In this week's Stansberry Investor Hour, Dan welcomes Matthew Tuttle to the show. Matthew is the CEO of Tuttle Capital Management, a firm that focuses on breaking away from conventional Wall Street wisdom by using its own ETFs that target new investment opportunities.

Matthew kicks things off by discussing the "death of value investing" and what he believes is contributing to it. First, with the advent of the Internet, information was more accessible to ordinary people, so a lot of the edge from learning crucial details was lost. Second, folks lost interest in value investing. When COVID-19 struck, a lot of new investors spent their stimulus checks on meme stocks instead of solid companies. But while Matthew thinks it's dead, he says the new value stocks are in heavy assets, low obsolescence ("HALO") investing. These are stocks with physical assets, so it's unlikely that even AI could disrupt them...

To me, [HALO is] the new value [investing]. Where it can work is you find companies that have assets that AI is not going to be able to kill. And you also find companies that are benefiting from AI. So, for example, Halo companies to me are like railroads. AI isn't going to put a railroad out of business, but a railroad can use AI to figure out all the logistics better... So I still think there is a place for what we have looked at as traditional value stocks. But I also think you've got to look at them now from that HALO... viewpoint.

Next, Matthew shares his disdain for exchange-traded funds ("ETFs"). He believes the majority of them "stink" and that if investors want to invest in a theme, they should completely invest in that theme. The problem, he says, is that Magnificent Seven companies are added to an ETF with the businesses having little relation to the theme, and you're probably holding them in several places. Additionally, there are "way too many ETFs, way too many indexes, [and] way too many... investment ideas" that folks are buying into. But one of the bigger problems is that ETFs are being advertised to individual investors using "marketable" people rather than proven and tested portfolio managers...

Wall Street wants faces out there. The one problem that index funds have [caused] the industry is – again, back in my day, you had star portfolio managers. You had the Peter Lynches... guys like the Warren Buffetts, guys like that. You don't have those star portfolio managers anymore. So they have to try to cobble them together. And what you get is Cathie Wood and, you know, a bunch of perma-bears.

Finally, Matthew shares the framework behind his hedging and asymmetry strategy. With hedging, you want to limit your tailing risk. However, Matthew says that bonds are not a proper hedge, and points out how "Liberation Day" and the Iran conflict saw bonds sell in tandem with stocks. With asymmetry, the idea is to limit your losses instead of your gains. Matthew says that all the top investors he has spoken with had their own methods that made them lots of money when their ideas were correct, but they only lost a little bit of money when they were wrong. It's important that you also set up your strategy work the same way. And Matthew says that going down the supply chain of breakthrough companies helps you find the best investing opportunities...

There are... a lot of chemicals that the whole AI build-out needs, and no one's thinking about those... You keep peeling the onion, and you find the names in the AI trade. For example, everything goes through copper wires. Well, that's too slow. All right. Photonics. Now the photonics stocks are ramping. We're past that. Now I'm looking at glass because for those... lights to work effectively, they need a substrate, and the best substrate is glass... And we're going to be able to keep peeling it year after year, because technology is going to continue to advance and change. As long as it doesn't kill us all, this is going to be fun for decades.

Click on the image below to watch the video interview with Matthew right now. For the audio version, click "Listen" above.

(Additional past episodes are located here.)

This Week's Guest

Matthew Tuttle is the CEO of Tuttle Capital Management and the author of How Harvard and Yale Beat the Market and Financial Secrets of My Wealthy Grandparents. He built his reputation questioning the default, torching the outdated, and creating tools for investors who refuse to settle for average. With more than two decades of experience and zero tolerance for Wall Street's cookie-cutter advice, Matthew and his team have turned the ETF space upside down. From launching headline-making funds like the Inverse Cramer ETF to developing the revolutionary HEAT Formula, Tuttle Capital has become a refuge for independent investors who like insight over "one size fits all" options.

Dan Ferris:                 Do you want to talk about the death of value? I do, too. In fact, our guest today, when he talks about the death of value, he really means it. And he describes a very compelling argument for it and what to do about it. We're not just saying value death; we're saying, "Here's what you can do about it." And the answer is not quite what most people suspect that it will be. It's a very, very interesting discussion and I want you to take notes, listen to it, think about it. It actually is something all investors ought to know about.

                                    Another thing all investors ought to know about is the Stansberry Vegas Conference. We've been doing this every year for 20 years or so and it's a great time had by all. You can find out more about it at stansberryconferencevegas.com. Stansberryconferencevegas.com. Of course, I'll be there. I'm there every single year. I've been there every year since the very first one. It's a lot of fun. All right, so let's do it. Let's talk with our guest, Matthew Tuttle. Let's do it right now.

                                    Mr. Matthew Tuttle, welcome to the show, sir.

Matt Tuttle:                 Hey, thank you very much for having me.

Dan Ferris:                 You bet – I want to talk, we've got a bunch of stuff that I want to talk to you about. But I have to start with a question that is near and dear to my heart, a topic that apparently I hadn't anticipated that it would mean as much to you as it does to me, and that is the death of value investing. I've been writing a newsletter called Extreme Value since September of 2002 –

Matt Tuttle:                 Uh-oh.

Dan Ferris:                 – which was a great moment for value, one of the few. So, we did really well out of the gate. But boy, these last – I've been saying decade, but arguably longer than that, but let's just say the last decade has been rough for value.

