Postcards: Brace for Impact

Another day on Tamiami Trail reminds us that you always need a plan when danger lurks before you. Plus, we talk about the biggest risks for these markets 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: Brace for Impact]( Another day on Tamiami Trail reminds us that you always need a plan when danger lurks before you. Plus, we talk about the biggest risks for these markets right now. [Garrett {NAME}]( Jan 13   [READ IN APP](   Dear Fellow Expat: My wife makes fun of me for driving five miles under the speed limit on Tamiami Trail (Intrastate 41) connecting Tampa to Miami. Today was a good reminder of why I’m a defensive driver, just trying to get Amelia to the roller skating rink on a Saturday. About three miles north of Florida Republic HQ, I was driving with no one in front of me when suddenly, a Nissan Ultima slammed on its brakes in the far right lane and careened over into the center lane. I was about three seconds behind that car. It turns out that this driver missed his left turn at the strip mall with the FedEx Kinkos and the ABC Liquor Store. Maybe he had to mail a package before having another drink. In graduate school, government contractors recruited a handful of my cohort members for high-paying jobs in Kabul, Afghanistan, and Baghdad, Iraq. (One friend - a former Baltimore police officer said he felt safer in Kabul than in East Baltimore.) But Kabul wasn’t a picnic. One colleague who accepted a job said he had two training sessions that made him rethink his position: Firearms and Evasive Driving. (My police officer friend, who had worked three tours in both nations as a Marine, had taken a similar course: Crash prevention training.) It’s wise to have a plan… When you’re driving 50 miles per hour, and the driver in front of you goes from 55 mph to a light jog (that’s about 175-200 feet or three to four seconds), the natural inclination might be to check the mirrors first for a way to pivot… and then shoulder check for blind spots. There’s no time to do this. I braced for impact - and worked backward. I quickly shoved the SUV into Neutral. My hasty, partial thinking was if I crashed and the airbag knocked me unconscious… the engine would shut off as it was designed… and it would go into neutral anyway. But if the pressure sensor in the front hood doesn’t trigger? Then what? What if the guy in front of me stole his car, doesn’t have insurance (about 20% of Florida drivers don’t), or drives off for whatever reason? That’s important because… there’s a six-year-old in the car. But there was a plan behind starting in Neutral. I now had more than two seconds to react and decide to brake hard and likely crash… (not good) or maneuver around this slowing vehicle. The car to my left blind spot saw this idiot trying to get across his lane to the far left median - to turn into that strip mall. This driver was moving right - with me in a side blind spot. Meanwhile, another SUV was accelerating in the right lane, about three car lengths, and gaining to my back right. The car behind me - a pickup truck the size of Godzilla was gaining behind me. And, if I hammered my brakes, this truck driver would turn my SUV into an accordion. All this was seen in the mirrors in a little more than a second. Now… a little more than a second to impact… I swerved to the right - still in neutral - knowing that we’d now be going from an accident I didn’t cause to the possibility of a pile-up I did cause by forcing into the right lane. But I had time to peel into the grassy embankment if necessary to roll to a stop… With a very fortunate drift (as the car to the front was slowly moving left) - I avoided the backend of this car by about two feet… Next, I put mild pressure on the brake - pulled the car back into Drive - switched to gas, and triggered the paddle shifters behind the steering wheel to downshift into a lower gear - before pressing the gas and triggering up and accelerating as fast as possible back into the correct gear. The right-lane driver, now behind me, slammed the brakes - then the horn. I accelerated back into the center lane with a clear gap in all traffic. I’m sure that people probably think this was an unconventional approach, which might be the subject of debate in the comments below. But that’s enough excitement for the day… and again… I hope that the Ultima driver enjoyed his freaking wine. [Upgrade to paid]( Stop, Go, Stop, Go Investing and trading in an environment dominated by higher interest rates and non-stop speculation around central bank policy is tough. You need a plan. To zig when others are zagging… to react to the conditions in front of you. Most people under 40 - especially on Wall Street - had yet to experience anything outside of the Zero Interest Rate Policy (ZIRP) before the Fed sharply started hiking rates in 2022. Yes, we did have some smaller rate hikes in 2018. Still, the train nearly fell off the tracks by the end of the year - once again exposing the system’s ongoing flaw: The never-ending need to keep refinancing debt and the economy to prevent deflationary and debt spirals. The S&P 500 dropped 27% from January 2022 to October 2022 - largely marked by higher global rates, inflationary concerns, and global liquidity pressures. Since then, there’s been a non-stop effort to provide support across the system, with the latest efforts by the People’s Bank of China to continue fighting off its massive debt challenges and support its currency. The Bank of England threw in the towel in October 2022 - and the Fed did something similar around Mortgage Securities (helping spur an incredible rebound in home construction stocks since that time). After last year’s rally (especially the monster 4th quarter for the market out of oversold levels due to a massive selloff in U.S. Treasuries in October 2023), the question is whether this market will find another leg higher or engage in a repeat of history similar to the early even-year selloffs of 2018, 2020, and 2022. I’d love to say I know the answer - but all we can do is manage risk and react. At the moment, we’re seeing ample support from central banks. But on the counter side, a sizable amount of insider selling has been marked by a wave of SEC Form documents. And while it’s easy to argue that this is largely the result of a blackout period ahead of earnings, one must consider the “cluster selling” happening now. Cluster selling refers to a situation where a group of executives or insiders from a particular company sell a large amount of their shares within a short period. The numbers are pretty big. There were 19 different sales in 10 days at Atlassian Corp. (TEAM). There were ten different sales in 10 days at AirBNB (ABNB). There were 11 different sales in 10 days at Salesforce (CRM) - mainly by the CEO, selling almost $4 million in stock every trading day. How about four sales at more than $921 million at CCC Intelligent Systems (CCCS)? Nine sales at Microstrategy (MSTR)… Five sales at Coinbase (COIN) before this recent 17% selloff in shares over the last five days. Four sales at Eli Lilly (LLY) worth $141 million. Six sales at Doordash (DASH) worth $34 million. The list goes on for a while. Yes, many tech executives are paid in stock - but they do seem eager to sell when the market is up - no? They’re unwilling to wait for more potential gains - because their stocks might start falling if we face another market panic from February through March (a seasonal reality). The market is experiencing yet another failure to properly account for the Federal Reserve’s plans to control inflation and bring it back down to its target rate of 2%. On multiple periods dating back to the January 2022 selloff, markets had underestimated the Fed’s policy commitments, only to dump equities when the narrative shifted to “Higher Rates Ahead.” These predictable selloffs - the ones we’ve largely avoided with our Equity Strength Signals - happened from January 2022 to March 2022… April 2022 to June 2022… August 2022 to October 2022… February 2023 to March 2023… and August 2023 to October 2023. Now the story is shifting from “How High…” to “How Long” will rates be high. And it’s setting up for history to rhyme again in the year ahead. We head into a short week - focusing on regional banks - not the most optimistic sector for investors over the last year - before we get into the reports of the Magnificent Seven stocks that held this market up in 2021 and 2023. Given the ever-increasing selling pressure since the Fed released minutes back on January 3, I wouldn’t be shocked by more downward pressure heading into the upcoming Fed meeting - which could reveal no rate cut coming in March. Buckle up? Nah… brace for impact. Stay positive, Garrett {NAME} Secretary of Defense 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]()