Ram Ahluwalia: The Speculative Boom Is Cracking | His Playbook for This "Goldilocks" Market
Summary
Market Outlook: Constructive, Goldilocks setup with strong earnings growth and disinflation; shift from high beta momentum to quality compounders with cash flow and reasonable valuations.
Digital Assets & Tokenization: Broad discussion of Bitcoin cycles, institutional adoption, and tokenization to improve tax efficiency and cross-margining; near-term focus on infrastructure and curated private listings.
AI & Data Centers: AI capex shows real ROI for hyperscalers, but the data center theme is digesting; energy constraints highlight opportunity in midstream and data center infrastructure.
Financials & Healthcare: Bullish on select financials and insurance moats, AI-driven productivity, and managed care tailwinds post Medicare Advantage cuts; emphasizes bifurcation and picking tech-forward winners.
Defense Tech: Preference for agile, autonomous systems over legacy platforms; attractive private names cited, with public-market beneficiaries in aerospace and defense sub-industries.
Demographics & Consumer: Baby Boomer economy supports travel, leisure, and health services; highlights NCLH (backlog, double-digit EPS growth, ~9x forward P/E) as a direct play.
Stock Ideas: Favors META (earnings growth, pullback), RPRX (royalty streams, high FCF yield), VIRT (ETF-driven volumes, volatility leverage), and stalking GENI (sports betting data); cautious/negative on PLTR (elevated valuation, insider selling).
Specific Themes: Mortgage Refinance potential if G-fees fall amid lower rates; attention and liquidity fragmentation are risks as hot themes rotate and IPOs underperform.
Transcript
shifting positioning from what's worked from the April rally to October is a good idea. High beta animal spirits, I would start to reduce that and start to shift towards the opposite side of the pendulum. >> Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.com/free. With markets hitting all-time highs, now is a great time to stress test your strategy and be prepared for what comes next. Ladies and gentlemen, welcome back to the Wealthy On podcast. I'm Chris Perkins and today I'm with Ram Alawalia, the CEO and founder of Lumida. How are you today, sir? >> I'm doing well, Chris. Great to see you. I know we were spending time together in Miami at the Caner event. Uh and I know you and I are also on another pod too and we always enjoy exchanging views with you. >> Yeah, I'm excited to deep dive with you today. There's so much going on. Uh for for the listeners first, I'd love for them to learn a little bit about your background. >> Sure. So, I grew up in in markets and banking. Been obsessed with investing in banks for a long time. First job was at a community bank when I was 14 years old, earning minimum wage at a the treasury desk of a small community bank. And I just can't seem to run away from banks. Uh, in 2008 I was at Merrill. I lived on Wall Street. I worked to tour two financial center. I saw the financial system blow up due to the lack of transparency around subprime mortgages. That planted then the seed for for digital assets. Uh, so I got involved in digital assets in in Q4 2013. I was asked to diligence what's now known as Ledger X. And so kind of the rest is history. I I built and sold a fintech platform called Pure IQ which was focused on analyzing bonds that don't have loan level transparency. Sold that to Crossover where I built the crypto business there. So love building, love markets and had always been focusing on what the next uh iteration of innovation is in this important ecosystem. >> I didn't realize you you were involved with Ledger X. I was I was too back in the day the first clearing. >> Oh yeah, it was it wasn't called Ledger X back in the day if you recall correctly. It was like NYC >> CX some random name with a terrible deck. [laughter] >> Interesting. >> And the funny thing about that, by the way, the price of Bitcoin then was like 180 bucks. And I remember I was >> a VC had reached out to me and they said, "Hey, look," and you I can see why you looked at it because there's a clearing house. >> Yeah. Yeah. >> Giving your background at the CFTC >> and they're like, "Ram, you know one or two things about this category. Why don't you get a view on it?" And meanwhile, the the move is just go buy Bitcoin. That was the move. >> Well, that's been the move. I mean to this day it seems well we're going to talk about that but before we do tell us about Lumida. >> Yeah so we're a a modern wealth manager focused on founders exited founders founders of created wealth. They care about performance. They want access to preipo deals. They want to mitigate tax. They want a holistic approach that includes emphasis on health and longevity. So you know when I exited cross river I looked around. I interviewed these wealth managers and realized they have no idea what they're doing. uh and they're just pushing product. Their incentives are not aligned and there's no modern interface. It's not AI enabled. Uh and they're not selective around the types of opportunities they focus on. They're pitching 6040 uh which I don't think really makes sense in a higher for longer inflation environment. So, it's really against that backdrop where I said, gee, there's a real opportunity here to build a modern wealth manager and disrupt the legacy approach to doing things. So, we're innovating on the user experience through an app. We're innovating on the offerings and the deal content. We're innovating on the approach to investing as well. Uh, and so we're we're having a lot of fun. You know, we're growing quickly and we've uh we're we're number one recall for wealth management certainly for founders in the digital asset space. >> Got it. So, you're focusing not only on the investments themselves, but the user experience and you're really saying the 6040 is dead. So, so can you deep dive a little bit further on your approach if 6040 is dead, you know, what do you see as as the rightful outcome here in the inflationary environment you just? >> Sure. So, like first off, everything starts with the client. What are their objectives, risk tolerance, their time horizon? What are they planning? Everything starts there, right? So, you know, there are scenarios where US government bonds may make sense if you need to preserve principal and you've got to save for a down payment in six months. Sure, I get I get why you might want to have T bills, but most of the time they're just better alternatives. They're better alternatives uh in the world that have higher free cash flow um and less uh damage from inflation. So, I think that 40 parts at risk uh and there are other types of assets that people can invest in too. um you know equities I think play an important role in portfolios but there are other types of asset classes as well that can include uh for example deals that are two years from an IPO. I'm not a huge fan of early stage venture. I know it's an incredibly hard category, but >> one of the things you can do is you can scan across top performing deals and see who's got traction, who's got a fairly priced valuation, who's got earnings growth, who's got a path of liquidity, and can I get a 2x plus with long-term capital gains and just cherrypick the leaders in the market? That seems like a good opportunity. So, we're we're looking for those kinds of alternative investments in lie of classic 640. Of course, you see endowments do this very well, right? They're taking advantage of opportunities and they keep, you know, Harvard's endowments now $50 billion. So that crossasset class type of investing can work and now with tokenization, the breath of these investoral opportunities are increasing. >> Yeah, I I totally agree. I I think one of the greatest things that's going to come out of tokenization is accessibility. I think we've talked about 81% of companies in the United States, uh, over hund00 million in revenue, they're private, and so only a small fraction of the populace can access them. That's going to change. Um, how's how's that going to turn out? I mean, is this going to be just a free-for-all where like people are essentially public from day one? I mean, how do you approach that as an investor? >> It's a great question. I fully agree. I mean, this is call it like the internet capital markets thesis. Uh and you know we agree and as you pointed out Chris the barriers to accessing public capital markets are significant from a compliance legal fees listing requirements and so there's an a significant underserved market that right now private equity is going after and companies are staying private for longer. Uh and really you know that should be opened up both on the equity side and on the debt side just as crucially important. people aren't talking enough about the financing side of this. So, um, you know, it's challenging because most investors, especially small investors, don't know how to assess risks. I saw a company on Twitter yesterday announce that they raise through a public crowdfunding offering. This is a company that specializes in direct indexing. That business model is going to go away because of the rise of other taxaware strategies. I won't get into that right now. They said their board had met and they decided to raise money from their customer because I was in the right interest. And I looked at this said, "What's really happening this year is they're not getting another round from their backers." And my critical cynical take is that they're just raising from the public because they can. >> Yeah. >> So, you know, investor protection does matter. Disclosure does matter. You do need a concept of curation. >> Yeah. >> These are difficult issues to sort out and address. Coinbase seems to be taking a very interesting approach which as you as you know they announced a program where it seems like they're competing with say the Republics of the world where they're going to have one listing per month. It's highly curated their disclosures their requirements around alignment of incentives. There's got to be a vesting schedule for founders. >> So there's got to be skin in the game and alignment. That's a very appropriate private market response to the challenges we've seen. uh you know in the market whether it's the ICO market or other crowdfunded opportunities. So I don't think we've cracked the code but we're vectoring in the right direction. >> Yeah, we certainly haven't cracked the code and you know the lines are going to start blurring. You know you're saying maybe they're competing with Republic. You know maybe they're actually competing with NASDAQ um as you start thinking through equity versus token. If it's public it's public, right? So I don't know. I think I think we're at the very early stage. Um but but let's let's dig into that 6040 portfolio again. Obviously you're tailoring >> the particular you you look at your client, you look at suitability, >> but what role do you think crypto and digital assets will play? And let's carve out for a second those tokenized assets like like crypto native products. Sure. >> How do you think about them um as part of a portfolio going forward? >> Yeah. So there's the there's the what and the how in terms of portfolio composition. There's a role for digital assets. Even within that, there's such a broad scope though. >> Then there's the how, right? Which is the pipes and plumbing and how that transforms things. I think where we stand today, I'm actually more interested in the how. We'll come back to that in a second. By that, I mean, you know, can you wrap a high free cash flow yield investment with a token to transform that to long-term capital gains? Benefit number one, significant benefit, right? like you can get a 16% return on a private credit strategy that beats the long run return on the S&P 500, but after taxes, after federal state tax, that 16% drops to eight. >> Yeah. >> Uh and uh you know, if you live in New York City, I guess that goes down to six. Then after inflation, that drops down to three. >> Yeah. >> But if you can wrap that in a token and make that tax efficient and turn that into long-term capital gains, you've seen this with like ESG, for example, right? pay wrap tea bills instead of throwing off income which is taxable just to cruise the NAV. >> It's a major major value proposition. The second is cross margining which I know you you appreciate as well. >> There's all sorts of assets out there in private credit trillions of dollars out there that are people on asset on the balance sheet of a household and it's not a source of liquidity. That's a great opportunity. So I'm I'm very interested in the how and the mechanics of these things on the what I would say like I've actually been you know on digital assets you know I think overall high beta assets whether it's digital assets uranium or I guess like pick your latest quantum computing stock >> I think overall these are retreating including other things like data center so um yeah I think you know we have this fouryear cycle and I think folks that have been in the market for a while are selling into like Bitcoin 125. So tactically I I I I don't think Bitcoin stays above say gets to or stays above like 150 from where we stand today. Um obviously if we get sty checks we saw this $2,000 comment from Trump. >> Yeah. >> Uh that takes congressional approval number one. Obviously we're in a trajectory of lower rates. However, the magnitude and scope of this stimulus is simply not the same as what we saw during COVID when you had backto-back trillion dollar stimulus packages. >> And we're not going to see the tenure at 1.5%. >> And again, both of these, you know, this takes congressional action. >> So, so I think there's a I think this actually where we are positioning wise. I'm more focused on quality compounders, financials, healthcare, looking at defense tech plays that data center, energy plays. Uh I think that's that's a very promising opportunity and just [snorts] still have digital assets exposure, but I'm uh uh you know, I'm I'm selling on rallies is what I would say here. If you're looking for a simple, secure way to invest and own physical gold and silver, visit our sister company, Hardass Assets Alliance at hardassetsalliance.com. That's hardassallalliance.com. >> That's really interesting. Um, you're you seem to be indicating that you're a believer in the four-year cycle and um particularly on Bitcoin. Is that what I'm hearing or is it more than just am I oversimplifying? >> I think it's more than just that. part of it uh you know it's