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

• Macro:  S&P Earnings Estimates

• Market: Israel v. Iran, Geopolitical Risks Are Best Faded, What does this mean for markets?

• Digital Assets: Stablecoins, Stablecoins Are Quietly Rewriting the Financial Stack

• AI: OpenAI o3-Pro, Gemini 2.5 Pro, ElevenLabs v3

Lumida in the Spotlight

Coinbase - State of Crypto

This week, Lumida’s CIO Ram Ahluwalia joined the Coinbase “State of Crypto” conference to explore the latest trends shaping the future of digital assets.

Watch the live recap for insights straight from the event.

Happy Father’s Day

When we had our first child, the first words my Dad said were: 

‘Congratulations. You are a father now.’

It took a minute to sink in.  

What he was saying is that each generation has a responsibility to learn from the past…

and has a duty to advance the torch of civilization to the next. 

He had played a role in bringing me to the next chapter in the Circle of Life. 

He was handing the heavy baton of Fatherhood forward. 

I believe Fatherhood, at its core, is about teaching leadership and responsibility. 

It starts with self-governance.

Everyone has a duty to lift themselves up. 

Once secure, lift those around you. 

Responsibility is a set of concentric circles. It starts with ensuring you have the skills and aptitudes.

Then it extends to your family and those around you, and ultimately your community.

My father cultivated in me a sense of curiosity. 

He was the OG philosopher. 

He also taught me a love for games like chess and poker. 

He never studied philosophy… but he would pick up a quote from a random movie and repeat it. 

Here’s one from Aristotle: ‘Excellence is a habit.’

He believed in continuously honing one’s craft. 

There is no end to learning. 

And just as important, ensuring one’s skills directly contributes to the benefit of others.

Thank you, Dad, for leading by example and holding the bar high. 

Cheers to the parents that advance the torch to the next generation. 

Marco

We have a new kind of war breaking out between Israel and Iran after a few weeks of respite from the headlines.

We’ll spend this week discussing  S&P earnings, how to think about the Israel and Iran conflict, and stablecoins.

S&P Earnings Estimates Keep Climbing Despite Tariffs

The S&P 500 forward EPS just hit an all-time high of $280.

That’s happening after the April 2 tariff announcement, not before.

Institutions allocated in large part based on analyst estimates of future earnings growth, so this is a big deal.

We saw a brief dip in earnings expectations right after the news. But that was short-lived — estimates bounced right back and kept climbing.

The interesting thing is, none of this is being driven by government policy. There’s no stimulus. 

This is purely private markets and competition at work.
It’s capitalism doing its job — pricing discipline, margin management, demand resilience.

Even with tariffs in place — including the baseline tariffs and the lingering China measures — there’s been no significant inflation pass-through.

That’s a big deal.

It’s especially bullish for sectors that are typically tariff-sensitive that have sold off hard.

Despite higher input costs, companies are holding pricing steady and protecting earnings. And the consumer is still spending.

That’s where it gets even more interesting.

Real incomes are rising. Tax cuts are coming. Inflation is easing across the board, except in shelter.

At the same time, the 10-year is coming down. That’ll pull mortgage rates lower, which helps ease shelter costs too.

So we’ve got consumers with more spending power, and no pricing blowout in the goods they’re buying.

Zooming out — we’re seeing record earnings, no policy help, and strong consumer fundamentals. 

And we’re not seeing any P/E shock: rates, inflation, and unemployment are all behaving.

There are several tactical considerations that can impact prices. The first is the latest geopolitical risk.

Israel - Iran Conflict

April 2024: Restrained Direct Engagement

The current kinetic conflict between Israel and Iran is more serious than April of last year.

In April 2024, the Israel-Iran conflict represented a shift from proxy warfare to direct military confrontations. The kinetic energy was both limited and restrained. 

Last year, the escalation began on April 1, when Israel conducted an airstrike on an Iranian consulate complex in Damascus, Syria killing senior Islamic Revolutionary Guard Corps (IRGC) commander Mohammad Reza Zahedi. 

Iran retaliated on April 13, launching over 300 drones and missiles directly at Israel—the first such attack from Iranian soil. 

Israel, supported by the United States, United Kingdom, France, and Jordan, intercepted most projectiles, resulting in minimal damage and casualties. 

On April 19, Israel responded with precise strikes near Isfahan, targeting a radar system for the Natanz nuclear site and an airbase, causing limited damage. 

Both sides signaled restraint, with Iran downplaying the Israeli counterstrike and Israel avoiding broader escalation. 

Note: April 19th - the end of the hostilities - also marked the bottom of a small correction in April 2024. 

The kinetic impact for its symbolism more than anything else. Iran was trying to “save face” and Israel was steering towards de-escalation.

Israel Has All But Won the Proxy Wars

Since then, quite a bit has changed.

First off, you have a new administration where Trump has stated as a part of policy that Iran cannot have a nuclear weapon.

