Postcards: Holy Inflation... and the Week Ahead

I'm confused about how things that used to cost $4 are now somewhere around $18.85 each. I can't be that old. Right? RIGHT? Plus, we put the coming week's events into Republic Speak.                                                                                                                                                                                                                                                                                                                                                                                                                 Forwarded this email? [Subscribe here]() for more [Postcards: Holy Inflation... and the Week Ahead]( I'm confused about how things that used to cost $4 are now somewhere around $18.85 each. I can't be that old. Right? RIGHT? Plus, we put the coming week's events into Republic Speak. [Garrett {NAME}]( Nov 25   [READ IN APP](   Last Chance… We did the Black Friday deal. The price of the Republic Risk Letter will go up when we release it to an institutional audience at the start of the year. So, this is your last chance to get 25% off - and lock in your price. [Go here… and get started on Monday.]( You’ll get full access to our Equity Strength Signals, signals for all 11 S&P 500 sectors, a deep dive each day into Insider Buying, monthly screens on various momentum and reversion opportunities, and much more. [Join us right here](. --------------------------------------------------------------- Dear Fellow Expat: My grandmother, Amelia - for whom my daughter is named - lived nearly 100 years. She was an interesting and particular woman. She’d go into hotels, try out the mattress, and demand not just a new room but a new hotel if it didn’t comfort her. She only drank once a year, typically a brandy on Christmas. She was one of the greatest card players I’ve met in my years playing worldwide. She called me her “Little Fella.” When I was seven years old - she instilled a confidence in me. She also famously predicted that most people in my generation wouldn’t know how to do most things around the house (fix their clothes, iron, do laundry) or save and manage their money. For years, she’d worked in retail at Hutzler’s - a Baltimore-based department store. She grasped consumer trends and the underlying consumer behaviors that produced economic and cultural shifts long before they became business school subjects. Amelia was born in 1908, before mass electricity, World War I, automobiles, televisions, Penicillin, plastic, microwaves, radio broadcasting, air travel, and even the Federal Reserve. She was the first of 10 children in a house the size of a shoebox and helped nurse her siblings through the Spanish Flu. She endured the Great Depression and made her clothes. She fixed everything - from holes in shirts to grandchildren’s ailments. And she made the best damn Tollhouse cookies on the planet. Two nights ago, I slept on the same pullout couch I stayed on as a kid at her apartment (in my parent’s third bedroom). She and I would watch Night Court, the Golden Girls, and Unsolved Mysteries on that couch together. She taught me to sew, cook, iron, budget, dining etiquette, and a few things about money management. And we played every card game I could think of. While we played cards, she’d talk about money from time to time. I half-paid attention at seven years old - but she was always stunned by inflation - and this was in the late 1980s. “When I was your age… [insert]… was a nickel,” she’d say. Today, I had that same feeling she held whenever she discussed the decline of the U.S. dollar’s purchasing power over her lifetime. She was born five years before the Fed’s foundation. And since 1913, this is the result. Today, I completed the bulk of my Holiday shopping. I’m trying to understand how a single pair of Fruit of the Loom sweatpants [runs for $18.85](. I’m not insane, right? That can’t be right… I understand food inflation - and yes, that loaf of white bread when I was seven was $0.61. But sweatpants inflation? I never asked my grandmother WHY things were so cheap back in her youth. And I never asked my parents the same. It took more than just economics courses in college to understand the source of this insanity. I was often misinformed by various professors who found ways to make inflation political. It was either the greedy businesses raising prices… or the workers demanding more for their labor. It’s the very same divide that today’s politicians and bureaucrats push. It’s on purpose. Today, many Americans on Twitter (or X) ask questions about inflation and the cost of living crisis. They’re always asking “Why” things are so expensive. My generation doesn’t know just about cooking (47% say they’re good cooks - which seems high) or sewing - they don’t understand the real source of inflation. Milton Friedman said, “It is always and everywhere, a monetary phenomenon. It's always and everywhere a result of too much money, of a more rapid increase in the quantity of money than an output.” This isn’t a political statement. It makes no mention of corporations. It doesn’t mention wages. It places the problem on the original source: The people who print the money and increase the money supply. And it’s not a “libertarian” talking point either. A variation of Friedman’s conclusion is on an economic blog of the International Monetary Fund. states]( Long-lasting episodes of high inflation are often the result of lax monetary policy. If the money supply grows too big relative to the size of an economy, the unit value of the currency diminishes; in other words, its purchasing power falls, and prices rise. This relationship between the money supply and the size of the economy is called the quantity theory of money and is one of the oldest hypotheses in economics. This is not hard. Anyone who says otherwise is selling you something… or trying to maintain power by distracting you with a political talking point. The Federal Reserve and the U.S. Treasury Department did this. They recently printed a third of all dollars in existence. [That’s where all problems begin.]