Postcards: Trade Buffett (Again) and The Week Ahead

Republicly speaking, we must prepare ourselves for a stronger U.S. dollar, higher for longer, and worry about wage growth and services inflation. Plus... a major warning sign with NVIDIA right now. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ 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: Trade Buffett (Again) and The Week Ahead]( Republicly speaking, we must prepare ourselves for a stronger U.S. dollar, higher for longer, and worry about wage growth and services inflation. Plus... a major warning sign with NVIDIA right now. [Garrett {NAME}](floridarepublic) Jun 9 floridarepublic   [READ IN APP](   Dear Fellow Expat: Away we go again. Another Federal Reserve meeting… Another massive short position from hedge funds… And never-ending questions about the reliability of government data. We have a busy week ahead… Today, we urgently discuss the market state of affairs (it’s your money)… and revisit one of the most reliable trades of the last three years. But first… [Upgrade to paid]( The Kid’s Taking to Maryland? As a child, [my father once took me to get Baby Back Ribs on a torn ACL](. I was six years old. We were sledding that day, and he hurt himself. Before going to the hospital, he still took us to the Corner Stable in Cockeysville, MD. This restaurant holds a special place in my heart. [Photo]( So, after a trip with my daughter at the gym pool’s family swim, we extended the generational story and got those ribs. I was largely intact. Not much has changed in the restaurant except for the lighting. The recipe was great, as always. I can say the same for almost everything around this town—except there was Radioshack across the street in 1987. Today, that building’s a tanning salon. Amelia played Keno for the first time… turning $10 into $16. I lost… That shared experience was an homage to my grandmother, Mary, who had a penchant for the numbers and Friday night Bingo. I escaped the restaurant, likely a few pounds heavier. Afterward we picked up a new lacrosse stick for her camp next month. I must say… I’m not ready to be a lacrosse parent in Maryland. This week, a young man—20 years my junior—who referees lacrosse and organizes tournaments told me a horror story about some of the parents around here. Not too long ago, the father of a seven-year-old implied to the organizers that he carried his gun in the car after the boy’s team went 0-3. He was mad that his SEVEN-YEAR-OLD lost lacrosse games. This isn’t unusual. I had a Little League coach whose son played on my team. He was regularly thrown out of games. Other parents avoided him. In my lacrosse years, the local parents tended to fall into three camps. They either didn’t understand the rules—like my parents. Or, they cared and, at worst - yelled at the coach about their kid’s playing time. Or, they were rabid people screaming at referees and sometimes my teammates. They made today’s howling, cursing Twitter politicos look tame. I just hope my child has fun. Whether she wants to be competitive… it’s up to her. That’s too much to ask out of kids these days. As we know, it all goes by too quickly. That was a theme of [Josh Brown's recent story about his daughter]( to prom. In it, he writes… Two clichés I find myself repeating to people with younger children - - It goes fast, enjoy it while it lasts. - The days are long, but the years are short. Sounds familiar… [He’ll never have to tell me twice.]( Now… let’s get on to what will be a quick week for many of us… Monday: There’s Money in the Buffett Trade Event(s): Reactions to the latest Buffett’s OXY Purchase Republic Speak: Warren Buffett’s Berkshire Hathaway (BRK.A) bought another $153 million in Occidental Petroleum (OXY). Berkshire bought at $59.75 per share on June 5, making this the first purchase since early February. It’s a perfect time to revisit the Buffett trade - [and over at Republic Insider,]( we’ll be recommending [our favorite trade of the last two years](. It might be in the $55-$57 range in July. Tuesday: What’s the Other Oil Play? Event(s): OPEC Monthly Oil Market Report. Republic Speak: [As I noted last week, OPEC]( world’s largest energy cartel—will start to unwind production cuts in the year's second half. This could bring nearly two million barrels of oil back online by next year. A few media outlets asked the question: Is OPEC moving forward with production hikes at a time when economic conditions appear to be weakening because of rising U.S. production? Well… Duh. It’s the United States against OPEC, The story is that the U.S. should produce nearly 14 million barrels of oil every day next year—all at a more efficient cost. All of that crude has to go somewhere. The play in oil is to ride the inventory and the pipelines—and not the price itself. Let me remind you for the 100th time this year—[there is ALWAYS money in the Midstream](. Wednesday: Prepare for The Inevitable Powell Trade Event(s): Federal Reserve Chair Jerome Powell speaks at 2:30 pm. CPI Data Republic Speak: The Consumer Price Index (CPI) comes in a few days after the jobs report shows that no one’s buying the government data. Wages continue to rise. The forecast for CPI is now at 3.4% for May. The