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Another TACO Tuesday? THE DAILY --- H.E.A.T. Torching Wall Street’s Obsolete Playbook. Delivered straight to your inbox 5 days a week. Subscribe Home Posts Another TACO Tuesday? Another TACO Tuesday? Daily 🔥 --- H.E.A.T.🔥 Your Financial GPS Matthew Tuttle Jun 17, 2025 Subscribe now Share I am traveling Wednesday and Thursday so may not have time to get a newsletter out one or both days. Either way back on Friday In Today’s Issue: Rareview 2X Bull Cryptocurrency & Precious Metals ETF Our Next Webinar— - Cash from Corruption: Profiting Off Washington’s Grift Machine Another TACO Tuesday? Why Preferreds Don’t Stink (and Most Bonds Do) P&C Insurers: Wall Street’s Overlooked Portfolio Theme Banking is Being Rewritten in Code The Time Will Never Be Right For Smart Beta and more…….. Rareview 2X Bull Cryptocurrency & Precious Metals ETF The Rareview Total Return Bond ETF (the “Fund”) seeks to provide a total return through the combination of current income and capital appreciation. rareviewcapital.com/2x-bull-cryptocurrency-precious-metals-etf Cash from Corruption: Profiting Off Washington’s Grift Machine Thu, Jun 26, 2025 2:00 PM - 3:00 PM EDT - Two strategies to tap into Washington's grift with limited risk and unlimited upside - How to use AI to recognize the next top themes before the "smart money" does. - My simple hedging strategy that takes advantage of the real "dumb money" on Wall Street To register: register.gotowebinar.com/register/8214490301707453020 Another TACO Tuesday? SPY closed almost where it was Thursday night on rumors of easing tensions. Futures are in the red slightly on Trump’s tweet about everyone leaving Tehran. You also have to wonder what this is…. Trump Says He Is Working on Something 'Bigger' Than Cease-Fire -WSJ — # (# ) Saw multiple “sources” on X last night either claiming the US had already joined the war or that Trump’s tweet and him leaving the G7 meant we were about to. As of yet not seeing anything showing we have though. At this point though it looks like we are back to macro concerns and the FOMC this week….. ❝ We expect Powell to try to be as non-commital as possible. With the current uncertainty around tariffs and geopolitics, the Fed just doesn't have sufficient information to lean one way or ther other. It would be prudent to wait for more incoming data and decide on the future course of action. Our base case remains for the next cut in September and two rate cuts this year. Our view is driven by our expectation that the employment picture will weaken over the summer months due to tariff impact and SMEs facing a big wave of refinancing towards year end. However, we are not in a recession camp and expect the unemployment rate to peak close to 4.5%-4.6% in this business cycle. On a 20Y chart, 4.5% unemployment rate actually looks great. Mohit Kumar, Jefferies 🚨 HEAT Formula Playbook: Themes I still have no interest in investing in Europe, except for European defense names. UBS Global Strategy seems to agree on EU defense spending…. ❝ Top themes and Top stocks EU Defense Spending remains the top scoring thematic basket in our rankings despite stretched valuations. Large fiscal announcements earlier this year have supported the theme and driven positive earnings revisions momentum. However, we do see risk of these revisions slowing, which could place the valuation overhang at the forefront for investors. Dassault Aviation and Thales SA are both among the higher ranking names that still appear attractive on our Valuation score. UBS Global Equity Strategy — # (# ) This stuff is always stupid, they have no way of knowing this. I’ll continue buying gold and the miners as long as the charts continue to tell me too…… Citi calls top on gold as it says prices may fall as much as 25% next year Citi forecasts a return to $2500-2700 gold prices in the second half of 2026. www.marketwatch.com/story/citi-forecasts-golds-last-hurrah-as-it-says-prices-may-fall-as-much-as-25-next-year-9c1e73ce?mod=home_lead 🚨 HEAT Formula Playbook: Asymmetry — # (# ) — # (# ) — # (# ) 🚨 HEAT Formula