Postcards: The "O" Word...

A term that has escaped U.S. financial markets and politics has reared its ugly head, and it's clear that Americans are waking up to reality. Plus, trouble at ADM, a Pirate Looks at Shorting and more.                                                                                                                                                                                                                                                                                                                                                                                                                 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 "O" Word...]( A term that has escaped U.S. financial markets and politics has reared its ugly head, and it's clear that Americans are waking up to reality. Plus, trouble at ADM, a Pirate Looks at Shorting and more. [Garrett {NAME}]( Jan 23   [READ IN APP](   Dear Fellow Expat: In the last week, I’ve been seeing a word that not many people in America use very often. It’s typically been reserved for Russia’s economy - but it’s now evident in the U.S. political class [and the “dirigisme” that captured our economy](. That term is Oligarchy. Since Sunday, I’ve read the term from left-leaning publications like Mother Jones to lengthy [libertarian arguments at the Unherd]( or Stream. And I think [author David Samuels has knocked it out of the park]( with his description of today’s system. The new American system has little in common with the process of balancing regional interests through the two-party system, as described by 20th-century American political scientists. Today, power flows from the top down, from a set of fantastically wealthy billionaires, to a national administrative class and to a new layer of non-profit administrators, foundation executives, and NGOs, which in turn employ a floating class of hundreds of thousands of grant-makers, organizers, case-workers and protesters who serve as the shock troops… How pointed and correct. I’ve [warned about dirigisme]( economic policy) for a few years. Still, Washington's[administrative class]( and non-profit NGOs continue to benefit because they are the recipients of the American purse. If we truly need to understand why nothing gets done in the [Banana Republic]( it’s because we have to spend hundreds of thousands of dollars to [conduct years-long analyses of what a new road]( would do to duck migration or how a charging station will impact “equity.” The Brookings Institution gets paid. Universities get paid by the never-ending subsidization of student loans… and we get new books about “Reimagining Capitalism” - as if that’s the problem. The construction worker… not so much. It’s insanity. And it’s creating a poorer nation with limited income mobility. Edwards continues. (Emphasis mine). After 2008, America’s rich continued to get wildly richer while the middle class lost ground, along with the poor. Unsurprisingly, income mobility has fallen radically, from 90% for children born in 1940 to less than 50% for children born in the Eighties. American life expectancy — perhaps the most basic gauge of how people are actually doing — is also experiencing a sharp decline, despite (or because of) the fact that America adopted a universal health care system more than a decade ago. What these grim statistics still fail to capture, though, is the feeling of utter, disorienting madness that pervades so many sectors of American life these days, from universities to corporate boardrooms to social media, where people seem to find themselves advocating causes which they are often at a loss to explain. As I’ve noted, the nation's financial system and spiritual fabric took an incredible hit in 2008. The American children of the 1980s - and I’m a card-carrying member - have lived through seven financial crises as adults (Dot-Com, Housing Bubble, 2011 Crisis, 2015 Crisis, 2018 Bond Crisis, COVID Crisis, and the Fed’s interest rate crisis). Each time, policy leaders have not allowed asset prices to crash. While people panic and sell all their stocks like in March 2020 or early 2009 - they don’t go back to take advantage of the policies that socialize the losses for the few and create a system where the most basic American Dream of owning a house is unobtainable for millions. All the while, we have seen incredible consolidation fueled by blisteringly unequal policies - ones that have enriched this Elite Davos crowd and driven the wealth of the equity markets into their hands. As I recently noted, Top 10% of Americans own 93% of U.S. equities](. And it will only continue to consolidate further. When we launched the Florida Republic, our goal and vision were to reveal the insane policies that so many people fail to understand. Many Americans don’t trust the equity markets or lack the education and confidence to invest. This system, aided by financial and monetary policies that consolidate wealth and power at the top, mixes with an increasing nanny and administrative state, making it difficult for the average American to get ahead. Looking ahead, this country will continue to increase its unsustainable debt levels. At the same time, the Fed covers up Artificial Intelligence's deflation and expands its balance sheet in a never-ending refinancing scam. The equity markets will benefit. Those holding cash or facing fixed income/pensions will not. The results are clear as day - a 52% drop in the U.S. dollar in 30 years… And a more than 750% gain in the S&P 500. We don’t want to be left behind… Not anymore. Quick Notes from the Republic It’s rare these days that we have real accounting scandals reminiscent of the crises we faced before the passage of the Sarbanes-Oxley Act (Enron, WorldCom). But Archer Daniels Midland (ADM) - a previous favorite stock at the onset of the Ukraine War - is facing an SEC probe on its books, all while its CFO was put on leave. Shares cratered by 24% on Monday when the news broke. Let’s pay close attention to the company's executives and any hedge funds that might step in and buy the stock. Sometimes, crisis creates opportunity, and we’ll continue to watch the big players- maybe Bill Ackman or another big name. We’re watching those insiders, and I’ll cover it at [Republic Risk Letter]( if an opportunity emerges. A Pirate Looks at Shorting Yesterday, [we outlined our favorite Warren Buffett trade]( the “Buffett Beach” trade. This high-probability trade has been built around his insider buying since 2022. But today - I want to highlight another opportunity. We’re simply calling it “A Pirate Looks at Shorting,” and it’s a hedge trade when our Equity Strength Signal goes negative. The trade is around the ProShares Russell 2000 Short ETF (RWM). So, when our signal goes negative, we purchase this ETF… [For every 1% that the Russell 2000 drops, this ETF will increase by 1%.]( We are looking to take advantage of swift moves down, as we have seen in various selloffs, such as the March 7, 2023, banking crisis, and the October 2023 selloff. We don’t like to short the market actively, and we aren’t in the business of buying put options. However, we have a few other trades that we’ll be using all this year at the Republic Risk Letter, including a trade around Valero (VLO) that we’ll discuss this week. [Upgrade to paid]( I’ll release a short Getting Started Guide and a larger book called Fat Tails from the Florida Republic later this spring. Stay tuned. Heading North Finally, I’m flying to Baltimore this evening to visit the Marketwise offices. Scott Dunn and I will continue outlining our projects and goals for the year ahead over the next three days. We’ll also start assembling new, original research to take advantage of market opportunities, including our update on our favorite shipping names. In addition, we’ll be selecting our new Model Portfolio pick for February 1, which will include a larger report on our strategy and goals. So, be sure to join us here at the Florida Republic - and take advantage of the opportunities this market is providing. [Upgrade to paid]( 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]()