Matt Tuttle:                 Yeah. So, here's why I say that the death of value – and understand I grew up in Peter Lynch's hometown, so I grew up with Fidelity and all of that and around a lot of value investors. Here's where I think the problem is, though. So, back when Peter Lynch was making money, we didn't have the Internet. We didn't have Bloomberg. We didn't have AI. So, if you were smarter and you worked harder, then you could consistently find companies that were undervalued. So, my argument is, first, you had the internet, which democratized information. Then you had Bloomberg. Or maybe you had it in a different order, whatever. And now you've got AI. And so, can you on a consistent basis find companies that are undervalued that Wall Street has just missed? I would argue you can't.

                                    The other issue is you've got a lot of these value index funds that say, "Hey, because a company is undervalued, it's a good investment." So, it's got a low [price to earnings (P/E)], a low [price to earnings growth], whatever it is. But now, you've got to kind of ask yourself "Does a company have a low P/E because AI is going to kill them?" And that's a risk.

                                    The other thing I think that happened is COVID made this market thematic and people just don't care about the value stocks. You've got this whole generation now of retail investors who are buying the meme-ier-type names. But then, what you've also got is you've got the hedge funds who learned their lesson on GameStop who are now – instead of fading with the retail guys are doing, they're following them and nobody cares about these value stocks except every once in a while momentum will sell off. You have one of those days, momentum's off 5%, money goes into value and then Cliff Asness gets on TV and says, "See? Value's not dead." So, that's why I say that.

Dan Ferris:                 So, you really think it's dead. You're not – this is not sentiment for you. This is real. It's gone.

Matt Tuttle:                 I really think it's dead. Can you have some value stocks? Sure. And we – so, I look at it where I think this HALO investment idea – so, it stands for heavy asset, low obsolescence. To me, that's the new value. So, what you – where it can work is you find companies that have assets, that AI is not going to be able to kill, and you also find companies that are benefiting from AI. So, for example, HALO companies to me are like railroads. AI isn't going to put a railroad out of business, but a railroad can use AI to figure out all this – the logistics better. A Freeport-McMoRan, AI is not A) going to put them out of business, B) they need copper, and they're going to figure out how to use that. Oil and gas names, the utilities, things like that. So, I still think there is a place for what we had looked at as traditional value stocks, but I also think you've got to look at them now from that HALO, that heavy asset, low obsolescence viewpoint, instead of just saying, "Hey, a stock has a low P/E. I'm going to buy it."

Dan Ferris:                 Right. I see you've got Target and Burlington stores in there.

Matt Tuttle:                 We do. So, we've got an interesting mix of traditional value names. And so, the ETF that we have is HALX, [the Tuttle Capital] Heavy Asset Low Obsolescence [Fund]. That's how we're looking at value. And I think that's where AI is going to force people to start looking at it.

Dan Ferris:                 Yeah, and it's kind of always been that way. For example, I mentioned 2002, we were buying stuff like – top of my head, the ones I remember are Gateway and Circuit City for less than the net cash they had on hand. And they were really quick doubles, within six or eight months or something.

Matt Tuttle:                 Well, understand the world I come from where I'm an ETF guy, and these value ETFs are just simply, "Hey, a company's got a low P/E." So, what you're doing is you're actually thinking, which the ETFs are not. They're just dumb indexes, which say, "Hey, a company's got a low P/E or a low book to sales or a low this, a low that. That means we should buy it." And no. But someone like you who is actually thinking about it? Yeah. Smart guys are always going to do OK in the market.

Dan Ferris:                 So, then what we're really talking about here, we're saying value, but what maybe what we're really talking about that has survived, that's not dead, is fundamental bottom-up analysis, knowing what companies are doing and what that's worth and buying them when they're attractive.

Matt Tuttle:                 I would agree. The only thing I would add to that is think of them in this new AI lens. So, you could find a company, fundamentally everything looks great, but they're in an industry or a business or an area that AI is just going to kill them within the next year or so. But besides that... And on the other hand, if you can find a company that meets those and it's going to help AI in some way, shape, or form, then so much the better.

Dan Ferris:                 Yeah, and it's funny. We've seen the AI narrative do some weird things. And I'm thinking of trucking. One minute it was going to ruin the trucking industry and then the next minute we all realized it was going to help them become more efficient. And you could see it in the market price. I was like, "Hmm." It seems to me like we're either in very early days of this or it's really hard to figure out or something. But just looking at all the names you have, some of them are interesting. CoreWeave.

Matt Tuttle:                 Yeah, so CoreWeave, actually – this is an index that I had designed for me and CoreWeave jumped out. And basically, it got in there and it's the only tech-y, meme-y name in there. It got in there because of the infrastructure that they have, the assets that they have. But that was a weird one to me as well. I was like, "Wait, did you guys make a mistake on this index? Every one of these names?" I'm like – and it turns out CoreWeave does fit. It's not a mistake.

Dan Ferris:                 Yeah, and it's true. Everything, like Devon Energy and J.B. Hunt, even West Pharmaceutical, Old Dominion, CSX, Targa [Resources], Diamondback [Energy], Burlington Stores, FedEx – it all makes perfect sense. And then, CoreWeave. OK. All right.

Matt Tuttle:                 Yeah. You're not missing anything.

