Postcards: Bugs... Bugs Everywhere (The Week Ahead)

Let's talk about cicadas and more... ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ 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: Bugs... Bugs Everywhere (The Week Ahead)]( Let's talk about cicadas and more... [Garrett {NAME}]( Apr 21   [READ IN APP](   Dear Fellow Expat: In the third episode of the first season of HBO's "Silicon Valley," Peter Gregory, portrayed by Christopher Evan Welch, has a great subplot involving Burger King and sesame seeds. Gregory gets distracted by Burger King’s business model while one of his portfolio companies (a startup in which he invested) deals with a global supply chain issue. The executives at the company badly need a bridge loan (money lent to them between investment rounds to maintain operations). But Gregory doesn’t reply to their requests. Instead, he orders his employees to go to a nearby Burger King and purchase everything on the menu. Later, the food lays before him on his desk when the payoff finally arrives. The two businessmen in whom he invested snap at him, demanding that he provide a loan or else their business will fail. Their emotions do not phase him. It turns out that Brazilian and Myanmar cicadas (locusts) will emerge from their hibernation at the same time. This is a mathematical anomaly that only happens every few decades. The bugs’ emergence will create a perfect storm, decimating the sesame seed crop in both nations. As a result, Burger King—which puts sesame seeds on all of its buns—will face supply chain problems and much higher costs. Peter Gregory had made a well-time bet on sesame seed futures (betting that prices would surge due to the bugs destroying the crop.) He generates so much money - during his long, incoherent rambling about Burger King food - for his venture capital firm that he can offer a sizable loan to this startup. It is a brilliant payoff… and showcases the type of thinking Peter Theil (on whom the Gregory character is based) operates. Fast forward to reality. Time to Do… What? I received an email from the reader this morning. Hi Garrett, Im a long-time supporter of yours and I really like the market timing that you have.   I happened to see this on the internet and I’m wondering if this is a Black or Grey SWAN event.  I have not seen anything about this in the financial news.   There are two hatches of cicadas that will occur this year.   Also, if you look at the Agriculture ETF it is making new highs.  I was wondering if this is worth playing and the best way to play this?   See below, What an awesome find. The reader also showed us a picture of the Invesco DB Agriculture Fund (DBA), which has been in breakout territory since January. Let’s unpack this. First, I love getting emails like this. Our reader has showcased a perfect breakout in this fund's 20-day moving average. This is a reminder that the bulk of gains are made when things break above that 20-day moving average and catch momentum. What does catching momentum consist of? Algos and traders are aiming to buy something for $1 and sell it for $2. We showcase these types of breakouts on Friday at the Republic Risk Letter. The latest name we highlighted was Cheniere Energy Partners (CQP), which just popped back above the 20-day and pays a 6.7% interest rate. If you want to trade this name… set a 2% stop, which is AT the 20-day average. Second… look at the specific indicators that we highlight: RSI, MFI, MACD, and ADX. When did they all turn positive enough to make this a momentum buy? All four are positive when shares hit $21.50 in January. Now… is not really the time. We’re overstretched and overbought. So, how would we address the bugs… Well, we have to qualify this story. From Arkansas to Georgia to Maryland… there are a handful of crops grown in bulk. (Editor’s note: Hey, Dr. Gray… I’m finally putting that degree to work!!!) They are? - Soybeans—Soy is one of the most widely cultivated crops in these states, especially in Arkansas, which is a top-ten soybean crop producer. - Corn - Widely grown across all these states, particularly for grain and silage. - Cotton - Predominantly grown in the southern states like Arkansas, Georgia, and Alabama. - Peanuts - Georgia is one of the leading peanut-producing states. - Tobacco - Historically significant in North Carolina and Virginia. - Wheat - Common in Maryland and Virginia, often winter wheat. - Poultry feed grains—In states like Arkansas and Georgia, sorghum is primarily used to feed the poultry