Beyond the Bond Index: An Unconventional Playbook for Q4

**SPEAKER_1** (0:00)
We're going to do our ETF watchlist segment. Frances Newton is with me.
And so, CIO, Tuttle Wealth Partners. Good afternoon to you. And wanted to get your thoughts on the big picture here.

**Frances Stacy** (0:17)
Yes, so I actually just moved over and I became the CIO of Tuttle Capital Management. So that was kind of an exciting change. But yes, the big picture, really what's going to be the prevailing theme, I think, into the fourth quarter and into election season is mainly going to be this bond market and what happens around rates, considering what we think potentially the Fed is going to do, what we think potentially the Senate is going to do, and now what Trump is sort of threatening around the Fed, and then how the bond vigilantes are going to respond to what the administration and the Fed does.

**SPEAKER_1** (0:54)
All right. So when we think about the Fed, and it's still a wild card, we have no idea what the rate decision will or won't mean for the markets at this moment, but a higher rate environment, which certainly seems to be the story, particularly with the nation's debt and maybe the debasement trade. Are you hearing a lot about that?

**Frances Stacy** (1:14)
Yeah, absolutely. I mean, the thing is, is that the system is, so the problems in the system are structural. They cannot be solved just alone with monetary policy. The whole purpose of lowering interest rates is to make the cost of capital cheaper, which then has an embedded theory in it that people will borrow more money. The borrowing is already at a record rate despite the fact that rates are quite elevated. We don't yet see a lot of problems in the credit market, but we're teetering on that. The main reason that the Trump administration wants to lower rates is because we're refinancing the national debt and we have a ridiculous amount of interest due every year, over a trillion dollars.
So there are multiple things to serve here. What it's going to threaten ultimately from a currency perspective is first of all, if you try to inflate your way out of this, so you go for the easy monetary policy, purchasing a ton of bonds, issuing a ton of currency, which is the same thing there when you're talking about government bonds.
Doing all of that is trying to inflate our way out of it. Inflating our way out of it is going to lower the value of the currency and then you've got this de-dollarization sort of narrative in the background. The problem is, is it structural because you have to keep demand in the bond market. And those interests, you're serving multiple masters at that point.

**SPEAKER_1** (2:30)
Let's talk about the Porter-Stansbury All Weather Portfolio and PCPP is the ticker symbol there. And it's something a little different. It's not bonds the way we used to know it. You said it's actively managed bonds. Tell me a little bit about that and what else is in there.

**Frances Stacy** (2:47)
Yeah, so the interesting thing about Porter is Porter was sort of a long student of, you know, Harry Brown initially with the original construct of the 6040 portfolio and then Ray Dalio's all weather portfolio, which considered global macro factors. And so what he's essentially done is he's kind of put his portfolio in quarters. One is cash, which is really just short term bonds on the short side of the curve. The other is Bitcoin and gold. And we distinguish between the two because they have different demands. They're not correlated, et cetera. And then he has what he calls his Lindy stocks. These are stocks that have been around and profitable for 100 years. They have deeply entrenched distribution channels, for instance. You know, we don't, the Porter doesn't own Pepsi, but an example is that, you know, it looked like Make America Healthy again was going to disrupt some of these soda companies.
And so Pepsi then just went and acquired Poppy, right? And so, and then it was able to take Poppy, which is the healthier soda option, and put into its existing distribution channels. And so they really are going to dominate for a long time because of that infrastructure that they have in place.
And then when you look at bonds, right? TLT did not do well and doesn't do well when bonds are correlated to stocks because stocks are selling off because yields are rising, which means bond prices are going to go down when you have a bond ETF, you're exposed to the price and not the yield per se. And the problem is, is that when you buy property and casualty insurance stocks, sounds very strange. It's definitely a paradigm shift. You are actually getting actively managed bond portfolios. They are benchmarking to zero because they have to be profitable instead of benchmarking to a lagging bond index.