Dan Ferris:                 OK. All right.

Matt Tuttle:                 But on your trucking example, I think that's important because that's also where if you know what you're looking at, you find opportunities. So, I didn't see the trucking trade, but I saw it on cyber. So, when all of the software names sold off, they sold everything. And I'm like, "Wait a second." I get a lot of these names selling off because, yeah, AI is going to put those guys out of business. But I think more AI means we need more cyber. And so, we have our meme-y ETF. I wrote up CrowdStrike. That thing's gone parabolic.

Dan Ferris:                 Yeah, more cybersecurity is what we're talking about.

Matt Tuttle:                 Yeah.

Dan Ferris:                 Yeah. OK. Yeah, I can buy that all day long. And kind of –

Matt Tuttle:                 I don't know if I buy it now.

Dan Ferris:                 Yeah. OK. Kind of by definition, though, too, just generally speaking, more ability to create a lot of code very efficiently, maybe that puts some software engineers out of a job, but it doesn't put software companies out of work necessarily. Right?

Matt Tuttle:                 So, I do think there are some software companies that it is going to put out of business or at least make them much less valuable. And I also do think we're still in the early innings here, but the game changer for me when I was playing around with Claude Cowork. What Claude Cowork can do is just insane. And I think I'm only scratching the surface because I'm old. This stuff is all new to me. You see people on Twitter who are like using it way more than I am, but certainly what it's doing for me now is replacing two or three people.

Dan Ferris:                 Yeah, I'm still – I guess I'm in earlier – an earlier stage than you because I'm still at the point where I'm thinking, "Wow, this is amazing." And then I look into the output it gives me and I think, "OK, well, maybe not so much." I thought it was delivering A-plus work and it's more like C-minus, and I'm like, "OK." And I know investors that I meet with regularly – I'm going to meet with another group of them in a few weeks here in Vail, Colorado – they're still figuring it out. And they're – one of them, a guy named Gary Mishuris, he has this whole document that is filled with these paragraph-long prompts and things to try to do research to help him out so he doesn't have to hire a person. And – but it's still very – it all seems very exploratory to me. So, I must be in need of some AI lessons. I think I need Claude lessons, is what I need.

Matt Tuttle:                 And I'm probably not the guy to give it to you because, yeah, this is all new to me. I'm just kind of figuring it out as I go along.

Dan Ferris:                 Fair enough. All right. So, so the death of value is real, but not the death of bottom-up stock picking. That's interesting –

Matt Tuttle:                 Correct.

Dan Ferris:                 – because most guys who sell ETFs, they're benefiting from what we generally refer to as the passive investment trend, revolution, whatever you want to call it. But you're not telling me that. You're in the ETF biz, but you're you sound like you're stumping for better bottom-up fundamental-based investing.

Matt Tuttle:                 I think 99% – and I may be being kind – of ETFs out there stink. They're dumb indexes and they're marketing gimmicks. So, for example, one of the things I'm a big believer in is that if you want to invest in a theme, you should be in that theme. So, for example, we launched a space ETF two and a half months ago. It's 11 names. They are all pure play space names. But if you look at other space ETFs, they have Lockheed Martin and Boeing and companies like that, that, yeah, they make some of this stuff. But if the aliens came down and said, "Hey, you guys cannot leave the earth anymore," Lockheed Martin and Boeing would still be fine. Rocket Lab, AST SpaceMobile, yeah, those guys go out of business.

                                    So that's one area where I think the ETF industry just gets it horribly wrong. They'll slap a name on something and you think "All right, I've got quantum computing," or "I've got this, I've got that," and really, what you have is you've got some Mag Seven names, which you have 20 other places in your portfolio, and then a whole bunch of names that really don't apply. There's that. And then there's just these dumb indexes, like the value ones, where it's, "Hey, low P/E ratio is good." Well, sometimes, but not all the time. Or "High dividend is good." Well, but the company could be paying a high dividend because the stock price got cut in half.

Dan Ferris:                 But of course, Matt, you know that people have done research on these factors and they've said, "Well, over these decades and decades, this value factor –" and there are other ones, too, momentum and quality and all kinds of other – "it performed. It did great. It outperformed the market. It did great." So, that's why the value indexes exist. Right?

Matt Tuttle:                 It is. And here's my pushback on that. So, you are right. And factor investing was the thing a little while ago, momentum, quality, value, size, on and on and on. So, my argument is a couple of things. First off, if that wasn't just data mining and those factors actually worked, once you start throwing a whole bunch of money at them, they're going to stop working. And that's the issue that I have with that. So, what we teach people, we teach investors our philosophy, which is the HEAT formula. It stands for hedges, edges, asymmetry, and themes. And we do believe there are edges in the marketplace. You've got to find edges that aren't going to get arbed out. So, one edge, for example: the two-to-three-to-four-period RSI. Larry Connors developed that in the '90s. It still works. I could take a two-, three-, four-period [relative strength index ("RSI")] at a time, the S&P 500, I'm going to be right 75% to 80% of the time. And same as 10 years ago, 20 years ago. So, that's an edge that works. Something like VIX –

Dan Ferris:                 I have to ask, if that's an edge that work, why don't you just go off and do that? Why do any of the rest of it?

