BETTER BACKSTORY

Below is my write up on $BETR in my public telegram group, and that same datw overlayed on the chart.

I had the CEO of Better on the @LumidaWealth Non-Consensus Investing podcast back in December when everyone hated the stock.

In the video below, I share more how we found Better…

Thank you @ericjackson for lifting this to the stratosphere.

Do I believe Better has more upside potential?

Yes.

1) Momentum creates its own demand.

2) Better has a chance now, like $HOOD, to tap into Community X Capital dynamics and turn shareholders into customers.

If they can execute that transition, then CAC drops.

3) There are few pureplay Mortgage players out there.

Rocket is one — and they have a much higher valuation…

Will close by saying - my approach with ideas is ‘quiet’. We own a dozens of stocks across a dozen theme.

Do the deep work, be patient, and price often follows…

$BETR
2/ More on how we analyzed Better

Small cap value, rates lowering, mortg refi, hated asset

Tell me more please.

https://twitter.com/ramahluwalia/status/1970251823127609645

THE STATE OF PLAY

Coinbase is entering equities trading.

RobinHood wants to get from crypto to alts.

Schwab is confused and feels disruption encroaching.

Fidelity is getting into bitcoin lending.

Kraken bot Ninja Trader and is eyeing a differentiated value prop.

Morgan Stanley is wondering why they bought e-Trade.

Competitive intensity is increasing.

Fair to say we are close to peak multiples as we see these heavy weight champs start to do damage to each other.

There is still blue ocean space here… a digitally native bank with deposits, lending, payments and a Fed Master account will be the next $100 Bn company.

It does not exist… yet…

$COIN $HOOD $MS $SCHW 2/ In 2022, various exchanges were blowing up in the background (FTC, Celsius, Genesis, etc) for pretending to act like a bank and rehypothecate

I look for mispricings.

Benicio del Toro is a mispriced actor.

Christopher Nolan was mispriced after he made Memento (back in 2000).

The Audi A6 is mispriced relative to luxury brands.

CoreWeave was mispriced at 15x PE in private markets.

The ETHE / GBTC trade was mispriced at a 50% discount to NAV.

A 2.5% 30 year fixed rate mortgage in Covid was mispriced.

Uranium was mispriced when we interviewed the CEO of $ASPI last year.

(Ditto $VIRT and $BETR both interviewer on Lumida Non-Consensus Podcast.)

Solana was mispriced when @LumidaWealth interviewed @KyleSamani

Hot sauna and cold dips are mispriced.
JP Morgan and UBS were mispriced during the 2023 banking crisis.

I believe the long-term benefits of having a family and memories to cherish is mispriced (eg, under-rated).

Physics and Philosophy majors are
mispriced.

Rocket Lab was mispriced when Elon was ex-communicated from Trump’s orbit.

Capitalism & entrepreneurship is mispriced.

Certain business models are mispriced.

Carl Jung and Joseph Campbell are mispriced philosophers.

Stand up comedy is mispriced.

I enjoy recruiting talent on Telegram or Discord because their intensity is mispriced.

Consumer discretionary and semiconductors like $NCLH and $TSM were mispriced after tariffmageddon.

People often classify strategies as momentum (trend following) or value (mean reversion).

There is another bucket.

I love mispricings. There are a lot of things that are overpriced.

English Majors. France.

Legacy brands in decline.

Don’t get me started.

THE BERKSHIRE CORRECTION

Berkshire Hathaway topped out the day Buffett announced his retirement.

It’s dropped non stop since then.

Look, it doesn’t make sense to pay 22x forward earnings on a portfolio loaded with T-Bills.

Here’s the opportunity though.

It’s a nice one, and no one has connected the dots here.

The decline of Berkshire Hathaway’s stock has dragged down the prices of all sorts of insurance companies.

Berkshire is the largest insurance company out there.

The others are dragging down due to correlation effects.

But, other insurance companies are growing earnings.

Their stock price decline has nothing to do with earnings expectations.

They are just getting cheaper because Berkshire is getting cheaper.

I see insurance companies with sub-10X PE and double digit EPS growth.

