Here’s a preview of what we’ll cover this week: 

• Macro: Stocks & Valuations, Recession, Tariff Watch, Dr. Oz and Pharma Stocks

• Markets: Healthcare, Pharma, Nu Bank, Dividend stocks

• Digital Assets: Stablecoins

• AI: The timeline for human level AI

Happy Thanksgiving: Lumida GPT

We would like to share with you the Lumida GPT Bot.

The AI is trained on our Investment Philosophy over several hundred pages of posts.

Note: You should not ask the AI for investment advice. It has no access to data - it can hallucinate.

You can ask questions such as:

• What is your invesment philosophy?

• How do you reconcile owning momentum factor with non-consensus?

Lumida Special Guest: Kevin Churko

We were pleased to interview Kevin Churko this Wed

Kevin Churko is a Canadian musician, sound engineer, songwriter, and record producer best known for his work with artists such as Ozzy Osbourne, Five Finger Death Punch, Shania Twain, and many others.  

Kevin is a music producer. He sold a major music catalog.   

He is a “gatekeeper” and a tastemaker.  

Kevin had bitcoin miners in his office in the early days.  Kevin spent years in Switzerland under the tutelage of world-renowned producer, Robert John "Mutt" Lange, Churko has emerged as one of the music industry’s leading engineers/producers in his own right.  

He currently resides in Las Vegas, where he works out of his premium recording studio, “The Hideout”  

Kevin is also a Lumida Client.  

We will discuss the music business, digital assets, the musician's creative process, and his experience with psychedelics.

Subscribe to "Lumida Non-Consensus Investing" on Youtube, Spotify, Apple for your travel trip tomorrow.

The AI boom is transforming markets & the economy, creating once-in-a-generation opportunities. 

I had a great chat with Andrew Brill from Wealthion about AI winners, macro trends, and smart investing strategies for this transformative era.

Check it out here.

Job Opportunities at Lumida

Exciting opportunities await at Lumida! Explore open roles on our website and take the next step in your career. Visit https://www.lumidawealth.com/careers

JD: "Hazardous journey. Small wages, bitter cold, long months of complete darkness, constant danger, safe return doubtful. Honour and recognition in case of success." - Ernest Shackleton

You will work closely with me and the investment team each day to continue to disprove the Efficient Markets Hypothesis.

Macro

Stocks & Valuations

What happens when the S&P posts two back-to-back years of 20% returns?

Statistically, you get another solid up year. 

Animal spirits are back, deregulation is coming, more tax cuts. On top of that, the Fed in a desire to remain apolitical, is cutting rates as if not recognizing the backdrop.

The left-tail risk is inflation. 

As we noted before, tariffs are linked to increases in costs. 

Perhaps it is no surprise then that we saw GM stock drop ~10% on Trump’s announcement of tariffs on Mexico and Canada before recovering about ⅓ of the losses in the following days.

But, Treasury Secretary Bessent and future Fed Chief Kevin Warsh are deficit and monetary hawks. 

Trump’s economic team is looking pretty good. 

For now, inflation is a ‘risk factor’ - it’s not at the forefront of Mr. Market’s thought process.

In fact, the 10-year yield has dropped to 4.18% from recent levels suggesting Mr. Market expects less inflation. (Surely Mr. Market isn’t expecting less nominal growth?)

Here’s another test to see if you are close to a top.

When looking for good stocks at good valuations using our screens, it’s hard to find any deals. 

That’s not the case. We see plenty of opportunities to deploy capital. Not every sector or every name – the game is more difficult – but there are plenty of opportunities.

When our screens don’t turn up many bargains, that is a warning signal. 

I don’t see that. 

We see Mr Market putting a different sector of the equity market on sale each quarter which makes our job a lot easier. 

Healthcare was the most recent “on sale” category, and now it looks like Brazil and emerging markets are starting to look attractive.

Healthcare Chart:

Healthcare, and small caps, are at a level where we could get a re-test or breather from here.

We continue to see strong relative strengh in small caps and value indices (IVE) vs. the S&P 500 which is lagging.

Also, the Momentum & Value factors (some of our favorites) are overbought. When looking out a few weeks, we could get some softness here. Midcaps and quality names (see MOAT ETF) are also overbought.

Dividend stocks should continue to do well from here.

Brazil ETF:

Historically, when Brazil’s ETF is this oversold you get at the very least a near-term snapback rally. That said, the category remains in a downtrend so there are tactical ideas here more than a strategic weight.

If you wanted to own Nu Bank, now is the time to get a position.

Notice Nu Bank is at the 200 Day Moving average just as the Brazilian country index has sold off. When the major indices sell off, focus on the highest quality names.

Speaking of emerging markets, take a look at the EEM ETF:

The index successfully bounced off its 200 DMA.

With the US dollar appearing to roll over, the outlook for international value stocks looks promising. (Note: Incoming Treasury Secretary Bessent is a soft dollar guy.)