key issue is wage growth - and we can thank the ongoing surge in government and healthcare jobs (with the latter mainly being a byproduct of government spending and bureaucracy). I am still apprehensive that the Core CPI bottomed last month - mainly on flat gasoline prices - and we see another uptick heading through the summer and into the rest of the year. We need to cut back on government spending, and we should raise rates by to 6% last year. But we didn’t because we’d have driven more banks into bust and made big short-term payments on our national debt. But instead, we’ll suffer stagflation instead. With Powell’s talk… no rate cut is coming, but the questions center on whether we’ll see two rate cuts - as predicted - in 2024. As always, [wait until the market direction until 2:35 pm]( and follow it as a trader, but be very wary about the last hour of the day. The trend has been a scream higher shortly into Powell’s speech, followed by institutional selling. I doubt that Powell will discuss that a rate hike could be on the table next year. But what’s clear is that the Fed will have an impossible task in cutting before the election without it looking political… and regardless, they can’t do so anyway because they don’t seem to understand the origins of inflation to even start. So… let’s gear up for the same nonsense we’ve been listening to for the last two years. Thursday: The Day Elon Musk Pays for Twitter? Event(s): PPI Data, Tesla (TSLA) shareholders meeting Republic Speak: Shareholders must decide whether to compensate Elon Musk, the founder of Tesla, some $56 billion. Wealth funds are lining up against the deal, but there are expectations that Musk could walk away from his business if he doesn’t get the compensation he believes he deserves. That’s a lot of money to expect, but I’m sure he could find plenty of time leading… SpaceX, X (Twitter), xAI, Neuralink, and the Boring Co. How much free time does this guy have? If we are living in a simulation, Musk likely designed it. Friday: Bank of Japan (BoJ) Monetary Policy Chat on Friday. Event(s): BoJ will talk about its rate decisions. Republic Speak: As I’ve noted, the weaponization of the Japanese Yen is one of the most important stories in the battle between the U.S. and China. There will likely be talk about needing to see more data before raising interest rates. But the reality is that this weakened Japanese currency is intentional… a rise in the Japanese rate will impact rates abroad - and could push U.S. 10-year bonds higher. All the while, America seems to hope that it can force China into a difficult situation where global trust cracks in the Yuan. It’s likely that there will be a Yuan devaluation at some point… but that exact time is nearly impossible to predict. China is a massive wild card in the next 24 months that could bring the global economy into serious peril. The threat of war in Taiwan could impact the semiconductor industry and bring multiple industries to a halt. Or, we could revisit the perils of 2015-16, when a massive Chinese economic event brought global markets much lower. Either way… stay vigiliant. You don’t get to say that you weren’t warned and “no one saw it coming.” Economics Woof… Econ P.I. takes us from worsening economic performance. Consumer sentiment doesn’t look to great at all, and I’m very worried about industrial production. There are voices out there suggesting that the Fed will cut rates due to the slump in housing and production. But - how can that happen when services inflation remains so high? How can that happen when wage growth is so high? There was a massive fiscal policy error that they just can’t correct. We printed too much money… and we gave Congress even more leeway to run massive deficits and borrow, borrow, borrow… all while rates are elevated. Now we have high services inflation, weakening private sector employment, and a host of other problems that mainstream economists just keep ignoring for the sake of political inconveinence. And Finally NVIDIA (NVDA) is the market right now… so any surprise downside would likely severely damage the NASDAQ and the S&P 500. I don’t know what to make about a company that somehow got cheaper despite the stock rising by 5x over the last year. But it did on a price-to-earnings multiple. That said, it’s important to note that this follows an incredibly close path that Cisco (CSCO) followed during the Dot-Com Bubble, starting when AOL went public in the early 1990s, compared to the 2016 statement about Alphabet being the first AI company by Sundar Pichai. This chart comes from Bespoke via Syz Group. It doesn’t mean it’ll implode, but we have to be rational about what we’re witnessing at some point. Come on… look at this chart. This is just flat-out insanity. And I’m not shorting this thing. Even in negative momentum. It’s just too damn resilient. And the market will eventually reprice that risk, or a paradigm shift will ensue. It’s getting VERY expensive to hedge against a 10% correction in the S&P 500. It’s the worst… since October 2023… when we had a rather relentless downturn and interest rates rallied to 5%. We’re nowhere close to this drama ending. 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]()