Republic Risk: Pouring Gasoline on a Gasoline Fire

The CPI figure increased 3.2% annually, which is still much higher than the Fed's 2% target. Why doesn't anyone care? Because of the Fed's next move. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ 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](. --------------------------------------------------------------- [Republic Risk: Pouring Gasoline on a Gasoline Fire]( The CPI figure increased 3.2% annually, which is still much higher than the Fed's 2% target. Why doesn't anyone care? Because of the Fed's next move. [Garrett {NAME}]( Mar 12   [READ IN APP](   Equity Storm Watch Is GREEN on the S&P 500 and GREEN on the Russell 2000 We’re back at new highs, and the market just keeps chugging higher thanks to strong global liquidity, expectations around financial repression (the topic of today’s Postcards), and expectations for rate cuts. This morning’s CPI figure came in around expectations at 3.2% - but we’re still nowhere closer to the Fed’s 2% target. Markets aren’t reacting yet to the prospect of no rate cut in June, and there isn’t any serious threat to liquidity at the moment. But I’m digging deeper into the $5 trillion cliff we face next year. We’re probably not facing a threat of any serious correction (down 8% to 10%) in this market until that June Fed meeting - as that’s historically a period where market volumes begin to decline heading into the summer. Dear Fellow Expat: I did something hazardous to my health. No. I didn’t swallow a gallon of wine. No, I didn’t jump out of the sky. I read President Biden’s proposed budget yesterday. All 175 pages. I’m now dumber because of it. But I did discover a wall of ideas around the government’s never-ending quest to spend your money without your permission. I’m reminded that we could have built a border wall for somewhere around $22 billion. That was too expensive… according to the opposition. Yet, we’re instead going to spend roughly $10 billion a year in deterrence, border patrol, and more. So, we’ll spend $100 billion over the next decade on something we could have addressed for 1/5th of the price. Why? Because of the broken window fallacy of government. We need - in their eyes - to constantly spend money. This is the core of Keynesian Economics. Instead of just fixing the problem easily, we will make an entire cottage industry out of it, with taxing, spending, and borrowing at the center of it. This is How America Works. It is a non-stop whirlwind of money exchanging hands. From this blurry practice, we do know a few things. First, about 10 to 15 cents of every dollar taxed or borrowed stays within 100 miles of Washington D.C. That’s great news if you’re a weapons contractor sending your children to Gonzaga Prep or Sidwell Friends (don’t look up the tuition costs of those schools, or your nose will start to bleed). Second, it’s completely legal for Congressional officials to invest in companies before the money is deployed. So… follow the money. There’s a reason why Nancy Pelosi’s stock performance is so good. She knows where the money is heading. That’s a reason why she made a retirement fund out of semiconductor stocks as we approached the passage of the CHIPS Act. Third, government is the most important activist in the financial markets today. Forget Bill Ackman or Carl Icahn. Sure, these guys have a few billion dollars to play with. However, the Biden budget proposes spending $7.7 trillion next year. And all the while, debt will keep adding up. Look at this chart. Each color represents another $1 trillion being added to the national debt.  It’s your money… and we’re just looking for ways to get it back. I’ll dig into a few ideas in the weeks ahead. On the CPI This came out at 10 a.m. today because of the CPI report. I started reading it at 8:45; when I looked up, it was 9:30. Car insurance is up 20.6% year over year (did you know it’s because the people who sold you the car and the manufacturer are tracking your insurance data and selling it?) Gasoline prices are also much higher—and this is entirely a manmade problem. We haven’t opened a new major refinery since the 1970s, and we’re no closer to achieving the Green Dream yet. But here we are. With the right drilling, pipelines, and refineries, gasoline could be constantly under $2.00. Housing is also an issue in the CPI report. I’ve been watching real estate in a few places, and I can’t help but notice that townhomes that range between $450,000 and $500,000 are being bought all-cash with a fast closing and then turned into $3,000 rentals within weeks. I’m seeing this in Maryland, Texas, Illinois, and Pennsylvania. We have a lack of supply and too much regulation. 