Playbook: New Permanent Portfolio Why Preferreds Don’t Stink (and Most Bonds Do) How to select bond funds based on your investing needs and time horizon David Sherman of CrossingBridge Advisors explained how investors can use bond funds with varying durations to generate high income while controlling volatility risk. www.marketwatch.com/story/how-to-select-bond-funds-based-on-your-investing-needs-and-time-horizon-ee404b3e?mod=home_lead I am working on a new white paper using the HEAT Formula concepts to modernize and potentially improve the Permanent Portfolio. A lot more to be said about that, but the original version had 25% in bonds. It’s no secret I think bonds suck, they aren’t a reliable hedge and they don’t provide asymmetric returns. The one exception to the rule is preferred shares, which I will be adding as a sleeve to my new Permanent Portfolio. I had GPT produce a very basic primer…. 🧾 Primer: What Are Preferred Shares—and Why Should You Care? Preferred shares are the hybrid lovechild of stocks and bonds . They sit above common equity in the capital stack, usually pay a fixed dividend, and often offer yields of 6–8% in today’s market. They don’t get the attention they deserve —and that’s exactly why they might be the smartest place to park capital in a broken bond market. 🔧 How They Work: Fixed Dividends : Like a bond coupon, typically paid quarterly. Seniority : Ranked above common stock, below debt. Callable : Issuer can redeem them—usually at par ($25)—after a call date. Perpetual or Long-Term : Many don’t have maturity dates (but trade like long-duration assets). Tax Advantages : Most U.S. preferred dividends are “qualified,” taxed at lower rates than bond interest. 💩 The Problem with Traditional Bonds Let’s be honest: most bonds suck right now . Treasuries? Still yield less than inflation after taxes. Long-duration? Killed when rates spike. Corporate bonds? Offer 5%–6% with far more credit risk and zero upside. If you’re going to tie up capital in fixed income, you need to be paid . Preferreds do that—with equity-like upside and bond-like stability. I prefer buying individual bonds, but only if you have the expertise. One of our traders manages a preferred hedge fund so we may do a preferred ETF at some point, until them PFFA seems like a decent alternative. From a performance perspective it’s crushed HYG and AGG since inception and has a yield over 9%. It’s more correlated to SPY over the past 5 years (weekly) than AGG .629 vs .397 (source: Bloomberg) but less correlated than HYG .679 (source: Bloomberg). 🚨 HEAT Formula Playbook: Themes I wrote about P&C a few weeks ago and have the only P&C ETF in the model portfolio. I think these companies offer a unique exposure and belong in a buy and hold portfolio. Jefferies just wrote a piece on hurricane season which caused me to want to revisit the sector….. P&C Insurers: Wall Street’s Overlooked Portfolio Theme Why selling hurricane insurance can outperform owning Treasurys during a storm 🔍 Executive Summary While most investors ignore the insurance sector until disaster strikes, P&C insurers quietly compound capital in a way few other sectors can match—balancing defensive income, upside optionality, and inflation sensitivity. The 2025 hurricane setup—paired with a maturing reinsurance cycle—gives us a rare entry point. As Jefferies notes, pricing power is likely to re-accelerate after any landfall , favoring select underwriters and brokers. 🧠 Why P&C Belongs in Every Portfolio Feature Why It Matters Natural Hedge to Crisis Disasters drive premiums up, not down. While markets sell off, insurers re-price. Float = Free Leverage Insurers earn yield on other people’s money —collected before claims are paid. Rate Sensitive Assets Rising interest rates increase investment income . Underwriting Cycle Alpha Smart management can grow earnings via pricing cycles, even without more customers . Low Correlation to Equities Especially true during inflation spikes or bond-market stress. P&C firms don’t sell protection—they sell volatility insurance , and when the world panics, they get paid more. This is structurally asymmetric —exactly what the HEAT Formula is designed to capture. 