Matt Tuttle:                 So, it's an edge that works and it's an edge that means you've got to be in front of your computer, which I'm not. So, I used to do a lot of trading personally based on the RSI. I don't have time to trade anymore, so I don't. But if I was retired and sitting here and day trading, the RSI would be a massive part of what I do. But also, you've got to understand psychologically, not everyone can be countertrend. Me, I would much rather buy something after it's gone down 10% than buy new highs, but the individual investor, they can't do it. They're going to get FOMO and they're going to say, "Oh my God, the market just went down 20%. I've got a buy signal here. I'm not taking it." And that's the signal.

Dan Ferris:                 And stepping back more generally, an edge doesn't mean – it's not a magic money machine.

Matt Tuttle:                 Exactly.

Dan Ferris:                 An edge is the beginning of the strategy. It's not the strategy. Right?

Matt Tuttle:                 Right. When we were using RSI, we were melding it with a bunch of other things, a bunch of other names. It's just – it's interesting to me that I can use a two-to-four-period RSI to time SPY, QQQs, whatever, and have a 75% win rate. Theoretically, that should not work, but it's – and it's the same win rate as you would have had in 1992, which again, theoretically should not happen. You and I have both probably been around for a long time. I've seen a lot of edges that then disappear and this one has not.

                                    The other one I love, which, again, I don't have time to trade anymore: VIX exchange-traded products. They're designed to go to zero. So, whenever you see VIX spike and one of these exchange-traded products spike, I buy puts, because VIX, unlike the market, needs a reason to stay elevated, so eventually it's going to come back down. One of my favorite strategies. Again, I don't have time to trade it anymore. But if I did, that would be a core of what I did as well.

Dan Ferris:                 Yep. Those VIX ETFs, I really – I was way ahead of my time. I went off in a presentation in – I want to say 2014 or '15, something like that. I just – I got – I stood up and just ranted for about 10 or 15 minutes and people were like, "What are you talking about?" And then, of course, then we had the big blowups and the one that went to zero. I think it was like February 2018 or whatever. Or the "VIXmageddon" or whatever. I forget –

Matt Tuttle:                 "Volmageddon." I remember it fondly.

Dan Ferris:                 Volmageddon. There we go. That's right. So, yeah, I hear you loud and clear on that one. Let's see. So, when I go to your website, which is lovely, by the way –

Matt Tuttle:                 Well, thank you.

Dan Ferris:                 – it's got a lot of neat stuff on it, just – there's just a lot to sort of mess around with and read. And a lot of – all your ETFs and stuff, just to look at what they do and what they're about. But you call your firm Total Capital, the antidote to Wall Street. To a guy like me, that prompts the question: What's the illness? Is it what you were talking about before with all those ETFs that are just – they're sort of fee collection, asset collection strategies rather than actual products that are needed? And you're telling me that we really need your products because they follow this hedge/edge asymmetry theme thing that is real? Is that – am I reading this right?

Matt Tuttle:                 So, that's part of it. So, I started off as a broker and I was a broker during the internet bubble and what I saw was – yeah, but what I saw was horrific. The only people who made money during the internet boom were the brokers. Then, I went to a couple of insurance companies. It was just as bad. Then, I started my own wealth management firm, my ETF firm, started working with other wealth managers. And so, Wall Street is designed to make Wall Street money. Programs like CNBC are designed to make money on advertising. Look who their advertisers are. So, a guy like Jim Cramer is not an analyst. Jim Cramer is an entertainer. So, you've got all of these products that are designed with marketing in mind, designed to make Wall Street money, not designed to make you money, and all of these conflicts of interest.

                                    You don't notice because 95% of the time the market goes up. So, if you were only up 8% and you should have been up 15%, you're not going to know. You're going to be like, "Oh, this is great. I was up 8%." Guys like us are going to look and be like, "Dude, that was awful. You should have been up 15%. You're only up eight because what you were doing was stupid."

                                    So, it's not you need my products. What I think you need is actual education because unfortunately, people are getting their education from the CNBCs of the world. And that's just horrific. The only thing you're going to learn from CNBC is what not to do. So, what I want to be able to be out there with is education, ideas that aren't stuck in the '50s because most of what Wall Street tells you, the 60/40 portfolio, asset allocation, that came out of the 1950s. And if you look, every single industry we know of innovates, changes with the times. You're not riding a horse to work. You're not using an abacus. But Wall Street doesn't – the advice doesn't change unless there's something where Wall Street finds they can make money, like the factor investing, for example.

                                    So, that's what I think investors need. I mean, my products, we're launching products based on, all right, I'm teaching you these concepts, like thematic investing. I want to give you pure exposure to that theme, because I can teach you "Hey, you want to be in this theme," and then you go out and you buy an ETF that says it's got that theme but it's only 20% invested, and it gives you the Mag Seven names, which again, you've got 20 other places in your portfolio. You don't need them again. So, that's really where we're trying to make a mark, is in the education. The products are just a by the way. I mean, use them or don't use them. But if I can convince you to think differently about markets, to me, that's a win.

Dan Ferris:                 OK. Yeah, we do a lot of that around here, too. We're always trying to tell people, "Well. the narrative is – the narrative is one thing and what we really think – the way we see that things really work is quite another." And frankly, just the subject of ETFs is – it's a great place to see that. All this stuff is, as you point out, it's not true financial innovation. It's what I would call asset gathering. And did you see – I don't know if you saw this recently. Torsten Slok, the economist from Apollo, he put out a little piece – it was really just a chart with a comment that the number of ETFs exceeds the number of stocks. And that's a little bit of a hint, isn't it?

