Postcards: Jerome Powell's About to Find This Out the Hard Way... (The Week Ahead)

Any surprise to the upside on PCE Inflation and the Fed loses more of its already tattered credibility. Let's recap Powell's never-ending tenure as the head of the central bank. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ 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: Jerome Powell's About to Find This Out the Hard Way... (The Week Ahead)]( Any surprise to the upside on PCE Inflation and the Fed loses more of its already tattered credibility. Let's recap Powell's never-ending tenure as the head of the central bank. [Garrett {NAME}](floridarepublic) Sep 22 floridarepublic   [READ IN APP](   Editor’s Note: This is a reminder that we’re also publishing Postcards on Finpub. I’m asking readers to check out this new platform from Marketwise and become founding members of our community. I’d love your feedback on this newer platform. [Check it out right here.]( --------------------------------------------------------------- Dear Fellow Expat: The Federal Reserve just cut interest rates by 50 points. This means they lowered the Fed funds rate, which banks use to lend to each other overnight. This cut affects many things, like mortgage rates, credit card interest, and the cost of borrowing money for businesses. This big cut shocked a lot of people. Why? Because: - The economy seems to be doing well (if we ignore all the government borrowing). - People are still finding jobs. - Stocks were already near all-time highs. - Inflation is still high and not going away easily. But there's more to this story. What you’re not being told. This is a global issue. Japan and China's economies are struggling. The U.S. has needed to weaken its currency for a while. This feels like 1985 when the Plaza Accord happened. Back then, the U.S. worked with other countries to weaken the dollar. It also feels like 2016, when China was weak, and central banks worked together. We might call this the "Zoom Accord" because no one had to travel to make these decisions. It's funny how our economy depends on these people's meetings, isn't it? The big challenge is keeping inflation from worsening in the coming year. We don't want prices to keep rising like in the 1970s. We haven't seen a new wave of inflation yet... except for what happened last year (did everyone forget that inflation has been north of 3% for over a year with oscillations?). Historically, the numbers tell an interesting story. According to Syz Group and TS Lombard, there's been a "second wave of inflation" 87% of the time when you look at all Western countries since the 1940s. We’re in the danger zone… yet pundits wonder why gold prices are surging. You’ve been warned. Nobody’s Coming to Save Us One of the most important lessons and attitudes here in the Republic goes… “No one is coming to save us.” We’re on our own. And people in Washington D.C. prove this every single day. With elections looming and the government nearly broke (again), you'd think they'd focus on helping us regular folks. Nope! Senate Republican honcho Mitch McConnell is dreaming up ways to drain our wallets for the military. Get this: he held a luncheon earlier this week with “experts” from the Commission on the National Defense Strategy. These people want Cold War-level military spending. You know, when tax rates were through the roof. Didn't we just cut corporate taxes? Funny how that works. Both parties are in on this game, folks. They're talking about fighting Russia AND China simultaneously. Because one war just isn't enough! Some "commission" (likely war profiteers) says we need to double or triple defense spending. Where's the money coming from? You guessed it - our pockets! Higher taxes and entitlement cuts (seriously). Who needs health when you can have bombs, right? So next time you're struggling with bills, remember - at least we'll be ready for World War 3! In the Washington circus, the clowns never stop performing. Now, let’s dig into this week’s calendar and what it means for your money. And - of course - some Republic Speak. [Upgrade to paid]( Monday, September 23, 2024 What's happening: FedEx is holding its annual shareholder meeting. Why it matters: FedEx's performance is often seen as a sign of overall economic health. Their shipping volumes and pricing outlook can hint at consumer spending and business activity trends. What's in it for you? Investors will seek FedEx's plan to regain ground in the competitive logistics market. If FedEx continues to struggle, competitors like UPS or even Amazon's logistics arm might become more attractive investments. The e-commerce boom has reshaped this sector, so watch for companies that adapt best. Republic Speak: Let's venture where "Overnight Delivery" meets "Overnight Disappointment." FedEx just delivered a package of bad news to its shareholders. Maybe they should've marked the forward guidance statement: "Handle with Care." While the suits will be busy discussing cost-cutting measures and "synergies" (corporate-speak for "we screwed this up"), they'll need to show how they plan to stop losing market share faster than a leaky cargo plane. Some folks are eyeing that 11% stock dip like a Black Friday deal. No thanks. I'm keeping my wallet shut. This stock's got a "Return on Invested Capital" (ROIC) lower than my hopes for on-time holiday deliveries. And the cash flow is as shaky as their trucks on a bumpy road. My advice? Let this stock sit on the porch for a while. Tuesday, September 24, 2024 What's happening: AutoZone, which sells car parts, shares its latest earnings report. Why it matters: When AutoZone does well, it often means people are keeping their old cars longer and fixing them up. What's in it for you: AutoZone's stock has been on fire, up 160% in five years. They've been buying back lots of stock, which has helped increase the price. If AutoZone does well, it could also be good news for other auto parts stores. Watch stocks like MPAA and