Plenty of them.

The way to approach this:

Wait for Berkshire to base and stop sliding.

Then load up on the other insurance companies.

$BRKB $BRKA $PGR $ALL $KBWP 2/ AI tools don’t yet have the ability to reason this way. Partly b/c this is a straightforward concept - but the CF- curriculum and wall street research doesn’t look at asset prices this way.

We’re training to look for anomalies like this.lumidaai.com

INVESTOR TIP: Free Cashflow Yield vs. ROE

ROE is a favorite of Warren Buffett.

ROE (and its realted cousing ROIC) is a great metric to look for in an investment.

These metrics are the cornerstones of all true quality compounders.

A quality compounder can 'invest in itself' -- utilizes its own free cashflow into invest in NPV+ opportunities and generate future returns.

But, it's not the only metric.

Free Cashflow Yield is another one.

High Free Cashflow yield means:

(1) You can buy back your stock
(2) PE firms can buy your stock with your own FCF
(3) Outside investors see FCF Yield and know that both (1) and (2) are possible so they step in and buy.

Also, there are some gaps with ROE.

For example, a business that had a capex splurge may have negative ROE due to the marking down of asset acquired at peak valuations.

But, that's a problem for legacy shareholders. After equity prices have dropped, the negative ROE is old news.

The assets are still there generating cashflow.

The negative ROE is better off ignored now (provided the return on those assets is higher than the cost of financing them).

The points is -- high FCF Yield is a sign that there is value even if ROE is negative.

FCF Yield may uncover 'mean reversion' opportunities, as often high ROE businesses are pricey

(Mag 4 stocks are high ROE for example.)

ROE is not the end all be all.

You can profit from the the mistakes of others by focusing on high free cashflow yield after asset prices have corrected.

Sometimes you can find high FCF Yield AND high ROE.

That's a beautiful thing provided those metrics aren't artifically high due to high levels of debt.

An example of that in the energy space would be Riley Exploration $REPX.

It has a 20% ROE and a 20%+ Free Cashflow yield.

tl;dr there is no single decisive metric or formula. 2/ Take a look at this chart of $REPX for example.

Looks like it hasn't gone anywhere since 2021 right?

But... look under the hood at FCF Yield

TAIWAN, TRUMP, AND LEFT RISING TAIL RISK

Trump recently said he wouldn’t use military force if China invaded Taiwan.

He’d respond with tariffs.

But tariffs on Chinese goods are already at 145%.

If that’s the full response, China may see limited downside to acting. 2/ Deterrence depends on the threat of escalation.

If China believes that Trump will avoid military action and that tariffs are already in place.

The potential consequences of invading Taiwan look lower than before.

TARIFF POLICY: FAFO

There a many conflicting statements in the tariff policy.

It also means @SecScottBessent wasn't forceful enough with @howardlutnick.

None of this inspires market confidence, and at the very least we should expect, sadly, a heightened probability of a bear market.

A thread. 1/ Trump's stated goal is to bring back manufacturing to the United States via Tariffs.

However, he also states tariffs are 'reciprocal' and will drop if other countries drop theirs.

But, how does that bring back manufacturing then?

1/ COREWAVE S1 DROPPED

CoreWeave is backed by Blackstone, Magnetar and Nvidia

(@LumidaWealth has a poker chip is somewhere on the cap table too :)

First, revenue surged 800% in 2024...

https://twitter.com/ramahluwalia/status/1859397509400899590

2/ Cost of Revenue as demand surges

Cost of Revenue relative to Revenue is 25% now and continues to decline

IT’s OVER > WE’RE SO BACK

We are back to 100% net long and bought $NVDA this morning

The Peak Sentiment events of last week are in the rear view mirror

I expect $MSFT and $META earnings to reiterate their capex spend on Nvidia

The forward PE on Nvidia will drop significantly after Nvidia reports

Thats the headline I am front running now

We have a typical relief bounce today

We also snapped up a number of names in the Datcenter theme that went on sale

This Monday we saw record margin debt combined with 3x levered long Nvidia and Semiconductors get wiped out

This was a margin call correction. A technical correction, not a fundamentals correction

That created a panic and a washout…

lumidaetf.com The VCs and Podcasts are talking about DeepSeek 😂

Buy time :)

Check out this lil tweet from last Friday

the warning signals were everywhere

👇

https://twitter.com/ramahluwalia/status/1883287245521907788

What happened after the Fed did ‘adjustment cuts’ in July 2019?

