Random Ramblings May 2025
Summary
Walker thinks markets have recovered faster than the economic outlook has. After falling roughly 10% around “Liberation Day,” the Russell was about flat for the quarter and the S&P slightly positive by May 10, despite year-to-date declines of roughly 10% and 3%-4%, respectively. His concern is that two months of corporate “delay, delay, delay” on plants, stores, deals, and capital spending may already have damaged a fragile economy.
AI may reshuffle which investing skills are scarce rather than merely making every investor more productive. Walker’s Steph Curry analogy is that changing rules and technology can elevate players whose weaknesses once would have ended their careers while pushing yesterday’s useful archetypes “off the field.” AI might neutralize quantitative work, business-model analysis, and tasks such as comparing successive 10-Ks, leaving judgment-intensive abilities—especially reading management in real time—as the new differentiator.
Management meetings are structurally dangerous because investors are facing elite salespeople on radically unequal terms. A CEO who successfully sells medical products to time-starved plastic surgeons is “literally at the top of his field,” while a value investor who spends perhaps 95% of his time reading is “the JV team playing against a professional.” Walker increasingly wonders whether direct access provides enough incremental information to offset the excitement and narrative capture it creates.
The difference between a true endorsement and a carefully framed economic exchange can hide inside management’s wording. One company said major TikTok influencers promoted its product without being paid, which initially sounded like extraordinary organic virality. Another person pointed out that the influencers may instead have received perhaps $15,000 of product for free in return for testimonials that might otherwise cost $50,000—still potentially attractive, but not literally free.
Personal dislike of a product is evidence, but not necessarily a reason to reject the stock. Walker, who disclosed being long Seaport, disliked Meow Wolf immediately despite expecting to fit its target market; yet the Vegas venue was packed, and Seaport had secured the long-term lease it needed. He says he is sure the New York location will do well, though its opening was mentioned as 2027 “or something.” Celsius, Monster, alcohol, sugar, and even Boeing illustrate why “I don’t like it” cannot substitute for evidence about customer demand or investment economics.
Busted-biotech management teams often mistake gross clinical upside for shareholder value because they omit probability, time, and the overhead that preserves their jobs. A supposed $85 million opportunity—$100 million upon success less a $15 million trial—falls to $25 million after a 50% success rate and time discount, then becomes deeply value-destructive when two years of roughly $50 million annual overhead are included. Walker notes that more sophisticated teams may risk-adjust and count direct trial costs, but he says they still commonly ignore overhead. His incentive diagnosis is blunt: “Whose bread I eat, his song I sing”—management itself is the overhead, may own little stock, and disappears if the company returns its cash.
Deep dive
1. The market rebound masks an economy frozen by uncertainty
Speaking as of May 10, Walker notes that the “Liberation Day” shock took markets down roughly 10% almost instantly, yet they had recovered completely: the Russell was about flat for the quarter and the S&P slightly positive. Year to date, the S&P remained down 3%-4% and the Russell roughly 10%—ordinary-looking declines that obscure how violent the path was.
His unease comes from what companies have done during two months of tariff uncertainty. Essential decisions still happen, but upgrading a plant, opening a new store, or pursuing a business deal can wait; across management commentary he hears “delay, delay, delay.” That marginal withdrawal of spending is, in his framing, “how the economy goes into a recession.”
Walker concedes that bull markets “climb a wall of worry” and that one tariff-removing tweet could send stocks higher. But another tweet could reinstate reciprocal tariffs after the 90-day pause, while CEOs now know policy can reverse overnight. Meanwhile, speculative growth remains “priced for absolute perfection,” as cyclical stocks appear to price an even larger, more imminent recession than they did a year earlier.
2. AI could change which investors belong on the field
Walker uses Steph Curry to frame technological fit: without a three-point line or coaches willing to tolerate 10-plus attempts per game, Curry’s defining skill would have been diminished. Walker also thinks modern shoes and strength and mobility work helped his weak ankles support a long career; in flat Converse decades earlier, he imagines those ankles might have forced retirement after six years.
Evolution also creates losers: the “plodding big” once had a natural place near the basket but has largely been played out by spacing and three-point math. Walker’s investing question is therefore two-sided—could AI rescue an investor whose former blind spot was career-ending, while making another investor’s previously valuable process “superfluous”?
