Whether you're a new investor or you've been milling around the old markets for decades, it's a great week to invigorate your appreciation for the oil, gas, and alternative energy markets. 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: Welcome to Energy Week]( Whether you're a new investor or you've been milling around the old markets for decades, it's a great week to invigorate your appreciation for the oil, gas, and alternative energy markets. [Garrett {NAME}]( Feb 11
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Dear Fellow Expat: I’m taking a break from our “Spring Cleaning.” We’ve thrown away a lot of things and put a lot of other stuff on the curb. The other day, I watched as neighbors circled like sharks to grab anything and everything that wasn’t nailed down to the sidewalk. They took used golf cart tires, busted wood, a used record player, and shovels without handles. It was madness. One man’s trash is something even greater to treasure. My daughter won’t leave my wife alone. Five hours ago, Amelia was supposed to clean up the living room from the “car” she made from all our furniture. Now, she keeps running around asking for hugs. I’m unsure if this is cute… or a way to get out of chores. I want to share a few weekend updates before we watch the Super Bowl. This will be a short postcard. Welcome to Energy Week We have a new tradition here at the Florida Republic. From now on, every week after the Super Bowl is Energy Week. It doesn’t matter if you’re new to the stock market or have been focused on it for decades. Why is the energy sector the best sector for investors to learn? It’s pretty simple. - It’s Universal. The entire global economy is built around energy, not vice versa. This is where you’ll learn essential things like supply/demand and geopolitics that impact the markets. - Risk-Reward: Various sections of the energy sector provide different types of opportunities. Want to play the upside of the oil price? Focus on production. Want income and steady reliability? Buy pipelines. Want to find value? Look downstream. Want to focus on the next generation of power? That’s where alternative investing and other commodities in the space come into play. - Volatility: Energy can be volatile. But when we use our measures around Global Liquidity and Momentum, we know when money is leaving and entering. Energy is one of the most logic-defying sectors in the world. So, when you wonder why the stock market is moving higher when news is bad, energy can provide clues. - Public Policy: Want to understand how the government has its thumb on the scale in all business? You’ll see it firsthand in the energy sector. - Going Long: No sector offers a deeper exploration into changing demographics and a changing world in the next 30 years than energy. This is a place where you want to be to learn about strong management and shifting global tide. Our Schedule This Week Let’s take a look at what we’ll be discussing this week. In addition, I do plan to shoot a few videos to help you navigate this content. So, stay tuned all this week. - Monday: Upstream Production, Drilling, And High-Upside Trading - Tuesday: The Role of OPEC on Supply and China on Demand - Wednesday: There is Always Money in the Midstream: Pipelines and Storage - Thursday: Alternative Energy - What Will Hold Back the Green Transition? - Friday: Downstream Profits, Speculation, and the Fuels of the Future - Saturday: Putting It All Together (The Best Ways to Trade and Invest). These stories will also fit into the themes, and best investing ideas shared this week in the Republic Risk Letter. So, sign up, and let’s get active this week. [Upgrade to paid]( Bitcoin and Global Liquidity As I’ve said, I highly recommend the work of Michael Howell at Capital Wars if you haven’t read his insights. I don’t know him personally, but his book was a final puzzle piece in how I trade and view the world. I revisited his piece last night on understanding [the difference between Fed Liquidity and Global Liquidity](. And why are Shadow Banks driving this rally higher? If we look at the Big 7 stocks that continue to rally and drive this market higher, we have to view it through the theory laid out by Howell. The S&P 500, at an Equal Weight, is barely up 0.5% this year. But find any ETF that concentrates on Meta Platforms (META), Apple (AAPL), Amazon (AMZN), NVIDIA (NVDA), Alphabet (GOOGL), and “FAANG” like names - and they’re up a LOT this year. (If you know what the Leveraged ETN “FNGU” is… it’s up 52% this year). There are two reasons to posit why these stocks are up the way they are. The first is “concentration” or “allocation.” This means that more money is being allocated to these names from the available pool of capital in the system. So, hypothetically, consider that there was a 5% allocation to these stocks, and now there is an 8% allocation. More demand in a finite supply generates higher gains for those equities. But then there’s the second part. “More Global Liquidity” that is cycling into risk assets. The pool of capital is expanding… while the allocation is increasing simultaneously. All while the number of available shares is declining due to buybacks… And that brings us to Bitcoin. What Drives Bitcoin Higher? Howell observed that an increase in Global Liquidity has coincided with BTC prices increasing over two cycles in the last decade. As we know, Liquidity hit a cyclical low in October 2022 and has been expanding since. The same goes for Bitcoin’s price, which bottomed out around the same time. Now, remember what I just said. [According to Howell]( two important elements influence the price of a stock or asset: allocation and the expanding pool of liquidity. Well - [allocation in Bitcoin is going UP](. We’ve seen countless ETFs emerge after the SEC approves these trading vehicles. And if you listen to people in the media or fund managers like Anthony Scaramucci, they view the ETFs as the vehicle that will propel prices higher. But it’s only half of the equation. As global liquidity expands, that helps fuel risk-taking as well. Given that Bitcoin is a finite asset, the theory goes that expanding liquidity should drive more capital into that asset. So, when people suggest that BTC is heading higher, it’s not just ETFs. It’s the global pool too. [Here’s an interview on it](. The same goes for gold - but that’s a counter-cyclical sector. I’ll explain what that means and why it’s relevant in the coming weeks. Finally I’d love to know who everyone is expecting to win this evening. Let me know in the comments. I hope you enjoy the game. 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](
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