Postcards: Where Bad News is GREAT News (And Worse Journalism is Rewarded)

Before we go rollerskating on Sunday, let's dig into the week ahead... and discuss basic economics and inflation.                                                                                                                                                                                                                                                                                                                                                                                                                 Forwarded this email? [Subscribe here]() for more [Postcards: Where Bad News is GREAT News (And Worse Journalism is Rewarded)]( Before we go rollerskating on Sunday, let's dig into the week ahead... and discuss basic economics and inflation. [Garrett {NAME}]( Dec 3   [READ IN APP](   “The head of state, has called for me, by name. But I don't have time for him. It's gonna be… a glorious day!” Radiohead, Lucky Dear Fellow Expat: It was 9:30 on a Friday night, out in Monkton, Maryland. The air was cool, and the sky was clear on this farm. My friend Nick was playing guitar at a campfire. Two other friends were singing “The Sweater Song” by Weezer. The only other rustle was the crackling of the fire. It was the fall of 1999; I was 18 years old. I felt a tap on my shoulder. It was the host of our party, James – a friend of a friend. “Do you want to meet my grandfather,” he asked. I stuttered for a moment. “Yes.” We jumped into a car and rode up the hill of this long manor. Then, we walked into the house, and one of the rare media heroes stood. He was the face of the Triple Crown and the marathon voice of sobriety during the 1972 Munich Olympics. It was Jim McKay, arguably the greatest sports journalist of all time. For the next 15 minutes, we discussed media, my applications to Northwestern and Syracuse to pursue journalism, and horse racing - since it was Baltimore. It wasn’t long, but it always left an impression. It was a small moment in time – and it was one of the first and only times I was genuinely starstruck. I was very nervous – and he had to know. But he was very gracious and offered to help me in my pursuit. I’d planned to go the sports journalism route – but discovered quickly how crowded the field was in the first month of school. Who wouldn’t want to watch sports and write about it – for money? One of the first people I met in my classes at the Medill School of Journalism asked me: “Have you ever seen SportsCenter?” (ESPN’s flagship sports show). Then, there was a long pause. “I’m going to be on that show,” he said. He did, as the primary beat reporter for the Los Angeles Lakers. I never really felt a passion for sports coverage when I immersed myself in it one summer. It didn’t feel like there was a real opportunity to educate anyone. So, I took a different route.   I quit journalism before I started, worked in competitive intelligence (corporate espionage), and pivoted to Wall Street. After a few years of graduate schoolwork in economic policy, I found myself back in media – initially covering hedge funds. As I started looking at coverage of the 2008 financial crisis, I realized something. The media was reporting the origin stories wrong. How could certain media outlets blame immigrants and poor people for the housing crisis? How did the financial media not hold so many people to the fire? How did so few people understand the monetary, fiscal, and supply-side policies that created the worst financial crisis in 80 years? It’s easy to argue that a Wall Street journalist doesn’t want to blow up his book of sources by attacking the same people. But that’s a downstream issue. The answer… Few journalists are economists. Few economists are journalists. It’s a niche. Instead of digging into the rubble and exploring the cause and effect of a crisis, many rely on the biases of other so-called “experts.” What we end up with is a narrative. And it’s usually rooted in a BS political scheme. Everything was politicized. And it still is to this day. And while people think that sports and politics don’t mix… Neither should politics and basic economics.   [Upgrade to paid]( Inflation is Your Fault! It’s too nice of a day to get upset. I took my daughter to lunch. She wanted to go roller-skating. We talked (without Legos) about school and how to tackle the mathematical challenges of “subtraction.” But this morning, an article popped up in my feed that made the hair stand on my neck. It’s from The Atlantic. The headline: “INFLATION IS YOUR FAULT.” Yes, it’s in all caps. If you think that’s bad, wait for the subhead. “If people are so mad about high prices, why do they keep buying so many expensive things?” That’s a real headline published by real people who reportedly cover economic policy. The keyword to focus on in the subhead is “expensive.” “Expensive” is never adequately defined. Nearly everything people need to survive is “expensive” compared to where we were two years ago. By this logic, one can deduce that inflation would magically disappear if only people stopped buying essentials like eggs and milk. The author went to Harvard, of course. I won’t try to outdo the excellent analysis of this trainwreck [by Quoth the Raven](. This author says EVERYTHING that needs to be said. But… a few things. [Inflation is ALWAYS a monetary phenomenon]( – and we can go back to the start of this crisis… to the origins of the 2008 crisis… to the Dot Com bubble… and we will find the monetary policies of the Federal Reserve. [This is Square One.]( Fed policy meetings are the “Wet Market” of the [massive inflationary fire]( that hammered our economy. The Fed’s central planning is the very thing to which all market participants must adjust their compasses. It creates the incentives and disincentives that ultimately propelled the Bubble of Everything across all asset classes - and recently blew up the U.S. bond markets after it had to recalibrate from a decade of its own artificially low-interest rate policy. The Atlantic article never acknowledges the Fed. Its author doesn’t mention Congress. And Joe Biden is mentioned at the end - when the author excuses the President’s policies and suggests Americans are better off economically than they’re willing to admit. It’s a hell of a take. It's an absolute “Alice in Wonderland” decent into gaslighting. And Now… The Insanity Grows I had to look up the Atlantic author Annie Lowrey. And what I found was a bit more head-scratching. This author rigorously advocates for Universal Basic Income - giving people money to spend. She sees it as a solution to everything from climate change to poverty. In fact, she wrote