Matt Tuttle:                 Oh, yeah. Totally. There's way, way too many ETFs, way too many dumb indexes, way too many dumb investment ideas, all sorts of marketing gimmicks, ways to separate clients from their money. Wall Street is good at that.

Dan Ferris:                 OK, so let me ask you this, though. Isn't it true that that's just the way life works? You always get a million people doing the wrong thing and then you get one guy who figures it out and then that moves things forward. And then – it's always a bunch of bad ideas before you get to the good one. I think the internet bubble is a great case in point. It was true. The Internet bubble was actually correct. It changed the world. It changed the way everybody does almost everything and it really left very few people on Earth untouched. Even people who aren't necessarily online. We're all touched by this. But there were Peapod Grocer and even Women.com was one that I remember that just came and went. And there were Pets.com. We could probably name a hundred of these, if not a thousand that came into existence and went out. And that's just the way it is. And out of that, we get one Amazon.

Matt Tuttle:                 Well, yeah, I would agree with that on a stock basis, sector basis. My issue was just the structure of the way Wall Street works where you've got brokerage firms that aren't allowed to innovate and have conflicts of interest. You've got advisers who just don't have time. You're running an advisory firm, your marketing, your compliance, this and that. You don't have time. And then, you've got this media empire that's built on advertising and that advertising – so, for example, I don't remember what they did, but JPMorgan did something. And I'm talking to a reporter at a big financial publication and I mentioned it to him. I'm like "Hey, I don't know if you saw this." He's like "Oh, yeah, I saw it. I wish I could write about it, but my editor would fire me." I'm like, "JPMorgan, big advertiser. Right?" He's like, "Oh, yeah. Couldn't write about it."

                                    So, those are the conflicts of interest. And it's not disclosed. So, like Jim Cramer, I don't know if you know, I did an Inverse Jim Cramer ETF because I just got to a point – so, I did – it was the Inverse Cramer and I did Inverse Cathie Wood. And yeah, so I did those. So, Cathie Wood, she's getting brought on CNBC and everywhere. She's the next Warren Buffett. There can never be a next – Warren Buffett isn't even Warren Buffett. I think he's underperformed for the past, what, 20 years. So, there will never be another Warren Buffett.

                                    But what you're going to do by bringing her on and saying that is what happened. Can't tell you how many people reached out to me like, "Oh my God, I lost so much money because I bought when she was up 120%." And you and I know, we've seen it enough, you have a parabolic up move, you're going to retrace some or all of that at some point. And Jim Cramer is brought out over and over. "Hey, Jim, what do you think?" It's like why don't you ask Jim about what he said yesterday, which would have cost you 10%? There's no accountability. And I think my one contribution to the world is he went out on CNBC one day after I'd done my ETF and he apologized for a call. And I had a whole bunch of guys on Twitter [saying], "Thank you." Beautiful. I accomplished something. I just – I don't – just hold him accountable and don't present him as this guru that if you follow him, you're going to make a ton of money. He's an entertainer.

Dan Ferris:                 And my big problem with that whole thing is what you just named, which is that investing, research, allocating your hard-earned capital is not – there's no entertainment component here. There is – this is serious business. It's financial life or death. Even if it's not 100%, even if you don't lose 100%, losing 20% or 30% or 50% is really, really bad and you don't want to do it. And the entertainment component has no part in that. Cathie Wood's a different problem, is she? She's used as an entertainment component and she's certainly learned how to market herself in a sort of –

Matt Tuttle:                 Oh, a brilliant marketer.

Dan Ferris:                 – self-aggrandizing way. Yeah, that's right. But that's part of the – she's part of the – what you described earlier was the incentive structure of the entire industry. All the ways –

Matt Tuttle:                 Right. They need to have another Warren Buffett.

Dan Ferris:                 Right. All the ways –

Matt Tuttle:                 But there won't be.

Dan Ferris:                 No, there won't be. All the ways to make money in that whole structure, industry structure you identified, no – none of them work for the client. In other words, there's one thing that works for the client and that's giving him returns that you can justify. You can say, "Well, we're matching the market. We're beating the market a little bit and we're charging you a little bit" or "We're providing you access to the market and charging a teeny, teeny, tiny bit." Whatever it is, there's legitimate things you can do that way. But that's by and large – when you say 99% of ETFs are not – are no good, that's by and large what people are not doing. And she is not. Cathie Wood is definitely one of those folks who is not doing –

Matt Tuttle:                 Well, no, she missed this entire AI trade, which all right, if you're a value manager, sure, you missed it. But you are innovation. What's more innovative than AI? But you basically missed it. How?

Dan Ferris:                 You're the disruptive innovation person and the biggest – potentially the biggest disruption in recorded history, and you've missed it. You've missed – you're somebody who invests in communication and you missed the Gutenberg printing press.

Matt Tuttle:                 Right. Yet she still has billions because she's a marketer and they still bring her out. Whenever they want to talk about innovative technologies, she's there. It's like why?

