Postcards: Stop Me If You've Heard This One Before

Another leader says that inflation is too high... but assures us that it's coming down soon. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ 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: Stop Me If You've Heard This One Before]( Another leader says that inflation is too high... but assures us that it's coming down soon. [Garrett {NAME}]( May 30   [READ IN APP](   Market Update: This is a choppy market with a rotation from tech to real estate and financials. Every sector is now down on the week, led by a sharp drop in healthcare. Considering their momentum and financial strength, it’s a good opportunity to start thinking about the stocks that could do very well at the start of the month. A stock that I’m adding to my watch list right now is Yelp (YELP). --------------------------------------------------------------- Dear Fellow Expat: At my wife’s birthday dinner, my daughter approached my brother. She had one fist clenched, thumb-side up. Her other hand covered the closed fist like a like. “Uncle Lance,” she said, holding both hands out. “Lift the top.” He lifted her right hand to expose the clenched fist. “Now, stick your finger into the space.” He dipped a finger into the gap her index and middle fingers created. “Now, wiggle it around and take it out,” she said. He did. He waited for a moment. “Now, close the lid,” she said. He placed her right hand back over her clenched fist. Then she smiled sheepishly… [“Thank you for cleaning my toilet.”]( I’ve heard Amelia deliver this joke from the kids’ show Bluey a dozen or more times… It doesn’t get old. But what does get old? The Fed’s nonstop messaging around inflation. [Upgrade to paid]( This is Getting Old New York Federal Reserve President John Williams must think we all have amnesia. On Thursday, the Fed member said that inflation is just too high… We’re aware. But then he said the dumb part out loud: “With the economy coming into better balance over time and the disinflation taking place in other economies reducing global inflationary pressures, I expect inflation to resume moderating in the second half of this year.” We’ve heard this promise before… in 2022… in 2023… Remember “Inflation is Transitory?” Good times. Despite the belief that the Fed was engaging in Quantitative Tightening, most investors missed the punchline. Following the October 2022 crisis—and then the Silicon Valley Bank implosion in March 2023—the Feds offered significant support to the financial system. All the while, the government was spending like crazy. In the fourth quarter, we borrowed $2.50 for every $1.00 in economic growth registered. That’s not a strong economy… that’s just borrowing and spending for political purposes. Get Ready for the Fiscal Money Cannon While Williams doesn’t see rate hikes on the horizon, too many people are ignoring them as a possibility in the markets in the future. While I don’t expect a rate cut this year, I’m also wondering if there could be another hike in 2025. Markets are already pricing in that possibility for September 2025… albeit just a 1.3% chance. After the election, the calculus will change. Load up the chargers… prepare for the money cannon. Biden’s strategy will focus heavily on more capital flushing into defense, industrial policy, and alternative energy. A new stimulus bill will probably be passed almost immediately to fix broken infrastructure (who knows where the old money went?) Trump’s will spin on the focus on revising the tax cuts set to expire in 2025, domestic oil and gas production, and a wave of deregulation across the proposed Project 2025 plan. There will likely be a very strong move higher - on the back of increased liquidity - after the election and toward the end of this monetary cycle (which Michael Howell projects will end in late 2025). This opens up the concept of a market boom at the start of next year, compounded with more debt and the threat of higher rates. The issue remains a government hellbent on refinancing trillions in debt at larger volumes in the future. At some point, when the U.S. debt hits $37 trillion or more, the bond market has to look around and scream… “Really?!!” It’s abundantly clear that the Fed has lost the war against inflation. It’s rising again (and it’s been rising), all while we’re doing little to address the supply side. We’re subsidizing food, housing, electricity, education, and things that matter. And we’re doing little to cut red tape around all of them. That’s not going to stop soon. The Fed hasn’t gotten it right… and now we’re supposed to start doing so? No thanks. Follow the liquidity and the signals. All signs point to higher interest rates… and equities for longer. 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]()