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.

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Rebel Finance Podcast-Episode 2 is Out

Episode 2

Market Recap

Crazy end of the day Friday with the market rallying 1.8% in the final two hours. Could have been month end stuff, Ukraine, or the announcement that Mexico would put tariffs on China. Bessent said this on Friday….

The big question now is whether we see the momentum carry into this week…….

One positive takeaway from this chart is they broke Thursday’s low and were able to rally it back. QQQs had an undercut and rally at the January 13 lows…..

Looking at the sectors, nothing is really “strong” except for financials. A couple of my counter trend models triggered on some individual names and XLF last week, got out of it all on Friday into strength. Not really bullish when financials are the leader…

Or consumer staples…..

I am not a fan of Europe (except defense) at the moment and am watching Latin America from both a long and short perspective. One market that caught my eye this weekend was India. I tweeted about it and then I got this from Jefferies…

Not ready to buy yet, but this is on the watchlist…

My favorite chart continues to be TLT, which broke above the 200 day…..

Jefferies also said this and I know short interest is high, so I am ready to be wrong and sized and structured accordingly…

Silver (SLV) caught my eye Friday, both Gold and Silver sold off, but Gold still looks a bit overbought, SLV had an undercut and rally at it’s 50 day…..

Speaking of Gold, someone had asked me about it on Thursday’s webinar. Long term I think you need to have Gold in your portfolio, short term it looks like a meme stock. I’d be a buyer if it came down to the 50 day….

The news of the day is the announcement over the weekend of a strategic crypto reserve.

Bitcoin had an undercut and rally at it’s 200 day on Friday that could have been buyable if you could stomach holding Bitcoin over the weekend…..

I do think Bitcoin should be something you own, if you don’t though I probably wouldn’t buy it here. Remember, the executive order talking about studying this said this…..

The market seems to be reacting as if the Government is going out and buying crypto, which they might, but they also really don’t have any money.

ETF Spotlight

TGLRETF.com

https://x.com/YahooFinance/status/1895572838511259835

Military-Tech Startups Vie for Billions as Hegseth Shakes Up Pentagon Spending-WSJ

I love this theme. If you haven’t seen the Palmer Lucky/Shawn Ryan podcast I highly recommend it. Here’s GPTs take…..

🛰️ The Landscape:

Pentagon leadership under Hegseth is aggressively shifting spending priorities toward innovative technologies:

• Autonomous drones

• Advanced missile defense ("Golden Dome")

• Collaborative Combat Aircraft (AI-driven combat drones)

• Drone-defense systems and autonomous platforms

This shift explicitly benefits agile, Silicon Valley-driven companies over traditional, slow-moving defense contractors.

🔥 Companies Most Likely to Benefit:

1. Palantir Technologies (PLTR)

Rating: 9.5/10Analysis:

• Deeply embedded within Pentagon, already integrated into DoD operations.

• Expertise in AI-driven data analytics and battlefield management software aligns perfectly with Hegseth’s priorities.

• Palantir is positioned to gain major contracts in the "Golden Dome" initiative, partnering with Anduril and SpaceX.

• Proven revenue streams and strong relationships within Pentagon bureaucracy.

Bottom Line: Palantir is a top beneficiary, leveraging its deep ties, strong brand, proven track record, and alignment with Hegseth’s agenda.

2. AeroVironment (AVAV)

Rating: 9.0/10Analysis:

• Leading player in unmanned aerial systems (UAS); highly aligned with Pentagon’s emphasis on drone technologies.

• Strong legacy supplying tactical drones to the military, well-positioned to capitalize on new drone initiatives.

• Existing contracts provide credibility and leverage to scale rapidly under new programs.

Bottom Line: AeroVironment will thrive as Pentagon shifts funds toward autonomous drone programs.

3. Kratos Defense & Security Solutions (KTOS)

Rating: 8.5/10Analysis:

• Key provider of low-cost autonomous jet drones and satellite communications systems.

• Well-positioned for the Collaborative Combat Aircraft program; significant expertise in AI-enabled unmanned aircraft.

• Cost-effective alternative to traditional large defense contractors, strongly aligned with Hegseth's cost-cutting and innovative mandates.

Bottom Line: Kratos will see increased demand and possibly expanded contract sizes as programs evolve.

4. C3.ai (AI)

Rating: 8.0/10Analysis:

• Expertise in enterprise AI systems relevant for predictive maintenance, logistics optimization, battlefield management, and cybersecurity.

• Could be a key player supporting Palantir and Anduril on larger contracts involving comprehensive software solutions.

Bottom Line: High upside through subcontracting opportunities and partnerships; benefits from strong thematic tailwinds.

5. Epirus (Private)

(Non-public but important as a barometer)

• Developer of directed-energy and EMP weaponry (e.g., drone-disabling microwaves).

• Directly aligned with drone defense initiatives.

• Likely to see significant VC investment interest, though public investment opportunities remain unavailable.

