Postcards: An Ominous Warning in Davos

The World Economic Forum is now on Day 2, and everyone is cold. But this warning from the Institute of International Finance (IIF) is                                                                                                                                                                                                                                                                                                                                                                                                                 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: An Ominous Warning in Davos]( The World Economic Forum is now on Day 2, and everyone is cold. But this warning from the Institute of International Finance (IIF) is [Garrett {NAME}]( Jan 16   [READ IN APP](   Market Update: We start today in Yellow territory, with a keen eye on the 4,750 level for the S&P 500 as support. The Russell will again battle at the 1,950 level as we watch higher volatility today, with the VIX back near 14. I’ll write to [Republic Risk Letter readers]( as sentiments shift during the day. --------------------------------------------------------------- Dear Fellow Expat: Between targeting Bill Ackman’s wife and [this recent post]( the Senior Chief of the media outlet’s European office, I’m not sure what happened to Business Insider. This week, the UK Bureau Chief of Business Insider is attending the World Economic Forum in Davos, Switzerland. The editor. turned the website into a travel blog with train tips on how to get from Zurich to the wealthy conclave… You know… Just in case you’re in the neighborhood? “My top tip: take the train. The journey from Zurich to Davos gives you some of the best views.” - Business Insider… aka… the State of Financial Journalism. She snapped and shared pictures of her suitcase in a parking lot, a random stream in the woods, and icy roads… roads… roads. Tonight, we’ll probably get pictures of a chocolate martini with the hashtag #earnedit. It’s always weird to watch media behave this way at economic and financial events - this time basking in the glow of Davos. One must worry if certain media members are too busy getting massages and warm spas to recognize the threat issued today. It’s the 42nd year in a row that I’ve missed the World Economic Forum. And I didn’t need to travel all that way to feel the tremble across the Atlantic. [Upgrade to paid]( Forget Climate or Twitter… This Is the Real Threat The other day, I lamented that the World Economic Forum listed “Misinformation” and “Extreme Weather” as the No. 1 and 2 threats to the world in the next few years, respectively. We have real war happening in Eastern Europe and the Middle East, while the prospect of China blockading Taiwan is an emerging threat. Responsible media outlets have done the math - and the risk of war with China over Taiwan would have an impact on Global GDP that surpasses the 2008 financial crisis and the 2020 COVID pandemic by a wide margin. See for yourself. Even a blockade would affect global growth in a way that rivals 2008 or 2020. Yet, the World Economic Forum is more concerned about Twitter and Climate. It’s impossible to take these people seriously. Meanwhile, during an interview this morning in Davos, another threat emerged - one we’ve discussed at length. This couldn’t be a better time for this warning as Congress heads back to Washington to discuss another debt ceiling deal to prevent a government shutdown. Simply put, we’re on the verge of a fiscal cliff, and no one is taking it seriously. Warnings from the IIF The Institution of International Finance (IIF) is a global banking trade group based in Washington D.C. Its CEO, Tim Adams, warned this morning that we are experiencing the highest debt levels of a nonwar period in modern economic times. And it’s not just government. This massive debt bubble stretches to households, companies, and municipal levels. The U.S. government is currently running a deficit that’s 7% of GDP while spending at levels rarely seen during times of no war. “We need sobriety,” Adams said. “And we need to focus on how we are going to get our fiscal house in order.” It’s not just the United States. Global debt hit $307.4 trillion during the third quarter of 2023, and the IIF expects that figure to increase to $310 when the numbers are tallied for the yearend. But that’s just the appetizer for the year ahead. Once the government shutdown is avoided, Janet Yellen will get to work.  She and the financial leaders of Japan, the United Kingdom, and the Eurozone will unleash a hellscape of bonds that haven’t been witnessed with human eyes. They will – combined – sell a net $2.1 trillion in bonds to finance just 2024 spending. That’s a 7% jump from last year, according to Bloomberg.  Here’s the rub. All this spending doesn’t guarantee… let alone… develop real growth…  We continue to spend an incredible amount of money to generate very little return in growth, a trend that has been a problem for decades. Between 2000 and 2020, global governments brought $150 trillion in debt into existence, only to see $42 trillion in growth.  Global citizens are paying attention, especially as central banks debase currencies and the cost of living rises. There are more elections this year than at any time ever. And this massive fiscal debt will return to roost without a profound shift in spending behaviors. The problem for so many nations - amped by dollar-denominated debt - is that getting off this train will take a lot of work. War and debt are the biggest threats to 2024 - and we’ll face some pressures in March when the Fed’s bank lending programs are supposed to wrap up. The threats continue to increase - especially in the financial plumbing of the markets. If you want unique insights on these risks - and how to turn them into opportunities - be sure to check out the Republic Risk Letter. [Upgrade to paid]( 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]()