25,000 regulatory groups in the U.S. oversee housing (local to Federal). And we wonder why supply is under pressure. Energy, car insurance, and housing… these are parts of the things that matter. Technology costs do not. However, purchasing power is hammered by the big things people need—the physical things—to get by in America. It’s incredible to me that we have this many Ph.Ds in economics floating around, yet no one seems to know how to manage this economy properly. I must warn you - there are serious bumps ahead over the next 24 months - and the Federal Reserve and the Treasury Department are about to embark on one of the most savage economic games in finance history. We’ll discuss later today. Stock of the Day Wynn Resorts (WYNN) has my attention today. Shares just broke above the 20-day moving average, and we’re starting to see positive movement on the RSI, MFI, MACD, and ADX. Things are trending.  There are 900 ways to trade the stock, but I like it as a buy with a tight stop at 2%. Another possible trade is to simply buy the $100 call for $6.10 and sell the $105 for $2.50. That creates a cost of $3.60, offering the potential of a 38% gain in two weeks, with a probability of profit above 53%. If the stock does fall back to its 20-day moving average, you exit the trade. That would only be about a 7 to 8% loss on the total position. I like these sorts of covered calls because you know exactly what you can make and have an exit strategy baked in ahead of time. I owe you a longer write-up on how to do Poor Man’s Covered Calls and how they are a great strategy for insider buying and strong market momentum. Sector Focus The Russell 2000 is top-heavy, and selling pressure accelerates and then stops. We’ve been positive since early February, but the real catalyst started around the first week of November 2023. Since that latter date, we’ve seen a move on the Russell 2002 from roughly 1,700 to 2,065. Funny how liquidity and central bank activity will lead to higher equity and risk assets. Today’s CPI report isn’t slowing anything down - but we have seen large amounts of selling across the technology sector in recent weeks. Be aware that we typically see a negative read on technology and the S&P 500 when there are real correction events. This is because the technology and S&P 500 indices are “where the money is.” This market is flush with capital. And it appears that we’re not done yet. Turning to Insider Buying Nothing positive to report on the insider front. The selling continues, for now.  It’s really a lack of buying that should capture your attention. A lot of selling happens in the technology sector where many executives receive stock and options in compensation. There wasn’t much on the buy side on Monday.  As for who's been selling, Michael Saylor has been capitalizing on the recent surge in Bitcoin by offloading shares of MicroStrategy (MSTR), and when I say capitalizing, I mean taking FULL advantage.  Saylor’s strategy, pointed out in a post on X by @amitisinvesting, essentially sees MSTR leveraging Bitcoin to secure loans for buying more Bitcoin. This creates a feedback loop where MicroStrategy's value goes higher with Bitcoin's performance, allowing debts to be papered over with appreciated company stock. This sounds familiar, but I cannot pinpoint where we’ve seen this before.  By opting to issue more shares rather than pursuing traditional debt repayment, one has to wonder who'll end up 'holding the bag' when the ponz—I mean, strategy encounters the statistically inevitable black swan event. Eh–It’s probably nothing. Meanwhile, MicroStrategy bought an additional 12,000 Bitcoin over the weekend. Maybe the Fed will take over MicroStrategy. It sounds like they operate in a very similar fashion. There’s something very off about this situation. If we have a liquidity event, this is probably the first stock I’d want to short. Be patient. Tamiami Tips - Bitcoin surpasses silver to become the world's 8th most valuable asset, reaching a market cap of $1.42 trillion after a surge over $72,000. This milestone comes as acceptance grows throughout financial markets. Yesterday, the London Stock Exchange approved applications for Bitcoin and Ethereum ETNs. - Archer Daniels Midland (ADM) reported Q4 earnings per share of $1.36, missing estimates by 7 cents, with revenue also falling short at $22.98 billion. The company forecasts a 2024 EPS of $5.25-$6.25 due to market shifts and has approved a $2 billion share buyback. Additionally, ADM concluded its internal investigation revealing improper accounting practices in its Nutrition segment's sales, asserting these do not materially impact consolidated financials. Remedial actions are underway, - Kohl's (KSS) beat quarterly earnings expectations with $1.67 per share, outpacing the predicted $1.21, despite a minor shortfall in net sales at $5.7 billion. It anticipates EPS between $2.10 and $2.70 for the year. The retailer also announced a strategic partnership with Babies "R" Us to venture into the baby gear market, supporting its growth ambitions for 2024. - February's Consumer Price Index (CPI) rose by 0.4% monthly and 3.2% annually, slightly above projections. Core inflation, without food and energy, also exceeded expectations at 0.4% monthly and 3.8% annually. With inflation still running hot, the timeline for interest rate cuts keeps getting pushed back. #HigherforLonger 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]()