The H.E.A.T. Formula
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The H.E.A.T. Formula is a radically different way to look at investing your portfolio.
H- Hedges, you should always have hedges and be agnostic as to being long or short. Bonds are not a hedge
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.
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.
T-Themes. You should always be invested in the top themes. Most everything else is just noise.
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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The news of the day is Bitcoin finally breaking $100K. With significant levels like this you often go back and forth for a while before something breaks out for good, so be careful if you are going to chase here.
The most important remark Powell made yesterday was this I think......
“The economy is strong, and it's stronger than we thought it was going to be in September. The downside risks appear to be less in the labor market, growth is definitely stronger than we thought, and inflation is coming a little higher.”
Makes you wonder why they are cutting rates
Was at a dinner last night where one of the major topics was this.....
The Trump M&A Boom Is Coming. A Top Dealmaker Spells Out What’s Next.-Barron's
Not sure what impact this will have on markets and where the pockets of opportunity will be, but something to keep an eye on.
Nothing really sticks out to me on the long side this morning. On the short side I am going to take a look at USO. It's typically not as great to short as the VIX ETPs and UNG, but it's not bad at times.
I did go short XLE yesterday. In sectors, REITs, home builders, and financials may be setting up as shorts as well.....
Other possible interesting names on the short side...
Themes
Regional Banks
What Trump’s Views on Too-Big-to-Fail Mean for Your Bank Account-WSJ
The president-elect disapproved of federal bailout for Silicon Valley Bank customers. That should be a warning for uninsured depositors at most banks.
One of my favorite themes, which has been totally wrong, has been trouble at regional banks. A chart of SKRE shows just how wrong.....
My thinking is that many regionals have troublesome assets that accounting rules can only let them hide so long and it is easy for depositors to flee at the first sign of trouble. The thesis doesn't work as well if any regional that gets into trouble gets bailed out, so this will be interesting to watch.
AI Power
There’s a New Stock to Play the AI Boom and Electricity-Grid Modernization-Barron's
Wednesday, Oppenheimer analyst Ian Zaffino launched coverage of engineering and construction firm Everus Construction ECG with a Buy rating and $70 price target.
Not enough history for me to opine on the chart, and no options at the moment, but something to keep on the watchlist perhaps.
Meta Announces $10 Billion Data Center in Louisiana-Barron's
The center will be powered by three new natural gas plants with 2.2 gigawatts of combined capacity, according to Entergy ETR , the utility working with the tech giant. That is enough to power more than one million homes. Neal Kirby, an Entergy spokesman, said the plants will also provide power to the surrounding community.
Adding ETR to the watchlist. If you are a trader you could buy it right here and use the 20 day as a stop, but it's had a massive run and looks like it needs to either consolidate or dip a bit.