(after caving to market pressure)

Markets largely went parabolic in q4 and finished their rally at year-end with a 29% gain

I see a scenario like this as quite possible

Then in 2020, markets drifted steadily lower until Covid hit accelerating a bottoming process

Mr Market caused the Fed to Flinch Seen this way, the Fed cuts pull forward 2025 returns

and we will get an IPO window to open

Investor Tip:

You have heard about Bulls vs Bears fighting.

That’s not what happens.

The truth is cold and dark.

*Bulls become bears, and bears become bulls*

That person in the foxhole next to you?

They can flip to the other team at anytime.

And, the more crowded your team is… well that’s the period of peak vulnerability.

The solitary individual on the other side, by definition, is selling a top, or like Buffett in October 2008 is buying a bottom.

You can only lose ground when you are fully priced and Consensus.

Another way to say all of this: you can’t under-estimate psychology.

‘Men, the enemy are in front of us, behind us, and to the left and right. They aren’t getting away from us this time’.

- Chesty Puller 2/ Have I told you my March 2009 story?

I was at an event in NYC.

Everyone by that point was a certified PHD macroeconomist, just like everyone became an expert at Covid and carry trades 😂

1/ Digital Assets & Bitcoin: Where Are We Now?

I believe we are mid-cycle on Digital Assets corresponding to the Genesis low on 11/16/2022 and the halving.

Bitcoin peaked on the day this tweet when 2,500 memcoins on Solana were created.

Here's the chart:

https://twitter.com/ramahluwalia/status/1767931489985970502

2/ Solana has been the fastest horse in the race delivering momentum.

Crypto is a momentum asset. Relative strength matters.

Solana topped on the day of this excellent point by @joemccann.

(Markets are funny like that. Consensus.)

https://x.com/joemccann/status/1769497076667404528

I was wrong.

@CathieDWood is right.

Nvidia is a bubble, like Cisco.

The Apple Vision Pro will be a smashing success.

A recession is coming. It will start with a ‘credit event’

Inflation and interest rates will be lower for shorter.

60/40 is the future. Always was…

Trust whatever Goldman Sachs, Morgan Stanley, and JP Morgan call research.

Especially their conviction buys.

Tesla will be the most valuable company globally and dominate the EV market.

Cybersecurity investment is a fad.

Crypto is a scam.

The SEC has provided crystal clear regulations, firms should just go in and register.

SoFi will transform banking. Credit losses will be ‘contained’ because management said so.

X offers massive alpha. Just buy Snowflake and Palantir.

SoFi007girl is a real person and has genuine feelings for abstract corporate entities.

Stay single. You can get an AI girlfriend or boyfriend, and build a family in the metaverse.

Centralized power works. We just need enlightened leaders that are incorruptible and know better.

Tech firms should not be permitted to compete with JP Morgan and other big banks.

They can’t built banking apps or serve tens of millions of people without a branch network.

The future is in 3D printing and seed oil based meats.

The United States isn’t growing any more. Invest in Europe.

China will eclipse the United States. Robots will replace China’s shrinking population.

The SEC under Chair Gensler is neither capricious nor arbitrary.

There is nothing to learn from Buffett except his dietary choices: diet coke & burgers.

Investing in pre-revenue AI startups with $1 Bn+ valuations is a good idea.

The BRICs will create a currency that replaces the USD.

The peak for humanity was when Prince released ‘We’re going to party like its 1999’

We don’t need more nuclear energy. We need to reduce our energy demands.

Modern Monetary Theory (MMT) represents our best science.

We do not live in a simulation.

Stay Consensus. @CathieDWood 2/ Governments bonds are a store of value.

You can park your hard earned wealth in bonds and preserve your purchasing power.