like follow the flows and what do you see actually happening out there or you know I I don't know that it's not that u a religion on this four-year cycle but you can see whales are selling at key prices and when I talk to people in the market you know we have we have clients that have invested in creative wealth in this category I ask them what they're doing and [snorts] so you you tie out the hypothesis with the on the ground the behavior >> and you know you can see these attributions taking place so I'm looking for evidence for and against the four-year cycle. I'm just seeing evidence that people are responding to it. Now, >> does the market clear this out at some point? Sure. >> Yeah. >> I'm going to wait for evidence for that to happen, too, rather than try to guess when that happens. And look, I I think between now and year end or even a month from now, I'd be constructive overall. But the this is like tactics squiggles versus the trend. >> Yeah, for sure. I'm I'm constructive as well. This is how I'm kind of seeing it and I would love your take. So I feel like retail they're they are they're selling right a lot of retail selling. They got burned in what we call 1010 or Black Friday. We we talked about this in the past. This was around all the liquidations and the per those really den cryptonative folks. So they got they got hit. Then you have those big whales who have seen three cycles now of getting of the cycle and they're like okay the time is the time. I've seen this before. um made a lot of money like my life has changed forever generational wealthier guys it's time for me to sell and so I see retail for those two reasons pulling back and retail moves really fast of course there's a big part of retail that's chasing the hot ball of money I think now they're in the privacy you know vertical and looking Zcash and stuff like that who knows where they're going to go next it's sometimes difficult to participate but against that backdrop you have the institutions slowly steadily methodically moving forward no turning coming back and I think right now we're in this like gap where retails move faster than those institutions have replaced it but I think we're coming into a cycle where the institutions now are going to be driving um and like how do you do you agree and like how do you play that market? >> Yeah, I think that's right and it's a it's a great point and I it does go segment by segment like you mentioned and you know there's sovereigns that are playing an increasing role. They're looking to utilize their idle energy needs in the winter where they don't need to cool their apartments let's say in the Middle East and using that to mine Bitcoin for example that's different from a primary that's different from sorry secondary market flows though. So uh you know I think if you if you take a step back like the big picture macro from our vantage point looks very constructive. >> Yeah. >> Uh there's a lot of fear out there. However, the two concerns I have is liquidity fragmentation and attention fragmentation. By attention fragmentation, I mean, you know, you've got the AI narrative, you got the quantum narrative, there's a biotech narrative, the small cap narrative, >> and then even within digital assets, you've got the DAT narrative. And you know what we saw there is we saw proliferation of IPOs and then you saw parabas there and then you saw a breakdown in there. What happens is, you know, I put this on the kind of the weight of evidence scale. You know, when you see new issue IPOs not make money, that's when risk appetite generally retreats. That's when I want to pull back. When IPOs are being rewarded and they're going up and they're quality deals, people are making money, it can continue. But the vast majority of these now are below their issue price. So, uh, it's hard to keep the flywheel going with that backdrop. And as you said, hot money ball of liquidity. If you look at these other themes, like the data center theme, you had >> Yeah. >> Sam Alman give a disastrous interview with Brad Gersonner from Altimter talking about they've got 13 billion revenue and they've got a quote unquote $1 trillion in committed spend. You and I both know the word committed spend is the same word for like debt. Like what does that mean? Is that like offbalance sheet liability? That doesn't sound too good to me too. So data centers in retreat and the you know generally people that own these assets like digital assets or the data center theme they are betting on the future. It's generally good bet to make but they're all in these similar crowded themes and those themes one by one are pulling back. They're getting margin called on them to the retreat more. I think that's the current market climate you know that we're that we're in. So, I, you know, I'd rather own things like Meta, which is down 20% uh from its recent high despite the fact that it's growing earnings like 35% year-over-year and had a onetime charge due to tax rather than excessive capex. >> Yeah. So, so it sounds like you're advising clients pull back from those frontier narratives and really get back to fundamentals. Um, look at cash flows, look at fundamentals, >> Yeah. Look what's working. Insurance and financials are working. Look at like All State was seven times earning now it's 7.5 times. Those things are quality compounders and earnings. There's a there's a tension between animal spirits. >> Yeah. >> Which are the high beta thematic Momo FOMO names, tradery names, and the exact opposite which are like these quality combaters, free cash flow, buybacks, growth, quality, right? And this high beta rally, we had a massive high beta rally off the April lows after they were absolutely destroyed, right? You had like negative two standard deviations on that high beta category. Now you went to the exact opposite and these other areas have been kind of quietly ignored and those includes like natural gas mid-stream pipeline which you need to power data centers. These are quality businesses and quality categories with earnings growth. they have an important role to enable the next uh uh leg here in terms of powering say energy for example or providing financing in a deregulatory backdrop as well. So I think that's where the capital is is going to [snorts] flow. I think that's where the institutional bid is >> right. So even in equity markets u if you weren't in the mag seven you've been left behind. Um so now what you're saying it's time to pivot back look around um and find value you missed the entire fantastic >> yeah I mean yeah exactly I think uh you know there's still quality names even in max 7 I mean a lot of them have rerated right like Google went from death of search is going to take out Google now it's like alltime highs and they you know all all these hyperscalers are showing doubledigit revenue growth in their cloud businesses so one thing to that we should all be clear on is that there is ROI on this AI capex right Michael Bur came out a week ago >> and said hey you know all this round trip you know this is a this is a bubble etc >> the fact is there is ROI on this capex and it is showing up in earnings you see that with Amazon you see that with Google you see that with Meta so that data center thesis fundamentally uh is is still is still there which is constructive and we're seeing productivity growth across the economy at levels we have not seen since the late 90s when we had another innovation come on the scene of course the internet >> y >> so you know for those reasons you just I think we should still be very constructive in fact starting to look at these industry groups that are going to be benefiting from AI adoption like financials if you look at financials the the penetration of AI is changing call center servicing. It's improving credit underwriting, creating more efficiency. You know, Bank of America CEO Brian Moahan talked about how they're seeing a a double-digit improvement in their tech release productivity. You know, that's just one example. Now, call center innovation is coming too. Uh Better Mortgage uh has this technology with Tin Man and Betsy. an AI LLM that uh increases productivity of their team. So, you're getting more done with less. You know, that's that's a great story. This deepening of of AI across sectors of the economy. >> So, you're very constructive on financials where some of my cryptonative bros will say, "No, no, no. Crypto is going to eat the financials. You're not you." >> That's true, too, right? I I I agree with that, too. It's really funny, right? like like Visa and Mastercard have a lot to lose. >> Oh yeah. >> Right. So they seem to part. >> Yeah. They seem to be leaning they seem to be leaning in though that like not not all institutions are you know it's not fair for me to paint them in one brush. It feels like you've got some folks that are leaning in some folks that are like oh crap I'm you know I'm not interested in other ones that are trying to fight. >> You got to break it down right. So you've got Mastercard that bought Zero Hash incredibly thoughtful acquisition. Um, Zero Hash provides fiat ramps. The world needs more fiat ramps for digital assets. So, Mastercard helps enable the movement of money. Uh, these small community banks are under incredible pressure with the rise of stable coins, right? So, it's hard for them to compete on the deposit side. So, yeah, there's a lot of pressure on that. But think about financials like insurance companies. They are protected by licensing. They've got a moat. >> Yep. >> Right. It's just it's hard to take that out. How does that go away? Now you can innovate with like lead genen, you can innovate with customer servicing, AI will improve those business models from that perspective. And then you know certain banks that are tech forward. I I agree the banks are interesting. It's like a double-edged sword. Most of them will have risk but those that are that can innovate, they will take more market share and they'll be a beneficiary of growth. Those that are leaning forward into the category, right? There's a there's a bank that Palmer Lucky just backed that's going to finance GPUs for example. That's a new market >> now. You know, um there are other banks like Lead Bank, Jackie Reese out of uh Square. She bought Lead Bank for $56 million. Three years ago, they did a round of financing two months ago to $1.5 billion. They power Stripe. >> Yeah. So the folks that enable payments these these fastmoving high-flying fintech somewhere in the back end there's a bank an infrastructure bank that moves money custodies provides financing they'll still play an important role you know deposit insurance confers lowcost capital you and I know the deposit insurance fund which is I don't know call it 100 billion plus is not enough to actually protect deposits which are 20 trillion dollars. >> Yeah. But but deposit insurance still confers lowcost capital. Lowcost capital wins the game. You know, you need that lowcost capital and digital assets too. Yeah. >> So I think it's highly bifurcated. You're going to have a concentrated pool of winners in financials that'll do extremely well. And overall though, they're still, you know, that category is still posting double digit earnings growth and the valuations are great. They've got buybacks. You know, I think JP Morgan's pricey. I was buyer of it two years ago. If you look at like the return on equity of their consumer bank, it's 30%. >> Yeah. >> The largest bank in the world is compounding at 30% the consumer bank. Those are big numbers. >> That's because they keep all the interest, right? Now, stable coins are >> they pay 0% out on, you know, demand deposits, but not, you know, to your point, you've got other risks like the Fisers of the world and the Jack Henry's of the world, these infrastructure providers, these community banks, >> you know, they're under pressure. So, you do have to pick the sub sector appropriately. But the moat and the advantage you have from the license of a bank charter of an insurance company is meaningful if you're tech forward and indexed to the right categories. >> Yeah. The one thing I noticed was that after DoddFrank, I watched that moat get really deep and anytime you've got a deep regulatory emote, it really forces consolidation because the regulation defines what you have to do. It's commoditized at that point. It's so like revenue gets squeezed and you got to be big as hell. Um, now we're seeing the opposite happen. It feels to me like the regulatory mode is getting more shallow. It's I feel like you're going to see more competition whether it comes in from crypto or somewhere else. >> How do you take advantage of that environment as an investor? >> No, you're right. Right. You've got like a 200 FinTech uh applying for an OC charter and the OC will hand them out these conditional charters. So competition is is coming. Uh it's I think it's hard to pick winners. It's so early. >> Yeah. >> Uh there's not product market fit and an OC charter doesn't confer FDIC insurance which is a lowcost capital >> thing you really need if you want to lend as a bank. And if you're going to be a bank, as you and I both know, it's so incredibly regulated. >> Yeah. >> Alco meetings, board meetings, supervision, FDIC examinations, the juice is worth the squeeze only if you're lending. If you're lending, you better be lending. If you're not, then you're not getting the the 10 terms of leverage that you have as a bank. >> Yeah. >> From that, you know, from 10% tier one capital. So, >> I think, you know, how to play it there opportunities there where banks, there are certain banks that are specialized that focus on the customer. They've got a unique edge in that market in terms of customer acquisition. Uh, and you know, I think those banks will still be fine, right? So, you know, Pay payments is a tricky c. I wouldn't want to bet on pay. P payments on the other hand so incredibly competitive. It's a circular gunfight. And if you look at you can see if you look at the stocks like PayPal and its peer group, they're all competing for ever smaller margin. >> Yeah. >> And it's the competition's so well capitalized that I think payments is a very hard category. And the great thing about being an investor, especially in public markets or liquid assets, you don't have to play that game. You don't actually have to pick the winner. You can choose which ponds to fish in and which ponds to avoid. >> You have ball control. Yeah. What do you think about the Western Union Salana deal? >> Well, you know what's interesting about that deal? So, uh, Western