Postcards: A Cup of Coffee to the Head (Literally)

The national debt is now sitting north of $31.4 trillion. Here's an action plan to protect your portfolio and capital. To get access February's top defensive play, dive into this financial adventure.                                                                                                                                                                                                                                                                                                                                                                                                                 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: A Cup of Coffee to the Head (Literally)]( The national debt is now sitting north of $31.4 trillion. Here's an action plan to protect your portfolio and capital. To get access February's top defensive play, dive into this financial adventure. [Garrett {NAME}]( Jan 29   [READ IN APP](   “A Cup of Coffee to the Head (Literally)" is Monday’s lesson on investing and economics from the Florida Republic. Today, we came upon a nasty scene at the coffee shop, Brewed Wealth. It seems that tourists are getting restless in 2024. Let’s start our “financial adventure.” Dear Fellow Expat:  This caffeinated circus started over a clock, of all the damned things. I warned Joey not to hang it up - especially during the Florida Republic's tourist season. Visitors don’t see the world the way we do. The disquieting way the clock’s numbers tick higher – it makes you anxious. Taunting you while you wait for coffee… while you’re already stressed. I told Joey: “It’s only a matter of time." One day a tiny political tiff will spiral into a full-blown Antietam.  But this time, espresso shots will fly instead of musket balls. Customers would hurl political punches and bayonets in close quarters.  Today was the day… [Upgrade to paid]( A Literal Cup of Coffee to the Head Brewed Wealth opens at 6:30 AM on Monday in the “Florida Republic.”  I arrived an hour later to [meet Captain Eddie]( and talk markets before his first charter trip.  But this morning, Eddie was talking to the police.    Joey Jones owns Brewed Wealth. He thought it would be educational to hang a clock showing the U.S. national debt behind the counter. He thought… because he sometimes doesn’t think… it'd bring attention to our fiscal trainwreck.  Instead, it took one visitor from the Land of 10,000 Lakes to unleash the "Great Clash of Fiscal Grounds!" Pun intended. The Minnesotan saw the clock and turned to her husband. Then she mumbled, “Conservative wars will do that...” So much for "Minnesota nice." That started a wildfire. A Hulkish man, with social awareness as barren as January cornfields, overheard her. "You liberals are spending America off a cliff," he said. (Except he used a very descriptive word before ‘cliff’ and ‘liberals’.) Only in America can you hear the volley fire of "Moonbat!" "Wingnut!" "Commie!" and "Fascist!" between strangers who have never met… over something none of them understand. But each barb was sharpened with a lifetime of bitterness and cynicism. More patrons joined in. Five strangers, at 7:05 am – dug their foxholes – and hurled the names Obama, Bush, Trump, and Biden at each other. Captain Eddie didn't hear the name of even one bureaucrat or permanently bolted-in Congressional figure who fueled that $31.4 trillion in debt.  The ‘coffee shop’ Foot Soldiers of Democracy didn’t know those names.  And then, the finale: a flying coffee cup, a crumbled, hypercharged symbol of a teetering nation. It missed the head of the Iowan and hit a pregnant Clara Bennett, who’d been waiting quietly to meet her doctor.  Three police officers arrived to contain this mess. The first took the Captain and Joey’s statement. The others questioned the belligerents. They then asked Clara if she wanted to press charges. But she waddled to the cop car, opened the backseat door, and clutched her stomach.  "My water just broke," she said. For a moment… it got quiet. Sobering. Those foot soldiers started to apologize. Turns out, their childish behavior triggered life's most apolitical act: the birth of a new generation. And that generation’s newest member owed part of $31.4 trillion in debt on Day 1. On Dialogue and Debt Joey grew up in the Rust Belt. He’s about as independent as they come. He likes brewing coffee and chatting about anything - especially small businesses. As a small business owner, a lot keeps him up at night - and not just caffeine. The three big worries… One: Another "hurricane" (and we’re not only talking about the weather) would cripple his store. Two: The toxic dialogue (and I use the term loosely) in D.C. has spread across the country. Not only are people divided, but they seem to hate different opinions. And it breaks his heart. Three: He’s watching the national debt swell and wondering if there’s a plan.  Joey has a son. He has nephews. So, he thought he’d do his part. He thought it’d be smart to display a national debt clock in his shop to raise awareness of the problem. It wasn’t.  The clock was in the trash by the time I ordered my morning espresso. “I know you warned me,” he said, wiping his counter. "I thought it looked good up on the shelf." “Yes, but do you know why I told you not to put it up?” I asked, leaning over the counter and seeing a pile of spilled beans tossed by the now-banned patrons. The thing to which he drew awareness is a source of the toxic discourse he fears.  Many Americans are deeply entrenched and committed to the talking points of their side of the political aisle on the national debt issue. They're convinced by their leaders that the other side did all this spending. The U.S. national debt is not a left or right debate. It’s an up-or-down one. It's the result of reckless monetary and fiscal policy decisions that go back decades. More importantly, that debt is the result of a lack of political will to address it.  Joey nods as I say this. And as Captain Eddie has said repeatedly: "It's made worse by a lack of sound money… the lack of borders… and lack of equal accountability in the law." The nation's decaying finances and cracking foundations have a close relationship.   There’s good reason to suspect that the debt will only surge in the future too. Because that's how the American debt system functions. America's economic system is not about financing growth anymore. It's about refinancing existing debt. And if you’re one of the lucky few who benefits from all this new money creation, like Wall Street banks, hedge funds, private equity - anyone who isn’t us - it’s about exploiting that new debt for equity gains.  