I still see plenty of securities and sectors at attractive valuations with earnings growth in financials, healthcare, and Mag 5 type names and international stocks. 

There’s no reason the show can’t continue.

Rate cutting by global central banks also bolsters the case for international value stocks.

On the sentiment front, indices are near all time highs and people are not giddy

That’s great news.

The most important data series to watch in a world where central banks are cutting rates in 2025 is inflation. 

Consider the following statement from FOMC officials. As Eric Wallerstein wryly noted: “We don’t where the neutral rate is, so we’ll cut anyway.”

Here’s a scan of recent headlines.

So far, the story on the inflation front looks good and we should get a nice IPO market next year.

We’d expect CoreWeave to be amongst the first to IPO.

The bankers are now guiding to a 50% increase to the last round (closed last month), and a ~500% increase to the 2023 Q4 round.

Recession

There are still people out there that believe we are in a Recession - including former Fed official Danielle DiMartino Booth.

What if the explanation is simpler.

Maybe the older people get, the more attuned the amygdala becomes more sensitive to risks?

The bear case on the economy is that retail spend is soft.

Can’t that be explained by higher insurance costs? People are prioritizing payments to obligations, and shifting to value (see Walmart’s earnings).

Tariff Watch

A few weeks ago, we had a newsletter focused on what sectors would benefit from Trump policies, or where we needed more clarity.

Now, the same analysis must be done for tariffs and export controls.

There’s clearly a lot more work to do in analyzing tariff impacts. But this is a decent start.

To the extent there is more bark than bite with tariffs, we’re going to see bargains emerge in several of these categories.

It’s hard to image, for example, that the US would actually impose stiff tariffs on China & Mexico.

The US automobile industry and the knock-on effect on consumer goods should constrain that behavior - and Treasury Secretary Bessent is not a tariff guy.

The real opportunity in tariffs is in influencing countries such as France and India in opening up their automobile markets, for instance, to US brands. 

And in disciplining China’s continued aggressive cybersecurity incursions.

The recent cyber-espionage campaign attributed to China-linked hackers, identified as "Salt Typhoon," represents an unprecedented breach of U.S. telecommunications infrastructure. 

Senator Mark Warner, Chairman of the Senate Intelligence Committee, described it as "the worst telecom hack in our nation's history—by far." 

Key Points:

• Scope of the Breach: Hackers infiltrated multiple U.S. telecommunications companies, compromising networks and intercepting surveillance data intended for American law enforcement agencies. 

• Data Compromised: The attackers accessed U.S. customer call records and communications, primarily targeting individuals involved in government or political activities. 

• Methodology: By exploiting vulnerabilities in outdated law enforcement infrastructure, the hackers activated unauthorized phone taps, enabling real-time eavesdropping on unencrypted calls and texts.
  

• National Security Implications: The breach has raised significant concerns about the security of U.S. telecommunications systems, with potential risks including exposure of sensitive communications and intelligence data.
  

Two things are sure. 

Spend on cybersecurity shows no signs of stopping.

And, it is bizarre that US telcos and defense contractors fail to have broad-based application of concepts such as Two-Factor Authentication.

The banks are more secure than the Defense establishment.

Treasury Secretary Bessent

I thought this window into Bessent’s thought process was revealing.

We haven’t had a Secretary with this level of depth than perhaps Secretary Rubin in the 90s.

Dr. Oz and Pharma Stocks

Rarely is the wost-case in our imagination what ultimately presents in reality.

Separately, did you notice?

Dr Oz appointment may have marked the bottom in pharma stocks. 

On November 19th, Trump nominated Dr. Oz to lead Center for Medicare and Medicaid Services.

Check out the price of the index since then:

The bark is often worse than the bite.

AI

Meta AI Chief, Yann Lecun, says his estimate for the creation of human-level AI is not that different from Sam Altman or Demis Hassabis.

It is possible within 5-10 years. Link: https://www.youtube.com/watch?v=JAgHUDhaTU0

Digital Assets

Federal Reserve on Libra stablecoin:

‘We can’t stop you from moving forward and launching, but we are not comfortable with you doing so.’ 

And just like that, [ Libra ] was over.

This is a quote from former Meta Executive David Marcus.

My take:

At Cross River I was the exec leading our involvement on Libra and then Diem. 

@davidmarcus story squares with my own. 

Fun Fact: Guess which bank was set to power Libra and Diem? Silvergate

That bank spent $100 MM+ acquiring and building tech, only to get rugpulled by the Federal Reserve

Another bank that was mistreated: @custodiabank and @CaitlinLong_ 

That’s another story to be told. 

Was the Fed ‘independent’ if they made a decision due to political pressure?

Once again, where was the due process?

The good news…

You are going to see new bank and non-bank issued stablecoins emerge on the scene…

Competition is good for the consumer and businesses engaged in cross border payments

Western Union shouldn’t charge a 7% fee for moving money decades after the launch of the internet 

And judging by the massive profit pools at Tether, the stablecoin category is a worthwhile space to explore.

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