Welcome back to the Lumida Ledger.

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

• Macro: Fed, Brazil, Inflation

• Markets: Goldman copies Lumida, ASPI, LUMIDA ETF

• Company Earnings: Travel & Tech in upswing

• AI: How AI will transform Investing; Coatue East West Conference

• Digital Assets: Gensler on ETFs, NVDA vs Crypto

Remember our call to buy Chenerie (Ticker: LNG) a few weeks ago?

The green line is our call.

Look what happened after.

We’re on a roll.

Follow the Money 

Datacenters need energy. Nuclear power is the key.

This week we had a superb interview with Paul Mann, CEO of ASP Isotopes (Nasdaq: ASPI).

We talked about the trends shaping semiconductors, healthcare and energy markets.

Spotify  | Apple

Youtube

(00:00) Introduction to Non-Consensus Investing

(00:31) Meet Paul Mann, Chairman and CEO of ASPIsotopes

(01:42) The Role of Silicon 28 in Semiconductors

(07:49) Understanding the ASP Process and Centrifuge Technology

(13:53) Challenges and Opportunities in Uranium Supply

(22:53) The Importance of HALEU for Small Modular Reactors

(24:30) Innovations in Isotope Enrichment

(28:09) Applications of Enriched Isotopes in Medicine and Technology

(32:37) Business Strategy and Market Potential

(36:20) Discussing Margins and Business Strategy

(37:53) Technical Feasibility and Readiness

(39:06) Building and Financing New Plants

(41:42) Customer Contracts and Capital Investment

(45:32) Company Background and Founding Story

(53:09) Navigating Public Markets and COVID Challenges

(59:31) Future Plans and Business Milestones

(1:02:56) Geopolitical Concerns and Competitive Landscape

(1:06:06) Investment Opportunities and Industry Insights

(1:07:14) Conclusion

Lumida In the News

This week an older article from Business Insider came back on our Twitter feed. It carried our take on Cathie Wood and ARKK.

SoFi: Future of Finance or House of Cards?

In case you missed our SOFI podcast last week, here are some of its best insights.

The Shocking Truth Behind SoFi's Revenue

How SoFi's Fair Value Adjustments Affect Loan Accounting

Sofi's Secondary Market Transactions Don't Make Sense!

Full Podcast

Lumida Curations of the week

We covered the Bloomberg Invest this week. Here are some interesting takes from the conference.

Be sure to follow Lumida Wealth on Twitter, and on Youtube, where you can get more such curations. The goal is to maximize insight per unit of time.

1. Coatue Management on AI

He got this right and wrong.

Right: 'There is only 1 breakthrough a year. No more.'

Wrong: He should have said, 'And this year, it's CoreWeave.'

CoreWeave is the only asset keeping pace with NVDA

2. Coatue’s East-West Conference coverage by Bill Gurley & Brad Gerstner

A Glimpse Into How AI Will Transform Investing

Introducing: ASPI and the Lumida AI Chatbot

We partnered with a Lumida client, Vinay Gupta, to build a Lumida chatbot focused on a single stock. Click here to try it out.

The bot is trained on 100 pages of Lumida research. 

Try asking it, ‘What are analyst price targets? What are comps? What are the risks?

We think sometime this week, perhaps now, is an excellent time to buy ASPI. 

If you want the bull case, read our prior newsletter.

Check out our interview with the CEO, Paul Mann, and please spend 1 minute giving feedback on this bot here. This will help us improve it in the next iteration!

If you are a VC that wants to throw $5 MM at a stupid valuation, our emails are open. Joking, not joking. :)

Macro 

There’s a lot of talk about how the Fed’s won the battle over inflation.

On labor market indicators, that’s true.

On housing and shelter, that’s not true.

Re-shoring logically means taking goods, which are a smaller part of the economy, and moving them into higher-production-cost areas. That’s inflationary.

The fact is that fiscal policy and re-shoring are running counter to the Fed’s objectives.

Our view is inflation will be higher for longer. That’s why we believe a portion of your portfolio in commodity-linked names, real assets, and assets that can pass through inflation is a really good idea.

China Check-In

We wrote back in February that China had capitulated.

We also noted that China was suffering from the ‘Trump Bump’, which helped US equities but hurt China.

Remember on the day Trump won the Iowa polls, China tanked.

Something new is happening…

This Friday, China rallied despite Trump winning the debate.

This has two conclusions:

1. A negative momentum rally is underway, which is why Tesla and Apple are rallying, too. It's a worst-to-first dynamic, and China is a part of that. 

2. Trump may be ‘priced in’. That’s bullish for China.

We remain of the view that China is in a bull market.