( [Everything else is noise.]( Let’s get to the week ahead and put events into Republic Speak. Monday, November 27 Event: Santa Claus Comes to Town Republic Speak: We’re officially on the other side of the Thanksgiving run-up and heading into the period where most in the market anticipate a Santa Claus rally. Yet, we can see on the Daily Chart that we’re in overbought conditions for the S&P 500 SPDR ETF (SPY). The Relative Strength Index is 71 and the Money Flow Index is 78. SPY Daily Chart - Finviz Momentum remains extremely strong in this market, and it appears that liquidity will continue to increase in the short term (likely into the rest of the year) thanks to the Bank of Japan and China’s infrastructure spending. But remember that if we strip out the Magnificent Seven from the Russell 3000, cash beats the rest of the index for the second year. Syz Group, Via Jim Bianco I continue to argue that it’s not just the hedge funds and passive funds crowding into those Big 7 stocks but also a reflection of the collapse in Venture Capital funding. Venture capital funding in the third quarter of 2023 was down 15% from last year - already experiencing a sharp decline heading into the end of last year. Venture capital funds the technology startups that should ultimately compete against Silicon Valley’s biggest players - those very dominant Seven stocks responsible for the market’s returns this year. A lack of competition is a very important element in stock prices, as evidenced in studies on value and mean reversion by Tobias Carlisle. [Pay close attention here.]( Meanwhile, our financial system is not out of the woods. Syz Group noted this weekend that regional banks never recovered from the March 2023 crisis. Banks are sitting on $650 billion in unrealized losses, and smaller banks have about 70% of all commercial real estate loans on their books, and roughly $1.5 trillion will need to be refinanced by 2025. The long-term outlook for equities and risk assets remains strong - but there will be some nasty, brute, and short corrections along the way. [Follow our Equity Strength Signals]( to know when to hedge, short, or buy the dip. Tuesday, November 28 Event: National Retail Federation reports sales numbers from the five-day Thanksgiving holiday shopping period. Republic Speak: How much did you buy on Amazon (AMZN) this weekend? I replaced half my wardrobe, and I don’t understand prices anymore. I might have to start sheering my own sheep and purchase a loom to make some pants. Maybe I’ll start a company and teach people how to sew and make their own shirts. This is a Wedding Crashers reference, Mom. The nominal figures are expected to break records. Adobe says that online revenue increased by 7.5% compared to last year to reach $9.8 billion. Based on inflation this year, I feel like I spent at least a tenth of that figure. Wednesday, November 29 Event: An interview with Elon Musk at the New York Times DealBook Summit.  Republic Speak: Elon Musk will have many questions about Tesla (TSLA) and the state of the electric vehicle market. But with the 2024 election season approaching, expect Aaron Ross-Sorkin (assuming he’s the person doing the interview) to ask many questions about misinformation and the media. The legacy media is in a lot of trouble. It’s just a matter of time before this event is called the Substack DealBook Summit, as the New York Times fades into oblivion. Thursday, November 30 Event: PCE Core Prices report Republic Speak: If there’s anything that can reverse this market rally, it would be a surprise PCE inflation number that tops expectations. Given the market trend since the Consumer Price Index over the last few months, it's unlikely. Remember, we’re overbought, so if there’s a time for profit-taking, it would likely center around either this number or the November jobs number (on December 8). In overbought conditions, now’s the time to understand how to manage risk. Friday, December 1 Event: COP28 kicks off in Dubai. Republic Speak: Now, politicians and NGOs fly on private jets thousands of miles to save the climate. When you spend your life learning about how policy is made (the sausage of climate rules), you quickly learn about the rank hypocrisy that has run through this global grift since the Kyoto Protocol in 1995. At Hopkins, I did an intense dive into the Copenhagen Accord in 2009. During that accord, poorer nations around the globe demanded “Climate Reparations” from the wealthiest countries in the world. This would account for trillions of dollars in payment transfers. I found that the most vocal of the climate justice crowd were leaders of nations with the least economic freedom, according to rankings in the Heritage Economic Freedom Index. In essence, this whole thing feels like the Oil for Food programs that failed in the past or the anti-poverty programs that sent hundreds of billions of dollars to Africa yet never trickled down to the people. The money remained in the hands of the government officials. And they pretend that the same isn’t going to happen again if we write a blank check to Nicaragua or Botswana to build windmills? This could turn out to be one of the most exploited grifts in the history of global finance. And no one seems to care. It’s madness. This is not about the climate. It’s about money. [It always has been.]( Stay positive, Garrett {NAME} Secretary of Defense You're currently a free subscriber to [Postcards from the Florida Republic](. For the full experience, [upgrade your subscription.]( [Upgrade to paid](   [Like]( [Comment]( [Restack](   © 2023 Garrett {NAME} 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()