Dan Ferris:                 It seems like the one and only thing that works is the incentive structure that says, "If I'm the manager, I lose as much as you do when we lose." That's skin in the game, as – there's a great book by Nassim Taleb that I know you've heard of called Skin in the Game, and really what it boils – skin in the game boils down to exposure to the downside. I'm exposed to the downside. She's not really truly exposed to the downside. Maybe she earns less of a fee if the assets decline, but she's still getting paid quite a bit when the assets are cut in half. That's just –

Matt Tuttle:                 Right. And she knows the Wall Street marketing machine has got to keep bringing money to her because she is marketable. Again, to her credit, she's great when she's on TV and she's marketable, and Wall Street wants faces out there. And the one problem that index funds have done to the industry – because, again, back in my day, you had star portfolio managers. You had the Peter Lynches, the Gerry Tsais, guys like the Warren Buffetts, guys like that. You don't have those star portfolio managers anymore, so they have to try to cobble them together, and what you get is Cathie Wood and a bunch of perma-bears

Dan Ferris:                 Right. We do have – I don't know, we have some stars, but you just – it's not the same. Bill Ackman's a star portfolio manager, isn't he? For example? I mean, they exist, but that whole other – the other thing is so much bigger now. It's so much bigger. Well, I don't know, I feel like we're identifying the problem map, but are we – we need to save the world here and we have a limited amount of time. We've been talking for 30 minutes or so and I don't see us saving the world here. I don't know.

Matt Tuttle:                 Well, we're trying. I'm doing your podcast. I'm writing a book, doing all sorts of stuff, trying to at least put these ideas out there into the world. You don't have to agree with me, but hopefully you can come across these ideas and at least make a decision, because I think so many investors, they don't know there are alternatives. And I think the more you can be out there pounding the table saying, "Hey, there are different ways to do this," that's the best you can do.

Dan Ferris:                 OK. Well, in the service of Matt and Dan saving in the world, we talked about edge and seam, but your framework is hedge/edge asymmetry. And so, what about hedge and asymmetry? I assume those two ideas are well represented in your ETFs.

Matt Tuttle:                 Without a doubt. So, the whole idea behind hedging is you want to hedge those tail risks, the down 20%, 30%, 40%, 50% moves. And there's no real good way to do that today unless you really know what you're doing with options.

                                    So, what I try to teach people: Bonds are not a hedge. Because that's Wall Street's answer. "Buy more bonds. Take your age minus 100. That's what you should have in stocks. The rest go in bonds." And what we've seen, 2022, Liberation Day, Iran selloff, bonds and stocks went down at the same time, number one. Number two, what we've seen – and depending on the type of, I mean, bonds are a big thing. Depending on what you have, bonds have been a drag on your portfolio for a while. And the problem is, again, Wall Street gives you this advice and it's static.

                                    So, I remember when interest rates were 20%. Interest rates go back 20%? Forget it. Buy bonds. Back up the truck, I'm going to lock in a 30-year bond at 20% all day every day. But interest rates down here? Oil up near $100. I'm not going to buy bonds. So, what we teach people is option-hedging strategies, which are very complicated. We're launching an ETF for this. The ticker symbol is OHNO – O-H-N-O. And that's going to be our preferred method. And I'm really – I'm doing it the same reason I do a lot of these ETFs, is I want to buy it. So, I used to – when I had time, I ran a very complicated option-hedging strategy. And the key to me is you've got to have puts on the market, calls on volatility, but you have to figure out a way to pay for them. You can't just say, "Hey, I'm going to buy SPY puts and hold them" because you're going to bleed. And at some point you're going to be like, "This sucks. I'm getting out." And it's going to happen right before the market crashes.

                                    So, you've got to use more advanced option strategies to hold them. I don't have time for that anymore, so we're launching OHNO. I'm going to buy OHNO with my own money because I want to have a hedge. So, that's my preferred way to hedge.

Dan Ferris:                 OHNO. "Oh no!"

Matt Tuttle:                 Hopefully within a month we'll have that out. It is, as you can imagine, complicated. It's taken me about two years to get to this point.

Dan Ferris:                 All right. Tell me about asymmetry.

Matt Tuttle:                 So, asymmetry is [limiting] your losses, not your gains. And you do a podcast – I do a podcast. I interview a lot of the top investors out there. Everybody does things differently. The one thing they all have in common is when they're right, they make a lot of money, and when they're wrong, they lose a little bit. And that to me is vitally important.

                                    And then I use – one of the other things I hate in the ETF marketplace is I hate covered call ETFs because I'm an options guy. If I am bearish on a stock – so, from time to time – and again, I don't have time anymore, but from time to time, if I'm bearish on the market, I will sell a call on ARKK because I want to keep the premium and have it expire worthless. But what's happened is the industry has come across this covered-call concept. And when I started off in the market, covered calls were something that old people did – which I'm now officially old. But back then it was old people when I was young. And you buy Procter & Gamble, McDonalds, and Coca-Cola, collect the dividends, sell a call. Not a problem with that strategy. Totally fine.

                                    Now, what you've got is people buying Palantir, MicroStrategy, Tesla, other stuff and selling calls. It's like, "Wait, that makes no sense." So, you're getting something that's very volatile, can have parabolic moves to the upside and the downside, you're retaining pretty much the entire downside, and you're capping your upside. Makes absolutely no sense to me. So, when I saw these things out there, I had to say something about it. And so, we launched this series of products where we sell puts instead of selling calls, give you the same income, unlimited upside. But that's also part of what I talk about with asymmetry. You don't want to be buying these products from Wall Street that limit your upside and retain your downside.