industry. - Rice - A significant crop in Arkansas, which is the largest rice producer in the United States. Okay… so are the cicadas going to hammer these crops? Not really. Cicadas feed on woody perennials. They might eat the roots of crops, but they don’t eat soybeans with the ferocity of me eating edamame after a few drinks. I think that this will be a “Sell the News” event - because most people don’t actually 1) understand agriculture (which is really hard and sometimes boring) and 2) understand the bugs themselves. It takes a special kind of crazy to love agriculture. I’m in that camp. I’d argue that the DBA fund is reacting more to inflation issues than it is news about bugs. But if you’re like me… and want a piece of the action… Don’t focus on the bugs. Instead, look to Farmland Partners (FPI) as a long-term hedge against inflation and rising farmland prices. Shares are under pressure right now due to high-interest rates and questions about liquidity. I think they will hit $10 in the next few weeks and then slingshot back above $12 when the Fed starts its process of winding down Quantitative Tightening. We need more agricultural land… and will run lower on it by the day. FPI is a great place to start. Don’t focus on the short-term headlines. Focus on the long-term and the fundamentals that support these companies. The smartest people I ever went to school with were Purdue agriculture grad majors. I thought I was smart, but then I [met people like Andrew Herr]( in that program, who found ways to sell multiple companies by running insane margins on gourmet cat food. (Also, I got to drink Angel’s Envy with the great Tracy Thomas, a former Nestle executive at Harry’s Chocolate Room in West Lafayette, Indiana. Great times…) It’s a reminder that good old-fashioned entrepreneurship is alive and well in America. It’s also amazing how boring old agriculture can and will make you wealthy. It’s also a lot of fun to talk about bugs on a Sunday. The Week Ahead It’s earnings week for the tech sector. Goldman Sachs (GS) has come out and recommended a sleeve of long-term S&P 500 stocks. Shockingly, these stocks are already at the top of the index by market capitalization. Full disclosure: I bought $10,000 in Alphabet (GOOGL) stock last week in my 401K. I think this stock will continue to retreat in PE ratio, and just keep generating cash flow. I have a 2026, $250 price target on it, but I recognize that it might hit $100 if there is a liquidity crisis next year. It’s a great company in theory. It’s a better hedge. April 22, 2024 Event: World Energy Conference in Rotterdam. You’ll hear from the CEO of Saudi Aramco. Republic Speak: Pretty good time to buy into the midstream for oil and gas heading into the summer. Scott and I will release our report on the midstream on May 1. Get on board now. This selloff is a blessing for names like Energy Transfer (ET) and Plains All American (PAGP). April 23, 2024 Event: General Motors (GM) earnings call. Tesla (TSLA)earnings call. Republic Speak: Bad company. But the stock is up 17% since the start of the year. I wonder if this has anything to do with the U.S. government dropping money from the sky. Dirigisme lives large… and its name is General Motors. You should pray that Tesla misses earnings and sells off comically. When our signal turns positive, the short covering may give this stock a 20% to 25% snapback rally. I don’t care about the stock… I care about the liquidity. Stay tuned. April 24, 2024 Event: Boeing (BA) earnings. Republic Speak: I’m bullish. I don’t really understand the insanity around this. Look, I understand that Boeing messed up badly. Who exactly is going to suddenly start selling planes? It’s lone rival can’t get aluminum out of Russia. Sell put spreads ahead of earnings at least 15% lower than today’s price. The $145-$150 credit spread for June 19, 2024 pays 18% with an 80% probability of profit. This is a duopoly. I’m in. April 25, 2024 Event: Super tech earnings. Alphabet (GOOGL) and Microsoft (MSFT). Republic Speak: I’m all in on Alphabet. The two-year price target is $250. Sell spreads down with a $130 level into August. April 26, 2024 Event: Exxon earnings (XOM). Republic Speak: Again… it’s earnings week. This is what you want. I love selling puts around Exxon at the $110 level ahead of earnings. I think they will fall short of expectations, but it’s too good to pass up now. Love this company. Stay positive, Garrett {NAME} Secretary of Finance 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]()