🌪️ 2025 Hurricane Season: Setup & Strategy Jefferies expects another active storm season, with elevated sea temperatures and a 51% chance of major U.S. landfall. But 2025 is still moderate vs. 2024 , and that matters: Landfall tends to trigger short-term pullbacks in P&C names on loss fears. But post-storm , stocks re-rate higher as losses are smaller than feared and premiums rise . ❝ “The ‘hurricane trade’ is real. Buy select P&C reinsurers and brokers near landfall. The greater the pricing power after, the higher the upside.” — Jefferies 🧩 Portfolio Construction: How P&C Fits Risk Profile: Low-beta + convex earnings exposure to catastrophe cycles Best Use Case: In a 60/40 portfolio or a rates-sensitive ETF, P&C acts as a volatility buffer and inflation hedge Options Strategy: Sell cash-covered puts on top P&C names during storm panic; buy long-dated calls post-landfall Reinsurance vs. Primary: If no storm , primary insurers win If storm hits , reinsurers win on back-end pricing power 🏆 Top P&C Picks (Based on Combined Ratio, CAT Strategy, and Market Position) Ticker Name Strategy Strength Rating (1– • 10) RNR RenaissanceRe CAT-focused, clean balance sheet, capital discipline 9 ACGL Arch Capital Group Deep Florida exposure but best-in-class underwriting 8 EG Everest Group Higher CAT leverage but upside optionality 7 WRB WR Berkley Strong U.S. commercial presence, consistent margins 8 CNA CNA Financial Conservative, dividend payer, steady underwriter 7 BRK.B Berkshire Hathaway Float king with exposure via GEICO + GenRe 9 Note: RNR, ACGL, and EG are the three Jefferies highlights based on Southeast positioning and CAT leverage. 🧠 What the Smart Money Is Watching CAT Bond Flows: Capital is returning to reinsurance markets (esp. ILS) → firms with cleaner loss ratios will benefit most. FL Insurance Reform: Legal reforms are making Florida insurable again. Underwriters who leaned in (ACGL, EG) may win long-term. Reinsurance Cycle Compression: A benign 2025 would soften reinsurance prices, helping primary insurers like WRB, CNA, and TRV. 🎯 Trade Ideas for HEAT Readers Strategy When to Use Example Buy post-landfall panic Storm forecast spooks market but landfall not yet RNR, EG, ACGL Sell puts during storm panic Volatility spikes, quality names get hammered WRB, ACGL Buy primary insurers post-season No major landfall → rates soften, margin expands CNA, WRB Buy LEAPS on RNR Long-duration pricing power on CAT risk re-firming Jan '26 $250 calls 🧮 Summary In a storm-driven pricing cycle, P&C companies become volatility extraction machines . They sell financial “insurance” in literal and metaphorical ways—and when panic rises, their embedded optionality pays off. By using float, underwriting discipline, and catastrophe cycles, they deliver: Equity-like returns with bond-like risk , Inflation sensitivity , and Systematic crisis hedging . That’s the holy trinity of uncorrelated return generation. And it’s why every institutional-quality portfolio should have P&C exposure. Bottom Line for HEAT Readers: Property & casualty insurers aren’t just a niche sector—they’re a strategic hedge with asymmetric upside . Whether the hurricane hits or misses, the opportunity lies in the reaction , not the event. And that’s where real money gets made. 🏦 Banking is Being Rewritten in Code Why Stablecoins Could Trigger the Biggest Financial Shift Since the ATM—and Who Wins When It Does This article caught my attention as I’m always looking for massive structural shifts and I think stablecoins is going to qualify…….. How Stablecoins Can Be Destabilizing -WSJ — # (# ) I had GPT take a deep dive on this, and interestingly it brought up regional banks. I have a lot of reasons I started an inverse regional bank ETF but this wasn’t one of them……. ⚙️ The Setup: Stablecoins Aren’t Stealing Money… They’re Rewriting Where It Lives Let’s be clear: stablecoins aren’t vaporizing bank deposits. They’re transforming them —from FDIC-insured retail accounts into uninsured wholesale liabilities , often pooled