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

Macro: Inflation Wasn't Waiting for Permission; The Private Credit Rot Is Spreading

Markets: The Most Contrarian Trade Right Now Is Optimism; Software Is The Odd One Out; The Boring Fintech Nobody Is Talking About; Jassy's Letter Highlights The Bull Case For AI Capex

Lumida Curations: AI’s Missing Link Isn’t Smarter Models; The Next Frontier of Compute May Be Off-Planet; Calm Markets Can Mask Fragile Geopolitics

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The Lumida Tribe — this community — is our most unique competitive advantage. No one else has built what we have built here. And now you can own a piece of it.

You can find everything here.

I did an FSD livestream this Friday, titled “Iran Negotiations, Positioning”, laying out the case that weekend negotiations with Iran were likely to fail.

Hegseth on Thursday's presser had a clear sense of finality to U.S. military action (while reserving the right to re-engage)

JD Vance announced negotiations failed citing lack of agreement on nuclear issue.

Trump shared this Truth Social point.

A few items stand out:

“The meeting went well”

“Most poinst were agreed to”

“Iran knows how to end this”

Trump is negotiating in public and signalling a continued path to de-escalation while maintaining free navigation on the strait.

Unlike Trump’s gambit two weeks ago, this approach makes a lot more sense.

The ball is now in the IRGC court. They are in a vice where they can continue de-escalation. Or they can contest the waters and escalate.

Trump has presented the IRGC with an off-ramp, and the U.S. - both via Hegseth, JD Vance, and now Trump are consistent in showing they want an off-ramp.

This is a significant turn of events from just two weeks ago.

Clearly, there were major miscalculations in the conflict. The timeline extensions, the exhaustion of interceptors, the consumption of ten years worth of Tomahawks are examples of that.

But, if the IRGC does de-escalate, and the Strait remains open with ships transiting without a tollgate fee, this would turn a costly mistake into a legitimate win.

The U.S. has shifted down a notch from kinetics back to ‘maximum pressure campaign’.

The IRGC itself needs to sort out what timeline the world moves forward on. It’s not clear what the decision making looks like, or who makes those decisions.

Still, the IRGC is in a ‘damned if you [ strike ], damned if you don’t [ ceasefire’ type of vice.

Iran issued a warning to the U.S. destroyers but chose not to fire. That’s incredibly constructive. Does that repeat tomorrow? And the next day? And for another two weeks?

That’s what a de facto cessation of the conflict looks like.

Each day the IRGC doesn't fire is another day the fear premium bleeds out.

A key reveal today: the U.S. decision to interdict tankers sailing to China is a big part of the story.

Without that, China would have no incentive to influence Iran into acquiesence. Crucial.

The ideal U.S. outcome: build confidence, define a path for tankers to move, get insurance costs low, and get tankers to move.

The IRGC is generating record revenues, and their stature on the global stage has increased. Sanctions were dropped on their tankers. They like the status quo as of just two days ago.

And the WSJ reports, the IRGC still has the ability to harass vessels transiting thru the strait.

The risk is that irrational IRGC actors fire rockets. Weighing it all together, we believe the IRGC will seek a de-escalation.

Overall, our view is the bottom is in for markets.

Markets

This past Tuesday, I posted this note on X:

What we see in markets is excessive hedging. The iceberg that everyone is looking at is rarely the one that gets you.

For example, retail investors have bought put options at such a level that they coincide with market lows. Short interest is extremely high.

Although the S&P fell 9%, the forward PE of the S&P fell 20% - in-line with major corrections.

Certain categories sensitive to energy inputs - such as Consumer Discretionary are not breaking down to new lows (unlike software).

Various sentiment surveys also show much cleaner positioning: the BAML fund manager survey, the AAII bull bear survey, and the Institution Investor survey.

We’ve also run a number of studies. They show that 3 months out and one year out markets are higher, and considerably so (a mid-teens return is the median).

Here’s the simple explanation.

A lot of cash exited the market. Now, they need to find a way back in the market. They will buy dips and cover.

What you have here is the setup for a hated non-consensus rally.

Over the last 7 days, the S&P reclaimed key moving averages all at once on a massive gap-up Wednesday — six, seven days up depending on your index. 

Some drivers.

The ten-year came down from 4.5 to 4.3, which lifted rate-sensitive names: homebuilders rallied, financials rallied. 

The earnings front-run trade is also working again — the simple strategy of buying stocks two weeks before earnings and selling roughly a week later has historically outperformed the S&P, it stopped working last quarter, and it's working again now. 

