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

• Macro: The Growth Scare Was Overblown; Tariffs Continue Squeezing Margins

• Markets: Calls Can’t Get Better than BETR; CSU: AI’s Latest Victim; Not a Bubble; The Death of the Operating System?

• Digital Assets: Stablecoins Are Eating ACH; Tether IPO?

Spotlight

This week, we had a podcast with with Andrew Keys, Chairman of The Ether Machine, to revisit Ethereum’s origins and trace its trajectory into today’s financial system. 

Andrew recalled how the Ethereum Virtual Machine was born, not as a rival to Bitcoin, but as a parallel system to power programmable markets. 

We are also proud to count on Andrew is a leading investor and client of
Lumida. (You can find our other investors on our website here).

Here’s what we discuss:

• Ethereum vs Bitcoin

• Tokenization and what it means for assets

• The Genius Act and Its impact on Crypto

• Stablecoins and the future of banking

You can watch the podcast here. 

BILL GURLEY: PEARLS OF WISDOM

This Thursday, I met Bill Gurley at an AI conference in Austin. I remember reading about Bill and his VC exploits at Benchmark Capital as a college kid in the dot com era. 

He is a truly thoughtful investor. He had a talk, and you can read my live notes here.

Jeff is a prior guest on Lumida Non-Consensus Investing. He makes a fantastic point above. The more general takeaway is that a commercial bank that is focused on the intersection of traditional finance and digital assets stands to do exceptionally well.

We are contemplating exploring such an opportunity at www.lumidadeals.com if you are a Qualified Purchaser or Family Office.

Macro

The Growth Scare Was Overblown

The final Q2 GDP print surprised to the upside, revised to 3.84% from 3.29%. It shows the economy is running above potential, and the consumer is carrying the torch. 

Recall we noted a few weeks ago that the fears around back-to-back negative NFP revisions was mostly statistical and ‘over confidence’ bias (combined with lower demand and supply of labor).

Household demand grew 2.5% in Q2, far stronger than early reads suggested. Retail sales in July and August confirmed the momentum. When households keep spending, corporate revenues and employment stay supported. 

Business investment was also revised higher. Structures, IT equipment, and R&D are all contributing. The narrative that growth depends solely on AI capex doesn’t hold. 

Yes, AI matters, but services, government outlays, and transportation equipment are quietly filling in the gaps. This shows a broader and healthier economy than the headlines imply.

Meanwhile, inflation remains sticky. Core PCE for Q2 was revised up to 2.6%. That marks the 20th straight quarter of inflation above target. 

We wrote last time how the rate cut was spurred by the high jobless claim numbers reported in September’s 3rd week, which was heavily skewed due to a decline in Texas (later turned out to be a fraud). 

This week’s data show that the employment situation is improving. Initial jobless claim numbers are at their best since July, dropping to 218,000. 

With GDP rising, and unemployment declining, September’s fed cuts look wrongly timed. 

The Fed has already cut 125 bps in the last 6 quarters, and even the doves are starting to realize the policy mistake here.

The Chicago Fed’s Goolsbee warned last week that “front-loading rate cuts risks a policy mistake.” 

He’s right. Cutting aggressively into this backdrop would risk reigniting inflation. Futures markets are still pricing more cuts, but the data argue for caution.

Tariffs Continue Squeezing Margins

Corporate America is losing altitude. Pre-tax margins slipped ~50 bps in the first half of 2025, with after-tax profits down 34 bps. 

The culprit: tariff-driven inflation. 

Companies are swallowing higher input costs rather than passing them on, eroding profitability. We wrote about it in a previous newsletter as well. Read it here. 

The inventory-to-sales ratio surged to 2.13x in Q1 but has since collapsed. 

At 2.07x, inventory levels are at almost the same level as during COVID’s supply crunch. This sets up a painful restocking cycle; firms will have to buy expensive inventory, and would either deplete their margins further or pass it on to consumers, raising inflation.

Market

Calls Can’t Get Better than BETR 

Last week we highlighted BETR as a clean way to play the easing mortgage rates.

This week, the stock had an unparalleled surge. The stock ripped ~47% in a day, added more after-hours, and has now roughly gained 65% in under a week. 

Eric Jackson (EMJ Capital) supplied the spark and the frame: “Better is the Shopify of mortgages.” He pushed the conviction further: “I believe BETR is a potential 350-bagger in 2 years,” and, “They laugh at BETR now at $34… but this is no meme.” 

The setup isn’t complicated. Mortgage demand is extremely rate-sensitive; even small declines unlock volumes. With household incomes and savings revised higher in the GDP update, there’s more dry powder than the market assumed. 

As Jackson put it, “a slight drop in mortgage rates is like a gusher for increased volumes to BETR.” 

After a parabolic move, the burden shifts to execution: origination growth, unit economics, distribution, and funding. If BETR turns the “Shopify of mortgages” analogy into a measurable scale, last week’s surge will look like the opening act, not the finale.

We’re going to have Eric Jackson on our podcast vdery soon - don’t miss it.