in mega-banks or shifted into T-bills and repo agreements. The WSJ piece nails this nuance: deposits don’t vanish. But the way they behave changes radically. Your paycheck used to go into a small regional bank account. In 2026? It might land directly in a Circle-issued stablecoin, backed by 1–3 month T-bills, and held in a wallet you control . The cash never hits a regional bank’s retail deposit base—it loops through primary dealers, into money markets, or directly into JPMorgan’s wholesale vault. The “deposit” hasn’t left the financial system—but it’s now: Harder for banks to lend against More flighty And no longer free capital banks can skim interest off of 🧠 Why Stablecoins Are Disruptive (Even If They’re “Still Dollars”) Think of stablecoins as digital money-market funds on steroids. They: Offer yield (e.g., Figure’s YLDS at 3.85%) Are programmable (you can embed payments, rules, limits) Settle instantly Travel globally Are non-bank, non-card-network dependent You don’t need to route payments through the Visa-Mastercard cartel. And you don’t need to lend your dollars to Bank of America to earn 0.03% while they blow it on bond trades. This is Blockbuster vs. Netflix all over again . But the theater this time is banking infrastructure , and stablecoins are the streaming platform. 📊 Who Wins and Loses from the Stablecoin Boom Category Winners Losers Consumers Anyone earning >0.03% yield on cash, with custody over their own money Anyone stuck in a low-yield bank account or unaware of stablecoins Stablecoin Issuers Circle (CRCL) , Figure (YLDS) , Tether , eventually Visa/Amex Shadow issuers who can’t prove 1:1 backing Mega Banks JPMorgan (JPM) , Citigroup (C) , Bank of America (BAC) —for now, they get large deposit flows from stablecoin reserve accounts Regional banks like NYCB, ZION, or SVB-style tech lenders —these lose sticky retail deposits Brokerages/Platforms Coinbase (COIN) becomes the new “checking account” for many Legacy retail brokers not integrating stablecoin rails Payments Visa (V) and AmEx (AXP) if they tokenize their brands Discover , PayPal , Mastercard if they resist adaptation Treasury Massive new demand for T-bills = lower funding costs May face duration mismatches or systemic risks if stablecoin redemptions surge suddenly 🧨 But Here’s the Real Rub… Stablecoins are draining the cheap deposits that regional banks rely on to fund loans. And they’re replacing them with volatile, high-balance, uninsured corporate accounts . That’s exactly what triggered the Silicon Valley Bank collapse. And the irony? Circle , one of the largest stablecoin issuers, had billions at SVB before the collapse. It got lucky when the government stepped in. But what happens next time? 🔮 Implications: What Happens Over the Next 36 Months? 1. Regional banks get squeezed They can’t compete on yield, tech, or convenience. They lose depositors to: Money market funds T-bill ETFs Stablecoins And they’re left with higher cost of capital and reduced lending capacity. 2. Payment rails get disintermediated Visa and Mastercard become less relevant as money settles directly over wallets and protocols. Unless they tokenize themselves (which they will), they risk Blockbuster status. 3. Treasury gets hooked Stablecoins are backed by T-bills. That’s great—for now. But if everyone’s liquidity sits in 90-day government paper, what happens in a panic? Who buys when the sell wave hits? 4. Banks get bigger, riskier Ironically, JPM and BAC may “win” on the surface—collecting larger balances. But these are hot-money deposits that can evaporate in a single blockchain-confirmed transaction. 🔍 Deep Dive: Public Company Exposure 🔼 Potential Winners CRCL (Circle) – IPO’d with massive traction, its USDC is regulatory friendly and transparently managed COIN (Coinbase) – Gains from custody, trading, and stablecoin velocity; it’s becoming the new “retail bank” for Gen Z V / AXP / JPM – If they issue their own stablecoins early FIGURE – First to launch a yield-bearing stablecoin (YLDS), with built-in distribution 🔽 Likely Losers BAC / WFC / ZION / KEY / NYCB – Retail banking is their lifeblood; without sticky deposits, their model breaks DFS / MA / PYPL – All at risk if they don’t adopt token-based systems for digital payments Unregulated or offshore stablecoins – Will face heavy scrutiny once U.S. regulation passes (GENIUS Act) 🧠 What This Means You’ve always bet on themes with asymmetric upside and misunderstood timelines . ❝ This is that moment—just like you saw with Tesla, DeepSeek AI, and anti-ARK ETF themes. Stablecoins aren’t a footnote. They are the new financial OS. 