Postcards: The "Wife's Out of Town" Starter Pack

It will be quiet for the next six days at the home. Here's the proper way to maximize the silence... ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ 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: The "Wife's Out of Town" Starter Pack]( It will be quiet for the next six days at the home. Here's the proper way to maximize the silence... [Garrett {NAME}](floridarepublic) Aug 1 floridarepublic   [READ IN APP](   Market Update: Just like that, the market gives its FOMC gains right back. Stocks that were BUYS on our radar as 20-day breakout moves have fallen back under that average and move off… as the S&P 500 yanks back under that level too. This is the nature of a higher volatility market (compared to where we were when the VIX was hovering near 12.) Back into the Yellow for the S&P 500, and the QQQs are red. It’s a very good time for investors to hedge on small-cap stocks. Tomorrow’s jobs report will be critical, but I’d anticipate more volatility as we move toward the Fed’s meeting in a few weeks in Wyoming. Already, we’re seeing some worries in Europe as their equity markets dropped after the Bank of England cut interest rates for the first time in four years. - S&P 500: Yellow and trending lower. - Russell 2000: Moving to Yellow - Nasdaq 100: Red --------------------------------------------------------------- Dear Fellow Expat: There goes the plane. My wife and daughter are off to Florida to see the in-laws. And I return to my house, where two dogs sit patiently by the door. My wife hates returning home to a dirty house—so much that she seems to have employed my daughter to give me a string of instructions before I have my coffee. “Pick up your things, clean up your dishes, and DON’T LEAVE FOOD OUT,” she said. This is from a six-year-old who is notorious for all three behaviors. There’s a simple solution to all this… The “Wife’s Out of Town” starter pack. I plan to bundle these products and sell them on Amazon.com for $135. In addition to bringing cleanliness, it will produce silence on the back end of the trip. - This is the “Wife’s out of town” starter pack: Paper plates, plastic cups, plastic cutlery, paper towels, disposable food containers, trash bags, cleaning wipes, aluminum foil cooking pans, and a disposable tablecloth. Food-wise, it’ll gonna run me $200… maybe much more. - Meat: This involves Porterhouse steaks, a Delmonico, organic chicken, lamb chops, swordfish, tuna steak, and plenty of bone broths. I’m not cutting up any vegetables or fruits… as I don’t need Green pepper seeds on the floor. There are a few apples here already, but this will largely be an experiment in carnivore land. And clothing? - Disposable: I can just wear all the T-shirts and pants a size too big I was going to throw away… (or donate). As far as I’m concerned, I’d be a ghost… and I won’t get yelled at come Tuesday… The dogs? Well, they’re on their own when cleaning up their messes… Let’s talk about the markets… and how they actually work. [Upgrade to paid]( How the Markets Work For anyone paying attention to mergers and acquisitions in today’s market, the most important combination of the last 18 months… The merger between the Federal Reserve and Janet Yellen’s Treasury Department. Over the last year, we’ve discussed Yellen's impact on the financial markets, liquidity, and overall economic growth. We’ve been told—time and time again—that this economy is rock solid. Of course, it required borrowing 6% to 7% of GDP… just to achieve 3% growth. If anyone ran a business like the government runs financial operations, they’d still be in prison. And when you peel back the onion further, you find Yellen’s fingerprints and the actions devised to ensure that the music will keep playing. I’ve been waiting for someone to quantify this argument. Finally, it arrived in a study from Hudson Bay Capital and authors Doctor Doom Nouriel Roubini and Stephen Miran. They cite a term that’s very important. It’s called Active Treasury Issuance (ATI). Sounds complicated… dull… and something you wouldn’t want to pay attention to… right? [That’s the point.]( So, consider ATI as fishbowl economists with Janet Yellen’s finger on the scale. Activist Treasury Issuance is the Treasury Department actively managing the mix of short-term and long-term government debt issuance. This isn’t predictable debt issuance. This is pretty sporadic, irregular, and at times aggressive. They increase the short-term Treasury bills and reduce the issuance of long-term Treasury notes and bonds. What does this do? It influences financial conditions and the economy similarly to the Federal Reserve's quantitative easing (QE) programs. Many analysts call this “stealth QE" because it drives market liquidity and suppresses interest rates without the Fed’s involvement. Here’s how it works. The Treasury Department increases the issuance of short-term bills and cuts the issuance of long-term bonds. This injects more liquidity into the market… Why? Short-term bills are more "money-like." They have lower risk and can be converted to cash quickly. As Hudson Bay explains, this also cuts the interest rate risk in the market, which mirrors the Fed's quantitative easing since it slashes interest rate risk at the primary source. As a result, we see looser financial conditions due to increased liquidity. The National Financial Conditions Index signals EXPANDED economic conditions the lower the reading is. So, when we were facing low economic conditions last summer - leading into that October chaos - we started to see some shifts in Treasury policy. And bam… look at how risk (red), credit (blue), and leverage (green) have all expanded greatly over the last 10 months. Isn’t finance great and cool, kids? Something… something… free market? So, how much influence does this have? After all, it can’t be breathtaking, right? The numbers show why this is stealth. Hudson Bay Capital says ATI cut 10-year yields by roughly one-quarter of a percent (25 basis points) in the last 12 months. This is the same economic stimulus that could be generated by a one-point cut in the Fed Funds rate. ATI's "stealth QE" is estimated at about $800 billion. That’s the same as a 1 percentage point cut to the Federal Funds rate. And Hudson Bay reminds us that rate cuts are the Fed’s primary tool to influence economic conditions. Remember… all that liquidity FINDS ITS WAY into the equity markets. Plus… the money will keep coming. Hudson Bay says the additional coupons from ATI are expected to be about $150 billion through the first quarter of 2025. Thanks to Janet Yellen that would be about $963 billion in Stealth QE. Sorry, short sellers. You’re playing against a stacked deck. The Reckoning Comes Hudson Bay expects this policy to become normal in election cycles - meaning that we see efforts to make the economy look rosy one year ahead of the vote. They expect this will lead to higher bouts of inflation and interest rates. Me? I’m good with it because it means I should buy 12 months out… But… here’s where the real challenges persist. At some point, the Treasury is expected to “normalize” its issuance patterns. So, they’ll term the big increases in short-term bills and roll it into longer-term debt. Whether the Fed starts buying the shorter-term bills is a question, but there should be a BIG bump in premia for long-term U.S. bonds. Hudson Bay projects that unwinding ATI will temporarily jump 10-year yields by 50 basis points (0.50%), resulting in a permanent increase of around 30 basis points (0.30%) . That will impact collateral across the markets… and likely lead to a broader selloff in the equity markets. AND… keep in mind that this would all be happening around the same time Michael Howell projects that the liquidity cycle peaks… The Fed is set to cut rates at the end of the year… and historically, that doesn’t lead to solid equity performance. Eliminate the alchemy of the Treasury Department… and we’re in for a VERY interesting 2025. I’m expecting a sizable correction in late 2025 or early 2026. For now, this market can continue its charge higher - potentially taking us as high as 6,000 on the S&P 500. From there, it would be smart to have a grocery list of things you want to buy in terms of great companies or your favorite stocks with steep upside from any sharp decline... Speaking of grocery lists… I have some steak to buy… 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]()