Postcards: Calvinball, Seasonality, Political Risk and the Weak Ahead

Did you know that there was a massive air strike in Yemen yesterday? Things are about to escalate. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ 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: Calvinball, Seasonality, Political Risk and the Weak Ahead]( Did you know that there was a massive air strike in Yemen yesterday? Things are about to escalate. [Garrett {NAME}](floridarepublic) Jul 21 floridarepublic   [READ IN APP](   Dear Fellow Expat, In the board game my daughter invented, if you roll a FOUR on your first effort, you go to a “Shop.” There, you get to choose how many spots you want to go from a “special space” near the end of the game. You bypass about 85 spaces on the board… And then you’re just five or six spots away from winning the game. Wait… I'm sorry. If you roll a THREE on your first effort, you get to go to the Shop. You just have to change the rules of the game off the bat and start on the first square instead of behind the first square. My daughter tried to change the rules after rolling a three instead of a 4… in the second game we played yesterday. You know where this is going? Calvinball. [Calvinball is a game invented]( by Calvin and his tiger Hobbes in Bill Watterson's Calvin and Hobbes comic strip. The game's only rule is that each game must be different and fun, and players can make up and change the rules at any time. I stopped her from advancing from that new starting spot… Then, I pointed out two things. First, I’m not a Stuffed Tiger who comes to life to agree with her. Second, don’t do that. She pouted… whined “Okay…” and then decided to proceed three spots (just short of the “Shop.” She still had a shot to roll a one with the next turn and still rig this game., Few things drive me more insane than suddenly changing rules during a game. It makes me throw up my hands, flip the board, and cleanse the game with fire. But as I’ve said, our political system, our accountabilities, and everything that comes with it… this system—feels like a gigantic game of Calvinball every day. [It’s all baked into the fabric](. Trump and Interest Rates… With the odds of a Trump Presidency now sitting around 70%, I’ll dissect the argument that a Trump presidency would lead to renewed inflation. It will… especially if the Fed cuts interest rates. And… if we start talking about tariffs again. Tariffs are a form of a consumption tax. James Bianco appeared on Bloomberg this week and pointed out what is starting to look clearer to me: that the U.S. economy—the one impacted by those 5% interest rates—could have bottomed in the second quarter… Bianco has long [argued that the Last Mile of inflation]( would be the most difficult. If we do bottom out, the Fed needs to be careful heading into 2025. Fed Chair Jerome Powell said that the Fed will move on rates when it expects inflation to move toward 2%. But if he gets this wrong, he might want to start looking for speaking engagements in Yugoslavia, like the Fed Chair in the 1970s [did after failing to get inflation under control](. Speaking of Last Mile A very important Real Estate Investment Trust (REIT) is going public this week. [It’s a “Last Mile” REIT… Lineage](. I have to read the S-1, but this is a mission-critical business. This could be about a $13 billion IPO, and there’s a lot to like about this business in a world where Last Mile activity is more important than ever... But I’m waiting to hear from REIT expert Brad Thomas on the company … and what we can expect. Bombing in Yemen This slipped under the radar for most people this weekend. From NPR: “Israel said Sunday it carried out a retaliatory airstrike on a key port in Yemen in an attempt to prevent the ongoing delivery of weapons to the Houthi militia by Iran. The Israeli bombing raid on Saturday evening ignited huge fires at oil and gas storage tanks in Yemen’s port of Hodeidah on the country’s Red Sea coast.” The strike killed three people and injured another 80 more. Israeli planes traveled more than 1,000 miles to strike the port… one of the longest missions ever. This is just a reminder that when it comes to Political Risk, it doesn’t matter who the nation is. No one likes it when you target oil and gas storage because it creates huge vulnerabilities—especially in an impoverished country like Yemen, where food delivery systems operate out… of the ports. Yemen rebels are primarily funded by Iran, which means… someone is coming to the rescue with funds. Just when these headlines had faded heading into the summer… now we might see a resurgence of shipping disruptions again in the Red Sea - and the threat of further escalation across the Middle East. What’s Next for Markets? As I noted, there’s been a good run for small-cap stocks against their Mega Cap rivals. This is the first time we’ve seen this sort of behavior in… (checks cheap fitness watch through which the Chinese Communist Party probably has my health data)… 21 years. Well, this is where it gets interesting. Historically, during election years, the first two weeks of July are great. And then… that’s where we tend to see a peak. Volatility tends to pick up during historical election years. Remember, this doesn’t mean that the market will tank—it just means that we can expect some wilder moves in the equity markets. And why not? It’s not like this election will be calm… Monday, July 