On July 31st at 2pm EST I will be doing a unique webinar. Normally I like to do monthly webinars about opportunities in the market or about what’s currently going on. This month there is not a lot different to talk about though, so I decided to open up the floodgates on the H.E.A.T. Formula and go through how you can implement it yourself. This is stuff we are going to be charging for at Tuttle Market Insights and Tuttle Wealth Management, and things we are going to lay out in my book that should be out next year…..

-Why the 60/40 strategy is dead and what to do instead

- How to use AI to uncover today and tomorrow's hottest themes

-4 unknown edges that still exist in today's market

- How to set up your portfolio for asymmetrical returns

- Little know asset class that has limited risk and potentially unlimited returns

- 4 ways to hedge your portfolio that don't include bonds

Back to the current market, the talk on Thursday was all about the jobs number. I never put much stock into any of these numbers as I think they are all manipulated, but they matter from the perspective of what impact they may have on Fed policy. The bulls will look at the topline beat of 147K jobs added vs. expectations of 110K. The bears will look at the strength being driven by government hiring with private sector payrolls increasing by less than expected. The important point is that the market is now pricing a July cut at 6% chance vs a 20% chance before…..

If the Fed pauses then expect the fight between Trump and Powell to heat up. I wouldn’t be against Trump getting what he wants.

Meanwhile, the path of least resistance for markets continues to be up. Unless Trump starts talking tariffs again, oops……

But….

And then…..

I will be looking to buy this dip……

I would continue to expect the action to be beneath the surface in themes, not asset classes, factors, or styles. Shay hit the nail on the head, but it’s not really just about buying the dip (though that does provide some edges IMHO), it’s because asset class, factor, or style diversification is a Wall Street construct. Retail investors are focusing on themes……

🔥 HEAT Formula Playbook: Themes-Coal

You know I prefer themes the involve Trump…..

I tweeted about this a few days ago, my bad, I should have written about it in the newsletter as well…

My favorite way to play coal is BTU, It could still be buyable here…..

🔥 HEAT Formula Playbook: Asymmetry-Pre Merger SPACs

One of my favorite ways to play these themes from an asymmetrical standpoint are pre merger SPACs. They snapped back last week after the CCCM debacle the previous week. CCCM has settled down to around cash in trust so not much further for it to drop (why pre merger SPACs are an asymmetric trade)…..

This could be a game changer…..

🔥 HEAT Formula Playbook: Themes-Big Beautiful Bill

Not much else new lately on the thematic front so now that the Big Beautiful Bill has passed we are looking for potential winners and losers. A couple of names that jumped out are GEO and CXW. For those unfamiliar, these are private prison companies, and places you put migrants who you are going to deport. GEO was the only “Trump Trade” I took before the election because it had sold off so much it became an asymmetrical bet. For a while this was the Trump Trade that everyone was talking about as after the election these stocks ramped. They eventually sold off when Trump started sending detainees to Guantanamo and other countries and now nobody is talking about them anymore. Enter the Big Beautiful Bill (BBB)…..

🚨 The BBB unlocks tens of billions in new federal funding for immigration enforcement and deportation infrastructure.
🚨 ICE detention capacity is set to more than double—with no-bid emergency contracts being handed out like candy.
🚨 Trump insiders are calling this a "domestic infrastructure boom for enforcement."

Both GEO and CXW run the detention infrastructure America doesn’t talk about at cocktail parties—but can’t function without.

When this capital hits the system, these are the two stocks at the center of the firehose.

I had GPT rate them……

Interesting because CXW used to the the poor stepsister, now it’s the strongest one.

I do like GEOs chart pattern a bit better though as it’s peaking about the 200 day, which could be a tight stop if you are a trader.

🔥 HEAT Formula Playbook: Themes-Trump’s Inner Circle

One stock that’s not a Trump Trade is TSLA. I do love the potential it has in self driving and robotics, and wouldn’t bet against Elon Musk…..

But at the moment Trump is more of the force of nature. Then again, if this is true and they make up then Elon could go back in Trump’s inner circle…

We have a 2x long and 2x short on TSLA so don’t really have a dog in this fight, would like to see them make up though.

🔥 HEAT Formula Playbook: Portfolio Design-Precious Metals

With all the talk you are seeing lately about Gold, this caught my eye…

Long time readers know that my version of the permanent portfolio has a precious metals sleeve, and while I believe Gold is should be the bigger allocation, silver should be in there as well. I asked GPT for it’s opinion on Silver…..

For an ETF that combines Gold, Silver, Bitcoin, and Eth…..

In case you forgot why you want to own crypto…..

🔥 HEAT Formula Playbook: Edges-Cash Secured Put Writing

With every ETF issuer tripping over themselves to launch covered call ETFs (me included), it’s refreshing to see an article about put writing…..

This is a strategy that we are going to go into detail on in the webinar at the end of the month. I consider it an Edge because I’ve always assumed that most puts expire worthless. I asked GPT about it and this is what it came up with…..

🔥 HEAT Formula Playbook: Hedges-Tactical Hedging

With Trump talking about all time highs in the market, I’m not really concerned with hedges. Part of the H.E.A.T. Formula is having a static hedge (not bonds) but I also like to employ tactical hedges. I have talked about ARKK before as a fund I use as a hedge from time to time. That’s because I think they are better marketers than portfolio managers and if you look at a chart of ARKK vs. the S&P 500 since inception I think it proves my point……

However, you will notice the period in 2021 when ARKK went parabolic, so I would not suggest a static hedge in ARKK as you will get your face ripped off from time to time. I’ve talked in previous newsletters about looking at charts and buying ARKK puts (or put spreads, or selling calls) when ARKK breaches key support levels. For example, during the liberation day selloff I was doing all of the above when it broke the 50 day moving average and again when it broke the 200 day. I was out when it broke back above the 200 day…..

That approach takes some effort and sometimes judgement calls, so I will lay out a simpler, systematic approach. In this approach you still use moving averages because they smooth out the day to day price fluctuations. Instead of eyeballing a chart you have a fast moving average and a slower moving average and you short ARKK (buy puts, put spreads, and/or short calls) when the fast moving average crosses below the slow moving average, and cover when it moves back above. On the chart above for example, you could short ARKK when the 10 day moving average (green line) crosses below the 50 day (blue line). This would have gotten you short in March somewhere in the mid 50s and you would have ridden it down to 38 and change. The flip side is that the market went down so far so fast that you wouldn’t have covered until the low 50s. I would argue that you would have slept much better during the downturn having at least one part of your portfolio crushing it, and though you would have given back a lot of those gains you should also be making money in the other parts of your portfolio. In this case the ARKK hedge reduced your volatility and could have saved your ass if the market really fell off a cliff.

Which measures you use aren’t that important, but expect to be profitable no more than 50% of the time and get whipsawed around a lot. A system like this is designed to protect you from the major moves down, not get every 1% down move in the market. So I still believe you should have static hedges as well. Adding something like this on during times of stress goes back to a lot of what I talk about when I say investing is like cards. There are times you double down or bet big, and times you fold. You don’t need this hedge when all the odds are in your favor, but you do possibly need it when they are not.