The best way to play it? Tencent. Topic for another time…

MARKETS

GOLDMAN FAST FOLLOWS LUMIDA…again

Imitation is the best form of flattery.

This week, Lumida’s arch-rival Goldman Sachs slapped a Buy Rating on Pag Seguro (PAGS), the Square of Brazil.

I wrote about it in our newsletter last Sunday. 

Below is the research excerpt and screenshots from the Lumida Wealth newsletter.

We have front-run Goldman several times this year alone by a couple of days: CloudFlare (NET), Haliburton (HAL), and Nvidia (NVDA). 

Also, it happened last year with JP Morgan.

Receipts as always

Committees are slower. 

The bigger the committee, the more consensus there is on the idea. Otherwise, how do you get it out of committee?

Here’s what Goldman had to say:

“The current environment in Brazil's payments sector should favor the company, given its competitive offerings in the more profitable small and medium businesses and micro merchant segments, Labarta said in the upgrade note.”

Thank you, Goldman, for pumping our bags as they say.

How To: We Like to “Stack Edges”

We believe the world is fundamentally risky. The best response to a risky world is to ‘stack edges.’ 

That means adding probabilities together to maximize your advantage.

Play the best hand you can.

Here’s a case study on how we identified Pag Seguro.

1. We noticed Brazil’s market had topped and had been tanking for months. In fact, we called the top within one day of returning to Brazil and said it was overbought.

We like Brazil because of its demographic pattern and other attributes (maturing capital market, entrepreneurship, multiple quality businesses, etc.) 

Digression:

Now, why was Brazil so expensive? The market was expecting rate cuts, weakening the dollar and strengthening emerging market currencies.

We wrote that we did not expect any rate cuts, if you recall.

2. Each week, we cycle through our internal chartbook and look at different markets.

We saw the US dollar was strengthening due to the Fed’s hawkish posture. That hurts emerging markets.

3. We waited for EWZ (Brazil ETF) to capitulate. 

This is when we put Brazil on a ‘capitulation watch’ like we did with China.

The green line here is where we called the capitulation. We did this with China on February 7th - take a look at our older Lumida Ledger.

Note: EWZ is re-testing now, so we aren’t out of the woods yet. A lower low is quite possible to shake out some hands, and then a rally.

If the Fed cuts in September, Brazil will rally. So this isn’t a layup per se, but the valuations are attractive and it’s time to start legging in. If we get a re-test we can buy more later.

4. Over the last several weeks, we have been researching the best players in the market: firms with leading and growing market share, strong brands, attractive economics, and good technical setups.

We looked at Nu Bank, Meli, Stone, Mercado Libre… and Pag Seguro.

At this entry price, Pag Seguro is a business we can hold for 10 years. Some of the other businesses are nice, like Nu and Mercado Libre, but they are much more expensive. 

Nu’s PE is 48x. Pags is 10.2x  

We can get much more multiple expansion from Pag Seguro.

And we’ll have to sell it much sooner. That means paying the tax man and having to start over again.

Taxes are the enemy of investment performance.

Consider your compounded returns at a 10% annual rate vs an 8% rate (after long-term capital gains) or a 5% rate (after short-term capital gains).

You need 7 years to double your money at a 10% annual rate, and you need 9 years to double at an 8% annual rate.

This is why Warren Buffett ‘stalked’ Coca-Cola for the better part of two decades before buying the stock in 1986 at a PE ratio of 16x.

Coca-Cola was an expensive growth stock for quite a while. He waited patiently, then struck. 

Just like when he bought the banks in October of 2008.

Maybe Brazil re-tests much like US equity markets did in March 2009. But we’ll be fine over the next few years regardless…

5. We wait patiently for a good entry

When the stars align - then we buy.

And the stars have been aligning quite a bit for Lumida. 

Chenerie, SMCI, Pag Seguro, Energy Rotation call. Even our ‘Cathie Wood’ top call for Nvidia. 

If you have enough of a universe to cover, you can ‘Find the Rotation’ and see the tensions driving markets from a higher level.

If we get rate cuts in July (we don’t expect that), Brazil, small caps, and biotech will absolutely rip higher.

However, we think rate cuts are within 6 months, and markets look ahead, so it’s time to start pre-positioning.

Nvidia and the Cathie Wood Top

This week, our post on Cathie Wood and ARK went viral on social media.

As of now, Cathie Wood has called the local top in semiconductors with ARKW's purchase of NVDA and TSMC two days ago.

Right down to the day.

You really can't make this up.

Notice how the market bottomed in October ‘23 on the day SMH hit its 200 DMA

I conjectured on 6/1 that the time to sell NVDA would be when it is crowned the most valuable company in the world.

