Postcards: A Knock at the Door is How Chaos Starts

There's still way too much noise in this market - and investors better start to temper expectations with the S&P 500 heading back toward record highs. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ 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 Knock at the Door is How Chaos Starts]( There's still way too much noise in this market - and investors better start to temper expectations with the S&P 500 heading back toward record highs. [Garrett {NAME}]( May 7   [READ IN APP](   Market Update: Lower Treasury yields are good for equities, and [global liquidity has expanded](. We’re green across the board. Stay up to date in Republic Risk Letter. [Upgrade to paid]( --------------------------------------------------------------- Dear Fellow Expat: In 1810, Theodore Hook made a bet with his friend Sam. The wager was One Guinea, a British coin containing one-quarter of an ounce of gold.  The bet: Sam could pick any house in London. Hook would then make it the most popular, most-discussed home within seven days. Back then, there weren’t as many homes in England’s capital as today. But tight, narrow roads were (and remain) a city staple. The two men settled on 54 Berners Street, a house north of Oxford Street. Sam didn't think one could generate such a buzz, especially with so many distracted by the Napoleonic Wars. In hindsight, who could blame Sam’s sentiment? This was long before phones, the internet, email, or modern communication. But what followed was a masterclass in mischief: The Berners Street Hoax. Like so many things today, it's an event that exposes the Madness of Crowds and the ease with which they can bring society to a standstill. [Upgrade to paid]( Early Morning Knocks 54 Berners Street was the home of a widow named Mary Teresa Tottingham. One might imagine the color of her robe as she flushed toward the front door at 5 am.  A chimneysweep had arrived to service the home. But Mrs. Tottenham told him that no one had requested such work. She wasn’t expecting company. Her husband, John, worked as a colonel for the East India Trading Company and spent most of his career in India. They had four children but only baptized one in England in 1783. The kids were much older now, out of the house or at least asleep if visiting. The eager chimney sweep, meanwhile, must have felt some disappointment at the lack of work—that he'd woken up for a job that wasn't real. He was the first of many to feel such sentiment, and countless visitors soon swarmed the house. Cake makers, doctors, lawyers, and priests arrived. Visiting dignitaries included the Bank of England Governor and the Archbishop of Canterbury. It turns out that Hook had sent 4,000 letters – forged requests, false summons, and deliveries. The scene escalated into pure bedlam. Ancestors of the Florida Republic arrive at Berners Street (Dall-E) The city had to deploy police to de-clog the streets of carriages and carts. Hook, who avoided any repercussions and won his bet, did so without modern technology. He spurred chaos across London in the old-fashioned way: With false promises and misinformation. Lessons from the Edge The spectacle is a perfect mirror pointed to modern society. It doesn't matter how often we see similar examples of such madness. Human beings are wired for chaos. In this case, it didn't matter whether each guest was high or low in society. They all responded to fraudulent summons. It is evidence of those intrinsic elements of human psychology. Humans will believe and chase opportunity. They do this even on the flimsiest pretext. How often do we see this in financial markets? All too often, traders and investors become infatuated by rumors and speculation, So many behave just as irrationally as the duped Londoners in 1810. Misinformation and rumor will inflate asset bubbles or trigger unwarranted sell-offs. More than 200 years later, we see countless examples of things we know aren’t true. Or we don’t trust them… but we still act upon it. Why? Everyone else is doing it. It’s worse today. In the digital era, information travels instantly, magnifying the effects of herd-like behavior. Viral news (true or false) can sway stock prices more than economic indicators. The lesson from Berners Street is clear. Unverified information can have big effects on rational choice. Follow the Signal, Not the Noise It can be easy to chase a story - especially on a beaten-up asset. But you need to know what you're buying and the noise source. Take Peloton (PTON) for example. The company's had 13 straight losing quarters. It's unprofitable. The stock's down 98% since late 2020. But today... traders are chasing the stock higher. This morning, Peloton stock popped 15%. Financial media magnified the story. Yahoo! Finance, Reuters, Barron's, and Marketwatch all provided this company with front-page coverage on their sites. Why? A report from CNBC said that a private equity firm might buy the company. Now, there are no direct sources—just CNBC's reporting. Yes, they're trustworthy to have unnamed sources in the Private Equity community. But was there any reporting on what the stock might actually be worth in a buyout? Of course not. The report says that several PE firms are looking at the company. But there's zero sign that anyone has talked to Peloton. More so... PE companies (and their consultants) are circling almost every company (public and private). As a former consultant, I built countless pitch decks for potential acquisitions. Most never advanced past a screening of the balance sheet, let alone a phone call. That said, yes, there might be a buyout. I'd say that $4.00 (today’s current price) is overpaying. Still, I see chat boards and Twitter where users speculate on higher valuations. Why? At most, the company’s assets are worth… $2.25 on a good day, and it’s trading at negative book value. Meanwhile, Hallador Energy (HNRG) popped as much as 14% on solid earnings today. This company did get on Yahoo! Finance... but it was [the United Kingdom version.]( No mainstream financial outlet mentioned it. Hallador is a name we found through insider buying metrics and scans of things we want to target. (Our entry price was $5.06.) We like excellent management and corporate change (which resulted in big insider buys). We like high capital efficiency, low debt, and real assets (especially in the energy/electricity generation world). This stock is cheap and has a real catalyst in providing power to Indiana's data centers and artificial intelligence. You’ll hear about Peloton a lot. It's a wholly broken business. As we say, you want to take a quantitative approach and then qualify for an opportunity. When the news or idea hits the front page of Barron’s or Goldman Sachs starts talking about $100 oil, the gains have already happened. The Berners Street Hoax is a quaint tale of 19th-century mischief. It offers a timeless reminder to beware of incomplete or wrong information. Today's investors should learn from this historical prank. It shows the critical value of skepticism and due diligence. After all, whether in 1810 or 2024, the street may change. But a crowd's foolishness constantly threatens both common sense and capital. 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]()