That said, we think you will get better entries and there’s no need to chase at the index level. After all, the S&P is just off the highs but we’re seeing higher inflation, weakening real income, and cancellations of datacenter projects.

The good news about the market, however, is you can find bargains in quality stocks that are resilient to economic conditions.

Many high quality names remain cheap and have not rallied. They sold off sharply when liquidity disappeared.

The categories that have rallied sharply - are high beta thematics such as industrials and semiconductors - those are likely avoids.

Better to focus on where the instistutions will re-gross. Hold those stocks for a year.

March CPI came in at 3.3%. Fastest inflation in two years. 

The transmission mechanism is playing out in real time. 

Jet fuel has rose to $4.10 a gallon, resulting in CPI for airline fares rising to 7.1%. 

This is the exact same sequence we saw in 2022 — jet fuel spikes, airline fares follow within weeks. 

The chart is nearly identical.

Higher crude price are also transmitting in CPI transportation. Saw it in 2022. It's doing it again now.

In 2022, inflation began rising from a low base due to pandemic supply chain disruptions. 

The energy shock arrived on top of that and forced the Fed to hike aggressively after they realized the problem was more persistent than expected.

This time, the energy shock is landing on an inflation backdrop that was already stuck at 3.0% — held there by tariffs. That was the backdrop before a single missile was fired. 

The starting point is higher. The additional shock is comparable. The Fed's credibility is thinner.

There is a split worth paying attention to. 

Consumer inflation expectations in the University of Michigan survey collapsed to their lowest sentiment reading since the 1970s. 

Short-term expectations have risen sharply.

US real disposable income declined by 5.3% in March from Feburary, and are only up 1.1% from last year. 

That is a direct hit to household spending power. Consumers have less money in real terms, and that weakens demand across the board. 

The stagflation dynamic - inflation rising, real incomes falling - shows up in March data.

If inflation proves more persistent than the Fed's current "transitory" framing - the next move in the 10-year is toward the top end of the range. 

Obviously, a lot turns on the Iran conflict. The hostilities need to end immediately, or the risk of an inflation upcycle taking root grows.

We have been flagging private credit stress since February. The data now signifies the stress building.

Thus far, defaults in private credit are relatively low. The issue isn’t default risk.

The question is - can these firms especially software companies refinance their debt when their equity values are sharply lower?

Senior lenders will lend at 20% loan to value. If the value of the enteprise drops 80%, however, those lenders won’t refinance.

That’s the main issue confronting private credit.

That said, we do see value in the BDC category. There are BDCs that are trading double digits below NAV. They are also buying back their shares with free cashflow.

So, the bad news is priced in, and they are bidding up their own stock.

One example name is Bargings BDC: ticker BBDC. They have senior secured first lien assets - not riskier mezzanine risk. We picked up the name around $8.00 or so.

We have been bearish since early February. Yet, we increased our net exposure this week.

Positioning has become so one-sided that the marginal downside is increasingly limited. 

They are now skipping dips, selling into rallies, and buying puts at a rate that has only been seen a handful of times in modern market history. 

The chart below tells that story cleanly: small trader put buying has spiked to levels last seen during the COVID crash, while call activity has simultaneously collapsed. 

More puts than calls traded by retail on April 2nd - only the sixth such occurrence since 2020.

This shows the sentiment amongst retail traders is at all-time lows.

The weekly net notional chart reinforces it. 

For most of the past two years, the retail cash flow bar chart was a sea of blue — net buying, week after week, almost without exception. 

The last several weeks have flipped that to red. The dip-buying reflex has broken down.

When the most reliably bullish cohort in the market throws in the towel, you are typically closer to a bottom than a top. 

The data bears this out signals like this have historically been followed by S&P gains roughly 82% of the time over the subsequent 1,3, and 6 months.

The average returns following a recovery like last week’s are almost 50% higher than average returns across all timeframes.

We can also see institutions dipping their feet in after sharp de-grossing in previous months.

The last time de-grossing hit these lows was the April 2025 bottom.

The market has been indiscriminate in what it has sold. That indiscrimination creates opportunity. 

A lot of stocks are down 20% to 30% with no fundamental justification for the magnitude of the move. 

Medical devices, for example, are loaded with bargains right now — a category with no Strait of Hormuz exposure, no OpenAI counterparty risk, and no Chinese supply chain dependency, yet marked down alongside everything else.

