Postcards: Clown Car Wednesday Cometh (And More on Cradle to Grave Stocks)

Jerome Powell goes to Washington on Wednesday, while the financial markets are sending Congress and the Federal Reserve a clear signal about America's future. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ 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: Clown Car Wednesday Cometh (And More on Cradle to Grave Stocks)]( Jerome Powell goes to Washington on Wednesday, while the financial markets are sending Congress and the Federal Reserve a clear signal about America's future. [Garrett {NAME}]( Mar 5   [READ IN APP](   Market Update: As I said in my Republic Risk Letter this morning ([You can get a copy here]( I think Monday might be the last day we see a lot of green this March despite St. Patrick’s Day approaching. Though, based on seasonality, this is usually a good two-week period, we might well have an outlier on our hands. Five sectors went red today, and we should be worried about two of them: finance and technology. It could be a rocky next few weeks for the Model Portfolio, so use hedging strategies like covered calls. The bottom line is that I don’t like the feel of things between today and next week when the Bank Lending Program ends. --------------------------------------------------------------- Dear Fellow Expat: There is a problem with Florida.  I’m not just talking about rampant Medicare fraud.  The healthcare in this state between December and April is worse than hot garbage.  You see, we have many snowbirds come down here to avoid paying state taxes in places like Maryland, New York, Illinois, and elsewhere. And they clog up the healthcare pipeline like… (you don’t need that image). I’ve been sick for two weeks.  Really red eyes. Nasty cough. Headaches. Body aches. Just bad. And I’ve smiled through it. But yesterday at lunch, my server said, “Um, you don’t look normal.” I wasn’t. I was ghost white. But my primary care doctor doesn’t have any openings until April. The clinics here are not good either. They hand out antibiotics and pat you on the head.  So, I did what was typical (for Florida at this time of year).  I went to the emergency room where, oddly enough, there were no patients. Alligators can’t spell It cost me a lot of money, courtesy of my insurance deductible, just to get in there.  But my situation had grown worse and worse over the last week, and my blood pressure was through the roof because I was in pain. It's a good thing my primary care physician, after getting the report from the ER (downstairs from his office), had his nurse call me and get me in tomorrow morning. “I’m sorry. He’s been really busy,” she said. No shit, lady. So am I. With a 100-degree temperature, eyes redder than Hades, and what turned out to be a nasty reaction to a medication that was impacting my kidneys. But “thanks for calling,” I guess. Let me know if he broke 80 on the golf course today. Last night, they put two bags of fluids in me, threw migraine medication into my head, and then gave me a list of dietary precautions for the next six weeks. A medication that I was taking was dehydrating me badly, and the prescribing doctor responsible for that little treat is on vacation until March 26. Because why wouldn’t he be? The ER billed my insurance company something like $6,500. Why? Because they can. Because America’s healthcare market is made up, and the values don’t count. Like any racket… This is what happens when the government subsidizes a market (Obamacare) and the incentives go bananas. My insurance company is Cigna (CI). Those shares have been up more than 800% since the passage of the Affordable Healthcare Act. Affordable… That ER visit would have run me $200 about ten years ago. Yesterday… 32 times that. A Warning to Congress Today, we will tackle two things: Consumer inflation and monetary inflation. Tomorrow, Jerome Powell will testify before Congress on the state of the economy.  The [focus will likely center on consumer inflation]( because that’s what Congress’ constituents face the most - the price of everything will be rising. Now, this meeting will be stupid.  Powell couldn't explain inflation the last time he was there.  That meme we made when we covered that testimony contains his actual quote. But he doesn’t have to worry about how bad that sounded.  Because the people listening—the House of Representatives on Day One and the Senate on Day Two—don’t understand economics or finance. Most of them think they can bend the laws of both to their imagination. I'll walk you through both of them. Why Prices Work the Way They Do Now As I’ve said before, [monetary inflation is like the water depth in a reservoir]( representing the total money supply circulating within the economy.  Central bank monetary policy causes this form of inflation. Fed policies, such as adjusting interest rates, conducting open market operations, or changing reserve requirements for banks, can impact it.  Just know that when central banks decide to increase the money supply, they pour more water into the economic reservoir. On the other hand, consumer price inflation is the wave that eventually reaches the shore from the expansion or contraction of the monetary base. This impacts everyday people.  We measure consumer prices through the Consumer Price Index. This is a measurement by government bean counters around a basket of goods and services over time.  