Union has been around for like 150 years. So, International Remittances, which they lead in, still plays an important role today. It's the business that >> every VC, myself included, just wishes would just get disrupted one day. And we keep looking at this thing. How is this still out there? This is Western Union, right? and it's a brick-and-mortar style approach and it still has relevance in emerging markets. Um, so I think one of the interesting takes about this Western Union deal is I believe Salana paid Western Union like $30 million to get that deal done. >> So who has the balance of power in this, right? I mean I don't know the background behind that but did Western Union have an auction >> was Stripe a part of that auction their new L2 call it Tempo their new chain L1 tempo etc. the the folks that own the customers have the leverage. They have the bargaining power right now because you're seeing hyper competition on these chains focused on payments to get usage and adoption and demonstrate real world use cases. So >> 100% >> I want to see Western Union go away. I think they will. I think folks like these big tech companies, Meta for example, they have WhatsApp. They tried to launch Libra and then DM >> and that was cancelled in a different admin and different regulatory regime. They're not doing that now, but if they did, it would get through because it was fully compliant then, but the it's constructed. But th those big tech companies are positioned to do well because they own the customer. The customer lives in their platform. They have day-to-day interactions. And we've seen this play out in China. >> Yeah. >> You know, China is actually ahead on consumer fintech. They, you know, they're using 10-cent apps and Alip Pay to move money and send gifts like envelopes. They've been doing it for years. >> Yeah. >> And it's social media driven payments. This is why you have the rise of the super app. >> Yeah. >> The super app is this all-in-one banking app that does social media and payments and banking and investing. So, I expect that Grock, Twitter will get after this quickly. It makes sense for them to do that. Coinbase is trying to get after it. Robin Hood is uh what's Amazon doing? They will do something. Um so I think betting on those players to continue to compete and win makes sense because they have a relationship, you know, with the customer. >> Yeah. I mean, Chairman Atkins is talking about super apps all the time, and I think he's thinking about securities and crypto coming together, but I I think you're right. I think it's much bigger than that. Who's and and you're going to see these regulatory remotes being lifted. So maybe a Twitter jumps in and maybe >> we'll see. I hope more of the moes are lifted. Yeah, >> I I hope more of the moes are lifted. Like the the big moat right now is this. So you know I have on good word that when the Genius Act was being drafted, which you know, as you know, introduced uh stable coin regulation that Jamie Diamond, his lieutenants marched down to DC and said, "Hey, if the bank holding company act means anything, then you cannot let technology companies compete and offer banking services." >> Yeah. So that this bank holding company, I'll be brief on this. It prevents uh technology companies or businesses that are quote unquote engaged in the activity of commerce from offering banking. This is why Amazon, which owns Whole Foods, doesn't have a bank branch. You'd expect to see a bank branch in every single Whole Foods. It's the reason why Google uh which has hundreds of millions of consumers and tens of millions of merchants, why they don't have a payment network that competes with Visa, Mastercard. So that mode is still not lifting. That is the biggest mode in town. Other modes are lifting on payments. >> Yeah. >> For these specialized fintexs with an OC charter. >> Yeah. Getting back to the Western Union side of things. There's one big trend that I've been noticing that people don't realize and I'd love to get your take. So in the old days when I was running business at Croup, I would pay my vendors, my tech vendors 80 million bucks a year or whatever. like buying tech is a huge huge um expense on your balance sheet. But now to your Salana point and I've seen this with other chains as they're integrating with these legacy enterprises. They're like wait a second I will make you money. I will make you money on sequencer fees. I will in certain cases pay you to onboard because the ecosystem and the network benefits from having these big super apps on on the system. So it's almost now what happens if you are the big enterprise that continues to pay for tech versus the one who's making money on their tech. Are you looking at that as as as as you seek you know your investments? >> Well I love the picks and shovels infrastructure play like when you've got rapid proliferation rapid capex investment looking the layer deeper at the pix and shovel layer makes sense. You know in AI that has been names like Nvidia and Taiwan Semiconductor. So in this payments category from a private markets perspective it might be for example like stable core or omnia uh which are two startups that are helping banks become stable coin relevant because the banks just can't adopt or innovate on new technology just rent from someone. >> So I like that I like the picks and shovels play. You know it's just so competitive at the application layer. >> Yeah >> I I I agree. I think those are interesting areas to focus on in private markets. Now, the thing is it's hard to express a good view on that in public markets. >> Got it. Let's pivot. >> That's where deals have a role, right? That's where we talked about earlier like that's where deals have a role because you can, you know, you have these amazing businesses that are just stay private for longer. Look at Stripe now. I don't know what it's worth now, but it was 80 billion dollars of Once Upon a Time. >> Yeah. >> And that deprivives public market investors of access to attractive sources of return. >> 100%. Let's pivot to macro a little bit. So, the government's starting to open up again. Um, I don't know how long it's going to stay open, but but we looks like we have a it's back on. Um, how do you see what macro um inputs are are you really tracking? What are you looking for? What's important to you? >> Sure. The primary things I look at are number one is corporate earnings growth. >> Tell me the direction of corporate earnings growth. I'll tell you the direction of the stock market. So earnings growth is strong double digit year-over-year growth. Uh in Q2 we had 12% year-over-year earnings growth. Uh now it's like high single digits. Uh so that's robust. And the reason why that matters is that the marker of recessions are layoffs. >> Yeah. >> And corporates do not lay off if they have earnings. They need talent. >> Yeah. >> They need labor together with their capital to d create drive more earnings. So number one is earnings growth. Number two is the pattern of inflation. And in general we have a pattern of disinflation. It is kind of sticky here but it's not heading up. And the Fed is biased to cut. >> Yeah. >> Despite that backdrop and maybe tacitly accepting a higher level of inflation which is constructed for real assets. Real assets are things like stocks, homes, commodities as opposed to fiat assets such as debt where you'd rather be a borrower. So your debt gets inflated away. Uh so then I also look at the productivity growth. Productivity growth is is the only free lunch in economics. Productivity growth enables a company to grow earnings and pay more to their workers. And so that's the climate we have. So actually this is Goldilocks. This is Goldilocks economy. This is great. What the mismatch we have is that people don't perceive it as goldilocks, >> right? >> Which is ideal because >> that's right. That's right. If people see the world as Goldilocks, that means the assets are expensive. That's when you have the Time magazine cover of Goldilocks and everyone feels chummy and happy and the valuations are high and that's probably when you want to, you know, derisk a bit. So I think it's a very constructive environment that people have PTSD from one the April tariff war two government shutdown three there's still geopolitical risk around the war um around the world so there's you know that people have these tensions and it's manifesting in you know kind of the recent election outcomes uh so that's that's why asset prices don't reflect that but that also creates the opportunity a lot of people are concerned erned about recession. >> Yeah, >> I mean it comes up so often when we talk to our clients and others which which is actually another contrarian signal for me. The sentiment is too bearish and a lot of people are off sides in terms of positioning. Meaning if you look at long short managers and you look at their exposure to US equities versus their historical trailing exposure, they're well below their medians. So what that means is when markets rally they are forced to performance chase into that. So they will buy dips they will buy dips to increase their their net exposure. >> So so you're risk on then generally but you should still seem a little bit um what's the word? Um you don't seem to be full throttle risk on. You seem to be very careful >> I would say. So the resolution so on beta and risk on. Yes. >> Yeah. The resolution to that tension you noted is positioning under that. It's the asset allocation within that risk on environment. So I think shifting positioning from what's worked from the April rally to October is a good idea. >> High beta animal spirits I would start to reduce that and start to shift towards opposite side of the pendulum. So that's the kind of reconciliation of this. >> Yeah. What I'm what I'm hearing is hardcore focus on fundamentals like like get back to fundamentals. >> Yeah. Real business with earnings growth with decent valuations, growth at a reasonable price that can compound and grow. >> Uh that includes technology stocks that are not insanely overpriced. >> I I still think Meta is great. I think other names in the semiconductor stack are are fine too. Data centers got a bit of a hangover because yeah, it is attached to that high beta, but fundamentally still good. >> Uh healthc care is great too. like the worst of this of the cutting Medicare advantage is behind us. >> Uh you saw this aging demographics. You have a baby boomer economy. The demand for services and healthcare is only increasing. >> Yeah. >> Uh and you've got the government is your customer there. Uh that's a creditw worthy customer with growing spend. That's a great category. >> Financials are great. Uh defense tech is also interesting in maybe especially in private markets actually. Anderil is too expensive, but there are other companies maybe like Shield AI that are doing full FSD for drones. >> Yeah. >> Right. Autonomous drone flight. You know, you and I were at this Caner Fitzgerald conference yesterday, the under secretary of state, uh, and Ted Cruz, I believe, rightly pointed out that having 12 fielded carrier battle groups makes them ripe targets. And maybe day one of a war with China. Yeah. And I you you served our forces so you have a better insight on society. But look, I I believe it makes sense like better to have smaller, cheaper, faster drone technology. So I like that on private markets. I think they're really good >> uh defense tech plays to to focus on. >> I I couldn't agree more on the defense defense side. Um having >> like honestly if if crypto has taught us anything, it's decentralization that really drives resiliency and scale. if you do it right. I think that's the trend that we're seeing across the armed services like Marine Corps is doing a distributed type approach to uh to warfare going forward. It's just it's it's all kind of intertwined in my mind. It's really interesting stuff. >> Awesome. Agreed. >> So So you talked about some of the folks some of the companies you're excited about. You mentioned meta meta a bunch. Um are there what's the most underowned asset? You know, if we carve out meta, you talked about how excited you are about it. Um asset or vertical? >> Uh yeah, I'll share a screen real quick here. here. And by the way, I mean, I I just call that as example. You know, we have like 50 different positions here, but I just call that I think within Maxim, it's like the cheapest one out there. >> Uh but like you know, here here are high level investment themes. I'm sharing on a screen for those that are watching. >> Uh but you know, it's the nuclear renaissance. The world needs more nuclear energy. Needs all of the above energy, but nuclear is a big part of that. >> Aging on longevity is a big part of this, too. We have aging demographics all across the world, including here in the US. They need services. They need nursing. Uh they need uh care. U digital fintech. We talked about the rise of AI. Defense tech. We spoke a bit about >> the data center and energy infrastructure build out. You know, there's a data center. Yeah. >> Not too far from SF that's got capacity, but they've got no energy. Just sitting there idle. >> I think mortgage refinance is a is a very interesting theme now. We've got >> three years of higher for longer rates. I believe rates are coming down. You've got the privatization of Fanny and Freddy. >> Yeah. >> The reduction or elimination of the so-called G G fee uh could cause a mortgage refinance boom which is great for consumers and certain mortgage refinance names will do well. I think biotech is extremely hard category but there select areas within biotech especially those areas linked to oncology. Uh I think those areas can do well. Uh biotech's generally been a go nowhere category for three years. I think uh a lot of the excess have been kind of washed out. And uh this is a big one for us like the baby boomer economy. I don't think people have really kind of focused in on this. But if you look at restaurants, you look at travel and leisure, the the effect of healthcare, elective health, there are a lot of sub themes in this baby boomer economy. Cruise lines, you know, we have a we just built a 5% position in Norwegian cruise lines one or two days ago, actually. >> You know, they've got backlogs. you you have they have a backlog that means they've got future revenue in hand double digit earnings growth and you're buying at a forward valuation of nine times. Uh there's also this call it the DGEN economy, right? The the rise of names like uh Robin Hood and sports betting. Um