Comparing successive 10-Ks is his simple example: AI can identify a newly added risk factor that a human might miss. More speculatively, it could level quantitative and business-model analysis, amplifying investors who excel at shaking management’s hand, reading credibility, and judging whether near-term earnings will be good or bad—and whether that outcome is priced in. “I don’t know,” he stresses; this is a possibility, not a forecast.
3. Management access can become an unfair sales contest
Walker’s busted-biotech work has made him increasingly skeptical of management and of the boundary between a productive relationship and friendship. Watching companies with $100 million of cash choose to “light this on fire on one crazy project after another” has made him question how much confidence investors should place in direct rapport.
Consider a CEO selling medical products to plastic surgeons. Walker speculates that a plastic surgeon’s time might be worth $1,000-$2,000 an hour and that a surgery might generate $5,000-$10,000, while acknowledging that he does not know the exact figures. Those customers face constant pitches, high opportunity costs, and many product choices, so the CEO has succeeded at selling in what Walker calls “the hardest of hard modes.”
Put that CEO across from a value investor who spends perhaps 95% of his time reading 10-Ks, reading books, and thinking about businesses, and who averages roughly one management call a day. Walker expects the CEO to “eat you alive.” The investor is “the JV team playing against a professional” and may leave convinced this is the greatest business ever. Walker genuinely goes back and forth on whether management access beats simply reading filings, transcripts, and the evidence of management’s actions.
One parsing lesson came from a company claiming that major TikTok influencers used and promoted its product without receiving payment. Another person Walker spoke with suggested that the exchange may instead have involved roughly $15,000 of free product for an endorsement that might otherwise command $50,000 in cash. That can still signal real demand—the customers apparently want the product—but “we haven’t paid a single one of them” painted a materially rosier picture than the full transaction.
4. Disliking a product does not settle the stock thesis
Walker disclosed that he is long Seaport, which signed Meow Wolf to a long-term lease. Expecting to fit the target audience, he visited the Las Vegas location with three friends and “flat out did not like it.” Yet it was packed and, in his view, doing fantastic; he says he is sure the New York location will do well when it opens, perhaps in 2027. His disappointment did not change the lease economics.
The broader dilemma reverses Peter Lynch’s familiar product-to-stock intuition. Investors who dismissed Celsius or Monster because they disliked the products missed major winners, just as avoiding every sugar or alcohol company would exclude large investable categories. Walker lands tentatively on yes, one can own a company without loving its product: personal taste cannot overrule observed customer demand, though he understands why some investors require a product they personally believe in.
5. Biotech optionality disappears when the whole cost structure counts
Walker starts with what he presents as clinical base rates: he describes each transition—phase one to phase two or phase two to phase three—as roughly a 50% proposition, implying about 25% across both. Small companies nevertheless insist their science is different: “We’re 95. We’re 99.” His response is deliberately unsparing: “Get out of here. Come on. You’re 50%.”
Suppose a two-year trial costs $15 million and success creates $100 million of value. Management may call that $85 million of value, but Walker first risk-adjusts the payoff to $50 million, then discounts it to roughly $40 million for time, then subtracts the $15 million cost. The result is $25 million—not $85 million—though still attractive before considering the company around it.
Walker notes that more sophisticated teams may risk-adjust their trials to 80%-90% and may account for direct trial expenses. But he says some ignore those expenses, many assume that a successful product will be worth billions, and even the more sophisticated teams commonly pretend the overhead does not exist.
The omitted burden is overhead. A small, single-asset biotech might spend $20 million annually supporting R&D and another roughly $20 million on overall corporate overhead, including the CEO, board, accounting, and public-company costs; Walker rounds the total to $50 million per year. Across two years, that is $100 million beyond the $15 million trial cost, overwhelming the approximately $40 million present, risk-adjusted payoff.
Extend that logic to a company with $500 million of cash and a phase-one asset that might be worth $500 million if approved eight years later: probability, direct spending, and time can leave the product on its own barely profitable, while eight years of corporate overhead can be disastrous. Management is itself part of the overhead; with little stock ownership or other incentive to liquidate, returning the cash also eliminates its salaries and livelihoods. “Whose bread I eat, his song I sing.”