It looks like that, and Cathie Wood was the coup de grace. Take a look at a chart of the semiconductor ETF:

Note: We believe that NVDA will reclaim its throne as the most valuable company in the world soon, anyway.

These mini shakeouts are healthy. We actually bought Nvidia for new accounts this Tuesday. 

We'll do the same if we get a red day next week. If you are benchmarked to the S&P, we believe overweighting Nvidia is still a good idea. Don’t confuse our short-term tactical views with how we want to position long-term.

S&P Outlook

Here’s a study showing the year-end performance of the S&P when it’s up double digits YTD.

S&P 500 up double digits at the midpoint of the year?

The full year never lowered and went up 25.1% on average.

For the rest of the year, it was up an average of 7.7% (median 9.8%) and higher nearly 83% of the time.

Corporate earnings are strong. If you invest in sectors with growing earnings and avoid those that are not (e.g., apparel, retail, etc.), you will do fine.

HIMS Down

We made this call last week that online pharmacy provider HIMS was overbought and poised to correct.

We did not short this - it was just an observation.

Look at HIMS now.

HIMS is down 10%.

If you do the opposite of what SoFi bros say, you can invest profitably.

Boomer Stocks

One of our big investment themes is Boomer stocks.

The younger generations have it rough. But Boomers are spending like it’s 1999.

Higher rates help the boomers.

I love that GM is a boring Boomer stock that no one talks about…

And it’s up 40% ish YTD.

The quietly ignored rallies with bad news priced in (eg, union negotiations last Nov) are nice.

I will have a new Boomer stock to share later this week, and it looks like a good entry.

We are doing a deeper scrub.

The Boomer Theme is a powerful one.

Boomers drive the American economy with the disposable income from Treasury yields, whereas the AI theme drives markets.

There are many ways to invest against the Boomer theme.

Take a look at the free cashflow yield and buybacks on GM.

On the fundamentals, GM is a cut better than the rest.

Here’s a chart. There was a good entry earlier this week - we bought it for new accounts. 

Keep an eye on it.

GM Fundamentals

A Lumida Mistake

We didn’t invest in Cruise stocks.

We saw the Boomer trend.

We wrote last year about how Boomers want to get out and stretch their legs. 

The value is cheap. The momentum is strong. They have a backlog.

So, why not buy?

We think Cruises are a weak business model. Remember, these were trashed during Covid.

So, they have embedded left-tail risks. I can’t imagine holding a cruise stock for 10 years.

It is a trade, not an investment.

But… we still reflect on this.

If we had an ETF and taxes were not a consideration, we should have bought cruises.

If you are looking for a wealth management partner, Lumida is now welcoming a limited number of new clients.

We offer a range of services, alternative investments (such as our CoreWeave deal), white-glove crypto management, to public equity management, and high-touch family office services, including trust, tax, and estate planning.

Ready to explore? Click here to fill out our form to start the discovery process.

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Company Earnings  

Consumer Sector:

1. Carnival Corp (CCL) - Travel and Leisure:

   - Strong performance, significant earnings beat with Robust revenue growth

   - High occupancy rates and increased passenger numbers indicate strong demand in the cruise industry

   - Trend: Recovery and growth in travel and leisure, particularly in cruise lines

2. Nike (NKE) - Retail:

   - Earnings beat despite slight revenue miss

   - Significant reduction in inventory levels

   - Trend: Potential challenges in retail sales, but improved inventory management and cost control

Tech, Media, Telecom Sector:

1. Micron Technology (MU) - Semiconductor:

   - Strong performance with both earnings and revenue beats

   - Impressive growth in both Computer & Networking and Storage segments

   - Trend: Robust demand for semiconductor products, particularly in computing, networking, and storage solutions

Overall Insights:

1. Consumer sector shows mixed results:

   - Travel and leisure (represented by Carnival) demonstrate strong recovery and growth

   - Retail (represented by Nike) faces some headwinds but shows resilience through cost management

2. Tech sector, particularly semiconductors, shows substantial growth:

   - Significant demand increase for computing, networking, and storage solutions

Link to Full Chart

AI 

AI Musings:

NAIL THE CHECKLISTS

It’s too early to ask AI to do higher-level cognitive work.

The value is in the low-level ‘microservice’ workflow tasks.

Example: Checklists

AI can’t even ensure that checklists (for example: ensuring that an Investment Memo, medical diagnosis, or credit risk report) satisfies specific criteria.

Getting to a stage where AI can disrupt checklists will be a significant accomplishment.

A business is nothing but a set of processes with inputs, outputs, decisions, and standards (e.g., checklists).

Nail the checklists and workflows before making a decision.

How Will AI Transform Investing?

Every day, Lumida has a 2-hour-long CIO call at 7 AM ET.