1/ Genesis Plan:

To Vote Yes, or Not, That is the Question

Here's my take on the Genesis Bankrtuptcy plan...

🧵 2/ Disclosure: I am not a lawyer, and I am not your advisor.

I am not a party to the dispute and have no commercial or customer relationship with Genesis, Gemini, or DCG.

You should retain legal counsel and an advisor to work thru this complex plan.

The @lumidawealth Top Ten List

While everyone was busy making '2024 Surprise Lists', we were feverishly researching and implementing ideas.

Goldman has an allocation to Apple and Tesla in their model portfolio. Apple is a 'Conviction Buy'

I've been consistent that this is a bad idea - and at the recent Apple highs said this is the time to get out.

Take a look at Apple and Tesla now.

I am long Google and Meta and short Apple and Tesla as part of my portfolio hedge.

Meanwhile, Google *closed up* yesterday.

Search for my post "LTEG" where I cycle thru the Mag 7 names one-by-one. Or better yet, subscribe to the @LumidaWealth newsletter.

1. Tech is prone for correction and underweight.

Everyone went bullish, we went to the other side of the boat.

Check.

2. Buy energy, it's a hedge for tech. Check

3. Don't own bonds at 3.8% - rates headed up now. Check

4. SoFi is a short. Check.

5. Buy Hersheys. Check.

6. Overweight Google. Check.

7. Underweight Apple (or short it). Check.

8. Underweight Tsla (or short it). Check

9. Rotate into Ethereum. ETH outperformed BTC and SOL. Check.

10. Tidewater, Beyond Meat, Palantir, The Trade Desk all over-valued and headed down.

Check, Check, Check, Check.

11. Healthcare - buy Elevance. Check.

12. Nvidia will outperform ASML and AVGO (short term).

Nvidia was the best performing semincondcuctor yesterday.

Check.
2/ December 25th - "I do think tech stocks are overbought - market has 2 weeks left give or take"

https://x.com/ramahluwalia/status/1739481285746164093?s=20

Non-Consensus View:

The visit of China’s premier js a symbolic bending of the knee.

China is capitulating.

@balajis is not reading this correctly

Why? China is hurting.

- China’s currency is under pressure as capital leaves at the fastest rate in 7 years

- FDI is down to 1998 levels

- Exports are down significantly due to friend-shoring

- Semiconductor export controls are not yet throttling China…but they have come up to the line

- China’s Ali Baba and tech leadership cannot get their hands on advanced GPU chips

- China’s birth rate continues a decline that spells industrial mediocrity

Why visit California?

And meet a ‘Provincial Governor’?

California is the state whose IP is most at risk of corporate espionage.

And China needs US semiconductor designs.

What about US Bonds?

Sec’y Yellen has ‘intensified’ talks with her finance counterpart.

The US needs to sell bonds at better rates. The US can then also import from China.

The capital account and current account worked together beautifully for decades.

And Semiconductors?

China imports more semis than Oil.

And the US is controlling exports, but not killing GPU exports. That would be the next escalation - it’s a clear threat.

China is pouring more money into semiconductor startups than the US.

But the US and Taiwan have the technical leadership and edge… too little too late.

China and US Relations?

Visits don’t often happen without some news announcements - trade deals, understandings, or a rapprochement.

Engagement is constructive.

They are bargaining on American soil.

The China Premier is making Nixon’s trip to China many decades ago a complete circle.

The symbolism is thick and my have substance. 2/ China has youth unemployment of 20%.

It’s so bad they stopped reporting.

The bargain between China leadership & its public is fraying.

https://twitter.com/ramahluwalia/status/1678889762747297792

SoFi bulls miss a few points.

Let's cut to the heart of the matter - SoFi is a personal loan business.

It relies on capital markets for cashflow. That presents a structural flaw to the business model.

When a recession ultimately arrives, the losses will hit SoFi in 3 ways
🧵 2/ SoFi loses about ~$9 Bn in negative Cash Flow from Operations each year.

This is also why Adjusted Ebitda numbers are deceiving.

Investment legend Byron Wien passed away.

I never met him.

