The Day After the Blue Wave: Oil, Deficits, Chips and Drugs
Recorded the day after the election, Mike Nicoletti, Hunt Lawrence, and Jason Wallace walk this week’s Cash Flow Memo: what a blue wave means for oil, the deficit, data centers and healthcare, plus the economics inside Anthropic’s S-1. The Cashflow Memo Key Takeaways * Hormuz tanker traffic, increasingly refined products, is back to or slightly above its pre-war (late February) level; crude supply is off only about 2 million barrels a day (103 to 101) and demand about 1 million, yet the 2027 strip printed $89 last Thursday against $60 WTI pre-war, so Hunt expects the near month to settle closer to $90 than $100 and reads the $78 2028 strip as the market pricing a US-Iran deal in 12 to 18 months, with 24/7 IAEA inspections the sticking point. * The blue wave gives Democrats a 40 to 50 seat House majority and roughly 57 Senate seats (Texas Democrats swept every statewide race, Railroad Commission included), so Exhibit A’s deficit becomes a shared problem: tax increases still die on a Republican veto for two years, and Hunt says 2020-21 levels of spending cannot come back. * Five governorships flipped (Georgia, Iowa, Nevada, Ohio, Texas); Mike says 2027 data center capacity is already permitted but the 2028-29 pipeline now depends on governors, ISOs and utilities, which may temper an overbuild, and he expects the semiconductor industry to route around any shortfall (enterprise-owned capacity, personal inference machines, even orbit). * Anthropic’s updated S-1 shows roughly two-thirds to 70% of its compute going to training, not inference; Jason concedes his inference-crossover call was wrong but expects diminishing returns as training data runs out, while Mike flags training cost growing faster than inference cost as the core investor negative, and Jason walks the marketplace math: on $100 sold through AWS, Anthropic books $100, receives about $65, pays about $15 of compute it records as marketing, and keeps about $50, so the claimed 85% margin is closer to 50%. * Moderna’s leaked Phase 3 melanoma vaccine data shows a 42% reduction in risk of metastasis or death against 60% in Phase 2, matching a cheaper study that simply moved Keytruda ahead of surgery, a problem for a planned $300,000 to $400,000 price; separately, two ADCs (antibody-drug conjugates) cut lung cancer death risk by more than 50%, and CVS is splitting off pharmacy and retail to become an insurer-PBM-clinic model closer to UnitedHealth Group. Show Notes [00:27] Hormuz Traffic Is Back Oil and product flows through the Strait are back to pre-war levels. Supply is off only 2 million barrels a day and demand 1 million, yet prices stay stubbornly high. [02:55] The Strip Says 18 Months The 2027 strip sits $25 above the pre-war price and 2028 trades at $78. Hunt reads that as the market pricing a US-Iran accommodation in 12 to 18 months, not sooner. [06:43] Blue Wave, Same Deficit Democrats take a 40 to 50 seat House majority and close in on 60 in the Senate. Tax hikes still face a veto, so fixing Exhibit A is now both parties’ problem. [09:16] Governors and Data Centers Five governorships flipped. 2027 capacity is permitted; the 2028-29 pipeline is in question, which may temper an overbuild. [11:06] Medicare for All? TrumpCare, or Bernie Sanders and Donald Trump at one podium announcing single payer. Hunt thinks it would cost the federal budget less. [13:04] More Chips Than Sites? If US sites stall, Mike expects the semiconductor industry to find a way: enterprise data centers, personal inference machines, even space. [15:18] Training Eats the Compute Two-thirds of Anthropic’s compute goes to training. Jason expects diminishing returns; Mike flags training cost outgrowing inference as the investor’s core risk. [22:26] The Marketplace Cut Jason walks $100 of tokens sold through AWS: Anthropic receives $65, pays $15 of compute booked as marketing, and keeps $50. The 85% margin is closer to 50%. [26:57] Moderna’s Leaked Phase 3 The melanoma vaccine cut risk 42%, not Phase 2’s 60%, and an earlier Keytruda timing study got the same 42% without a $300,000 to $400,000 price tag. Lung cancer ADCs were the conference’s good news. [32:14] CVS Splits Off the Pharmacy CVS separates retail and pharmacy from the insurer, PBM and clinics, moving toward the UnitedHealth Group model. [33:16] Healthcare Under a Blue Congress More money for healthcare and higher costs. Jason hopes the FDA’s accelerated pathways and rare-disease priorities survive. More on healthcare under the new Congress, and whether Lilly could run on 200 researchers, next week. Download this week’s Cash Flow Memo at telltales.us and subscribe. Cashtags $AMD $AMZN $AVGO $CVS $GOOGL $LLY $MRK $MRNA $MSFT $MU $NVDA $UNH This post and the information herein are intended for informational purposes only. The views expressed herein are the author’s alone and do not constitute an offer to sell, or a recommendation to purchase, or a solicitation of an offer to buy, any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the author nor any of his employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. 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