We bought names like Medtronic and Danaheur - although many, many names are on sale. You could buy the ETF, ticker IHI.

Here is the valuation history:

That’s not idiosyncratic risk. That’s institutional de-grossing.

This week's rally was broad. Software, however, missed the memo.

While the S&P ripped and semis caught a bid, software sold off hard — three consecutive days of losses that pushed IGV down high single-digits from Wednesday's open. 

That divergence is historically unusual. 

Since 1990, software and the broad index have only moved in opposite directions over a five-day window about 10% of the time. This week was an outlier even by that standard.

The reason matters. 

We believe software names - especially cybersecurity - are over-valued.

But, the category is due for a tactical bounce now. Just look at a chart comparing SMH (semis) vs. IGV (software). These tend to move in opposite directions.

That’s the AI apocalypse trade in a nutshell.

Software's share of S&P 500 market cap has collapsed to 8.44% — the lowest weighting since April 2010. 

For a category that historically averaged 16% of the index, that is a dramatic derating. 

Semis meanwhile have quietly taken share, now sitting above software in index weight for the first time in years.

The semis versus software spread has become one of the most extended pair trades in the market. 

We agree with this tweet by Andy Constan.

The volume picture on IGV is worth a close look. 

Volume has exploded to multi-year highs on the down days, with April registering some of the heaviest selling in the ETF's recent history. Price is at 74.67 — down nearly 40% from its highs.

That kind of volume on a selloff may mean selle rexhaustion. This is often what clears the way for a recovery. 

We have been selective in Software.

The valuation compression has been real — names like Adobe and GoDaddy are genuinely cheap. We own both of those names.

Michael Burry just resurfaced after four months of silence and disclosed a position in Fiserv. 

But his disclosure matters for a different reason: it brings attention and flows to a name that has been completely ignored. 

That attention is a catalyst

We took a long position in Fiserv in March, so we enjoy the company. Funny thing is - we also picked up China (not touching Gamestop).

Fiserv is the connective tissue of American finance.

It processes payments, runs core banking systems for thousands of banks and credit unions, and powers Clover — the small business operating platform that grew 23% last year and is expanding into healthcare, restaurants, and professional services. 

The stock has been destroyed. Down 72% over the past year. 

The market has treated it like a melting ice cube — a legacy payments processor being disrupted by fintechs and AI. 

That narrative is wrong, and the valuation reflects maximum pessimism rather than fundamental reality.

Look at where it trades.

Forward P/E of 6.9x — sitting at the lowest of its history. Price to free cash flow of 7x. EV/EBITDA of 6.9x. Every multiple is at or near the lowest it has been in years.

The cash flow picture highlights the same mispricing.

Free cash flow yield is at 14.38% —highest in its history. Buyback yield is 19.52%.

The company is generating enormous cash, buying back stock aggressively, and trading at a fraction of what it historically has. That combination doesn't last.

It’s also a market leader. Their customers - banks - have high switching costs. And, they have a stablecoin play. 

Full year revenue of $19.8 billion, up 4%. Free cash flow of $4.44 billion, ahead of guidance. Adjusted EPS of $8.64, above the guided range. 

Clover finished the year at $3.3 billion in revenue, up 23%, with Clover Capital growing 30%. Management guided for low double digit Clover revenue growth in 2026 with a medium-term target of 15-20%.

The near-term headwinds are real. 

The first half of 2026 will be messy — the company is lapping higher non-recurring revenue, and margins will trough in Q1 before recovering strongly in H2. 

Fiserv is piloting stablecoins for banks, building agentic commerce tools for Clover merchants in partnership with Google, Mastercard, and Visa, and has 155 financial institutions signed onto CashFlow Central with a pipeline of over 400. 

None of this is in the numbers yet.

At 6.9x forward earnings with a 14% free cash flow yield and a management team fixing known problems, Fiserv is one of the more asymmetric setups in this market.

You may have to wait several months for the stock to get mojo. But, I believe pre-positioning and waiting for the market to catch-on is the right idea.

.

Most AI systems still lack the ability to learn and adapt in real time, making continual learning the critical bottleneck to true intelligence.

View Curations

As AI pushes against Earth’s limits in power, space, and cooling, the long-term evolution of data centers could shift toward space—not by choice, but by necessity.

View Curations

Market stability can coexist with rising geopolitical risk, as Iran talks progress under conditions that remain inherently unstable.

View Curation 

Meme

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