Still, after reading his pieces over many years I do feel a sadness for the loss of someone who was witty, provocative and non-consensus.

Read below his list of 20 life lessons.

Legend. pws.blackstone.com/education-insi… The hard way is always the right way. Never take shortcuts, except when driving home from the Hamptons. Shortcuts can be construed as sloppiness, a career killer.

1/ NY Attorney General vs. DCG @BarrySilbert:

FTX was worse than Madoff.

And, DCG was worse than Enron.

This thread will show how.

And why the NYAG's request will force a sale of Grayscale. 2/ The Enron fraud involved the use of off-balance sheet special purpose entities (SPEs) to hide debt and inflate profits.

Enron executives engaged in self-dealing transactions.

The NYAG alleges DCG did both of these...and more.

Time to Shame the IPO Underwriters:

We can add Birkenstock to the list of failed IPOs this season.

The stock opened at $41 per share after being priced at $46 per share.

The stock slipped 21% in the first week of trading.

That's the worst IPO performance in 2 years.

The CEO of LVMH had these words: "The reaction is more a reflection of the pricing than it is the quality of the stock".

Here's who the Lead Underwriters were:

Birkenstock: Goldman Sachs, JP Morgan, and Morgan Stanley

ARM: Goldman Sachs, JP Morgan, and Barclays

Instacart: Goldman Sachs, JP Morgan

Klaviyo: Goldman Sachs, Morgan Stanley, and Citigroup

There are obvious conflicts of interest when an investment bank raises capital, and at the same time sells those shares to its own wealth mangement clientele, and then writes a research report.

Remember that Morgan Stanley $400 price target on Tesla issued not too long ago?

Wake up folks.

https://twitter.com/ramahluwalia/status/1715386636232429851

Here's the Morgan Stanley report on Tesla.

Tesla's been heading to $200 rather than $400 since then.

https://x.com/ramahluwalia/status/1714817450015961337?s=20

Non-Consensus:

Why is it so fashionable to predict the decline of the US?

Hard disagree with @Noahpinion and @balajis

Let’s break it down by category.

1) Technology leadership: US dominates

2) Military: US dominates

3) Banking: US has 4 of the Top 10 banks.

China has 4 of the Top 10 banks.

>> This is the one source of vulnerability, but it’s the US prize to lose.

JP Morgan is now expanding to the UK…

Blackstone is in China…

>> True, China’s banks are ahead on cashless society

4) Demographics: Younger and wider base than China, Russia, Europe.

The US still ‘imports’ the best brains from China, Russia, and India.

5) Culture of Entrepreneurship: The US has multiple venture/angel ecosystems and the most advanced capital markets.

China meanwhile is silencing erstwhile heroes like Jack Ma.

Sergey Brin left Russia for the United States.

6) Capital Flows: Chinese millionaires and Russian oligarchs want to flee with their capital and secure their funds in American banks

7) China’s growth rate is faltering.

The constraint on US growth is not capital nor investment opportunity - it’s hungry for workers of all skill levels.

8) Advance Technical Education:

CalTech, MIT, Stanford, CMU, IAS

9) Biotechnology

90% of new IP originates in the United States. (The exceptions are Astra Zeneca and Novo Nordisk)

It’s not a competition.

Are there issues?

Plenty (fiscal imbalances, public education, immigration, student debt, digital asset policy, banking policy, credibility in institutions, etc).

BUT, the issues other countries face are far more severe.

The default in rival countries is censorship, corruption, and no exit.

*Any other country would gladly trade their position for the US*

Side Note: There is an ‘edge’ for small ‘city-states’: Singapore, Dubai and Finland

It’s easier practically to unify, govern, specialize and root out corruption.

https://twitter.com/noahpinion/status/1710748177731920369

China’s entrepreneurs are incredible.

They are insanely hungry. They sleep at work. They are smart. They are humble.

I have a lot of admiration and respect for Jack Ma.

And yet the CCP views Jack Ma as a threat to their power rather than a symbol of entrepreneurship.

Great countries rest on a foundation of markets, entrepreneurship, rule of law, innovation, and property rights.

There’s no close second to the United States.