But as I’ll explain, it’s all B.S. anyway. Because the CPI is largely based on a lie. Just know that monetary inflation fills the reservoir, and consumer price inflation is the measurable change in how much water splashes over the edge, impacting the cost of living. Here’s How “BS” the CPI Really Is Powell’s testimony will be a classic dog and pony show. When Congress asks why inflation is higher, Powell should tell them because they can’t stop spending. Today’s inflation isn’t 3%, as the pundits will tell you. If you bother to listen to the private readings, especially in the cities, you’ll know. According to the Chapwood Index, Baltimore, Maryland shows that the city [has averaged an 11.8% increase in its cost of living since 2017](. Chapwood analyzes “the true cost-of-living increase in America… it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation.” So - Chapwood is looking at the things real people buy. But, the government’s measurement is a broad tally of various goods on the national level. Two examples. First, I got my car insurance premiums for the next six months - a 40% increase. No accidents. No bumps. No claims. Just inflation - that, and covering for any uninsured drivers roaming the state. But you won’t hear that on C-SPAN tomorrow. Because they’re all lying to you and making sure they don’t accidentally admit just how bad things have gotten. Which brings us to the second part. Monetary inflation… The link between monetary inflation and consumer inflation isn’t always immediate. So - recall that during COVID-19, the Fed expanded the money supply by around 33%. But prices didn’t skyrocket right away. “Official inflation” didn’t really become a severe problem until late 2021. (But Chapwood numbers will tell you otherwise.) An increase in the money supply (monetary inflation) can lead to consumer price inflation if it outpaces economic growth. Which is precisely what started to happen. They increased the money supply by 33%... but we saw anemic economic growth. In Keynesian economics (another term for government theft), they’re just trying to prevent the system from falling and ensure that consumer inflation is small enough that you don’t notice. But in the last few years, that monetary expansion meant [more money chasing the same amount of goods]( and services. Basic economics: price goes up. The Fed can try to slow that down by raising interest rates. But when they start to go up, money can go into productive parts of the economy… or it can go into non-productive parts of the economy. And what we’re witnessing right now is… not productive. The endgame will be as disastrous as it is predictable.  The time and place are right for investors to put on a hedge. The “Greatest Hedge in American history.” It’s a hedge against the coming flood of global monetary expansion to prevent a complete debt/deflation spiral spurred by terrible economic and government policies over the last six years. Bitcoin and Gold Explode Bitcoin prices are surging again - with the price hitting $70,000 over the last few days. It’s been easy to watch shitty networks like CNBC crap all over Bitcoin for the last few years and try to celebrate their demise. Today, they’re advertising ETFs for cryptocurrency exposure. Funny how that works… right? But there’s another side to this. As I’ve explained for a while, the reservoir of monetary expansion goes outward. Allocation to Bitcoin is increasing at the same time that the monetary base is expanding around the world. What does that fuel? Rising Bitcoin prices - because Americans are not as stupid as those who represent them. People see Bitcoin as a hedge against the falling dollar. I’m not saying it’s perfect, and I have said that it’s crazy that you could have bought a house for less than the price of one Bitcoin. But let’s not forget that the damn U.S. currency is paper that relies on trust not only in its value but also in its institutions. If Bitcoin were rising on its own, I’d be worried. But two other historical hedges are sitting at record highs as well. First, the stock market. As I noted - during periods of dramatic expansion of the monetary base - people turned to the markets.monetary base expansion Not to make money… but to protect it against the shock of capital.  And if you need evidence of what monetary base expansion can do, look no further than the fact that the U.S. dollar has fallen 52% since 1993 in its purchasing power, while the S&P 500 is up over 1,000%. Meanwhile, gold is now at an all-time high. And that coincides with rapid declines of fiat currencies against gold’s value. While gold is counter-cyclical, meaning higher prices will likely lead to more mining and, thus, more supply, Bitcoin is finite. The market has that element, too, as companies with good balance sheets and little debt don’t need to issue new shares. In this environment, they’ll likely repurchase their stock with the cheap flood of money. The markets are sending Congress and Powell a message. One they’re unlikely to absorb through their thick skulls.  It’s just a shame that none of us can explain to both of them that they are the collective problem. All we can do is protect ourselves. And Finally There’s zero accountability in the healthcare market, and it’s just a vast chasm of capital flying into the wind. Yesterday, my male nurse with radical tattoos and Pat Mahomes-hair was digging a needle into my left forearm. He asked what I do for a living, and I stupidly explained… “I’m an economist and market analyst.”  “What do you think of crypto?” he immediately asked. He’d later confess that he has zero understanding of finance but considered buying Bitcoin. (At $67,000?) My wife always tells me not to talk to strangers, but I’ve found that these sorts of interactions are a good barometer of the world around me.  But we started talking about where he went to school. And he warned me - to be careful with nurses who graduated during COVID. They didn’t get much time in the hospitals, but the schools graduated them anyway because they needed money. They’re diploma mills. Isn’t American healthcare excellent? We spend more than anyone, and care quality is getting worse. We all know it. The same goes with education… Food quality… And much more. Everything the government touches with subsidies creates incredibly false incentives. The result is the system we have. They’re the problem, no matter how many times they try to convince you that you are. America is an insane asylum, and the inmates are running the show. All we can do is try to play defense and take advantage of their policy errors. I know I just ranted, but now I feel better, I’ll be looking at Cigna (CI). Like I said, since the implementation of the Affordable Healthcare Act, Cigna shares are up 803%, compared to an S&P 500 run of 466%.  It’s a perfect hedge against the government’s spending. And it’s a cradle to grave name that takes some time off during market shocks, but always bounces back as there is more capital sloshing around in the system. It may come at a discount soon. They will print more money, spend more money, and borrow more money. And Cigna covers every age from cradle to grave. More on that this weekend. 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]()