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The H.E.A.T. Formula is a radically different way to look at investing your portfolio.

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H- Hedges, you should always have hedges and be agnostic as to being long or short. Bonds are not a hedge

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E-Edges, you should always look for edges. Preferably these are edges with some sort of psychological underpinning, structural edges, or some sort of barrier to entry.

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A-Asymmetric. Everything you do, be it trades or your overall portfolio, should be designed so that heads you win a lot, tails you lose a little.

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T-Themes. You should always be invested in the top themes. Most everything else is just noise.

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We will continue to build out our resources here to help. In the meantime we have a model Hedges and Edges ETF portfolio.

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One of my favorite themes going forward is the Fed is clueless theme. Thank you Governor Waller for confirming my thesis.

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Fed Governor Waller says he is ‘leaning toward’ a December rate cut, but worries about inflation-CNBC.com

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Off my watchlist today I like ASML.....

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BIDU....

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NVDA....

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On the short side I like MNDY....

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NU......

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OWL....

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Market looks like it just wants to bleed higher, however, read below for my thoughts on the VIX, I think VIX calls here wouldn't be a bad idea just in case.

Hedges

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This move by the stock market’s ‘fear gauge’ is historically bullish for the S&P 500-MarketWatch

The last time the VIX dropped back below 14 after a push above 20, in the fall of 2023, the S&P 500 went on to score a 10% gain over the next three months, Christians said. And history shows that when the VIX has cycled above 20 and then dropped back below 14, “stocks have scored excellent returns and consistency over the medium- and long-term horizons,” he wrote.

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Be careful here, VIX is near the lows, which we expected post election, but our work shows that a 4 period RSI below 30, or 20, is bullish for the VIX short term. Williams % R is another measure we use, not as predictive for VIX as RSI but does confirm it is oversold. I would actually be looking to buy VIX calls here.

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Themes

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European Defense

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World's top 100 defence groups boost arms sales by 4% in 2023, think tank SIPRI says-Investing.com

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European companies on the list - excluding Russian - had roughly unchanged combined sales in 2023 at $133 billion, but order intake surged, and some groups saw a surge in demand linked to the war in Ukraine.

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Jefferies flags 7 key themes amid European Commission's 5-year policy priorities-Investing.com

Defense: With growing pressure for NATO members to boost spending, especially in Poland and Italy, Jefferies expects a shift towards strengthening Europe’s military capabilities. Analysts favor Thales (EPA:TCFP) and Babcock for their limited exposure to the Ukraine conflict, alongside Avon Technologies and Chemring (LON:CHG) in UK industrials.

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