there's quite a few names in there. I think you got to pick those spots really well. Obviously, Coinbase is part of this, but a lot of those names have rallied and are expensive right now. So, I think timing this is is tricky, but you know, there's a there's a big market of these DIY investors that >> yeah, >> are taking investing in their own hands. uh and you're seeing turnover increase. So one of the ways I express that is through Virtue. So Veru is >> the only publicly traded market maker and they're indexed to the launch of and growth of these ETFs. >> So you got the 3x bull bear 5x bull bear ETF on any other theme under the sun. >> What's the picks and shovels expression of that? It's a name like Veru. Uh the market makers are providing liquidity. You know, I like a name like that. And it's also it they benefit during periods of higher volatility. So high singledigit Ford PE. I mean it's with double digit earnings growth, you know. So I like those kinds of themes. And those are some of the ideas that we're investing against. >> Started by West Point Grat I'll add. >> Um on the deep end economy, how do you play prediction markets? >> I mean it looks like everybody wants Yeah. >> Yeah. You're right. I mean like we both I think we were at the conference where we saw the poly market CEO talk about this, you know. I mean I think and private markets is is really how you do it. But you got to look at the valuation of this. Everyone knows Poly Market now. >> Yeah. >> There's nothing non-conensus around Poly Market. It's definitely heavily shopped and efficiently priced. So, uh, you have to have a bet that they'll have continued product innovation growth that will get additional traction. Um, or that it'll be wellreceived in public markets, which it probably will be just because it's poly market and it's a consumer brand with a retail following, including amongst DGEN traders. That's kind of the recipe by the way, right? There's a reason why Robin Hood, Tesla, Palunteer, and SoFi have these stratospheric valuations. Four out of five of them are consumer brands and it's this rewrite own economy where shareholders are consumers, consumers are shareholders. >> Yeah. >> And they just bid up valuations on this thing. Poly market has those attributes. >> Yeah. >> But it's not a fundamental underwrite. It is a >> repricing underwrite which isn't necessarily bad. It is what it is, right? >> Like it probably does rerate, but I haven't dug into the earnings on this thing. So I I haven't I haven't focused it. But yeah, that that's like a private markets bet. Yeah. >> On it. In public markets, there's a stock that uh we are I call it stalking, meaning it's on our watch list and we're just waiting for a good entry. So, that means everyone listening this might front run me, which would be unfortunate. [laughter] Please don't do that. Uh or let me know when you do. But the ticker is Genie uh Genius Sports Limited. I'll see if I can share my screen on this real quick here. But you can see how it seems to be setting up right now. It's given back quite a bit, which I like. Uh so um but you can see this is a business that um you know overall has a has a good trend. This business uh they focus on sports betting. It's got a 26 times Ford PE uh and strong long-term trend and it's given back recently along with these other kind of degen economy high beta stocks. So, I think sometime in the next couple of uh weeks, that may be an example of a way to express on this. It's a lot cheaper than Robin Hood and probably a lot cheaper than Polyark. I I don't own it right now. I'm just giving you an example of how you might express if you run on on DJ Economy. >> I imagine uh $2,000 stim checks may help uh boost that. >> Oh, yeah. If that if that goes through, then that you know, we'll see. You know, that I mean, you'll get a for sure you'll get some lift on that. >> Yeah, for sure. All right. So, we talked about um underowned. What about the most overowned assets? Anything that you are uh you think is not worth the time? >> Uh great great question. Um over you know I would say like the positioning is still dower and the sentiment is dower. >> So what's overowned is probably like T bills >> sovereign debt is overowned. You know you've got T bill yields at like call it 4% and an inflation backdrop of 3%. I don't know why people own bonds in the current environment. You can own equities that uh like royalty pharmaceutical companies. I'll show you this company that we do own and they it's called Royalty Pharma and uh this company has a a very attractive free cash flow yield and they're making revenue through royalties royalty streams. So that you know this is a company take our RPRX the free cash to market cap yield is 14%. Uh it's gone up about 58% in the last one year by the way. So you're getting valuation you're getting momentum and you're getting a quality business. I'm not saying the entry is great where we stand by the way. I'm just giving you an example of why I wouldn't want to own sovereign debt. Uh because there are other assets in public markets that uh are linked to yield and are real assets. So they repric in response to in inflation. So the most overrown thing is is sovereign debt uh and maybe things like Palunteer stock, I guess, although I've been saying that for a while, so I don't know. [clears throat] >> Interesting. [laughter] So you're long defense but short Palunteer. Get it? Well, I'm not sure. I'm just saying like 250 times PE ratio where all the insiders have sold out. Like Alex Karp hit like sell. >> Uh Peter Teal hit sell, Joe Lansdale hit sell. >> And they're very good at the market. I I I have a tremendous amount of respect for Alex Karp, by the way. Personally, >> I love his message. I love his defense of Western civilization and American values. And >> like I'm an Alex Karp fanboy, just to be clear. But there's a difference between investing and like the message and all this and you know if you look at you know you had a lot of these high beta stocks for call like a year and a half ago is remember cava uh like sweet green chip Mexican grill they had these massive double digit rallies. I'll I'll pull up a few of those charts for those that are watching on screen here. I remember in May of last year I noted that it was a terrible time to buy restaurant stocks. Um the theme was just overbought. Yeah, that's that's been correcting. That's been correcting. So, at some point that's going to bottom. Um, this is Chipotle. This one hell of a rally from uh the end of the bare market in 2022. It's almost fully retraced, right? Almost fully retraced. And the valuations are becoming more reasonable now, right? So, Cava, you could tell a similar story. was a massive bull market where this thing was the poster child uh massive rally and given back 60% of the gains, right? Still in a bare market though, right? Uh but uh overall though, like at the big picture level, I think it's high beta stocks that are overowned. >> So, it's kind of like time to do the opposite. uh you know quality compounders, free cash flow, >> got it, >> earnings growth. >> Uh let's pivot to crypto real quick. Uh are there particular verticals that that that you think are particularly exciting or not exciting? >> So in in digital assets like I I think the you know on tokenization thesis incredibly excited about this been writing about this. Um >> but but you can only access that really via private markets, right? Or or is it no? Oh, is it more of a black rockck play because they're embracing it or yeah, in private markets it's it's tough also, right? like these are all expensive names and this is this is what you do as a VC of course >> and I'm I'm valuation sensitive so I'm like I'm waiting for the good deals but you know I I think there are um I I I'm focused on as a theme you know we found we did an investment in a private company called News Data we just closed on that and uh uh this is a company that does uh it's like the next Crusoe I call it so for those that don't know Crusoe Crusoe um takes off energy from natural gas and they are powering open AAI. So they've got a 10 to12 billion valuation on a big commercial agreement from open AI. Uh and they started and it's an off-grid Bitcoin miner. So they were taking excess NAT gas in the Peran Basin. >> They'd go to these oil and gas drillers and say, "Hey, look, you got this Nat Gas and there's no egress. There's no mid-stream pipeline infrastructure. It's too remote." They said, "Let's let's slap on a generator there." the same generators that Elon Musk is using to power his Memphis data center and they'd mine Bitcoin. >> So, we made an investment in Alberta, Canada. It's called New West Data. Uh, great valuation, great team. You know, the former CEO of Hut 8 is on the board, former partners from Golden Tree, Deutsche Bank. And, uh, we're getting a 35% plus or minus free cash flow yield through the mining and sale of Bitcoin and the selling of oil. Because in Canada, it's illegal to flare natural gas beyond certain limits. Far more restrictive than the US >> and there's a lack of na natural gas midstream pipeline egress due to the Trudeau admin for 10 years. They neglected the capex that set up our opportunity where our partners are buying these oil and gas wells at two times free cash flow. Two times free cash flow. This is bananas. >> Yeah. >> In public markets that asset trades at five and a half to six times. Two times free cash flow. Then they put on the January, they mine it, they sell the Bitcoin at the month end. Uh, and then, uh, they sell the oil. And so now, uh, we're exploring how to tokenize that. Can I tokenize that onchain? Can I get long-term capital gains? Can I send a senior bond off of that to a stable coin issuer to increase our returns? >> So, I'm excited about that, that kind of opportunity, whether you're originating a quality asset that can go on chain. Um, >> so R just pick it well though in crypto. Go ahead. Yeah. >> No, like so when you're t you talked to us earlier how you're using tokenization to effectively structure products for tax efficiency. You're doing that yourself or are you working with somebody to token? >> Yeah. Yeah. Because no one's doing it, so we'll get after it. [laughter] >> We're waiting for someone to do it. And I [snorts] I I'm not seeing you know I I was at a there was a there's a conference last week in New York here. as a panel and two of the people talking about AI agents like the hype is so ahead of the substance. The thing about digital assets as as you can appreciate there are incredibly brilliant technologists that know how to engineer and build technology. >> Absolutely. >> And they have a good view of the future. Yeah. AI agents will have an important role. Okay, great. But the the near-term commercial value from that is limited or close to zero. That's that's just the reality of it. The reality of it is that you know these the existing c existing technology platforms have the reach the distribution they'll be the primary beneficiary of this you know I I think folks in a commercial value near term where do I see that tokenizing of assets to create tax efficiency you know the other areas of course uh too I I think very soon by very soon I think maybe within a couple months we will see oversold the digital asset treasury companies that have significant discount to NAVs and there'll be moves to make there. Uh I my sense is we might still be too early though and >> it's a it's a ch it is a stock pickers game there. You know you've got treasury companies that in their offering docks are expressly prohibited from for example selling their token to go buy back shares and close the gap. There's no structural mechanism for them to close the gap but they're going to have issues. Uh so yeah, I think I think there's a lot of promise around digital assets for sure, but I think hype is ahead of reality where we stand today. Uh there are now 580 VC funds. I talked to a friend, he's launching a VC fund. I guess it's 581 now. [laughter] So it's it's challenging, right? Like uh valuation is the enemy of returns. You know, 2013, 2014 vintages of venture were amazing because the market for venture capital was uh star, right? You could get an Uber at a $4 million valuation. Now you're seeing >> preede valuation preede >> preede valuations at $40 million. >> Yeah. >> So I I'm not excited about those opportunity. I'd wait for a d-risk later stage priced correctly valuation where I got a path to liquidity and focus on that. That's what I'm looking at and say defense tech. >> Got it. Well, I know we're uh I could talk to you all day and uh I've already learned a ton before before we uh cut it off. Just is there anything I I should have asked you that I didn't? >> No, I think you covered a lot of ground. Look, I'd say, you know, the future goes to founders, the future goes to innovation. Be optimistic. Fight the negativity. You know, this is a Goldilocks economy. We've got a great deregulatory backdrop. Uh, you know, stable coins are decentralizing the US dollar to a common standard, which benefits the United States. Productivity growth is great. >> So, be optimistic. You know, invest in the future. Uh, if you're young, now's a time to take risk. Be a founder. Be a part of catalyzing uh that positive change. It's an extraordinary time to be alive. make sure you're positioned against these trends and take advantage of that. >> I love it. Incredible advice and I think you're right. It's a golden age and I hope a lot of people jump into the ring. Got to be in the arena. >> Uh Rahm, awesome. Awesome to speak with you. Um love every time you open your mouth and learn something. Always a pleasure and hope we get you back on soon, man. Thank you. >> Same to you. Thank you. >> How people connect with you? >> Oh, you can follow me on Twitter, Ram Alawalia. R A M A H L U W A L I A or you can go to our website Lummit Wealth. We have a newsletter we drop every Sunday at 11 a.m. Eastern and it on topics including macro trends in AI. Uh we go through earnings analysis. I write it myself uh with our team. It's very high quality. And we're also on Tik Tok and Meta. If you look up Lumida wealth uh luma, you can find us there too. So very active on social. >> Awesome. Great to see you, sir. Perfect. Thanks, Chris. >> Well, till next time. Cheers. >> Byebye. >> Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.com/free. With markets hitting all-time highs, now is a great time to stress test your strategy and be prepared for what comes next. Thank you all for watching. We'll see you again next time.