It's myself, a research analyst, and our trader.

The future CIO committees will be quite different.

They will comprise AI Avatars : portfolio manager, risk manager, specialists, and traders.

There will be a 'discussion'.

The AI presents recommendations.

The human asks questions. There is 'Socratic' debate.

The human is mostly nodding their head and signing off on 80% of the decisions the AIs have recommended.

Figure we're 2 to 3 years away from that.

Then, those AI Avatars will hand off to the Client Service AIs.

The Client Service AIs translate the technical jargon into easier-to-understand themes tailored to the target persona (male/female, old/young, concise vs. depth, etc.).

Then, the Client Service AIs are handed off to the Influencer AIs.

These AIs then go on a show and debate with one another on the state of markets and how to interpret the events of the day.

There is the curmudgeonly AI, the stout AI, the tall/thin AI, the model AI, the funny AI.

The groupings of AI personalities are tailored to niche segments (e.g., boomers, Gen Z, crypto-natives, etc.)

That's how we see AI transforming Lumida's operations, from investing to marketing, over the next few years.

(I did not discuss how AI transforms research. We're working on that now...and it would take 10 pages)

NVDA CEO at the AGM:

"By customer demand, ecosystem adoption and bookings, the Blackwell architecture platform will likely be the most successful product in our history and even for the entire computer and even of the entire computer history."

Stay long, Nvidia. 

Digital Assets

Chair Gensler on Crypto & ETFs on Bloomberg Invest

Nvidia vs Digital Assets

Both are Momentum assets.

The fastest horse benefits in a momentum race.

Momentum assets are ‘attention’ assets.

Retail flows into Nvidia have surged post-earnings

This chart is strong evidence for the thread below.

We sold ETHE in May, where we had LT cap gains.

…but we have a digital asset idea, which we will share within 24 hours.

Horses need to rest.

Receipts on ETHE sale

Timing was excellent

Cross-asset class investing lets us spot this tension between Nvidia and Digital Assets.

Getting out ahead of Nvidia earnings at peak sentiment for the Ethereum ETF made sense.

Quote of the Week

"You don't have to forecast the future, you just have to figure out which future is most likely." - Peter Lynch

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Disclaimer: Lumida Wealth Management LLC (‘Lumida”) is located in New York, NY, and is an SEC registered investment adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Lumida only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Any direct communication by Lumida with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

The information in this material has been obtained from sources believed to be reliable. While all reasonable care has been taken to ensure that the facts stated in this material are accurate and that the forecasts, opinions and expectations contained herein are fair and reasonable, Lumida, Inc. and Lumida Wealth Management LLC (collectively Lumida) make no representations or warranties whatsoever the completeness or accuracy of the material provided, except with respect to any disclosures relative to Lumida. Accordingly, no reliance should be placed on the accuracy, fairness or completeness of the information contained in this material. Any data discrepancies in this material could be the result of different calculations and/or adjustments. Lumida accepts no liability whatsoever for any loss arising from any use of this material or its contents, and neither Lumida nor any of its respective directors, officers or employees, shall be in any way responsible for the contents hereof, apart from the liabilities and responsibilities that may be imposed on them by the relevant regulatory authority in the jurisdiction in question, or the regulatory regime thereunder. Opinions,forecasts or projections contained in this material represent Lumida’s current opinions or judgment as of the day of the material only and are therefore subject to change without notice. Periodic updates may be provided on companies/industries based on company-specific developments or announcements, market conditions or any other publicly available information. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or projections, which represent only one possible outcome. Furthermore, such opinions, forecasts or projections are subject to certain risks, uncertainties and assumptions that have not been verified, and future actual results or events could differ materially. The value of, or income from, any investments referred to in this material may fluctuate and/or be affected by changes in exchange rates. All pricing is indicative as of the close of market for the securities discussed, unless otherwise stated. Past performance is not indicative of future results. Accordingly, investors may receive back less than originally invested. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipients of this material must make their own independent decisions regarding any securities or financial instruments mentioned herein and should seek advice from such independent financial, legal, tax or other adviser as they deem necessary. Lumida may trade as a principal on the basis of its views and research, and it may also engage in transactions for its own account or for its clients’ accounts in a manner inconsistent with the views taken in this material, and Lumida is under no obligation to ensure that such other communication is brought to the attention of any recipient of this material. Others within Lumida may take views that are inconsistent with those taken in this material. Employees of Lumida not involved in the preparation of this material may have investments in the financial instruments or securities (or derivatives of such financial instruments or securities) mentioned in this material and may trade them in ways different from those discussed in this material. This material is not an advertisement for or marketing of any issuer, its products or services, or its securities in any jurisdiction.