Second, 2 out of 3 of Iran’s proxies - Houthis, Hezbelloah and Hamas are routed or scrambling.

Third, Israel’s pre-emptive attack is something that forces an Iranian response.

Today’s strikes on Iran are far more significant. 

On June 12-13, Israel launched a massive unilateral offensive against Iran, targeting nuclear facilities (e.g., Natanz), ballistic missile sites, military bases, and senior IRGC leadership, including three top military leaders and nuclear scientists. 

This operation, described as a "21st-century warfare" campaign, integrated cyber, kinetic, and autonomous strikes, leveraging AI-assisted systems and exploiting Israel's prior destruction of Iran's S-300 air defense systems in October 2024. 

Iran retaliated with approximately 100 drones and dozens of ballistic missiles. But its response was largely ineffectual. 

Iran’s gerontocracy is showing greater signs of incompetence and limited range in its response options.

The scale of Israel's strikes, penetrating deep into Iran's strategic infrastructure, dwarfs the April 2024 exchanges.

This is a shift from symbolic deterrence to a campaign aimed at crippling Iran's nuclear and military capabilities.

What are the incentives?

Iran’s extreme hardliners are gone except for the Ayatollah who Israel won’t take out due to fear of martyrdom. 

Netanyahu is trying to thread a needle and urge the Iranian public to step up and call for regime change. It’s hard to imagine that scenario unfolds here. 

Israel has significantly degraded Iran’s nuclear weapons enrichment program. 

However, there are sites that are buried deep within mountains and defunct mines that are immune from aerial attack (unless aided by special U.S. “bunker busting” munitions.)

Israel has the tempo - and it’s hard to see any near-term path or motivation for de-escalation.

Every time Iran fires rockets into Tel Aviv’s civilian population, Israel can track, target, and attempt to intercept those launch sites. So, they will do that.

Iran will keep up with the rocket attacks. It’s their only lever. 

The disproportionate level of success Israel is having might embolden Trump to keep it going.

Iran’s drones are largely ineffective, as are the missile barrages although several have gotten past the Iron Dome.

Where we stand today, it’s hard to see a path for de-escalation.

The best defense for Israel is more offensive operations. Iran has described Israel’s actions as “war”. 

Israel won’t get an American President in this set of exact circumstances again (e.g., the timing, some distance from the midterms, and a neophyte U..S. defense secretary, etc).

One should expect Israel PM Netanyahu to remain aggressive. We would expect several more weeks of conflict at the very least. 

Trump’s response is not clear. 

He may not want this to continue for too long. The MAGA base is splintering, and oil and gas prices are heading up.

At the very least, Israel’s incentive is to keep the kinetic intensity up before they get tapped on the shoulder. 

Israel does need deep bunker busting munitions to disrupt the most hardened site. And these apparently can only be delivered by the American B2 bomber. 

We should note that extreme hardliners were taken out – so the internal political calculus in Iran does shift somewhat longer-term.

How about public opinion in Iran?

First off, the level of intelligence penetration Israel has across Iran is significant. The students who were protesting in 2011 are now in their mid-30s and now occupy significant positions. 

There is significant distaste within the government for the regime - and they are feeding targets to Israel.  

There have been protests against the Iranian regime in recent years, though the scale and intensity vary. The most significant recent protest movement was the 2022-2023 "Woman, Life, Freedom" uprising, sparked by the death of Mahsa Amini in morality police custody.

There was also a significant Trucker’s Strike last year involving 400,000 private vehicles.

But, it’s unrealistic to imagine a domestic uprising here. 

There’s also a risk of backlash from civilian casualties. 

Market

Geopolitical Risks Are Best Faded

I’m reminded of this table, every time I think about selling assets in light of geopolitical events.

What does this mean for markets?

What drives stock prices higher are earnings growth, reasonable valuations, and a stable inflation and interest rate environment.

One year from now, we have strong confidence that stock prices will be higher. 

By year-end, stock prices will be higher.

The economy continues to out-perform expectations. The AI story is delivering a high ROI.

Cisco’s annual conference shows plenty of demand for AI. 

The AI datacenter story is one of those obvious themes you should investigate. 

I pointed out last month Taiwan Semiconductor had a 15.3X forward PE. Now TSM trades at 16.9X PE. It’s our second largest position and has been a great performer for us.

Several small cap value names have also rallied sharply as offside money looks for a way to park capital on an improving rates and inflation backdrop.

Where to focus in markets?

We continue to like healthcare. Healthcare has attractive free cashflow yield and can benefit during an economic downturn. The sector has gone up 4 weeks in a row since the United Health drama. Hedge funds are buying here too.

Financials and Consumer Discretionary are also excellent sectors. Timing these is difficult given the current conflict and “risk off”.

But, many of these names are well below their cycle highs and are not priced for de-regulation or capital relief. 