Ram Ahluwalia: The Speculative Boom Is Cracking | His Playbook for This "Goldilocks" Market
Summary
Transcript
shifting positioning from what's worked from the April rally to October is a good idea. High beta animal spirits, I would start to reduce that and start to shift towards the opposite side of the pendulum. >> Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.com/free. With markets hitting all-time highs, now is a great time to stress test your strategy and be prepared for what comes next. Ladies and gentlemen, welcome back to the Wealthy On podcast. I'm Chris Perkins and today I'm with Ram Alawalia, the CEO and founder of Lumida. How are you today, sir? >> I'm doing well, Chris. Great to see you. I know we were spending time together in Miami at the Caner event. Uh and I know you and I are also on another pod too and we always enjoy exchanging views with you. >> Yeah, I'm excited to deep dive with you today. There's so much going on. Uh for for the listeners first, I'd love for them to learn a little bit about your background. >> Sure. So, I grew up in in markets and banking. Been obsessed with investing in banks for a long time. First job was at a community bank when I was 14 years old, earning minimum wage at a the treasury desk of a small community bank. And I just can't seem to run away from banks. Uh, in 2008 I was at Merrill. I lived on Wall Street. I worked to tour two financial center. I saw the financial system blow up due to the lack of transparency around subprime mortgages. That planted then the seed for for digital assets. Uh, so I got involved in digital assets in in Q4 2013. I was asked to diligence what's now known as Ledger X. And so kind of the rest is history. I I built and sold a fintech platform called Pure IQ which was focused on analyzing bonds that don't have loan level transparency. Sold that to Crossover where I built the crypto business there. So love building, love markets and had always been focusing on what the next uh iteration of innovation is in this important ecosystem. >> I didn't realize you you were involved with Ledger X. I was I was too back in the day the first clearing. >> Oh yeah, it was it wasn't called Ledger X back in the day if you recall correctly. It was like NYC >> CX some random name with a terrible deck. [laughter] >> Interesting. >> And the funny thing about that, by the way, the price of Bitcoin then was like 180 bucks. And I remember I was >> a VC had reached out to me and they said, "Hey, look," and you I can see why you looked at it because there's a clearing house. >> Yeah. Yeah. >> Giving your background at the CFTC >> and they're like, "Ram, you know one or two things about this category. Why don't you get a view on it?" And meanwhile, the the move is just go buy Bitcoin. That was the move. >> Well, that's been the move. I mean to this day it seems well we're going to talk about that but before we do tell us about Lumida. >> Yeah so we're a a modern wealth manager focused on founders exited founders founders of created wealth. They care about performance. They want access to preipo deals. They want to mitigate tax. They want a holistic approach that includes emphasis on health and longevity. So you know when I exited cross river I looked around. I interviewed these wealth managers and realized they have no idea what they're doing. uh and they're just pushing product. Their incentives are not aligned and there's no modern interface. It's not AI enabled. Uh and they're not selective around the types of opportunities they focus on. They're pitching 6040 uh which I don't think really makes sense in a higher for longer inflation environment. So, it's really against that backdrop where I said, gee, there's a real opportunity here to build a modern wealth manager and disrupt the legacy approach to doing things. So, we're innovating on the user experience through an app. We're innovating on the offerings and the deal content. We're innovating on the approach to investing as well. Uh, and so we're we're having a lot of fun. You know, we're growing quickly and we've uh we're we're number one recall for wealth management certainly for founders in the digital asset space. >> Got it. So, you're focusing not only on the investments themselves, but the user experience and you're really saying the 6040 is dead. So, so can you deep dive a little bit further on your approach if 6040 is dead, you know, what do you see as as the rightful outcome here in the inflationary environment you just? >> Sure. So, like first off, everything starts with the client. What are their objectives, risk tolerance, their time horizon? What are they planning? Everything starts there, right? So, you know, there are scenarios where US government bonds may make sense if you need to preserve principal and you've got to save for a down payment in six months. Sure, I get I get why you might want to have T bills, but most of the time they're just better alternatives. They're better alternatives uh in the world that have higher free cash flow um and less uh damage from inflation. So, I think that 40 parts at risk uh and there are other types of assets that people can invest in too. um you know equities I think play an important role in portfolios but there are other types of asset classes as well that can include uh for example deals that are two years from an IPO. I'm not a huge fan of early stage venture. I know it's an incredibly hard category, but >> one of the things you can do is you can scan across top performing deals and see who's got traction, who's got a fairly priced valuation, who's got earnings growth, who's got a path of liquidity, and can I get a 2x plus with long-term capital gains and just cherrypick the leaders in the market? That seems like a good opportunity. So, we're we're looking for those kinds of alternative investments in lie of classic 640. Of course, you see endowments do this very well, right? They're taking advantage of opportunities and they keep, you know, Harvard's endowments now $50 billion. So that crossasset class type of investing can work and now with tokenization, the breath of these investoral opportunities are increasing. >> Yeah, I I totally agree. I I think one of the greatest things that's going to come out of tokenization is accessibility. I think we've talked about 81% of companies in the United States, uh, over hund00 million in revenue, they're private, and so only a small fraction of the populace can access them. That's going to change. Um, how's how's that going to turn out? I mean, is this going to be just a free-for-all where like people are essentially public from day one? I mean, how do you approach that as an investor? >> It's a great question. I fully agree. I mean, this is call it like the internet capital markets thesis. Uh and you know we agree and as you pointed out Chris the barriers to accessing public capital markets are significant from a compliance legal fees listing requirements and so there's an a significant underserved market that right now private equity is going after and companies are staying private for longer. Uh and really you know that should be opened up both on the equity side and on the debt side just as crucially important. people aren't talking enough about the financing side of this. So, um, you know, it's challenging because most investors, especially small investors, don't know how to assess risks. I saw a company on Twitter yesterday announce that they raise through a public crowdfunding offering. This is a company that specializes in direct indexing. That business model is going to go away because of the rise of other taxaware strategies. I won't get into that right now. They said their board had met and they decided to raise money from their customer because I was in the right interest. And I looked at this said, "What's really happening this year is they're not getting another round from their backers." And my critical cynical take is that they're just raising from the public because they can. >> Yeah. >> So, you know, investor protection does matter. Disclosure does matter. You do need a concept of curation. >> Yeah. >> These are difficult issues to sort out and address. Coinbase seems to be taking a very interesting approach which as you as you know they announced a program where it seems like they're competing with say the Republics of the world where they're going to have one listing per month. It's highly curated their disclosures their requirements around alignment of incentives. There's got to be a vesting schedule for founders. >> So there's got to be skin in the game and alignment. That's a very appropriate private market response to the challenges we've seen. uh you know in the market whether it's the ICO market or other crowdfunded opportunities. So I don't think we've cracked the code but we're vectoring in the right direction. >> Yeah, we certainly haven't cracked the code and you know the lines are going to start blurring. You know you're saying maybe they're competing with Republic. You know maybe they're actually competing with NASDAQ um as you start thinking through equity versus token. If it's public it's public, right? So I don't know. I think I think we're at the very early stage. Um but but let's let's dig into that 6040 portfolio again. Obviously you're tailoring >> the particular you you look at your client, you look at suitability, >> but what role do you think crypto and digital assets will play? And let's carve out for a second those tokenized assets like like crypto native products. Sure. >> How do you think about them um as part of a portfolio going forward? >> Yeah. So there's the there's the what and the how in terms of portfolio composition. There's a role for digital assets. Even within that, there's such a broad scope though. >> Then there's the how, right? Which is the pipes and plumbing and how that transforms things. I think where we stand today, I'm actually more interested in the how. We'll come back to that in a second. By that, I mean, you know, can you wrap a high free cash flow yield investment with a token to transform that to long-term capital gains? Benefit number one, significant benefit, right? like you can get a 16% return on a private credit strategy that beats the long run return on the S&P 500, but after taxes, after federal state tax, that 16% drops to eight. >> Yeah. >> Uh and uh you know, if you live in New York City, I guess that goes down to six. Then after inflation, that drops down to three. >> Yeah. >> But if you can wrap that in a token and make that tax efficient and turn that into long-term capital gains, you've seen this with like ESG, for example, right? pay wrap tea bills instead of throwing off income which is taxable just to cruise the NAV. >> It's a major major value proposition. The second is cross margining which I know you you appreciate as well. >> There's all sorts of assets out there in private credit trillions of dollars out there that are people on asset on the balance sheet of a household and it's not a source of liquidity. That's a great opportunity. So I'm I'm very interested in the how and the mechanics of these things on the what I would say like I've actually been you know on digital assets you know I think overall high beta assets whether it's digital assets uranium or I guess like pick your latest quantum computing stock >> I think overall these are retreating including other things like data center so um yeah I think you know we have this fouryear cycle and I think folks that have been in the market for a while are selling into like Bitcoin 125. So tactically I I I I don't think Bitcoin stays above say gets to or stays above like 150 from where we stand today. Um obviously if we get sty checks we saw this $2,000 comment from Trump. >> Yeah. >> Uh that takes congressional approval number one. Obviously we're in a trajectory of lower rates. However, the magnitude and scope of this stimulus is simply not the same as what we saw during COVID when you had backto-back trillion dollar stimulus packages. >> And we're not going to see the tenure at 1.5%. >> And again, both of these, you know, this takes congressional action. >> So, so I think there's a I think this actually where we are positioning wise. I'm more focused on quality compounders, financials, healthcare, looking at defense tech plays that data center, energy plays. Uh I think that's that's a very promising opportunity and just [snorts] still have digital assets exposure, but I'm uh uh you know, I'm I'm selling on rallies is what I would say here. If you're looking for a simple, secure way to invest and own physical gold and silver, visit our sister company, Hardass Assets Alliance at hardassetsalliance.com. That's hardassallalliance.com. >> That's really interesting. Um, you're you seem to be indicating that you're a believer in the four-year cycle and um particularly on Bitcoin. Is that what I'm hearing or is it more than just am I oversimplifying? >> I think it's more than just that. part of it uh you know it's like follow the flows and what do you see actually happening out there or you know I I don't know that it's not that u a religion on this four-year cycle but you can see whales are selling at key prices and when I talk to people in the market you know we have we have clients that have invested in creative wealth in this category I ask them what they're doing and [snorts] so you you tie out the hypothesis with the on the ground the behavior >> and you know you can see these attributions taking place so I'm looking for evidence for and against the four-year cycle. I'm just seeing evidence that people are responding to it. Now, >> does the market clear this out at some point? Sure. >> Yeah. >> I'm going to wait for evidence for that to happen, too, rather than try to guess when that happens. And look, I I think between now and year end or even a month from now, I'd be constructive overall. But the this is like tactics squiggles versus the trend. >> Yeah, for sure. I'm I'm constructive as well. This is how I'm kind of seeing it and I would love your take. So I feel like retail they're they are they're selling right a lot of retail selling. They got burned in what we call 1010 