Second down day in a row but the bulls came in and the market closed way off the lows. Tomorrow is Jackson Hole, so anything could happen.

Fed minutes came out yesterday and they seemed to be more hawkish than I would have expected. They were from before the disappointing jobs number, but still. I’m not saying they won’t cut rates in September, but if Powell comes out tomorrow and hints at no cut I wouldn’t be totally shocked…..

I think the key to holding this market up is AI spending, so headlines like this give me pause…..

Bottom line, make sure you have hedges.

Below is a link to our latest white paper about the Permanent Portfolio 2.0……

When it was designed it was revolutionary, but it needs a facelift for the challenges and opportunities of a new century.

The biggest issues I have with set it and forget it portfolios like this, the Dragon Portfolio, the All Weather Portfolio, and of course 60/40, is the assumption that there are assets you always want in your portfolio and the fact that markets are different.

Bonds are a great example. When interest rates are at 20% you back up the truck, when they are low you don’t. You cannot time the market, but as I often say, investing is a lot like cards, you know when the odds are in your favor and you bet, or invest, accordingly.

You can have a settish and forgetish portfolio, but you have to be cognizant of what’s going on in markets. Investing in 1981 when interest rates are high and stock valuations are low, is way different than investing today when interest rates are low and valuations are high.

I am personally a trader at heart, I think that’s the optimal approach, assuming you have the time and the skill. I no longer have the time. I need a framework that doesn’t require looking at charts all day to maintain, but still allows the ability to respond to changing markets.

The H.E.A.T. Formula is extremely adaptable on purpose, there is no one size fits all solution to markets. Time, skill, risk tolerance are all different, and of course different market regimes require different strategies.

H-Hedges-You should always have hedges, but you can ramp them up and down based on the market. For example I am slightly more hedged than normal ahead of Jackson Hole and seeing momentum stocks sell off two days in a row.

E-Edges-I’m doing a lot more put writing (cash covered) than I normally do. I think selling puts is an edge, you also don’t need to be right to make money as long as a stock ends up above your strike. I’m doing this because I don’t think we see massive upside at the moment, and if the market does crater here it probably doesn’t do it overnight. I place my puts at spots unlikely to get assigned (keep an eye out for an ETF from us that tries to get assigned, more on that strategy in a later newsletter). I almost never sell covered calls, because unlike the put strategy you do have to be pretty much right on direction.

A-Asymmetry- Because I use mostly options I can ramp up and down my equity exposure (delta adjusted) based on where I see the odds of success. Currently I am somewhat under invested.

T-Themes-I believe investing is now thematic, so I always want to be in today and tomorrow’s hot themes, but I can buy dips and take off exposure in rips.

Going into a lot more depth on this in next week’s webinar……

Please register for our next webinar:

Wednesday August 27, 2-3pm EST

-Why covered call strategies suck, and what may be much better

Click Below to Register

Today’s stock is Cracker Barrel (CBRL), on the short side……

Back when I was trading I was agnostic between long and short, but shorting requires a lot more attention. You can ride a stock up for months or years, but most shorts either work pretty quickly or you need to cover pretty quickly.

From a chart perspective CBRL broke the 50 day and could be shorted there, with the 50 day as a stop. I don’t care what you think of DEI, whenever a CEO puts politics ahead of profits I don’t think it ends well for the stock.

EUAD is number one on the list….