6. BigBear.ai (BBAI)

Rating: 7.5/10Analysis:

• AI-driven analytics and cyber solutions closely tied to military and intelligence sectors.

• Positioned to win secondary contracts or joint ventures with larger startups (e.g., Palantir).

• Still early-stage compared to more established firms, but agile enough to scale quickly under new Pentagon mandates.

Bottom Line: Higher risk, higher reward; substantial upside if larger partnerships are announced.

ACHR is a name I own so I asked about that one as well…

Rating:✅ 7.0/10 — A speculative "option-like" play that could rapidly move higher if military validation occurs, but currently ranks below more direct beneficiaries like Palantir, AeroVironment, and Kratos.

Interesting move in ACHR on Friday, initially sold off big and then had a massive recovery….

DeepSeek Reveals Theoretical Margin on Its AI Models Is 545%-Bloomberg

Something tells me this could end up being important. Of course you need to be able to trust these number, which you can’t. Assuming it’s correct ( I had GPT rate the possibility it’s correct: I would rate the likelihood that DeepSeek's disclosed "theoretical profit margin" of 545% is accurate as about 6 out of 10.) I had GPT take a deep dive….

🌐 1. Core Thesis: Why Is This a Fundamental Turning Point?

DeepSeek's theoretical profit margins (545%) imply an epochal shift in AI economics, centered around:

• Radical cost efficiency in AI inference.

• An open-source innovation model, disrupting closed ecosystems.

• Accelerated AI commoditization and broader adoption.

This potentially redefines competitive advantages and capital allocation across the entire technology ecosystem, especially impacting leading tech firms (the Magnificent 7: Apple, Amazon, Alphabet, Microsoft, Nvidia, Meta, and Tesla) and the suppliers dependent on their CapEx cycles.

📈 2. Winners: Publicly Traded Companies Likely to Benefit

✅ A. Cloud & AI Infrastructure Optimizers

Companies positioned to rapidly adopt and deploy hyper-efficient, open-source AI:

• AMD (AMD): Gains from open competition in AI chipsets as companies diversify from Nvidia; accelerates market penetration.

  • Impact Rating: 9/10 (significant potential upside)

• Marvell (MRVL): Enhanced demand for optimized silicon, benefiting from cheaper AI deployments.

  • Impact Rating: 8/10

• Micron (MU) and SK Hynix: Reduced costs for inference boost memory and storage demand, as broader AI adoption multiplies total compute consumption.

  • Impact Rating: 8/10

✅ B. Enterprises Leveraging AI at Scale

Firms rapidly embedding cost-efficient AI in products/services:

• Oracle (ORCL), Salesforce (CRM), Adobe (ADBE), ServiceNow (NOW): Reduced inference cost accelerates AI-driven feature integration, boosting margins and competitive advantages.

  • Impact Rating: 8/10

• Palantir (PLTR), C3.ai (AI), SoundHound (SOUN): AI-specialist companies gain massive leverage from reduced inference costs, potentially improving profitability paths dramatically.

  • Impact Rating: 9/10 (high sensitivity, exponential growth leverage)

✅ C. Semiconductor Equipment Providers

• ASML (ASML), Applied Materials (AMAT), Lam Research (LRCX): Increased demand for AI accelerates capacity expansion and investments in advanced node manufacturing.

  • Impact Rating: 8/10

📉 3. Losers: Companies Facing Headwinds

❌ A. Traditional AI Leaders Facing Commoditization

DeepSeek’s open model could erode pricing power and margins:

• Nvidia (NVDA): Pricing pressures from competitors and open-source chip designs. Despite its lead, margin compression risks intensify as open models democratize AI access.

  • Impact Rating: 5/10 (still resilient but margin risk increases notably)

• Alphabet (GOOG) and Microsoft (MSFT): Proprietary AI investments face pressure as cost advantages narrow. Cloud customers demand lower pricing, compressing future cloud margins.

  • Impact Rating: 4/10 (modest pressure given diversified businesses)

• Amazon (AMZN) (AWS): Reduced pricing power in cloud infrastructure as lower AI inference costs propagate industry-wide. Must compete on efficiency vs. premium capabilities.

  • Impact Rating: 4/10 (medium exposure)

❌ B. Proprietary AI-Focused Startups (Indirectly Listed)

• OpenAI (via MSFT exposure), Anthropic (via AMZN exposure): Risk losing competitive advantages if open models rapidly close capability gaps. Proprietary technology premium shrinks.

  • Impact Rating: 6/10 (elevated strategic risk)

❌ C. Legacy Hardware Suppliers

Companies that rely heavily on expensive, less efficient infrastructure:

• Dell (DELL), HP (HPQ): Face commoditization risk as customers pivot toward cheaper, open-model optimized architectures.

  • Impact Rating: 6/10 (moderate to high risk)

Drug Stocks Are the New Safe Bet in a Shaky Market-WSJ

I think there’s a lot of opportunity, specifically in AI healthcare, GLP1s, and robotics. I had GPT take a deep dive on this article for some sectors and stocks…

🔹 Sub-sector #1: AI in Healthcare (Rating: 9/10)

AI in healthcare is transformative, tackling drug discovery, diagnostics, personalized medicine, and predictive analytics. While not directly covered in the WSJ article, it's a rapidly growing field with explosive long-term growth potential.