or Black Friday. We we talked about this in the past. This was around all the liquidations and the per those really den cryptonative folks. So they got they got hit. Then you have those big whales who have seen three cycles now of getting of the cycle and they're like okay the time is the time. I've seen this before. um made a lot of money like my life has changed forever generational wealthier guys it's time for me to sell and so I see retail for those two reasons pulling back and retail moves really fast of course there's a big part of retail that's chasing the hot ball of money I think now they're in the privacy you know vertical and looking Zcash and stuff like that who knows where they're going to go next it's sometimes difficult to participate but against that backdrop you have the institutions slowly steadily methodically moving forward no turning coming back and I think right now we're in this like gap where retails move faster than those institutions have replaced it but I think we're coming into a cycle where the institutions now are going to be driving um and like how do you do you agree and like how do you play that market? >> Yeah, I think that's right and it's a it's a great point and I it does go segment by segment like you mentioned and you know there's sovereigns that are playing an increasing role. They're looking to utilize their idle energy needs in the winter where they don't need to cool their apartments let's say in the Middle East and using that to mine Bitcoin for example that's different from a primary that's different from sorry secondary market flows though. So uh you know I think if you if you take a step back like the big picture macro from our vantage point looks very constructive. >> Yeah. >> Uh there's a lot of fear out there. However, the two concerns I have is liquidity fragmentation and attention fragmentation. By attention fragmentation, I mean, you know, you've got the AI narrative, you got the quantum narrative, there's a biotech narrative, the small cap narrative, >> and then even within digital assets, you've got the DAT narrative. And you know what we saw there is we saw proliferation of IPOs and then you saw parabas there and then you saw a breakdown in there. What happens is, you know, I put this on the kind of the weight of evidence scale. You know, when you see new issue IPOs not make money, that's when risk appetite generally retreats. That's when I want to pull back. When IPOs are being rewarded and they're going up and they're quality deals, people are making money, it can continue. But the vast majority of these now are below their issue price. So, uh, it's hard to keep the flywheel going with that backdrop. And as you said, hot money ball of liquidity. If you look at these other themes, like the data center theme, you had >> Yeah. >> Sam Alman give a disastrous interview with Brad Gersonner from Altimter talking about they've got 13 billion revenue and they've got a quote unquote $1 trillion in committed spend. You and I both know the word committed spend is the same word for like debt. Like what does that mean? Is that like offbalance sheet liability? That doesn't sound too good to me too. So data centers in retreat and the you know generally people that own these assets like digital assets or the data center theme they are betting on the future. It's generally good bet to make but they're all in these similar crowded themes and those themes one by one are pulling back. They're getting margin called on them to the retreat more. I think that's the current market climate you know that we're that we're in. So, I, you know, I'd rather own things like Meta, which is down 20% uh from its recent high despite the fact that it's growing earnings like 35% year-over-year and had a onetime charge due to tax rather than excessive capex. >> Yeah. So, so it sounds like you're advising clients pull back from those frontier narratives and really get back to fundamentals. Um, look at cash flows, look at fundamentals, >> Yeah. Look what's working. Insurance and financials are working. Look at like All State was seven times earning now it's 7.5 times. Those things are quality compounders and earnings. There's a there's a tension between animal spirits. >> Yeah. >> Which are the high beta thematic Momo FOMO names, tradery names, and the exact opposite which are like these quality combaters, free cash flow, buybacks, growth, quality, right? And this high beta rally, we had a massive high beta rally off the April lows after they were absolutely destroyed, right? You had like negative two standard deviations on that high beta category. Now you went to the exact opposite and these other areas have been kind of quietly ignored and those includes like natural gas mid-stream pipeline which you need to power data centers. These are quality businesses and quality categories with earnings growth. they have an important role to enable the next uh uh leg here in terms of powering say energy for example or providing financing in a deregulatory backdrop as well. So I think that's where the capital is is going to [snorts] flow. I think that's where the institutional bid is >> right. So even in equity markets u if you weren't in the mag seven you've been left behind. Um so now what you're saying it's time to pivot back look around um and find value you missed the entire fantastic >> yeah I mean yeah exactly I think uh you know there's still quality names even in max 7 I mean a lot of them have rerated right like Google went from death of search is going to take out Google now it's like alltime highs and they you know all all these hyperscalers are showing doubledigit revenue growth in their cloud businesses so one thing to that we should all be clear on is that there is ROI on this AI capex right Michael Bur came out a week ago >> and said hey you know all this round trip you know this is a this is a bubble etc >> the fact is there is ROI on this capex and it is showing up in earnings you see that with Amazon you see that with Google you see that with Meta so that data center thesis fundamentally uh is is still is still there which is constructive and we're seeing productivity growth across the economy at levels we have not seen since the late 90s when we had another innovation come on the scene of course the internet >> y >> so you know for those reasons you just I think we should still be very constructive in fact starting to look at these industry groups that are going to be benefiting from AI adoption like financials if you look at financials the the penetration of AI is changing call center servicing. It's improving credit underwriting, creating more efficiency. You know, Bank of America CEO Brian Moahan talked about how they're seeing a a double-digit improvement in their tech release productivity. You know, that's just one example. Now, call center innovation is coming too. Uh Better Mortgage uh has this technology with Tin Man and Betsy. an AI LLM that uh increases productivity of their team. So, you're getting more done with less. You know, that's that's a great story. This deepening of of AI across sectors of the economy. >> So, you're very constructive on financials where some of my cryptonative bros will say, "No, no, no. Crypto is going to eat the financials. You're not you." >> That's true, too, right? I I I agree with that, too. It's really funny, right? like like Visa and Mastercard have a lot to lose. >> Oh yeah. >> Right. So they seem to part. >> Yeah. They seem to be leaning they seem to be leaning in though that like not not all institutions are you know it's not fair for me to paint them in one brush. It feels like you've got some folks that are leaning in some folks that are like oh crap I'm you know I'm not interested in other ones that are trying to fight. >> You got to break it down right. So you've got Mastercard that bought Zero Hash incredibly thoughtful acquisition. Um, Zero Hash provides fiat ramps. The world needs more fiat ramps for digital assets. So, Mastercard helps enable the movement of money. Uh, these small community banks are under incredible pressure with the rise of stable coins, right? So, it's hard for them to compete on the deposit side. So, yeah, there's a lot of pressure on that. But think about financials like insurance companies. They are protected by licensing. They've got a moat. >> Yep. >> Right. It's just it's hard to take that out. How does that go away? Now you can innovate with like lead genen, you can innovate with customer servicing, AI will improve those business models from that perspective. And then you know certain banks that are tech forward. I I agree the banks are interesting. It's like a double-edged sword. Most of them will have risk but those that are that can innovate, they will take more market share and they'll be a beneficiary of growth. Those that are leaning forward into the category, right? There's a there's a bank that Palmer Lucky just backed that's going to finance GPUs for example. That's a new market >> now. You know, um there are other banks like Lead Bank, Jackie Reese out of uh Square. She bought Lead Bank for $56 million. Three years ago, they did a round of financing two months ago to $1.5 billion. They power Stripe. >> Yeah. So the folks that enable payments these these fastmoving high-flying fintech somewhere in the back end there's a bank an infrastructure bank that moves money custodies provides financing they'll still play an important role you know deposit insurance confers lowcost capital you and I know the deposit insurance fund which is I don't know call it 100 billion plus is not enough to actually protect deposits which are 20 trillion dollars. >> Yeah. But but deposit insurance still confers lowcost capital. Lowcost capital wins the game. You know, you need that lowcost capital and digital assets too. Yeah. >> So I think it's highly bifurcated. You're going to have a concentrated pool of winners in financials that'll do extremely well. And overall though, they're still, you know, that category is still posting double digit earnings growth and the valuations are great. They've got buybacks. You know, I think JP Morgan's pricey. I was buyer of it two years ago. If you look at like the return on equity of their consumer bank, it's 30%. >> Yeah. >> The largest bank in the world is compounding at 30% the consumer bank. Those are big numbers. >> That's because they keep all the interest, right? Now, stable coins are >> they pay 0% out on, you know, demand deposits, but not, you know, to your point, you've got other risks like the Fisers of the world and the Jack Henry's of the world, these infrastructure providers, these community banks, >> you know, they're under pressure. So, you do have to pick the sub sector appropriately. But the moat and the advantage you have from the license of a bank charter of an insurance company is meaningful if you're tech forward and indexed to the right categories. >> Yeah. The one thing I noticed was that after DoddFrank, I watched that moat get really deep and anytime you've got a deep regulatory emote, it really forces consolidation because the regulation defines what you have to do. It's commoditized at that point. It's so like revenue gets squeezed and you got to be big as hell. Um, now we're seeing the opposite happen. It feels to me like the regulatory mode is getting more shallow. It's I feel like you're going to see more competition whether it comes in from crypto or somewhere else. >> How do you take advantage of that environment as an investor? >> No, you're right. Right. You've got like a 200 FinTech uh applying for an OC charter and the OC will hand them out these conditional charters. So competition is is coming. Uh it's I think it's hard to pick winners. It's so early. >> Yeah. >> Uh there's not product market fit and an OC charter doesn't confer FDIC insurance which is a lowcost capital >> thing you really need if you want to lend as a bank. And if you're going to be a bank, as you and I both know, it's so incredibly regulated. >> Yeah. >> Alco meetings, board meetings, supervision, FDIC examinations, the juice is worth the squeeze only if you're lending. If you're lending, you better be lending. If you're not, then you're not getting the the 10 terms of leverage that you have as a bank. >> Yeah. >> From that, you know, from 10% tier one capital. So, >> I think, you know, how to play it there opportunities there where banks, there are certain banks that are specialized that focus on the customer. They've got a unique edge in that market in terms of customer acquisition. Uh, and you know, I think those banks will still be fine, right? So, you know, Pay payments is a tricky c. I wouldn't want to bet on pay. P payments on the other hand so incredibly competitive. It's a circular gunfight. And if you look at you can see if you look at the stocks like PayPal and its peer group, they're all competing for ever smaller margin. >> Yeah. >> And it's the competition's so well capitalized that I think payments is a very hard category. And the great thing about being an investor, especially in public markets or liquid assets, you don't have to play that game. You don't actually have to pick the winner. You can choose which ponds to fish in and which ponds to avoid. >> You have ball control. Yeah. What do you think about the Western Union Salana deal? >> Well, you know what's interesting about that deal? So, uh, Western Union has been around for like 150 years. So, International Remittances, which they lead in, still plays an important role today. It's the business that >> every VC, myself included, just wishes would just get disrupted one day. And we keep looking at this thing. How is this still out there? This is Western Union, right? and it's a brick-and-mortar style approach and it still has relevance in emerging markets. Um, so I think one of the interesting takes about this Western Union deal is I believe Salana paid Western Union like $30 million to get that deal done. >> So who has the balance of power in this, right? I mean I don't know the background behind that but did Western Union have an auction >> was Stripe a part of that auction their new L2 call it Tempo their new chain L1 