Many discretionary names were priced for a recession that never seems to arrive. You really need to pick your spots however, and we’ve discussed this in the past and on a recent podcast our thoughts on positioning.

Bear in mind that the latest conflict in the Middle East won’t impact earnings growth. 

It will impact oil prices which hurts airlines, consumer spending, and is a kind of tax on the economy. (Notice United Airlines was down 4% this Friday along with its peers.)

But, as soon as oil prices recede, these assets will be on-sale. 

It will be hard to time it right, so legging into attractive dislocated assets seems like a reasonable idea to us.

We look at many sectors, themes, and at the stock level – I can tell you this bull market still has plenty of legs purely on valuation and earnings growth. 

Positioning matters, but don’t psyche yourself out of this very strong bull market.

Also, institutions and hedge funds have PTSD from Trump Trade War 2.0.

Positioning is coming into balance but remains offsidies. The current geopolitical conflict will keep them offside. 

There are signs of irrational exuberance in animal spirits type names.

We see breadth expansion - a movement towards mean reversion as tech leaders hand the baton to other sectors will resume as this conflict eventually recedes into the background.

Search Is Evolving

This signals a broader shift in how users discover content, likely fueled by AI-driven alternatives. 

While we acknowledge this transformation, it doesn’t dim the value of established players like Google. 

With Gemini advancing in agentic AI , Waymo leading autonomous driving, and YouTube’s dominance—recently spotlighted in our newsletter—Google is evolving and remains a robust asset. 

Digital Assets

Stablecoins

In ‘23, we noted that Fintech is transforming into Crypto. 

The Stablecoin bill and Circle IPO confirm this. 

Stripe’s back to back crypto acquisitions confirm this. 

Robinhood and Square getting into crypto confirms this; and Coinbase offering a 4% yield bitcoin card does as well. 

Stablecoins represent both payments and lending. 

Stablecoins fulfill the original vision of decentralized peer to peer exchange. 

The next 3 years will be wild as far as winners and losers shaking out.

Stablecoins Are Quietly Rewriting the Financial Stack

Visa’s stock was down 7% on news of Walmart and Amazon potentially teaming up to launch a stablecoin.

Stablecoins aren’t just another crypto asset.

They’re infrastructure for payments, lending and custody - those are the key attributes of what a bank does.

Stablecoins represent decentralized on-chain programmable banking.  

(Yes, behind the scenes there is a bank somewhere…) 

And they’re beginning to reshape the core of global finance — quietly, but decisively.

They extend U.S. dollar hegemony without requiring a central bank push.

By allowing anyone, anywhere, to hold and transact in USD, they make the dollar more accessible than ever — no SWIFT, no correspondent banking, no gatekeeping.

At the same time, they give the U.S. Treasury a new kind of reach: on-chain deposits.

That’s a powerful shift — capital flowing directly into dollar-denominated assets, globally and permissionlessly.

The implications for talent flows are equally big. Paying high-skill individuals in frontier markets directly in USD is now possible — in real-time, with low fees.

That’s a direct challenge to China’s long-term influence in many of these regions.

Meanwhile, a parallel banking system is being built — decentralized, global, and 24/7.

It has no branches, no tellers, no legacy tech stack — and increasingly, no reason to rely on Visa or Mastercard.

Remittances and payment networks are next.

The 3% interchange fee merchants pay starts to look at risk..

For billions who rely on remittance flows, stablecoins cut cost and time dramatically.

Visa and Mastercard were down ~7% on the news of Walmart and Amazon teaming up on Stablecoins.

So who wins?

Consumers with better access and lower fees.

Merchants get better margins.

Stablecoin issuers are growing float and market share

Private credit: new capital flows chasing yield

Who loses? Card networks, Regional banks, Legacy payments infrastructure. 

We’re still early.
But the direction of travel is clear.

The transformation stablecoins are enabling is massively underappreciated.

We’ll have more to share in the coming weeks.

AI

Developments in AI

OpenAI o3-Pro and Data Connectors: OpenAI rolled out o3-Pro, hyping enhanced reasoning and problem-solving, yet its real-world edge over competitors remains unproven. ChatGPT’s new data connectors for Google Drive and Dropbox promise integration, but security risks and over-reliance on proprietary datasets could undermine trust for businesses and researchers.  

Google Gemini 2.5 Pro: Gemini 2.5 Pro’s launch via Vertex AI, paired with an Agent Development Kit (ADK) from Google I/O 2025, aims to boost AI app development, but its expansion into Photos and Calendar raises privacy concerns and questions about execution given Google’s patchy AI track record.  

ElevenLabs v3: ElevenLabs’ Eleven v3 (Alpha), launched June 5, touts advanced text-to-speech with emotional control and multilingual support, but its alpha status suggests instability, and the hype around content creation impact may overstate its readiness for widespread use.

Meme of the week

Stay tuned, stay informed, and as always, stay ahead.

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