                                    And I would also be careful – there are products that limit your upside and limit your downside. I'd still be careful with that because, yeah, the market averages 8% to 12% a year, but that's misleading. That's like the statistician that drowned in water that averaged 12 inches deep. It's really – you've got some big years and some really bad years, but you have more big years than the bad years. So, you see a lot of these structured products. "Hey, we'll give you up to 10% of the upside and your downside can't be more than 10% or whatever." It's like, "Eh." When the market's up 30%, I want that 30% because for all of that math to work on growing your money, retiring, everything like that, I need those up 30s, and you're giving them away. So, that, that's a lot of the stuff I like to talk about with asymmetry.

Dan Ferris:                 Yeah, you not only need those up 30s, you need the individual days that make them.

Matt Tuttle:                 Yeah.

Dan Ferris:                 Those individual days, if you miss those individual days, and I forget the number of those days throughout the past 100 years, but it's a lot less than people think. You miss those individual days, you don't get that return at all. So –

Matt Tuttle:                 Right. Which is why market timing doesn't work and why I tell people have hedges. Always go to bed hedged. Market opens up down 10% tomorrow? All right, that stinks but it doesn't stink as bad because I've got some hedges.

Dan Ferris:                 Right. What's the book going to be about, Matt?

Matt Tuttle:                 So, the book is about the HEAT formula. So, hedges, edges, asymmetry and themes. So, we're going to go into depth on all of these ideas and then really take the thematic investing idea beyond, because when most people think thematic, they're like, "OK, AI." Well, yeah, but that was 2023. Things change. So, yeah, 2023, buy Nvidia. Nvidia, I would still argue, it's a must own, but you're not going to get any alpha from owning Nvidia.

                                    So, we teach people look for the bottlenecks, look at kind of what we call the thematic investment hierarchy. Who are the obvious winners? Who are the suppliers to the winners? Suppliers to the suppliers? The further you go down in that chain and keep going down in that chain, you're going to be ahead of where the Wall Street analysts are because the Wall Street analysts are only going to tell you about a stock when it's already up 300%. But if you're looking down [and saying,] "All right, who are the suppliers to the suppliers, suppliers to the suppliers," on and on and on, you're going to get these names before anybody else does.

Dan Ferris:                 You're going to buy low instead of buying high. Yeah. Yeah. I'm doing something similar because I – every time I think I'm done with the impacts of the biggest oil market disruption in history, the Iran War, I'm not done. Every time I think I'm done with it, "Oh, wait a minute." And I go farther down the supply chain and I find something else and something else and something else. And I'm finding things where I think to myself, "OK, there's a little bit of this in the stock price, but there's none of it in the financial results yet." So, I'm waiting for – so, I look at those sort of industrial-type chemical companies and various things, and the last quarter or the last year or whatever was a loss. The results are all saying cyclical lows. And then this huge disruption is saying, well, the price is up 50% to 100%, so, maybe the margins are not going to be negative anymore. And that's – it's not completely baked into the price.

                                    So, I think there's a lot to be done there, is all I'm saying. I think there's going to be 10 or 15 industries, different themes. And for example, I think stuff like helium and sulfuric acid is going to start showing up on conference calls of semiconductor companies. They're going to say, "We're paying 50% more for helium. We're paying 100% more for sulfuric acid"
or whatever their inputs are. And those are –

Matt Tuttle:                 There are also a lot of chemicals that the whole AI build-out needs and no one's thinking about those.

Dan Ferris:                 Yeah. And where they come from and how much they cost and how there's no substitute for many of them. There's just – we haven't really found a suitable substitute for a lot of these materials. And in some cases, like I covered the whole – they make plastics with naphtha a lot in Asia. We make plastics in the Gulf Coast in the United States, a lot with ethane. Ethane comes from natural gas liquids. It's like 20 cents a gallon, whereas the naphtha price, of course, gas gone through the roof because of it can't get through the Strait of Hormuz and probably won't for longer than most folks suspect. Plus the destruction of the infrastructure in that region. Anyway, I just want to – that's how I'm finding the buy low. That's how I'm doing something –

Matt Tuttle:                 Yeah. That's brilliant. You keep peeling the onion and you find the names. Like in the AI trade, for example, everything goes through copper wires. Well, that's too slow. All right, photonics. Now the photonics stocks are ramping. We're past that. Now I'm looking at glass because for those – I'm not an engineer or physicist, but for those lights to work effectively, they need a substrate and the best substrate is glass. So, now we're starting to look at that and we're looking at companies nobody is talking about. They're still all stuck on the photonics, but they got to the photonics late because they, again, weren't peeling the onion and realizing, "Man, these copper wires aren't going to support everything we need."

Dan Ferris:                 Yeah, that's actually not a bad way to look at AI, I think. A massive onion in need of peeling to really find the good bets.

Matt Tuttle:                 And we're going to be able to keep peeling it year after year because technology is going to continue to advance and change. As long as it doesn't kill us all, this is going to be fun for decades.

