Welcome to the Lumida Ledger: your cross-asset guiding light for macro, crypto and regulatory updates.

We had lunch with former SEC Chair Arthur Levitt and ex. Knight Capital CEO Kenny Pasternak. We discussed crypto, real estate, and the barbell approach to investing. Arthur remains constructive on digital assets in the US, predicting they’ll be part of the American financial scene “sooner than later.”

Kenny Pasternak, former CEO of Knight Capital Group, is one of the most legendary investors of all time. He deserves a chapter in Jack Schwager’s “Market Wizards”. Kenny made his first million at the age of 21 flipping used cars. He bought distressed assets during the Savings & Loan crisis from the RTC. Kenny was the first maker maker to introduce algorithmic market making at the dawn of the ECN era. He shorted banks in ‘08. Then he went long distressed real estate in 2011.

What’s he doing now? Kenny is investing in dislocated commercial real estate and Lumida client’s have access to his fund. We believe CRE is a good inflation hedge that generates cashflow and is highly tax efficient. In our humble opinion, it’s an ideal complement to Digital Assets.

Reach out to us to learn more.

Insights of the Week

• Digital Assets

  • Senator Lummis suggests crypto needs more use cases

    • Senator Lummis says in this clip “if there’s anything I can ask, help us make the use case”

    • Now is the time for crypto to deliver a single unifying message. Crypto is kicked like a pinata and labeled an “unregulated casino”. We believe a positive vision for crypto is in linking crypto to real world impact. 

    • We believe tokenization is the answer for Senator Lummis. The banks have too much CRE debt and the MBS market doesn’t have enough capital to finance it. Putting loans & securities on-chain is a win-win for the banking system and crypto investors.

    • Tokenization levels the playing field for smaller banks that do not have structured products sales teams like JP Morgan. Linking crypto as a partial solution for the banking sector’s woes is a powerful story.

  • Coinbase Highlights:

    This thread contains a detailed breakdown

    

    • Coinbase reported an 18% revenue beat 

    • Product Strategy Shift: There was a notable emphasis on “updating the financial system” to support emerging markets and reducing payment costs, embracing crypto's original, noble purpose.

    • This is consistent with our recommendation: link crypto to real-world use-cases that benefit ordinary Americans.

    • Coinbase launches Crypto345, a grassroots campaign for policy change, with Brian Armstrong spending more time in DC.

  • Will DCG Make its $630 MM in Debt Payments this Week?

    • This week we joined the Unchained Podcast with Laura Shin to discusses default risk of DCG who owes Genesis $630 million next week

    • Debt payments are due this Tue, Wed, and Thu

    • Adding to pressures, FTX is seeking to claw back $3.9 billion of cash and crypto from Genesis. We discuss this and more in the podcast.

    • Ram also addressed follow-up questions in two short twitter videos here and here

• ETH is deflationary and the staking machine is working

  • When the gas fees are high, deflation accelerates

• NY Attorney General is proposing a bill called Crypto Regulation, Protection, Transparency and Oversight Act, or CRPTO, which expands the NY AG’s authority to regulate Crypto and imposes customer protection obligations on Crypto

  • The act would require exchanges to undergo annual audits, publish financials, and prevent them from lending out customer fund

  • Crypto exchanges would not be allowed to keep custody of customers’ funds, and crypto brokers would not be allowed to lend out or borrow customers' funds, prevent self-dealing, and separate exchange from custody functions

  • On the surface, the bill seems reasonable. However, Drew Hinkes has an excellent breakdown thread showing how the bill creates obligations exchanges and auditors are not ready for

• The Future of Digital Assets is Bright

  • Despite current challenges, the long-term future of digital assets is bright, as highlighted in our superthread on innovation, regulatory updates and new products.

• Banking

  • First Republic Seizure & Sale to JPMorgan

    • First Republic failed, was seized the FDIC, and sold to JPMorgan in the 2nd largest bank U.S. bank failure

    • Ram predicted the sale to JPM in Mid-March in a Business Insider interview. See quote in Business Insider. Ram explains in this video why the deal is a ‘match made in heaven’

    • JPMorgan’s focus now? Pitching wealth advisors on staying.

  • What the Banking Crisis Means for Crypto 

    • Lumida’s Co-Founder Justin Guilder joined Real Vision’s Crypto Daily briefing to discuss the banking system.

      • The topics include the loss of trust in centralized institutions, the importance of decentralization, and the role of banks in credit creation

• Macro

  • Unemployment rate dropped to 3.4% - matching the lows seen in 1969

    • Wages grew 4.4% YOY, slightly higher than March

    • This supports our view that rates will stay higher for longer

  • Fed raises rates by 25 bps in May

    • Despite whispers of a Fed pivot, Powell implies that the Fed may not be done with rate increases.

      • Powell did not commit to a pause

      • He merely stated that the Fed is “no longer saying we anticipate“ rate increases

    • The market expects a 25 bps rate cut in September, and 40% chance of rate cut in July

  • FAANG to MAANGO

    • Within 24 hours of the MAANGO tweet NVIDIA’s market cap surged $30B

    • Apple beats earnings. Apple revenue declined for a consecutive quarter.

      • We believe the growth stocks we have come to love over the last cycle are starting to transition to value stocks as their growth opportunities diminish.

    • Similarly, we see Netflix as past the ‘S-Curve’ and NVIDIA as on a growth trajectory

    • Out with FAANG, and in with MAANGO (Microsoft, Apple, Amazon, NVIDIA, Google, and OpenAI)

We also note the irony that Apple is buying $70 Bn of its own stock. That’s more than enough to re-cap all the recent bank failures and have plenty of dry powder. Antiquated regulations prevent non-banks from owning controlling interests in banks.

Chart of the Week

Excess savings are gradually melting. The impact varies across consumer group. The “Louis Vuitton” end of the market is doing fine. The lower-end of the market is closer to burning off savings.

This cycle is unique because stimulus took place before the recession. That’s why the economy is resilient despite the fastest pace of rate increases since 1981.

When excess savings burns off, you should expect to see economic weakness from the middle class. Our guess is the 2H.

Meme of the Week

Upcoming Events

• Bitcoin Miami: May 18-20th

  • Ram will be on a panel about Investing

• SALT iConnections New York May 18-20th

Quote of the Week

"The most important quality for an investor is temperament, not intellect." - Warren Buffett

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