Investment Thesis:

• AI accelerates drug discovery timelines and reduces R&D costs significantly.

• Healthcare AI can reduce healthcare system costs, increasing adoption by hospitals and providers.

• The defensive nature of healthcare combined with tech-driven growth makes it especially compelling in volatile markets.

Stocks to Watch:

• Schrödinger (SDGR): Leader in AI-driven drug discovery. Huge partnerships (BMY, NVS) add validation.

  • Rating: 9 (High growth, strategic partnerships)

• Recursion Pharmaceuticals (RXRX): AI-enabled biotech rapidly advancing pipeline.

  • Rating: 8 (Strong pipeline, higher risk/reward)

• Alphabet (GOOGL): DeepMind’s advancements position Google to integrate AI in healthcare effectively.

  • Rating: 8 (Diversified tech giant, stable play)

🔹 Sub-sector #2: GLP-1 Weight-Loss Drugs (Rating: 8.5/10)

GLP-1 medications (Novo Nordisk's Ozempic, Lilly’s Mounjaro) represent a blockbuster market. They have significantly reshaped diabetes management and obesity treatment—markets worth hundreds of billions.

Investment Thesis:

• Market demand is massive and expanding, driven by obesity/diabetes epidemics.

• Patents provide durable competitive advantages.

• Near-term valuations stretched; timing entry is critical.

Stocks to Watch:

• Eli Lilly (LLY): Dominant alongside Novo, huge revenue potential, but rich valuation.

  • Rating: 8 (Strong growth, expensive valuation)

• Novo Nordisk (NVO): Clear market leader in GLP-1; valuation also elevated but execution near flawless.

  • Rating: 9 (Best-in-class execution, global dominance)

🔹 Sub-sector #3: Medical Robotics (Rating: 8/10)

Robotics is steadily becoming standard-of-care in surgical procedures. The precision, efficiency, and safety provided by robotic systems are increasingly adopted across specialties.

Investment Thesis:

• High barrier to entry due to technology complexity and FDA clearance hurdles.

• Growth driven by procedure adoption and hospital investments in robotics.

• Valuations high; market leaders priced for perfection.

Stocks to Watch:

• Intuitive Surgical (ISRG): Market leader (Da Vinci system). High valuation poses risk if growth slows.

  • Rating: 8 (Dominant position, but richly valued)

• Stryker (SYK): Growing robotic surgery portfolio, expanding beyond orthopedics.

  • Rating: 7.5 (Strong surgical portfolio, reasonable valuation)

• Vicarious Surgical (RBOT): Emerging innovator (miniaturized robotics), riskier small-cap play.

  • Rating: 6 (High upside potential, significant execution risk)

🧠 Strategic Insights

• High Conviction Long-term Plays: Prioritize AI Healthcare and GLP-1 drugs. These sub-sectors have large TAMs, secular tailwinds, and robust innovation pipelines.

• Robotics: Allocate selectively given valuation risks, with emphasis on market leaders (ISRG, SYK) and cautious positions in smaller, innovative names (RBOT).

• Traditional Pharma: Balance your growth exposure by holding core, stable pharma names (GILD, VRTX, AMGN) offering dividend yields, cash-flow stability, and reasonable valuations.

Conclusion:You're correct: healthcare is too broad for a uniform investment approach. Prioritizing high-growth sub-sectors (AI, GLP-1, Robotics) complemented by stable pharma creates a powerful risk-reward profile. Given your investment style and emphasis on innovation, AI in healthcare stands out as the highest-conviction bet, with GLP-1 and robotics offering robust additional upside.

Super Micro is back in compliance. Is that enough to make its stock a buy?-MarketWatch

I talked about this one on the Schwab Network on Friday….

https://x.com/SchwabNetwork/status/1895473733676286046

I do not own it currently and would be more interested on pullbacks into the 50 day moving average…

Interestingly, GPT likes DELL better….

🎯 Final Ratings:

• Dell Technologies (DELL): 8.5/10 (Most robust competitive position)

• Super Micro Computer (SMCI): 7.5/10 (Strong but with clear risks)

• Wistron Corp. (3231.TW): 7.0/10 (Solid but less differentiated)

Bottom Line:

• SMCI is attractive for speculative upside but carries execution risks.

• Dell represents a safer AI server bet with broader market strength.

• Consider SMCI as a strategic allocation but prioritize risk management given competitive threats and customer concentration.

Not a great looking chart at the moment, but if it can find a bottom it could be a lot more interesting…..

Jeremy Grantham on the meltdown coming for U.S. stocks and where he’s putting his money now-MarketWatch

Don’t get why this is news, he’s always calling for a meltdown. When Cohen and Singer turn bearish I’m interested, him not so much.

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