The H.E.A.T. Formula
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I am going to be on the Schwab Network this morning at 9:45AM Est to talk about the Magnificent 7 Stocks.
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Our Next Webinar:
Topic: How to Determine the Best Potential Investment Themes.
When: Oct 24,2024 11:00 AM Pacific Time
Register in advance for this webinar:
https://zoom.us/webinar/register/WN_nicbiSSlTwqTDXqOmfd1cA
Why Things Like Factors, Asset Classes, Styles, and Market Cap Diversification are Stupid.
Why most thematic ETFs suck.
How to use first-order, second-order, and third-order thinking to pick stocks and ETFs with the best potential upside.
One below-the-radar theme that could end up being extremely relevant regardless of who wins the election.
For Investment Pros Only
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Themes
Goldman: Unless China does QE now, the current market rally will crash and burn and the economy will be a crater. If China does do QE, oil will soar, and gold and bitcoin will be orders of magnitude higher.
— zerohedge (@zerohedge) October 6, 2024
That's why it's better to invest in themes....
A Tried-and-True Investing Pattern Has Lost Its Shape-WSJ
One of the biggest simplifications in markets is to buy cyclical sectors when the economy’s booming, and defensives in a slowdown. It’s obvious—until you try to decide what’s cyclical and what’s defensive.
As a guy who loves the power and flexibility of options I have been watching this trend with interest. I have also been watching from the sidelines, but we will have products this year and I am thinking through ideas. Investing should be about returns, which includes--dividends, interest, and capital gains. If I get $5 in dividends but give up $10 in capital gains, that's not a good thing. I think that could be the biggest issue I have with these ETFs, if you invest solely for the yield then that also influences the extent that you can be out of the money in your calls. The closer you are to being in the money, the less upside you have in the stock. This is where understanding how markets and options work can be valuable. For example, you want to sell options when they are expensive. When are they expensive? When people are fearful about something, like an economic release, or an upcoming election. You also want to understand the chart of the underlying. When it's going sideways then selling options is great. When it's had a drop, and then starts to move up, selling options close to in the money doesn't make sense. ....
‘100%’ Yields Are Fueling a Retail Boom in New Quick-Buck ETFs-Bloomberg
Across platforms like TikTok, YouTube and Reddit, financial influencers are promoting a new way to speculate in the stock market — touting payouts that, at first blush, can top 100%, or more.
Self Defense
Supreme Court to Hear Smith & Wesson’s Bid to End Mexico’s $10 Billion Lawsuit-Breitbart
SWBI is a little over 5% holding in GUNZ.
Chart doesn't look great here but would assume if they end this lawsuit it would change the situation dramatically....
Politically Neutral
According to Jefferies ESG Weekly....
U.S. ESG-related funds have returned 18% on average this year, compared to 22% for the Standard & Poor's 500 Index and 21% for the Russell 1000 Index.
As you know I am not a fan of anything related to investing that is not solely focused on the investor making money. Make as much as you can and then use some of the excess to express your values. Way more targeted approach to making a difference anyway.
The Tuttle Capital Shareholders First Index ETF $ESGX is the only ETF that invests in companies that put Profits over Politics, DEI, and ESG.
— Matthew Tuttle (@TuttleCapital) October 1, 2024
For more information and a prospectus please go to:https://t.co/QYuKWXSsyN pic.twitter.com/T88RVqu5gt
Nuclear
Interesting research report that came across my desk. Trades in the US, but not options, I may pick up a little, just a little as I have no way to hedge it....
Would like it better if it moves above the 200 day....
AI Power
A really good day Friday for all the AI power plays. The article below shows how big this could be.......
Texas Regulator Wants Data Centers to Build Power Plants-Bloomberg
Data centers designed to support artificial intelligence can guzzle as much electricity as entire cities, leading some developers to propose building them next to power plants. But Thomas Gleeson, chairman of the Public Utility Commission of Texas, said allowing construction near existing plants threatens resource adequacy on the grid if the data centers buy all the plants’ power. Texas has at times struggled to keep the lights on as its growing economy and population strain supplies.