This subtle shift happened after the Great Financial Crisis of 2008. And the shift is ongoing. It’s only going to get worse. That's why the U.S. National Debt is the No. 1 Republic Risk Trend and Opportunity for the next decade.  We are spiraling toward $50 trillion in national debt by the end of the decade. And, yes, I said opportunity.  If all that unsound money drives the stock market to all-time highs… and it ultimately will… Well, don't let debt shock shock you. [Upgrade to paid]( The Current State of the Debt (and Some Dire Projections)  Don’t shoot the messenger or throw a coffee cup at his head. Look at the numbers prepared by the Congressional Budget Office (CBO).  The agency sees no path to grow out of our debt. In fact, they predict that the U.S. public will own almost 150% of federal debt by 2040. (And that’s just the federal debt - it doesn’t account for state, municipal, or corporate debt). They also predict insane deficits in the coming decades. We're talking deficits of 5% of GDP in this decade. They swell to 10% or more by 2053. That’s not a sustainable path. It breaks at some point. We’ll be engaging in deficit spending previously reserved for wartime and the worst financial crisis of our lives (2008). Second – zoom out from just the last 15 years.  Dollar debasement and a growing money supply (money is debt) go hand in hand. But do notice that the stock market loves cheap money in all forms.  As I’ve noted for the last month, the U.S. dollar has lost 52% of its value since 1993. However, the S&P 500 is up more than 750%.  And there’s a very important reason why. Debt forms the foundation of the financial system.  We have to refinance all that debt.  The U.S. government doesn't have trillions sitting around in a vault to pay the principal back.  So... it rolls that debt over - especially this year - at higher interest rates. In 2024, the U.S. Treasury Department will refinance at least $7.5 trillion in short-term debt. That’s more money than the entire national debt was 20 years ago, right around the time we started spending on the Second Iraq War.  Take a look at this chart. The S&P 500 is up 5,000% since 1971. Adjusted for inflation, though, it’s up 500%. That’s how badly this has gone for five decades. No one hanging out in a coffee shop did this. Decades of inflation targeting, dollar debasement, weak pro-growth policies, and worse, did.  We are the unlucky inheritors of a fiscal mess from the likes of Alan Greenspan, Ben Bernanke, and Janet Yellen.  From career politicians in Congress who oversaw these budgets for decades...  From the NGOs in D.C. who advocated for subsidies for their pet projects...  From the revolving-door Yale lawyers who haven't left that D.C. in decades. And we... we hold the bag. I propose we protect ourselves from more inflation, mismanagement, and rising interest payments.  After all, no one from Washington is coming to save us. We must stay ahead of the Federal Reserve’s and Treasury’s ongoing spiral. Here's how. [Upgrade to paid]( This Is What We Do About It Because we refinance all this debt, there will be choppy periods in the future when liquidity dries up or collateral quality weakens due to rising interest rates.  The Fed and other central banks step in often, but not for the reasons people think.  The central banks don’t interject capital because of the stock market. They interject because of the clogged plumbing in an overleveraged financial system.  The Fed can't let the system go backward, otherwise we could fall into a debt-deflation spiral. That's a situation where there isn't enough capital to go around for refinancing, and everyone starts to panic sell to raise cash.  The Fed needs to help the system refinance existing debt - to prevent liquidity even similar to post-Lehman Brothers in 2008 or the COVID crash of 2020. So the Fed and other central banks aim to prevent credit events by providing ample support to their systems. The consequence of their efforts to "save the economy" and provide liquidity is that they end up fueling financial bubbles. Nonetheless, we must play this game - and actively invest in the financial market. - Fortress Stocks are the best place to start. They are in the S&P 500 and have strong fundamentals. They have a great history of using cash flow to improve their value. They make real things and they’re necessary to our economy. We’ll have a special report on these stocks very soon. - Smart Risk Stocks: Next, own low-risk reversion candidates. These are underdogs with bulldog teeth. They have strong management, low intrinsic value, little debt, and high returns on invested capital. Our favorites this month were Teekay (TK) (up 20%) and PBF Energy (PBF) (up 10%) since our recommendations on Jan. 1. We’ll have a new pick in the Republic Risk Letter on Thursday. - Metals: Own some gold. An allocation of 5% in silver and gold will do. Gold is the ultimate protection against monetary inflation. And only 12% of Americans own gold. Don’t be the one without a chair when the music stops. - Money Markets: You need some cash while waiting for buying opportunities - and they will come. But have cash that’s earning interest. Money markets are a great choice. Don’t leave money in a checking account.    - Follow Momentum: We've got you covered if you're worried about a possible crash. Pay close attention to our Equity Strength Signals in the Republic Risk Letter. It's helped readers avoid big selloffs in the last two years. It alerted us before a few of those big credit events happened. Finally: Be civil. Remember, none of this is your fault - or your neighbor’s fault.  Washington stirred this pot, and they’re not going to solve their crisis. We're here in the Florida Republic, working to save ourselves. Let's stay together. Tomorrow, we’ll talk about the No. 2 Republic Risk and Opportunity Trend. It will need massive government debt to bring this change, and we’re well ahead of the curve. Since you’re a taxpayer, it’s best if you find a way to at least get some of your money back… and more. Stay positive, Garrett {NAME} Disclaimer The characters in this “Financial Adventures” are fictitious and based solely on the author’s experiences and knowledge. The financial analysis and research is real, and conducted by the author for the purposes of education. 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]()