David Hay — Haymaker Daily: Lies, damned lies, and earnings — Gerard Minack (Downunder Daily) on US overvaluation on a cyclically-adjusted CASH-FLOW basis ("earnings are an opinion; cash is a fact"); SBC excluded from Street estimates; hyperscaler ~$750B capex hits cash flow now / income statements later; non-cash gains booked on stakes in loss-makers like OpenAI (also major customers of e.g. Microsoft) inflate profits; financials + energy sectors "bargain rich" (Jul 15 2026)

An earnings-quality Daily built on Gerard Minack's (Downunder Daily) warning that US overvaluation is far more extreme on a cyclically-adjusted cash-flow basis — "earnings are an opinion; cash is a fact." Two distortions: share-based comp routinely excluded from Street estimates, and the hyperscalers' ~$750B of AI capex that hits cash flow now but income statements only later. A further profit-inflator: non-cash gains booked on stakes in loss-makers like OpenAI — which are, circularly, major customers of firms such as Microsoft. Hay's constructive counterpoint: the financial and energy sectors are "particularly bargain rich."

One-line take: An earnings-quality Daily leaning on Gerard Minack (publisher of the Downunder Daily, "this newsletter's favorite Aussie financial analyst"), whose July-14 missive warns — despite his "innate bullish predisposition" — that US overvaluation is understated. The crux: America's market is far more highly priced "on a cyclically adjusted cash-flow basis" because "earnings are an opinion; cash is a fact" and, amid "creative accounting," "significant expenses, like share-based compensation, [are] often being excluded from Wall Street earnings estimates." The primary driver is the tech sector's enormous capex — hyperscalers projected to spend ~$750B this year, largely on AI build-out: those outlays are "depreciated over time but the hit to cash flow is immediate," so "there will be a time of reckoning" once the capex hits income statements. A second inflator: "massive non-cash gains on investments in loss-generating entities like Open AI," whose "astronomical" red ink is masked — made "even more aggressive" because these start-ups "are often major customers of companies such as Microsoft." The constructive close: "a long list of reasonably priced U.S. stocks that are not playing such earnings augmentation games — the financial and energy sectors are particularly bargain rich." MSFT is a Neutral accounting-quality reference; OpenAI (private) the loss-maker exemplar.

1. Stocks & names mentioned

Ticker	Name	Research	View	What he said	At
MSFT	Microsoft	QT · SA · STK · FA	Neutral	Named as the accounting-aggressiveness exemplar, not a rated call. The "massive non-cash gains on investments in loss-generating entities like Open AI" are made "even more aggressive" because those start-ups "are often major customers of companies such as Microsoft" — i.e. a circular, profit-inflating loop (mark up the stake and book the revenue). A caution on the quality of hyperscaler earnings, not a view on the shares.	read ↗
OpenAI	OpenAI (private) — AI lab	—	Neutral	The loss-maker exemplar: US profits are inflated by "massive non-cash gains on investments in loss-generating entities like Open AI," whose "red ink… is astronomical" (with peers "vectoring to go public"). Private; cited to illustrate the earnings-augmentation problem, not an investable idea.	read ↗

"View" is Haymaker's stance in this post. OpenAI is private (no ticker; Research = —). The financial and energy sectors are named as "bargain rich" but no individual ticker is given. Research: QT Qualtrim · SA Seeking Alpha · STK Stock Analysis.

2. Talking points

The source — Gerard Minack, a bullish analyst turning cautious

Gerard Minack, publisher of the Downunder Daily, is "this newsletter's favorite Aussie financial analyst" and "one of our regular must-reads."
In his July-14 missive he warned "about the true extent of the present overvaluation" — notable "despite Gerard's innate bullish predisposition," and echoing themes from Haymaker's other preferred research sources. "These are facts, not opinions."

The frame — "earnings are an opinion; cash is a fact"

Minack's line, just above his chart: "Earnings are an opinion; cash is a fact."
"Considering the high level of creative accounting going on these days — with significant expenses, like share-based compensation, often being excluded from Wall Street earnings estimates — rarely have opinions and facts so dramatically diverged."

The driver — hyperscaler capex hits cash now, the P&L later

"America's stock market is far more highly priced on a cyclically adjusted cash-flow basis" chiefly because of tech-sector capital spending.
The hyperscalers "are projected to spend some $750 billion this year alone, largely on AI build-out." The outlays "are depreciated over time but the hit to cash flow is immediate" — so "there will be a time of reckoning as this unprecedented cap ex starts hitting corporate income statements."

The second inflator — non-cash gains on loss-making stakes

An "additional profits-inflating factor has been booking massive non-cash gains on investments in loss-generating entities like Open AI." "In reality, the red ink from it and its peers… is astronomical," and several "are vectoring to go public."
Making the treatment "even more aggressive": these recent start-ups "are often major customers of companies such as Microsoft" — the circular-revenue loop.

The constructive close — where the bargains are

"Fortunately, there is a long list of reasonably priced U.S. stocks that are not playing such earnings augmentation games."
"The financial and energy sectors are particularly bargain rich."

3. In plain English

A jargon-free note on why each name is cited. (Companion to the table above; renders on each name's consolidated page.)

MSFT — Microsoft Neutral

Microsoft isn't a buy or sell call in this post — it's used as the clearest example of how big-tech profits can be flattered. Microsoft owns a large stake in OpenAI. When OpenAI's paper value rises, Microsoft can book a "non-cash gain" — a profit on its income statement even though no actual cash came in. What makes Hay call this "aggressive" is that OpenAI is also a major customer of Microsoft (it runs on Microsoft's cloud), so money effectively circulates: Microsoft's investment helps fund a customer that then pays Microsoft, and the rising value of that money-losing customer gets booked as profit. None of that is illegal, but it means the reported earnings overstate the real, cash-generating quality of the business. The takeaway isn't "avoid Microsoft" — it's "don't take hyperscaler earnings at face value; check the cash."

OpenAI — AI lab (private) Neutral

OpenAI is the private company behind ChatGPT. Hay names it as the poster child for the earnings problem: it loses enormous amounts of money ("astronomical" red ink), yet the big companies that hold stakes in it get to report gains as its private valuation climbs. So a business that is deeply unprofitable in cash terms actually boosts other companies' reported profits on paper. Several such loss-makers are heading toward IPOs, which would add a wave of new stock supply. You can't buy OpenAI directly (it's private), so it's here purely to explain why the market's overall earnings look better than the underlying cash reality — the core of Hay's caution.

Summary derived from the paid Haymaker newsletter (text in transcript.txt) for personal study. Not investment advice. © Haymaker / David Hay for source material.