AI
Keep a close eye on this. AI is a game changer, but not for everyone. GOOGL is still a long term holding, but if they don't execute they will not be..
Google’s Grip on Search Slips as TikTok and AI Startup Mount Challenge-WSJ
Google’s grip on the nearly $300 billion search advertising business is loosening.
For years, the tech giant has seemed invincible in this corner of the ad market, which is the foundation of its business. Now, rivals are beginning to eat into its lead, and new offerings—fueled by the rise of artificial intelligence and social video—threaten to reshape the landscape.
European Defense
EU arms industry boost plan may fall short of goals, watchdog warns-Reuters
The European Commission, the EU's executive body, unveiled a proposal in March to allocate 1.5 billion euros ($1.65 billion) to incentivise EU governments to buy jointly from European defence firms and encourage industry to increase capacity.
Election
Stifel put out an interesting piece on investment themes for each candidate. The most interesting to me is GEO and CXW if Trump wins. These are names I have been in, but am not at the moment as this race is too close to call. MSTR also hits close to home.
- What Are Big Market Themes Under A Trump White House? If President Trump returns to the White House, we would expect it to be positive for: (1) M&A and consolidation; (2) Fannie Mae (FNMA, Not Rated) and Freddie Mac (FMCC, Not Rated) as there would be a pronounced effort to end the conservatorships; (3) private prisons such as Geo Group (GEO, Not Rated) and CXW (CXW, Not Rated) given the focus on immigration enforcement; (4) fossil fuels, nuclear energy, and clean coal; and (5) companies in the digital asset ecosystem such as Coinbase (COIN, Not Rated), MicroStrategy (MSTR, Buy, $180 PT; Analyst: Harte), and Riot Platforms (RIOT, Buy, $22 PT; Analyst: Lewis). The biggest negative theme for markets would be Trump's embrace of tariffs, which could lead to retaliatory tariffs, a global trade war, and an average after-tax reduction in household incomes of ~$1,800. The threat of a trade war, coupled with enhanced immigration enforcement, has led many investors to suggest that a Trump II administration could slow growth and ramp inflation.
- What Are the Big Market Themes Under A Harris White House? We do not believe that a Harris administration's policy priorities would differ materially from the Biden administration. There are arguments to be made at the margin on certain economic policies, and we would expect a different tone on foreign policy, but many Harris policies are substantively similar to Biden policies. Therefore, we would largely expect the status quo on energy, healthcare, tech, M&A, and financial services. From a market perspective, a Harris administration would mean that the IRA's clean energy tax credits are safe, the threat of a global trade war is lower, and taxes would move modestly higher for high earners and possibly businesses depending on the composition of Congress.
Brendan Wood Did a global investor poll on who's victory will increase equity exposure......
Equity Exposure if Donald Trump wins Election
Increase = 48%
Static = 35%
Decrease = 17%
Equity Exposure if Kamala Harris wins Election
Increase = 26%
Static = 52%
Decrease = 22%
Asymmetrical Risk
No......
Is This ETF Your Knight in Shining Armor?-WSJ
Financial advisers love to pitch these funds as a “bond substitute,” without mentioning that armored ETFs usually track the stock market so closely they don’t offer the usual diversification benefits of bonds.
“There’s no free lunch with these funds,” says Innovator’s Bond. “The key peculiarity is that the outcome you get depends on the price you buy at.” If you invest after day one or sell before the annual reset date, you might incur an interim loss or earn up to the cap in a shorter period.
I would much rather see you position your portfolio and your trades for asymmetrical risk yourself. For example, these funds will typically use options. You can use options also. Easiest way to do this would be to purchase puts on all your positions. You cap the downside and still have unlimited upside. More sophisticated would be what I teach in the H.E.A.T. Formula where most of your money is in Tbills with the equity portion being in options. Options cap your downside to premium paid (do not sell naked puts or calls) and don't limit your upside at all. There are also ways to structure the options trades to further reduce the risk of the trade.
This is not how you trade options...
Day Trader Says He Made $306 Million on Tesla, Then Lost It All-Bloomberg