SMP, which often move with AutoZone. Republic Speak: AutoZone's earnings are about to drop, and Wall Street's bracing for a potential 6% swing. At $3,000 a share, AZO's been leaving the S&P 500 in its rearview mirror. How? Capitalizing on America's aging car fleet while everyone else obsesses over EVs. With a 65.75% five-year average ROIC, these folks know how to make a dollar work overtime. But keep an eye on that declining free cash flow - it might be a speed bump to their projected $5,000 per share by 2029. Wednesday, September 25, 2024 What's happening: Jefferies, an investment bank that sounds like a candy shop, is reporting its earnings. Why it matters: How Jefferies does can show us if big deals are happening on Wall Street. What's in it for you: If Jefferies does well, it might be a good sign for other financial stocks. It could also mean more mergers and buyouts, creating opportunities in various sectors. Republic Speak: I know that Micron Technology (MU) reports earnings on Wednesday. But in the words of Smokin’ Jay Cutler in a bathroom line… “Dooooonnnn’t care!!!!” Nothing is more interesting on Wednesday than Jefferies and the investment bank's recent romance with Sumitomo Mitsui Financial Group (SMFG). That's right, we have a new Wall Street Power Couple. SMFG bought 9 million Jefferies shares. This financial duo feels hotter than a freshly minted IPO. It's like Jefferies found Japan's ATM PIN and is making the most of it. Swiss investment bank UBS is playing cheerleader for ol' JEF, slapping a Buy rating on Jefferies. The UBS analyst is swooning over Jefferies' pivot to core banking and their knack for leveraged finance. I mean, who doesn't love a good debt party? With a 29.4% stock surge in 6 weeks, Jefferies is on a hot streak that would make even a meme stock blush. With SMFG's deep pockets and Jefferies' dealmaking prowess, this earnings call might set the stage for Wall Street's next blockbuster. Keep your popcorn handy - this show's just getting started. Thursday, September 26, 2024 What's happening: Fed Chair Jerome Powell will give a pre-recorded talk at a big Treasury meeting. Why it matters: Powell's words move markets. People will listen closely for hints about future interest rates and the economy. What’s in it for you? Powell will likely spike the football and declare the win over inflation. But I remind people that we’ll see inflation come back at some point soon (especially if China has to pump its economy up again). Depending on Powell's tone, there could be some reallocation of capital to sectors that will benefit over the long term from increasing monetary inflation. Remember… [the Hedge of Tomorrow.]( Republic Speak: Good grief. Fed Chair Jerome Powell is back… but on a pre-recorded line. Why prerecorded, Jerry? Afraid of another live "transitory" slip-up? Economist Michael Busler has b[een keeping score for Powell's greatest misses](. This is a historically bad run as Fed Chair. And what's worse is that he seems to be playing different characters along the way in this one-person show. Let's recap: - 2018: The "Killjoy" - Raised rates faster than a cat up a tree, squashing tax cut joy. - 2021-2022: The "Ostrich" - Buried his head in the sand while inflation partied like it was 1979. - 2023: The "Premature Celebrator" - Declared victory over inflation, only to find it lingering like a bad hangover. - 2024: The "Mixed Signal Man" - Cut rates while inflation exceeds 3%. Busler argues this latest move might be Powell's costliest blunder yet. At least Powell's consistent in his inconsistency, right? Friday, September 27, 2024 What's happening: The government is releasing a critical inflation report - the CPE. Why it matters: This report is the Fed's favorite measure of inflation. It could affect everything from interest rates to stock prices. What's in it for you? If inflation is higher than expected, the Fed might raise rates again at some point. This could hurt stocks but help savings accounts and bonds. If inflation stays high, consider investments that typically do well in inflationary times, like [certain commodities or real estate investment trusts (REITs)](. Republic Speak: The PCE report anticipation is like waiting for your doctor's test results, but it's for the entire economy. The Fed had better get this right on inflation. Because if they didn't… Bitcoin will be at $80,000 by Election Day. Am I the only person looking at gold prices and thinking something's wrong? We launched our Hedge of Tomorrow plays on March 1, and what's happened since is very concerning. Gold's up from $2,100 in March to $2,650. And it's up from $1,600 from the liquidity bottom in October 2022. Is anyone home? Fiat currencies are cratering compared to gold - and what's worse - there's still plenty of money creation, monetization, and monetary inflation coming… fast. Everyone's hung up on the 50-point hike as if that's going to inspire investor confidence. It shouldn't. People should be buying stocks to protect themselves against the ongoing destruction of fiat. It's a hedge… against the world around us. Recall - someone did object to a 50-point hike. That was Michelle Bowman, and she'll probably be selling flank steak out of a truck in nine months for embarrassing Powell. She's the only one who dissented, and she did so with core PCE stuck at 2.6% in June and July. Bowman's warning that we're not out of the inflation woods yet looks spot-on. But we're just the guinea pigs. If next Friday's number doesn't show improvement, Powell's cooked. After all, declaring victory over inflation when it's hotter than a summer sidewalk isn't a winning strategy. But I'm sure they'll dust off the "Transitory" term again. It'll be a big week, and we're here to help you through it. Be sure to join us at Republic Risk so you can get insights in the morning… and investment ideas as they emerge. [Upgrade to paid]( 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. 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