🔥 Positioning Strategy for Readers: Long Circle (CRCL) and Figure , if available Long COIN – becomes the modern retail interface to money Short undercapitalized regional banks or buy puts Long U.S. T-bill funds and brokers that benefit from demand Track GENIUS Act progress closely – catalyst-driven opportunity Monitor any announcement from Visa, AmEx, or JPM on token launches 🧠 Final Take Porter Stansberry’s “banks are f***ed” thesis may be bombastic—but directionally, he’s spot on. The same way you don't buy DVDs anymore , you won't “deposit” money at a retail bank in five years. You’ll just move capital between wallets, platforms, and protocols—with no middleman and with interest . ❝ That’s not a fintech fad—it’s the future of monetary architecture. If the dollar is going to stay dominant globally, it won’t be because of the Fed or the banks. It will be because stablecoins make the dollar usable anywhere, by anyone, in real time —and because Treasury debt is quietly being monetized through it . This is a once-in-a-generation financial dislocation. Let’s play it accordingly. 🚨 HEAT Formula Playbook: Edges The Time Will Never Be Right For Smart Beta Rob Arnott’s Firm Says the Time Is Finally Right for ‘Smart Beta’ Research Affiliates, which once criticized the popular investing strategies, now sees growing value in them www.wsj.com/finance/investing/rob-arnotts-firm-says-the-time-is-finally-right-for-smart-beta-509af50e?mod=finance_lead_pos1www.wsj.com/finance/investing/rob-arnotts-firm-says-the-time-is-finally-right-for-smart-beta-509af50e?mod=finance_lead_pos1 ❝ Smart-beta strategies simulated by Research Affiliates lagged behind benchmarks by up to roughly 6 percentage points annually from 2017 to 2024, the new paper found. Here’s the problem. Edges do exist in markets, but once you discover “smart beta” type edges like low volatility, value, etc they get arbed out….. ❝ Research Affiliates and Arnott, known as “the godfather of smart beta,” also produced a contentious article in 2016 titled, “How Can ‘Smart Beta’ Go Horribly Wrong?” It questioned the prospects of one popular smart-beta investment, low-volatility funds, which seek to fluctuate less than the market. Arnott and his colleagues argued that a deluge of money from investors had sent valuations soaring and dimmed the outlook for future returns. The edges you want to look for are structural or behavioral, or are so intensive that they can’t be arbed out. For example, a structural edge is being short VIX ETPs (through puts please) as with the built in contango they are designed to go to zero. A behavioral edge is something like 2-4 period RSI which has been around since the early 90s but still works just about as well today as it did then. We also have ETFs like BWTG that have a process that’s so intensive that nobody has the infrastructure to match it. How Did You Like Today's Newsletter Love it It's Okay Not Great Login or Subscribe to participate Before You Go Some Ways I Can Help ETFs : We offer innovative ETFs that cover all aspects of The --- H.E.A.T. Formula, Hedges, Edges, and Themes. Consulting: I'm happy to jump on the phone with financial advisors at no charge. I've built a wealth management firm and helped other advisors grow their practices through the use of substantially differentiated investment strategies. If you want to talk just send me an email at [email protected] Monthly investing webinars Rebel Finance Podcast https://www.youtube.com/@TuttleCap Wealth Management-Coming Soon Paid Newsletter Service-Coming Soon All rights reserved. Keep Reading No posts found View more caret-right 0