22, 2024 Event: The Farnborough International Airshow Republic Speak: This is one of the weirder events in the world. It’s a static air show of large aviation craft, with people just hanging out near the runway with disposable cameras (if they’d like). But this year's big news is that Boeing won’t be showcasing ANY aircraft as it continues to focus on safety and trying to avoid headlines. This is an event from which companies receive orders for new aircraft, and two years ago, Boeing got 176 orders (double its rival Airbus). The company just agreed to plead guilty to one count of defrauding the Federal Aviation Administration (FAA). Naturally, no person will go to prison over the crime. Tuesday, July 23, 2024 Event: Alphabet (GOOG), Coca-Cola (KO), Phillip Morris (PM) Earnings Republic Speak: It was a really good day of earnings reports from great, capital-efficient companies. Tesla will steal the headlines, but it’s really important to use this week to understand how the sentiment is shifting back from the multiple expansions (PE ratios, EV/EBIT) to earnings-driving price movement. Any weakness in Alphabet will likely create a buying opportunity, and I’d love to see Coca-Cola pull back under $60 somehow. As we said over at Republic Risk recently, PM is a Buy. Wednesday, July 23, 2024 Event: June New Home Sales Report Republic Speak: I’m not sure what to expect out of the new home sales report, but I can’t imagine that this is going to go well. Affordability is still bad in the housing sector, and interest rates remain elevated. But we continue to see a lack of supply on the market, and the government (stupidly) keeps trying to pump new credits and subsidies to first-time buyers who can’t afford the damn house in the first place. [Maryland numbers weren’t good for June.]( [South Florida was even worse.]( And people think that cutting rates is suddenly going to solve the problem? Nope… everyone might try to sell simultaneously to move to a different home. The agents will do well… Plus, if the economy did bottom out… production costs may start to creep up again. We’re nowhere near the end of this saga. Thursday, July 24, 2024 Event: The start of a three-day Bitcoin 2024 Conference in Nashville will include talks by Donald Trump, Robert Kennedy Jr., Cathie Wood of ARK Invest, Michael Saylor of MicroStrategy, Vivek Ramaswamy, and Anthony Scaramucci. Republic Speak: If I’m arrested and convicted of a crime in the next 72 hours, my punishment should be that I’m forced to attend this event and cover it as a journalist - but tied up in the process like Alex in A Clockwork Orange. This feels like that SALT-FTX Conference I attended in the Bahamas, only… it’s in Nashville. Who on this speaking roster isn’t a hype person? This is the ultimate “Talk Your Book” event. Vivek Ramaswamy has started many companies… and I can’t tell you what any of them actually do. I’ve been a financial journalist for 20 years. Word is that he’s now pushing for JD Vance’s Senate seat if the vacancy opens… Cathie Wood? The same person who just moved the goalpost again on the performance of that dismal fund? [The same person who doesn’t know how insider buying works]( Is Michael Saylor going to start rambling about “one chair” again? I wouldn’t be shocked if we looked back in two months, and this conference is where Bitcoin hit a near-term peak and then pulled back into the year's final months. I might finally start selling from my October 2022 buying before this event. That’d be my first time actively selling longer-term BTC since November 2021. Friday, July 25, 2024 Event: The Summer Olympics Start Republic Speak: Do you remember the Summer Olympics? Do you care? For reasons I can’t understand, television companies keep bidding on the rights to the Olympics, and most Americans forget that they’re even happening. Pay close attention to Comcast's (CMCSA) stock, which owns NBC. Olympic Observations… - I’m setting a 50% chance that the U.S. Men’s Basketball team doesn’t win Gold. I wouldn’t bet on them with your money…The United States basketball team, full of some of the greatest players in the world, like Lebron James and Steph Curry, [nearly lost to South Sudan in a warm-up game](. It was like an NBA All-Star Game on acid. Why did this happen? They’re older, and they don’t play defense. This has 2004 written all over it. I’ll speculate on the Canadians, whose defense did well against France yesterday. - Pay attention to one man during the Olympics. Noah Lyles. Did you know that there was so much trash talk in Track? This guy’s been talking… talking… talking… for weeks and is ready to back it up. - Do you remember Butler basketball? Jimmer Freddette? [He’s headlining a team in 3X3 Basketball]( I can’t believe basketball gets two events, and we’re still waiting on Lacrosse… Hell, we’re finally getting baseball in 2028. What about Darts? Or Chess Boxing? Or Squash? Seriously… 3X3 Basketball? - Look for [Jahmal “Hard Rock” Harvey]( out of Maryland to win the Featherweight Boxing gold medal… He’s going to be a tremendous professional boxer. - French athletes achieve the lower side of the prop bet on 24.5 gold medals. There’s too much pressure at home, and host nations tend to underachieve on gold medals. France has only averaged 11 or fewer gold medals over the last few Olympics. This number makes VERY little sense to me. 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]()