a book on the subject called: “Give People Money: How a Universal Basic Income Would End Poverty, Revolutionize Work, and Remake the World.” The disconnect between the Atlantic’s inflation headline and her UBI advocacy (and THIS IS advocacy, not journalism) is stunning. We just engaged in one of the greatest rounds of Universal Basic Income ever. The COVID stimulus was UBI on AcidTM, a “helicopter drop” of money to anyone who wanted it. One-third of every dollar created was circulated in the last three years. How does she not even mention that long-winded post about inflation? Meanwhile, I hate to break it to Lowrey, but UBI is – by basic nature – inflationary. It’s not “hyper inflationary,” – but it is a policy artificially stimulates economic activity from the demand side of the basic economic landscape. It can produce many of the same effects of inflationary targeting by the central bank when you’re talking mass adoption. UBI without supply-side reforms is a terrible idea. Some will argue that UBI can be funded by higher taxes, but let’s be honest. The government would print or borrow here – as they do with everything. If you create money from nothing – like we just did after COVID – and you don’t have a corresponding increase in productivity, it can fuel inflation. (In fact, it did…) If UBI discourages work and reduces productivity – like the U.S. did in 2020 to keep people home – it can contribute to inflation. If UBI increases people's income and there’s no increase in supply to meet demand, then this capital can contribute to inflation. And if businesses respond to changes in this consumer purchasing power and just raise prices without increasing production (possibly because of regulatory burdens), then inflation may follow. Would any inflation caused by UBI also be the American consumer's fault? Or the result of the policy? This Atlantic piece offered zero monetary, fiscal, or supply-side policy analysis on inflation. I cannot for the life of me understand how in the hell this is so complicated for some people to understand. This is how we end up in a situation where we’ve gone from “inflation is good for you” to “inflation is your fault” in exactly two years. It is either willful ignorance or malice. It can’t be both. Now, before I pass out and they find me on the floor of this rollerskating rink, let’s talk about the week ahead. Monday: December 4, 2023 Event: The October Factory orders report arrives and won’t be good. Economists expect a 2.6% drop. Republic Speak: The narrative in this market has shifted from “How High” to “How Long” on interest rates. We just had one of the greatest months ever for the S&P 500 – and I have to tell you that we called for a squeeze based on the oversold numbers on the S&P 500 back in late October. [Narratives dominate everything in this market]( – and following our Equity Strength Signals ([Republic Risk Letter]( will be critical to helping people navigate what comes next. We are starting to see the great disconnect between economic reality and the financial markets. You see, the economy will need support from the Federal Reserve. And the Fed, to stop a recession or something worse – might start cutting interest rates sooner than later. While they provide modest support to the underlying economy, they end up pouring gasoline onto the fire of the equity markets. This has been the story of the markets for the last 15 years. Valuations are still insane – but if the central banks are pumping out capital, and the European Central Bank starts making cuts too, don’t be stunned to see a further rally. This is how it works. I hate to break it to everyone: The economy is not the market, and the market is not the economy. Eventually, funds will take profits, and the narrative will shift that everyone is worried about the state of the economy – but Quantitative Easing is rocket fuel for equities. Standby. Tuesday: December 5, 2023 Event: Toll Brothers (TOL) reports earnings. Republic Speak: I’ve been talking about Toll Brothers for five months. Some people have avoided housing while ignoring the underlying story that evolved all year. There’s still a supply shortage, and TOL is one of the names that stands out because of its strong fundamentals. You’ve got a company with an F score of 9, a Z score over 4, outstanding profitability and returns on its equity and capital, and a low buyout multiple. This stock has been cheap all year and is marching toward $100. Wednesday: December 6, 2023 Event: ADP Jobs Report and EIA Crude Inventory Levels Republic Speak: It’s the most important jobs report… EVER. There are probably balloons on the ceiling waiting to drop at CNBC studios. Meanwhile, WTI crude has been under pressure over the last two months since before [the Hamas attack on Israel](. Now, the markets face another geopolitical upheaval on news that Venezuela is voting on whether to invade neighboring, oil-rich Guyana. It’s a very odd market for energy right now, and we’re negative in the sector. I’ve largely advocated for investors to buy into oil at $75.00. Energy is lagging behind other commodities right now - and bad policies out of this climate event in Dubai will only make oil that much better of a yield source in the future. Thursday: December 7, 2023 Event: The Senate Committee on Banking, Housing, and Urban Affairs hosts its annual oversight hearing on Wall Street banks. Republic Speak: Get ready for Dirigisme Theater, as many Senators who don’t understand finance lecture their donors in person. Wednesday’s playtime cast includes Bank of America (BAC) CEO Brian Thomas Moynihan, BNY Mellon (BK) CEO Robin Vince, Citigroup (C) CEO Jane Fraser, Goldman Sachs (GS) CEO David Solomon, JPMorgan Chase (JPM) CEO Jamie Dimon, Morgan Stanley (MS) CEO James Gorman, and Wells Fargo (WFC) CEO Charles Scharf. Why do we pretend these meetings matter? Because of politics - and it’s easier to keep everyone angry on the left and the right than realizing all these problems are up and down issues that originate from the Halls of Congress. Friday: December 7, 2023 Event: The November U.S. non-farm payroll report. Republic Speak: Three letters: [J, O, B, S. Jobs](. Economists expect that employment increased by 190,000 positions in November. How are we still expanding? The logic says that the end to the United Auto Workers and Screen Actors Guild strikes are positive. However, it’s a matter of time before the narrative shifts again. Bad news may become bad news. Just be prepared for that event. If you’ll excuse me, I need to spend an outrageous amount of money on video games with my child. [Thanks, Congress](. Stay positive, Garrett 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]()