Postcards: How Fast Will Life Come At Us?

We're looking at a massive deficit this year... and the economy's still slowing at a troubling rate. Let's dive into the data to make sense of the road ahead. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ 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: How Fast Will Life Come At Us?]( We're looking at a massive deficit this year... and the economy's still slowing at a troubling rate. Let's dive into the data to make sense of the road ahead. [Garrett {NAME}](floridarepublic) Jul 2 floridarepublic   [READ IN APP](   Dear Fellow Expat: We’re in a fun media environment. A week after getting caught lying about the President’s cognitive abilities for months… everyone in the media… and I MEAN EVERYONE IN THE MEDIA… is now suddenly an expert on Presidential Immunity; Federalist Papers 69, 70, and 78; and Article II of the Constitution. It’s too much… it’s incredible that everyone is now upset about the amount of power that they’ve given the Presidency since the early 1990s. the 1993 empowerments]( to the “[Pen and a Phone” celebrations]( it’s all just too much. I really wish this was all a fever dream. But these people have screamed the sky is falling so many times that they’ll find that their latest pearl-clutching falls on deaf ears. And why is this is the subject of the day… What should the media be reporting on but isn’t? The state of the economy. Because this will set the tone for the market in Q4 and beyond, and it’s starting to look very problematic once again. The Fed to the rescue? The Treasury? Or is the plan to just let it sink and then blame someone else later? Either way… we need to ignore all the noise… and pay attention. Above all else remember: The economy is not the market, and the market is not the economy. The market can play tricks on your eyes… but the numbers don’t lie. Down Goes GDP The latest breakdown of the Atlanta GDP Forecast predicts that the U.S. economy will only grow by 1.7% in the second quarter, while the Real Final Sales show 1.1%. Remember, we’re borrowing money at an incredible clip - largely to rollover debt at higher interest rates and to engage in the Ponzi finance of paying off interest. [And despite a deficit poised to hit $1.9 trillion this year]( (27% higher than the previous forecast)… we’re only mustering out economic growth in the very low single digits. Imagine what this place would look like if we had austerity or a balanced budget? Well… maybe you don’t want to know. That’s just a sign of serious structural problems in the economy - aided heavily by bad incentives, bad policies, and more lawyers than we can count. This week’s jobs report will likely show more of the same: More government jobs (no economic value), more healthcare jobs (basically government jobs), and more part-time jobs as Americans try to keep their head above water. Meanwhile, Powell keeps pushing the “Disinflationary” message - as echoed today during a forum in Europe. The think is… [he’s not showing any hand around cuts](. The last week has been a string of economic reports showcasing bad headline after bad headline - but it’s all been ignored because of the Debate and “Immunity!” Manufacturing figures were bad - which is why economists are now projecting that a rate cut is imminent. But it’s probably construction that would force action faster. Private investment is falling in the wake of ugly manufacturing and construction figures yesterday. The numbers from yesterday showed the first monthly decline in construction spending in a year and a half. I can’t stress the importance of construction spending - even if it’s just the American way of ripping down or revitalizing a building every 15 years. Net exports are falling… which is the backside end of the GDP calculation. The numbers from Friday suggest that Leading Indicators are now in contractionary territory - which has a number of economists worried that we’ll either enter a recession soon. So long as Yellen is at the helm, I don’t see how that happens - as they will continue to borrow to the tilt through the election. This chart above shows leading and lagging indicators and where they are based on readings on a month-to-month, three-month, and annual basis. As we can see, small business optimism and job openings are improving. But keep in mind that more job openings tends to lead to higher wage demand in theory. There were 8.1 million job openings today, higher than the expected 7.9 million projected by economists. Meanwhile, home sales are struggling, consumer sentiment is weak, construction is moving in the wrong direction, and auto sales are getting dangerous. What About Trump? Look, I’m not here to make any political statements. I just want to point my camera at the world and make money in the process. I don’t have control. We don’t have control. All I’m trying to point out right now is that the world isn’t the rosiest. And a victory for Trump… well… it has implications. First - the markets in the last few days have seen interest rates RISE… and not fall. That’s interesting… considering that a sharp drop in bond prices and rise in yields has largely gone unexplained. It’s easy to point at France and its move to the right as a reason why global markets are on edge. But one must consider the obvious. Markets aren’t just pricing in a Trump victory. They’re pricing in a trifecta of GOP victories in the House, Senate, and White House. So… a redux of 2017. We can expect tax cuts to be extended. But we can also expect… higher interest rates. And for the yield curve to start to show real teeth on the backside. If Janet Yellen is replaced, who takes over? It won’t be Mnuchin… as he wants to buy TikTok… and they’re talking about hedge [fund manager Scott Bessent]( who loves tariffs. Trump actually floated John Paulson as a name a few weeks ago. That’s the guy who made a fortune betting against the U.S. housing market, and enlisted Goldman Sachs to help sell - [what he believed to be a bunch of worthless crap]( - to unsuspecting buyers. Regardless, what does it look like with one party dominating the sales of U.S. Treasuries? The last two cycles - 2009 (Democrats) and 2017 (GOP)… - Post-2008 Financial Crisis: The Treasury issued substantial debt to finance stimulus spending and bailout programs, leading to a significant increase in Treasury supply. - Post-2017 Tax Cuts: The Tax Cuts and Jobs Act led to higher deficits, necessitating increased Treasury issuance to cover the shortfall. Remember… supply has to meet demand… and when the demand isn’t there… bond yields increase. Bond yield hikes lead to an impact on collateral quality. Collateral quality impacts borrowing capacity and new liquidity growth. New liquidity growth impacts capital flowing into risk assets. Equity markets contain lots of risk assets. The bond market closely watches fiscal policy changes. Increased Treasury supply can lead to higher yields if investors demand greater returns for holding more government debt. Increased government spending and borrowing can stoke inflationary fears, leading the Federal Reserve to adjust monetary policy, which can further influence Treasury yields and supply dynamics. Again… this is why I’m still willing to bet on a rate hike next year if inflation does come back on the backside of this election - which is possible given the sheer amount of spending that remains in the coffers. What to Do Now Right now, there is hyperbole on both sides of the election here. You’re seeing people predicting outright collapse. You’re also seeing people predicting that the We are likely in-store for what I’ve been arguing since February - baring some significant changes to public policy, Treasury policy, and monetary policy. That’s a continuation of monetized debt… We remain locked into the same long-term strategy… Buy real assets. Gold, silver, some BTC, commodities, and prime real estate assets. Oh, and companies with assets that are buying back their stock, paying down debt, and returning money to shareholders. (Private credit is also getting a lot of love and support these days - probably because no one wants to go public… why should they.) That is the Hedge of Tomorrow. We’ll discuss more this week. 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]()