Postcards: Republic-fully Speaking (The Week Ahead)

We're in our first negative Equity Strength event since November. What does the market bring to us this week? And what to make of Bitcoin's massive liquidation the same day Iran attacked Israel... ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ Forwarded this email? [Subscribe here]() for more You are a free subscriber to Postcards from the Florida Republic. To upgrade to paid and receive the daily Republic Risk Letter, [subscribe here](. --------------------------------------------------------------- [Postcards: Republic-fully Speaking (The Week Ahead)]( We're in our first negative Equity Strength event since November. What does the market bring to us this week? And what to make of Bitcoin's massive liquidation the same day Iran attacked Israel... [Garrett {NAME}]( Apr 14   [READ IN APP](   Dear Fellow Expat: Yesterday, I discussed [the negative signal we experienced on Friday.]( It’s the first since November 2023, as the market pulled itself out of a liquidity-driven event fueled by 5% interest rates on the 10-year bond. There are three major themes at play: - Tax Season: Money flows out of money markets and reserves to meet tax obligations. This can create short-term issues within the financial system. Looking back to April 2022, a $600 billion drain affected the markets and took us into oversold territory in June of that year. It’s no surprise to see Bitcoin dump, as there seems to be some leverage leaving the system. Near-term risk… elevated. - Rising interest rates: Markets are on edge due to inflation concerns, affecting investor sentiment. Not only are higher interest rates a temptation for investors to take the higher rate, but higher interest rates impact margin as collateral quality teeters. We should have gone to 6% on the Fed Funds rate last year… but we didn’t… and inflation is returning. Medium-term risk… very high. - Geopolitical tension: We’re now at new near-term highs as Iran threatens retaliation against Israel. These events compound, so Russia and Ukraine remain problematic… and China is sniffing around Taiwan. Biden rushed back to the White House, and Iran started a drone attack on Israel after seizing a container ship belonging to the fleet owned by an Israeli billionaire. Near-term risk - VERY HIGH. Oil and materials are likely to move higher on Monday… Good thing we have that Strategic Petroleum Reserve to ensure that price stability… Oh… Remember—cash is a position… and your friend in these environments. I’m not suggesting that you dump everything and move to cash. Instead, we focus on using hedges - selling calls on existing positions, rotating capital to longer-term positions with greater stability, and reducing risk and leverage. We haven’t had a 2% day in a long time, and this is the environment where the machines might stop bidding. The U.S. dollar hit a 34-year high against the Japanese Yen, and foreign investors continue to boost U.S. equities. Last week, I said that April would come down to how much American taxpayers owed and how quickly Middle East tension abates. However, the “surprise” CPI figure pressed rates higher, and Middle East tensions created new upward pressures on oil, which affected consumer behavior expectations. Finally - again- yesterday’s sizable selloff in Bitcoin is not surprising… especially on a weekend after a signal moved negative. These are just further signs of short-term stress. If BTC finds itself under $56,000, it will create a great buying opportunity. The Week Ahead Quotes of the Week "In an economy that's growing faster than potential, with an unemployment rate that has a free handle, in the presence of massive and growing budget deficits and epically easy financial conditions, the idea that inflation would remain robust or even accelerate should not be a surprise to anyone, and that's what (the CPI) data suggests.” - Former Treasury Secretary Larry Summers on why CPI moved higher this week… "You have to take seriously the possibility that the next rate move will be upwards rather than downwards, and anything could happen. Markets could crash, indicators could turn down." - Former Treasury Secretary Larry Summers on what other possibilities await… "But on current facts, a rate cut in June seems to me would be a dangerous and egregious error comparable to the errors the Fed was making in the summer of 2021 when it just didn't get the thread on inflation." - Former Treasury Secretary Larry Summers on how bad the Fed is at this… Can someone at the Fed or White House… listen to the man? Summers has been correct the entire time. We should have gone to 6% on the Fed funds rate. We didn’t. We all suffer as a result. Even if they cut rates in June… they have mismanaged inflation around the things that matter: Food, energy, education, etc. None of those pre-COVID prices are ever coming back. Anyone suggesting they will bring those prices… don’t trust them…. UNLESS they announce plans to slash red tape around agriculture, energy, and manufacturing. Even then… deflation would cause problems for the Fed… because our entire financial system is built on debt and the refinancing of said debt. Our financial system is a house of cards. Act