Dan Ferris:                 I was just going to ask – part of the narrative here is quite dark, from "put us all out of work" to "kill us all." And there's a clip that goes around social media of Bill Gates on some late-night talk show saying, "Humans aren't going to be needed for a lot of stuff." Now, when I see this, I think, well, we've said that about every major technological revolution, including the Internet. Maybe not "it's all going to kill us," but they said – the things they're saying about AI and data centers they said about railroads and textile machinery and all of it. We really – I feel like we humans just don't learn from history. I don't think – I don't know that it's – aren't there going to be – don't you expect, as the Internet did, that AI will just create businesses and whole industries that we just don't even know anything about right now?

Matt Tuttle:                 One hundred percent. Yeah, 100% I agree with that. That's happened throughout history. And again, the smarter people are going to realize that and be like, "Oh, wait, this, that" and there will be whole companies, industries we weren't even thinking about. Which also makes it interesting for guys like us because if we can find those early, we're going to make a whole heck of a lot of money because we're going to be able to find them before Wall Street is going to be able to find them. But that's going to be there. It's also going to disrupt a bunch of people. I have three kids in their 20s. I do worry about what they're doing and what they're going to be able to do. And AI does have that one lurking thing where we know the future of warfare are those Terminator robots, and we really hope that they don't become self-aware and realize what Bill Gates realized. Then we could have a problem.

Dan Ferris:                 Right. All right, Matt, it's time for our final question. Same question for every guest, no matter what the topic. If you've already said the answer to it, feel free to repeat it. And it's simply this. It's for our listeners' benefit. If you could just give them one thought today, one takeaway today, what would you like that to be?

Matt Tuttle:                 One takeaway today. I would say bonds are not a hedge.

Dan Ferris:                 Wow. I did not expect that. You said it before –

Matt Tuttle:                 Neither did I, but that sounded like the best takeaway.

Dan Ferris:                 That was the one. OK, great. And we talked about you've got your OHNO ETF coming out for hedging and a lot of ideas around that. So, yeah, OK. I like it because I like the idea of via negativa. Rather than just picking stocks all the time, and you addressed this in many of your comments, you also have to understand risk and what not to do. So, don't hedge with bonds. All right. Well, thank you for that. And thanks for being here, Matt. It was really great to talk to you.

Matt Tuttle:                 Thank you very much for having me.

Dan Ferris:                 You bet.

                                    Well, that was interesting. I've never spoken with Matt before. That was really interesting. Normally, when we talk about ticker symbols, they're usually not that person's offering. It's usually a stock they like. All the tickers we talked about, HALX – H-A-L-X, and OHNO, his upcoming ETF, they're all from Tuttle Capital Strategies. They're his ETFs. OK? But I find them interesting. I'm not saying I own them or plan to own them. I certainly love the theme of HALX, what he calls heavy assets, low obsolescence. A lot of folks, me included, have called it hard assets, low obsolescence. And you heard the types of things that are in there: trucking and railroads, things that AI – AI isn't going to change them. In fact, it may improve them and make them a lot more efficient and make the better companies even more profitable than they already are. And there were a bunch of things in there like that. Energy companies. The biggest position in there was Devon Energy, big natural gas producers. So, Devon Energy, which is a company I have recommended in one of my newsletters. Well-run energy producer. And frankly, it's been unable to catch a real serious bid. I think it's going to – I think a serious bid lies in the future of Devon Energy.

                                    So, there was a lot to talk about. We could have – I feel like we could have gone through – and I wouldn't expect this. Normally, I don't tell the guest and say, "Come on in and we'll talk about all the stuff you sell." But in this case, you can go to their website, just Google "Tuttle Capital Strategy," and go to each one and there's something to study because he has all these themes. He's got the hedge, edges, asymmetry, and themes, a lot of thematic ETFs. Just looking, he's got the HALX, the hard asset, low obsolescence. Space. We talked about the space ETF, SPCI. UFO disclosure ETF. We didn't get into that one. Meme stocks, Magnificent Seven, bitcoin, Europe, aerospace, and defense. Boy, that's been a screamer for the past several years here.

                                    So, I find that more interesting than the average set of offerings. I'm not – again, not advice. I'm not saying buy any of these. I just like to know about things like this because studying what's in them is interesting to me. I might look through that HALX ETF and find some ideas. Like, we talked about CoreWeave. I wouldn't have put CoreWeave in there but it's building infrastructure for cloud computing. Is that going to go away because of AI? I don't think so. I think we're probably going to have a lot more of it because of AI.

                                    So, it gives you a way to look at the market, which is interesting because, as I said, Torsten Slok from Apollo recently published something that said there's more ETFs than stocks now. So, finding somebody who can help you sort of look at the market in a different way is more valuable than ever because there are a million products that are looking at the market in a way that's probably, as Matt pointed out, 99% of them are probably not going to add any value, similar to what happened with mutual funds. We went through this in – I don't know if it was in the '90s or early '00s when the number of mutual funds exceeded the number of stocks and it was the same problem. Their fees were a lot higher. This is a lower fee type of a wrapper than a mutual fund, but it's the same idea. You've got to be careful. There's a billion, bazillion of them out there and you have to do work if you actually want to buy the ETFs. But if you don't want to actually buy the ETFs, just look through them. Explore the themes. That's what I like about what he's doing.

                                    So, a fun conversation. I hope you enjoyed it as much as I did. OK, that's another interview and another episode of the Stansberry Investor Hour. And remember, hit the like button and the subscribe button. And please sign up for our free daily email.

Announcer:                 Opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stansberry Research, its parent company, or affiliates.

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