down 23%! NVDA Is up 9X With Accelerating Growth (PEGY Is Down Even More!)

AI Boom Keeps Getting Bigger: Welcome to The Age of AI- The More True The Numbers The Crazier They Seem

The CEO of AMD just doubled her estimate of the annual addressable market for AI data centers in 2030, from $500 billion to $1 trillion. That’s 35% CAGR growth consistent with estimates from Citigroup, Morgan Stanley, IDC, and Nvidia.

$3 to $4 Trillion PER YEAR In AI Spend By 2030 (Globally, about 60% of that in the US)

Humana Earnings: The Thesis Is Intact BUT There’s A Catch

We bought 150 More Shares of HUM Over The Last Few Days

Heck of a Day for Value Stocks!

So what’s going on with Humana lately?

Humana has spent 2 years in a 60% bear market and appears to have bottomed, though in recent weeks it suffered from an earnings guidance cut.

What is the key to HUM’s thesis? Why are we “catching the falling knife”?

Yes, the earnings decline in 2026 is expected to be steep, but if management delivers its 2028 plan, analysts currently expect EPS of almost $40 by 2029.

HUM is a stock that historically trades at 20X and if management can execute on the turnaround then even factoring in the significant earnings hit next year, it’s a potentially very strong return over the coming years.

• “Humana’s earnings are struggling and expected to fall about 20% in 2026 due to elevated medical cost inflation and a sharp decline in quality ratings for its Medicare Advantage plans, which will reduce government bonus payments and margins.​” Perplexity Pro

The Catch Is That Next Year’s EPS Hit Means POTENTIALLY Weak Returns

Except for the fact that stocks are forward-looking, and HUM has hit -60% and is likely to have bottomed.

The downside risk to HUM is that if the growth turnaround doesn’t happen, then the stock is trading near historical fair value, and then long-term total returns would be about 8% to 10% CAGR.

If even a fraction of the growth occurs, then investors stand to make a lot.

Starting Next Year, HUM Investors Start To Price In 2027…This is a 55% EPS growth recovery.

Management Guidance + Analyst Consensus Says A Potential Almost 4X In 5 Years

If you don’t believe management? Can it achieve $40 in operating EPS in 2028 and then grow at low single digits beyond that, over the long term? Then don’t buy it.

But if you do? Then it’s a chance to buy a leader in Medicare Advantage AND believe it or not, industry-leading customer service ratings.

Plenty of risks, including the approximately 5% risk that Morningstar puts on the chances of Medicare for all within the next decade.

But with the stock still near bear-market lows, 55% below record highs, the best data says Human is a Buffett-style fat pitch.

PEGY Updates: Looking For Buffett-Style Opportunities From The 52 Week Low List

Let’s take a look at whether there are any Buffett-like returns to be found from blue-chip bargains hiding in plain sight

Procter & Gamble PEGY Analysis

Procter might have another 10% to 15% downside potentially, based on historical bear market lows, BUT it might be close to bottoming, so the question is, do fundamentals justify this correction?

Do I really think that PG should be trading at 12X earnings? No, however, what I can say is that historically, investors have expected total returns of 10% to 11% CAGR from PG. And today’s growth rate has slowed to 50% of its 14-year median, which means that in order to achieve the same returns, it would require a 6..63% yield.

Or an acceleration in growth.

Right now, PG investors can expect long-term returns of 6% to 7%, about 3% to 4% below historical returns due to slower growth.

Right now, though, PG doesn't look like a bargain, despite trading at a 52-week low and in a 15% correction.

Non-Growth Adjusted Return Potential

Growth Adjusted Return Potential