tempo etc. the the folks that own the customers have the leverage. They have the bargaining power right now because you're seeing hyper competition on these chains focused on payments to get usage and adoption and demonstrate real world use cases. So >> 100% >> I want to see Western Union go away. I think they will. I think folks like these big tech companies, Meta for example, they have WhatsApp. They tried to launch Libra and then DM >> and that was cancelled in a different admin and different regulatory regime. They're not doing that now, but if they did, it would get through because it was fully compliant then, but the it's constructed. But th those big tech companies are positioned to do well because they own the customer. The customer lives in their platform. They have day-to-day interactions. And we've seen this play out in China. >> Yeah. >> You know, China is actually ahead on consumer fintech. They, you know, they're using 10-cent apps and Alip Pay to move money and send gifts like envelopes. They've been doing it for years. >> Yeah. >> And it's social media driven payments. This is why you have the rise of the super app. >> Yeah. >> The super app is this all-in-one banking app that does social media and payments and banking and investing. So, I expect that Grock, Twitter will get after this quickly. It makes sense for them to do that. Coinbase is trying to get after it. Robin Hood is uh what's Amazon doing? They will do something. Um so I think betting on those players to continue to compete and win makes sense because they have a relationship, you know, with the customer. >> Yeah. I mean, Chairman Atkins is talking about super apps all the time, and I think he's thinking about securities and crypto coming together, but I I think you're right. I think it's much bigger than that. Who's and and you're going to see these regulatory remotes being lifted. So maybe a Twitter jumps in and maybe >> we'll see. I hope more of the moes are lifted. Yeah, >> I I hope more of the moes are lifted. Like the the big moat right now is this. So you know I have on good word that when the Genius Act was being drafted, which you know, as you know, introduced uh stable coin regulation that Jamie Diamond, his lieutenants marched down to DC and said, "Hey, if the bank holding company act means anything, then you cannot let technology companies compete and offer banking services." >> Yeah. So that this bank holding company, I'll be brief on this. It prevents uh technology companies or businesses that are quote unquote engaged in the activity of commerce from offering banking. This is why Amazon, which owns Whole Foods, doesn't have a bank branch. You'd expect to see a bank branch in every single Whole Foods. It's the reason why Google uh which has hundreds of millions of consumers and tens of millions of merchants, why they don't have a payment network that competes with Visa, Mastercard. So that mode is still not lifting. That is the biggest mode in town. Other modes are lifting on payments. >> Yeah. >> For these specialized fintexs with an OC charter. >> Yeah. Getting back to the Western Union side of things. There's one big trend that I've been noticing that people don't realize and I'd love to get your take. So in the old days when I was running business at Croup, I would pay my vendors, my tech vendors 80 million bucks a year or whatever. like buying tech is a huge huge um expense on your balance sheet. But now to your Salana point and I've seen this with other chains as they're integrating with these legacy enterprises. They're like wait a second I will make you money. I will make you money on sequencer fees. I will in certain cases pay you to onboard because the ecosystem and the network benefits from having these big super apps on on the system. So it's almost now what happens if you are the big enterprise that continues to pay for tech versus the one who's making money on their tech. Are you looking at that as as as as you seek you know your investments? >> Well I love the picks and shovels infrastructure play like when you've got rapid proliferation rapid capex investment looking the layer deeper at the pix and shovel layer makes sense. You know in AI that has been names like Nvidia and Taiwan Semiconductor. So in this payments category from a private markets perspective it might be for example like stable core or omnia uh which are two startups that are helping banks become stable coin relevant because the banks just can't adopt or innovate on new technology just rent from someone. >> So I like that I like the picks and shovels play. You know it's just so competitive at the application layer. >> Yeah >> I I I agree. I think those are interesting areas to focus on in private markets. Now, the thing is it's hard to express a good view on that in public markets. >> Got it. Let's pivot. >> That's where deals have a role, right? That's where we talked about earlier like that's where deals have a role because you can, you know, you have these amazing businesses that are just stay private for longer. Look at Stripe now. I don't know what it's worth now, but it was 80 billion dollars of Once Upon a Time. >> Yeah. >> And that deprivives public market investors of access to attractive sources of return. >> 100%. Let's pivot to macro a little bit. So, the government's starting to open up again. Um, I don't know how long it's going to stay open, but but we looks like we have a it's back on. Um, how do you see what macro um inputs are are you really tracking? What are you looking for? What's important to you? >> Sure. The primary things I look at are number one is corporate earnings growth. >> Tell me the direction of corporate earnings growth. I'll tell you the direction of the stock market. So earnings growth is strong double digit year-over-year growth. Uh in Q2 we had 12% year-over-year earnings growth. Uh now it's like high single digits. Uh so that's robust. And the reason why that matters is that the marker of recessions are layoffs. >> Yeah. >> And corporates do not lay off if they have earnings. They need talent. >> Yeah. >> They need labor together with their capital to d create drive more earnings. So number one is earnings growth. Number two is the pattern of inflation. And in general we have a pattern of disinflation. It is kind of sticky here but it's not heading up. And the Fed is biased to cut. >> Yeah. >> Despite that backdrop and maybe tacitly accepting a higher level of inflation which is constructed for real assets. Real assets are things like stocks, homes, commodities as opposed to fiat assets such as debt where you'd rather be a borrower. So your debt gets inflated away. Uh so then I also look at the productivity growth. Productivity growth is is the only free lunch in economics. Productivity growth enables a company to grow earnings and pay more to their workers. And so that's the climate we have. So actually this is Goldilocks. This is Goldilocks economy. This is great. What the mismatch we have is that people don't perceive it as goldilocks, >> right? >> Which is ideal because >> that's right. That's right. If people see the world as Goldilocks, that means the assets are expensive. That's when you have the Time magazine cover of Goldilocks and everyone feels chummy and happy and the valuations are high and that's probably when you want to, you know, derisk a bit. So I think it's a very constructive environment that people have PTSD from one the April tariff war two government shutdown three there's still geopolitical risk around the war um around the world so there's you know that people have these tensions and it's manifesting in you know kind of the recent election outcomes uh so that's that's why asset prices don't reflect that but that also creates the opportunity a lot of people are concerned erned about recession. >> Yeah, >> I mean it comes up so often when we talk to our clients and others which which is actually another contrarian signal for me. The sentiment is too bearish and a lot of people are off sides in terms of positioning. Meaning if you look at long short managers and you look at their exposure to US equities versus their historical trailing exposure, they're well below their medians. So what that means is when markets rally they are forced to performance chase into that. So they will buy dips they will buy dips to increase their their net exposure. >> So so you're risk on then generally but you should still seem a little bit um what's the word? Um you don't seem to be full throttle risk on. You seem to be very careful >> I would say. So the resolution so on beta and risk on. Yes. >> Yeah. The resolution to that tension you noted is positioning under that. It's the asset allocation within that risk on environment. So I think shifting positioning from what's worked from the April rally to October is a good idea. >> High beta animal spirits I would start to reduce that and start to shift towards opposite side of the pendulum. So that's the kind of reconciliation of this. >> Yeah. What I'm what I'm hearing is hardcore focus on fundamentals like like get back to fundamentals. >> Yeah. Real business with earnings growth with decent valuations, growth at a reasonable price that can compound and grow. >> Uh that includes technology stocks that are not insanely overpriced. >> I I still think Meta is great. I think other names in the semiconductor stack are are fine too. Data centers got a bit of a hangover because yeah, it is attached to that high beta, but fundamentally still good. >> Uh healthc care is great too. like the worst of this of the cutting Medicare advantage is behind us. >> Uh you saw this aging demographics. You have a baby boomer economy. The demand for services and healthcare is only increasing. >> Yeah. >> Uh and you've got the government is your customer there. Uh that's a creditw worthy customer with growing spend. That's a great category. >> Financials are great. Uh defense tech is also interesting in maybe especially in private markets actually. Anderil is too expensive, but there are other companies maybe like Shield AI that are doing full FSD for drones. >> Yeah. >> Right. Autonomous drone flight. You know, you and I were at this Caner Fitzgerald conference yesterday, the under secretary of state, uh, and Ted Cruz, I believe, rightly pointed out that having 12 fielded carrier battle groups makes them ripe targets. And maybe day one of a war with China. Yeah. And I you you served our forces so you have a better insight on society. But look, I I believe it makes sense like better to have smaller, cheaper, faster drone technology. So I like that on private markets. I think they're really good >> uh defense tech plays to to focus on. >> I I couldn't agree more on the defense defense side. Um having >> like honestly if if crypto has taught us anything, it's decentralization that really drives resiliency and scale. if you do it right. I think that's the trend that we're seeing across the armed services like Marine Corps is doing a distributed type approach to uh to warfare going forward. It's just it's it's all kind of intertwined in my mind. It's really interesting stuff. >> Awesome. Agreed. >> So So you talked about some of the folks some of the companies you're excited about. You mentioned meta meta a bunch. Um are there what's the most underowned asset? You know, if we carve out meta, you talked about how excited you are about it. Um asset or vertical? >> Uh yeah, I'll share a screen real quick here. here. And by the way, I mean, I I just call that as example. You know, we have like 50 different positions here, but I just call that I think within Maxim, it's like the cheapest one out there. >> Uh but like you know, here here are high level investment themes. I'm sharing on a screen for those that are watching. >> Uh but you know, it's the nuclear renaissance. The world needs more nuclear energy. Needs all of the above energy, but nuclear is a big part of that. >> Aging on longevity is a big part of this, too. We have aging demographics all across the world, including here in the US. They need services. They need nursing. Uh they need uh care. U digital fintech. We talked about the rise of AI. Defense tech. We spoke a bit about >> the data center and energy infrastructure build out. You know, there's a data center. Yeah. >> Not too far from SF that's got capacity, but they've got no energy. Just sitting there idle. >> I think mortgage refinance is a is a very interesting theme now. We've got >> three years of higher for longer rates. I believe rates are coming down. You've got the privatization of Fanny and Freddy. >> Yeah. >> The reduction or elimination of the so-called G G fee uh could cause a mortgage refinance boom which is great for consumers and certain mortgage refinance names will do well. I think biotech is extremely hard category but there select areas within biotech especially those areas linked to oncology. Uh I think those areas can do well. Uh biotech's generally been a go nowhere category for three years. I think uh a lot of the excess have been kind of washed out. And uh this is a big one for us like the baby boomer economy. I don't think people have really kind of focused in on this. But if you look at restaurants, you look at travel and leisure, the the effect of healthcare, elective health, there are a lot of sub themes in this baby boomer economy. Cruise lines, you know, we have a we just built a 5% position in Norwegian cruise lines one or two days ago, actually. >> You know, they've got backlogs. you you have they have a backlog that means they've got future revenue in hand double digit earnings growth and you're buying at a forward valuation of nine times. Uh there's also this call it the DGEN economy, right? The the rise of names like uh Robin Hood and sports betting. Um there's quite a few names in there. I think you got to pick those spots really well. Obviously, Coinbase is part of this, but a lot of those names have rallied and are expensive right now. So, I think timing this is is tricky, but you know, there's a there's a big market of these DIY investors that >> yeah, >> are taking investing in their own hands. uh and you're seeing turnover increase. So one