accordingly. Hedge accordingly… Trade and invest… accordingly. [Upgrade to paid]( Monday, April 15 Event: Tax Day, Bitcoin Halving, Goldman Sachs (GS) earnings. Republic Speak: You have my analysis on Tax Day and the expected drain on banking reserves. Anything that takes total reserves under $3 trillion will be a problem for the Federal Reserve (around $3.5 trillion now). See how reserves have ticked up… with support in March last year? That’s on purpose, further proof that the Fed’s Quantitative Tightening cycle hasn’t been what they had advertised. Source: Bloomberg, Fed With Bitcoin, I don’t know what to tell you. We’re in the middle of a negative signal, and BTC is just another form of capital for traders to use in periods of margin worries. I believe these long-winded buildups around events like “[The Halving]( - read that article for more insight - become “sell the news” periods. That said, anything can happen if Bitcoin handles 4.5% interest rates well. We remain long BTC and Gold as hedges against more monetization by central banks around the globe. I have nothing to say about Goldman Sachs - except that you shouldn’t trust them with any of their oil predictions… ever. “ this instead](. Tuesday, April 16 Event: IMF Outlook, Housing Starts Report Republic Speak: many people have nothing great to say about the International Monetary Fund. To say these people are out of touch would be an understatement regarding the last 25 years of fiscal and monetary policy. However, their annual outlook will impact commodity prices, particularly as they assess the state of the Chinese economy. I’m sure they’re going to blame the United States for something. This is an agency that put French Socialist Dominique Strauss-Kahn in charge, as he was part of a party that [advocated for a 75% supertax]( on the wealthy, which led to less government revenue and greater capital flight instead. Fiscal policy is not complicated, yet Ph.Ds constantly get it wrong. That all said, Dominique Strauss-Kahn [was a special kind of corrupt](. That Time Magazine headline was nearly as bad last week's OJ Simpson AP headline](. Meanwhile, housing starts arrive this Tuesday. New home prices are down 20% in the last 16 months - compared to the 43 months it took for these prices to drop ahead of the Great Financial Crisis. Why on earth would people be building new homes? Tax incentives, subsidies, and undersupply. It's simple. Wednesday, April 17 Event: The Boeing (BA) Testimony Republic Speak: Boeing’s stock value has lost one-third since the start of the year. So what’s another 15 percentage points? The company’s CEO will testify before Congress about the recent mechanical and other airplane problems. Company engineer Sam Salehpour will also outline concerns about the manufacturing and assembly of the 787 Dreamliner. If you need me… I’ll drive back to Maryland this month to visit family… Yeesh. Thursday, April 18 Event: Zoom IPO Anniversary Republic Speak: Now, here’s an incredible fact. Thursday will be the 50-year anniversary of Zoom Video (ZM) going public. Share debuted at $62.00 on April 18, 2019. On Friday, shares closed at… $61.63. But a funny thing happened on the way to this breakeven five-year period. Shares hit $559 in October 2020, the height of the post-COVID money-drop frenzy. The stock is now off nearly 90% since that top, and it’s a key lesson that fundamentals don’t matter until they do. The company has no natural moat or barriers to entry. But its balance sheet isn’t terrible. It’s cash-rich… its margins are pretty good, cash flow is excellent, and it’s not trading at like 40x revenue anymore. When our signal turns positive, I might buy this as a short-term reversion candidate, as the upside of $70 is there for a trade. Market bias is bad against this name, but things have improved on the balance sheet for the last 18 months. Friday, April 19 Event: Phish in Las Vegas, American Express (AXP) earnings. Republic Speak: I have two significant brand loyalties: Delta Airlines (DAL) and American Express (AXP). The two have an excellent program in place - and I put the bulk of my spending on AXP cards to enhance my travel ability. I’m interested in American Express because good times lead to greater rewards. However, we know that consumer credit card use is at a breakneck level, and rates are heading higher again due to inflation and mismanagement of monetary and fiscal policy. So, let’s see what happens, as this is a very important “health of the consumer” earnings report. A wise man once said, “Set the gearshift for the high gear of your soul. You've got to run like an antelope, out of control.” Two of my friends will be in Las Vegas to see Phish at the Sphere. They’ll eat grilled cheese and do that twirly dance in the parking lot. Unfortunately, I had to skip this concert, though I’m looking forward to getting to the Sphere sometime next year. Enjoy the week. Stay positive, Garrett {NAME} Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. Under company rules, editors and writers cannot recommend their positions. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.   [Like]( [Comment]( [Restack](   © 2024 Garrett {NAME} 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()