Postcards: Northern (Risk) Exposure (Green for Now)

We're in positive conditions on our signals, but worries loom large heading into the Fed meeting and ensuing conference from Jerome Powell. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ 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: Northern (Risk) Exposure (Green for Now)]( We're in positive conditions on our signals, but worries loom large heading into the Fed meeting and ensuing conference from Jerome Powell. [Garrett {NAME}]( Apr 29   [READ IN APP](   Market Update: Today's strength in Tesla (TSLA) has given this market underlying support. Small caps are getting a big bump off healthcare, and the squeeze is still on. Given the Fed meeting on Wednesday, we still recommend exercising caution. As I said, I’m bullish through at least Wednesday… but this is an EXTREMELY strong snapback for the S&P 500 since it hit oversold. Remember - short squeezes are expected when the RSI and MFI are BOTH in oversold territory. Now, the MACD is turning around and could signal a positive trend. This is the ultimate test of the 20-day and 50-day moving averages (the S&P 500 is currently sitting within fractions of a percentage point away) We’ll revisit the data. --------------------------------------------------------------- Dear Fellow Expat: I’ve given up my sunburn collection for a little while. And the pace of life is immediately different. Florida summers are when the sun shines hot enough to fry eggs and common sense. In Maryland, every season is seasoned in Old Bay and paperwork. That doesn’t change the fact that the Florida Republic is a state of mind - one we’ll be flashing here and there along the Eastern Seaboard. I’ll be tapping away up the road from Washington, D.C. while working on a project and taking easier access to Manhattan to see money managers. The dogs handled the drive well. Of course, my daughter was about as fun as a six-year-old can be in the final hour of the 18-hour trek. Her neck hurt. Her stomach hurt. She had a lot of questions… but largely varieties of the same one. When are we going to get to Maryland? “In 16 hours.” When are we going to get to…? “In 15 and a half hours…” When are we going to get… “Go to sleep!!!” We aren’t a musical family like the Griswalds. [We listened to murder podcasts.]( Finally, we crossed the Woodrow Wilson Bridge (not far from my former office in National Harbor, Maryland) and entered the state. Amelia initially wanted to see the office building. But then she learned that the nearby Gaylord National Hotel has a massive Christmas Ice! Wonderland event each year… that became the subject. Without thinking, I cost myself $50 a family member crossing that bridge (plus airfare). Never give away information you don’t need to… it will cost you money. And speaking of costing you money... The Federal Reserve. [Upgrade to paid]( Powell and the FOMC The markets continue to rebound off oversold levels from April 18-19, and our signals turned positive this morning. But there’s a lot of choppiness. I suggest you wait out this process if you’re not positioned. Long-term investors shouldn’t be dumping anything. But traders might want to keep cool. After all, Jerome Powell’s about to speak in two days. Over the last two years, relying on the Federal Reserve to gauge what to do next has been as reliable as using a roulette wheel as a compass. We’ve had multiple events where markets expected a hawkish tone, only for the central bank to adopt a dovish tone. Then, the markets would rally to overbought levels. Then, investors expected dovish language - promises of rate cuts - only to have their dreams dashed and many buyers holding the bag. With our positive signals and investors entering the pre-Fed FOMC Drift, I anticipate a lower-volume move higher on Wednesday, bringing us to the index's 20-day moving average. From there - pour a cocktail. Anything can happen. We’ve witnessed some interesting trends in the last week that defy the broader, negative tone around issues like Japan’s woes, stagflation hints, or China’s demise. It’s just one of those aggravating elements of risk - where rallies can continue despite logic, and the bottom won’t fall out even though the screws have all been unhinged. The entire situation feels like playing Jenga, and we’re running low on pieces to pull from the tower. Even global liquidity figures are dropping, and vast monetization if debt is on tap. The Fed’s Wednesday statement will provide a short-term emphasis on the market. That’s been how markets have operated for years - with the Federal Reserve (and its monetary policy) driving about 100% of this performance in the last 15 years. Algorithms are poised to profit. Funds that use payment for order flow know exactly how retail is positioned ahead of this critical data week. Short-covering accelerated last week, and momentum is growing, even after the recent selloff. The Fed will discuss interest rates and the economy and likely taper its Quantitative Tightening program, bringing some joy to algorithms. But there’s much more on the horizon. The U.S. debt situation is becoming even more unsustainable, and short-term interest rates are exploding. The 3-month Treasury bond sits at 5.38% compared to a 10-year bond at 4.62%. This is not a pretty picture of stability - and short-term borrowing costs are eye-watering. But with the government running massive deficits and borrowing costs rising, the Fed is backed into a corner. This is all self-inflicted, resulting from politicians buying into the madness of delusional economists who sell the absurd belief that deficits don’t matter. If that’s the case, why are we paying taxes? To stabilize this, I’ve warned [about fiscal repression on the horizon](. The Fed must use massive debt monetization to suppress short-term rates and help the government avoid massive borrowing costs. This is all happening at a time when no asset class has outperformed inflation since 2021. But gold is waking up… and flashing a HUGE warning sign about what’s coming. After all, the U.S. government sold $23 trillion in debt last year. But are we showing economic growth that can sustain this new debt? Of course not. The U.S. borrowed $2.5 for every $1 in growth it generated in Q4. Then, in Q1, growth fell while inflation rose. That’s a problem - issuing concerns about STAGFLATION in the future. The Fed must answer for this… Of course, Powell is very good at speaking and whispering sweet nothings into the ears of algorithms. So, even a hawkish-sounding tone about not being there yet will likely complement chatter about “almost being there,” that data in certain places are showing progress… and on… and on… and on. But it doesn’t hide from the fact… that while the Fed might taper this month… It will probably need to engage in massive amounts of QE in the future. That’s going to be very positive for gold and a variety of other inflation-targeting assets, which I’ll discuss tomorrow at Republic Risk. What to Do Today I’ve started a small piece of insight for readers of [Republic Risk]( each morning. It’s a simple few lines on what to do today. It’s simple and actionable. And I think in these periods, it’s really critical that you take the time. You don’t have to make an 18-hour drive with your family to devise a plan. You can do one or two simple things - and get to work. [Upgrade to paid]( Today, I told readers a few simple things. One of them… I asked: Do you have at least 5% of your assets in Gold right now? If not, why not? Can you answer this question? Answering it is part of the first step to taking action and building a well-allocated portfolio. It’s okay if you need cash to pay debt or move money around to pay bills. But this period of monetization will hit like a mule. Most Americans have no idea what a nation like Japan went through during a period of vast manipulation of bond prices. There are many ways to invest in gold - and then do nothing. Let it sit and hedge against the rest of your portfolio and the additional pressures ahead for the Fed. Tomorrow, I’ll talk more about how we got here - and the insanity that continues as people blame capitalism for inflation… instead of the damn central bank. Stay positive. Garrett {NAME} Secretary of Defense Postcards from the Florida Republic is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber. [Upgrade to paid]( 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]()