of the ways I express that is through Virtue. So Veru is >> the only publicly traded market maker and they're indexed to the launch of and growth of these ETFs. >> So you got the 3x bull bear 5x bull bear ETF on any other theme under the sun. >> What's the picks and shovels expression of that? It's a name like Veru. Uh the market makers are providing liquidity. You know, I like a name like that. And it's also it they benefit during periods of higher volatility. So high singledigit Ford PE. I mean it's with double digit earnings growth, you know. So I like those kinds of themes. And those are some of the ideas that we're investing against. >> Started by West Point Grat I'll add. >> Um on the deep end economy, how do you play prediction markets? >> I mean it looks like everybody wants Yeah. >> Yeah. You're right. I mean like we both I think we were at the conference where we saw the poly market CEO talk about this, you know. I mean I think and private markets is is really how you do it. But you got to look at the valuation of this. Everyone knows Poly Market now. >> Yeah. >> There's nothing non-conensus around Poly Market. It's definitely heavily shopped and efficiently priced. So, uh, you have to have a bet that they'll have continued product innovation growth that will get additional traction. Um, or that it'll be wellreceived in public markets, which it probably will be just because it's poly market and it's a consumer brand with a retail following, including amongst DGEN traders. That's kind of the recipe by the way, right? There's a reason why Robin Hood, Tesla, Palunteer, and SoFi have these stratospheric valuations. Four out of five of them are consumer brands and it's this rewrite own economy where shareholders are consumers, consumers are shareholders. >> Yeah. >> And they just bid up valuations on this thing. Poly market has those attributes. >> Yeah. >> But it's not a fundamental underwrite. It is a >> repricing underwrite which isn't necessarily bad. It is what it is, right? >> Like it probably does rerate, but I haven't dug into the earnings on this thing. So I I haven't I haven't focused it. But yeah, that that's like a private markets bet. Yeah. >> On it. In public markets, there's a stock that uh we are I call it stalking, meaning it's on our watch list and we're just waiting for a good entry. So, that means everyone listening this might front run me, which would be unfortunate. [laughter] Please don't do that. Uh or let me know when you do. But the ticker is Genie uh Genius Sports Limited. I'll see if I can share my screen on this real quick here. But you can see how it seems to be setting up right now. It's given back quite a bit, which I like. Uh so um but you can see this is a business that um you know overall has a has a good trend. This business uh they focus on sports betting. It's got a 26 times Ford PE uh and strong long-term trend and it's given back recently along with these other kind of degen economy high beta stocks. So, I think sometime in the next couple of uh weeks, that may be an example of a way to express on this. It's a lot cheaper than Robin Hood and probably a lot cheaper than Polyark. I I don't own it right now. I'm just giving you an example of how you might express if you run on on DJ Economy. >> I imagine uh $2,000 stim checks may help uh boost that. >> Oh, yeah. If that if that goes through, then that you know, we'll see. You know, that I mean, you'll get a for sure you'll get some lift on that. >> Yeah, for sure. All right. So, we talked about um underowned. What about the most overowned assets? Anything that you are uh you think is not worth the time? >> Uh great great question. Um over you know I would say like the positioning is still dower and the sentiment is dower. >> So what's overowned is probably like T bills >> sovereign debt is overowned. You know you've got T bill yields at like call it 4% and an inflation backdrop of 3%. I don't know why people own bonds in the current environment. You can own equities that uh like royalty pharmaceutical companies. I'll show you this company that we do own and they it's called Royalty Pharma and uh this company has a a very attractive free cash flow yield and they're making revenue through royalties royalty streams. So that you know this is a company take our RPRX the free cash to market cap yield is 14%. Uh it's gone up about 58% in the last one year by the way. So you're getting valuation you're getting momentum and you're getting a quality business. I'm not saying the entry is great where we stand by the way. I'm just giving you an example of why I wouldn't want to own sovereign debt. Uh because there are other assets in public markets that uh are linked to yield and are real assets. So they repric in response to in inflation. So the most overrown thing is is sovereign debt uh and maybe things like Palunteer stock, I guess, although I've been saying that for a while, so I don't know. [clears throat] >> Interesting. [laughter] So you're long defense but short Palunteer. Get it? Well, I'm not sure. I'm just saying like 250 times PE ratio where all the insiders have sold out. Like Alex Karp hit like sell. >> Uh Peter Teal hit sell, Joe Lansdale hit sell. >> And they're very good at the market. I I I have a tremendous amount of respect for Alex Karp, by the way. Personally, >> I love his message. I love his defense of Western civilization and American values. And >> like I'm an Alex Karp fanboy, just to be clear. But there's a difference between investing and like the message and all this and you know if you look at you know you had a lot of these high beta stocks for call like a year and a half ago is remember cava uh like sweet green chip Mexican grill they had these massive double digit rallies. I'll I'll pull up a few of those charts for those that are watching on screen here. I remember in May of last year I noted that it was a terrible time to buy restaurant stocks. Um the theme was just overbought. Yeah, that's that's been correcting. That's been correcting. So, at some point that's going to bottom. Um, this is Chipotle. This one hell of a rally from uh the end of the bare market in 2022. It's almost fully retraced, right? Almost fully retraced. And the valuations are becoming more reasonable now, right? So, Cava, you could tell a similar story. was a massive bull market where this thing was the poster child uh massive rally and given back 60% of the gains, right? Still in a bare market though, right? Uh but uh overall though, like at the big picture level, I think it's high beta stocks that are overowned. >> So, it's kind of like time to do the opposite. uh you know quality compounders, free cash flow, >> got it, >> earnings growth. >> Uh let's pivot to crypto real quick. Uh are there particular verticals that that that you think are particularly exciting or not exciting? >> So in in digital assets like I I think the you know on tokenization thesis incredibly excited about this been writing about this. Um >> but but you can only access that really via private markets, right? Or or is it no? Oh, is it more of a black rockck play because they're embracing it or yeah, in private markets it's it's tough also, right? like these are all expensive names and this is this is what you do as a VC of course >> and I'm I'm valuation sensitive so I'm like I'm waiting for the good deals but you know I I think there are um I I I'm focused on as a theme you know we found we did an investment in a private company called News Data we just closed on that and uh uh this is a company that does uh it's like the next Crusoe I call it so for those that don't know Crusoe Crusoe um takes off energy from natural gas and they are powering open AAI. So they've got a 10 to12 billion valuation on a big commercial agreement from open AI. Uh and they started and it's an off-grid Bitcoin miner. So they were taking excess NAT gas in the Peran Basin. >> They'd go to these oil and gas drillers and say, "Hey, look, you got this Nat Gas and there's no egress. There's no mid-stream pipeline infrastructure. It's too remote." They said, "Let's let's slap on a generator there." the same generators that Elon Musk is using to power his Memphis data center and they'd mine Bitcoin. >> So, we made an investment in Alberta, Canada. It's called New West Data. Uh, great valuation, great team. You know, the former CEO of Hut 8 is on the board, former partners from Golden Tree, Deutsche Bank. And, uh, we're getting a 35% plus or minus free cash flow yield through the mining and sale of Bitcoin and the selling of oil. Because in Canada, it's illegal to flare natural gas beyond certain limits. Far more restrictive than the US >> and there's a lack of na natural gas midstream pipeline egress due to the Trudeau admin for 10 years. They neglected the capex that set up our opportunity where our partners are buying these oil and gas wells at two times free cash flow. Two times free cash flow. This is bananas. >> Yeah. >> In public markets that asset trades at five and a half to six times. Two times free cash flow. Then they put on the January, they mine it, they sell the Bitcoin at the month end. Uh, and then, uh, they sell the oil. And so now, uh, we're exploring how to tokenize that. Can I tokenize that onchain? Can I get long-term capital gains? Can I send a senior bond off of that to a stable coin issuer to increase our returns? >> So, I'm excited about that, that kind of opportunity, whether you're originating a quality asset that can go on chain. Um, >> so R just pick it well though in crypto. Go ahead. Yeah. >> No, like so when you're t you talked to us earlier how you're using tokenization to effectively structure products for tax efficiency. You're doing that yourself or are you working with somebody to token? >> Yeah. Yeah. Because no one's doing it, so we'll get after it. [laughter] >> We're waiting for someone to do it. And I [snorts] I I'm not seeing you know I I was at a there was a there's a conference last week in New York here. as a panel and two of the people talking about AI agents like the hype is so ahead of the substance. The thing about digital assets as as you can appreciate there are incredibly brilliant technologists that know how to engineer and build technology. >> Absolutely. >> And they have a good view of the future. Yeah. AI agents will have an important role. Okay, great. But the the near-term commercial value from that is limited or close to zero. That's that's just the reality of it. The reality of it is that you know these the existing c existing technology platforms have the reach the distribution they'll be the primary beneficiary of this you know I I think folks in a commercial value near term where do I see that tokenizing of assets to create tax efficiency you know the other areas of course uh too I I think very soon by very soon I think maybe within a couple months we will see oversold the digital asset treasury companies that have significant discount to NAVs and there'll be moves to make there. Uh I my sense is we might still be too early though and >> it's a it's a ch it is a stock pickers game there. You know you've got treasury companies that in their offering docks are expressly prohibited from for example selling their token to go buy back shares and close the gap. There's no structural mechanism for them to close the gap but they're going to have issues. Uh so yeah, I think I think there's a lot of promise around digital assets for sure, but I think hype is ahead of reality where we stand today. Uh there are now 580 VC funds. I talked to a friend, he's launching a VC fund. I guess it's 581 now. [laughter] So it's it's challenging, right? Like uh valuation is the enemy of returns. You know, 2013, 2014 vintages of venture were amazing because the market for venture capital was uh star, right? You could get an Uber at a $4 million valuation. Now you're seeing >> preede valuation preede >> preede valuations at $40 million. >> Yeah. >> So I I'm not excited about those opportunity. I'd wait for a d-risk later stage priced correctly valuation where I got a path to liquidity and focus on that. That's what I'm looking at and say defense tech. >> Got it. Well, I know we're uh I could talk to you all day and uh I've already learned a ton before before we uh cut it off. Just is there anything I I should have asked you that I didn't? >> No, I think you covered a lot of ground. Look, I'd say, you know, the future goes to founders, the future goes to innovation. Be optimistic. Fight the negativity. You know, this is a Goldilocks economy. We've got a great deregulatory backdrop. Uh, you know, stable coins are decentralizing the US dollar to a common standard, which benefits the United States. Productivity growth is great. >> So, be optimistic. You know, invest in the future. Uh, if you're young, now's a time to take risk. Be a founder. Be a part of catalyzing uh that positive change. It's an extraordinary time to be alive. make sure you're positioned against these trends and take advantage of that. >> I love it. Incredible advice and I think you're right. It's a golden age and I hope a lot of people jump into the ring. Got to be in the arena. >> Uh Rahm, awesome. Awesome to speak with you. Um love every time you open your mouth and learn something. Always a pleasure and hope we get you back on soon, man. Thank you. >> Same to you. Thank you. >> How people connect with you? >> Oh, you can follow me on Twitter, Ram Alawalia. R A M A H L U W A L I A or you can go to our website Lummit Wealth. We have a newsletter we drop every Sunday at 11 a.m. Eastern and it on topics including macro trends in AI. Uh we go through earnings analysis. I write it myself uh with our team. It's very high quality. And we're also on Tik Tok and Meta. If you look up Lumida wealth uh luma, you can find us there too. So very active on social. >> Awesome. Great to see you, sir. Perfect. Thanks, Chris. >> Well, till next time. Cheers. >> Byebye. >> Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.com/free. With markets hitting all-time highs, now is a great time to stress test your strategy and be prepared for what comes next. Thank you all for watching. We'll see you again next time.