By the way, we bought CROX on Friday shortly after Sydney Sweeny announced her sponsorship of the brand. Now, it’s not a great idea to buy into a stock just because a celebrity endorses it. (See Nike’s slump for example). But, we like the EPS growth, valuation, and the catalyst. We have a < ~2% position here to give you a sense of how we sized it.

CSU: AI’s Latest Victim

Constellation Software (CSU) broke to fresh 52-week lows this week, trading as low as the mid-3.6K CAD before stabilizing. It has lost 26% in the last 3M. The latest decline was led by Mark Leonard stepping down from President’s rank due to health reasons. 

However, the stock’s decline isn’t only due to the president stepping down; it is driven by weakening fundamentals.

AI is eating their demand.

Mark Leonard admitted in earning’s call: “AI makes it potentially way more exciting for us to provide customization, but it also makes it much more likely that the client will do it themselves.”

He added, “AI has created uncertainty for our employees, shareholders and customers,” and was blunt about the industry’s fork in the road: “It’s difficult to say whether programming is facing a renaissance or a recession.”

We remain of the view that “AI is Eating SaaS” and there are significant risks to SaaS and software stocks.

Each form factor - desktop, mobile, social - creates a new set of winners…

Not a Bubble

The “this is 1999 again” argument doesn’t hold up. Back then, the largest TMT names traded at a 41× median forward multiple with thin or even negative cash flow. Today, the median is closer to 31×, and this time, the earnings are real. 

Microsoft, Apple, Alphabet, Amazon, and Meta collectively generate hundreds of billions in free cash flow each year, fund their own capex, and still return capital.

Yes, concentration is elevated. NVIDIA, Microsoft, and Apple alone make up over 20% of the S&P 500. That means crowding risk is real, if the leaders wobble, the tape goes with them. 

But unlike the dot-com cohort, these companies aren’t priced on eyeballs or speculative TAM. They’re monetizing AI, cloud, semis, and consumer ecosystems with visible margins and entrenched moats.

Valuations are full, but not frothy. The leaders are delivering operating leverage and cash generation that justify their scale. 

We’re bullish on Meta, Nvidia, and Google - not because multiples look cheap compared to Mag7, but because their earnings’ quality and moat durability make today very different from the bubble era.

The Death of the Operating System?

Satya Nadella is right to be concerned about the rise of AI and the long-term relevance of operating systems. 

Microsoft missed the Mobile UX form factor. 

Actually, they saw it coming, but botched execution by shrink wrapping the Windows UX into a mobile form factor. 

Apple and Meta took a different approach- they re-invented the UX using mobile first principles. 

Microsoft remains one of the most picture perfect business models in the world. I’ve written about how good their M&A discipline is and how it’s easy for them to just raise prices and watch earnings go up. 

But, looking out 5 years, we can’t be sure what the dominant consumer and enterprise experiences will be for AI. 

I’m not sure an Operating System is that crucial. 

Browsers play a more important role, and even more so the AI app itself. 

In my own experience, I can follow my primary AI app (Grok xAI) across platforms - a PC, an iPhone, a Tesla. 

In that world, the app captures the consumer value by mediating transactions and spinning up UX on demand - not the operating system.

Digital Assets

Stablecoins Are Eating ACH

Stablecoin rails are now running ~$65 trillion annualized in transaction volume. That puts them within striking distance of ACH at $93 trillion.

The story here isn’t just volume, it’s migration. Customers are voting with their feet, preferring the speed, programmability, and global reach of stablecoins over legacy batch systems. 

ACH was designed for a pre-digital age of overnight settlements; stablecoins clear in seconds, 24/7, with transparency by default.

If stablecoins can rival ACH volumes this quickly, then the displacement timeline is accelerating. Tokenized deposits will only add fuel. 

ACH won’t vanish tomorrow, but the “relic” framing isn’t hyperbole. Payment infrastructure is being rewritten in real time, and the banking system will adapt on stablecoin terms, not the other way around.

We could foresee this a lot earlier. 

TETHER IPO?

Last year, I noted we wanted to own a slice of Tether, and got a lot of funny looks. Here is my thesis from 2024. 

Today, it's one of the best businesses in the world. 

They are raising at a $500 Bn valuation. 

We haven’t seen the dataroom yet, but it is likely too pricey for us, and has too many eyes on it. 

But, we did close on Canva recently. 

Think with their revenue growth and dominant market leadership (and multiple M&A suitors: Adobe, Figma, etc) that they will do well. 

Be sure to enroll at Lumida deals if you are an accredited or qualified purchaser. 

We have previously invested in Coreweave and QXO.

We got Coreweave at a 7Bn valuation, and the stock soared to a 70Bn valuation post-IPO.

Similarly, the Brad Jacobs QXO Deal delivered a 28.6% return (Net of fees) in six weeks. Several investors invested in QXO at the advice of Lumida on the secondary market and have continued to enjoy gains.

We have several exciting ideas in the pipeline. Sign up to be a part of them.

Important: The figures above are approximate, based on public sources, and reflect gross valuations only. Actual returns may be significantly lower after fees, expenses, carried interest, and taxes. Past performance is not indicative of future results. Private investments are speculative, illiquid, and involve a high degree of risk, including possible loss of principal.

Meme

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