Well... That Escalated Quickly

This might accelerate the ever-growing divide of the global economy. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ 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](. --------------------------------------------------------------- [Well... That Escalated Quickly]( This might accelerate the ever-growing divide of the global economy. [Garrett {NAME}](floridarepublic) Dec 1 floridarepublic [READ IN APP]( Dear Fellow Expat: There’s a great way to get men to go visit the doctor. It’s called “encouragement.” That’s according to People Magazine's Sexiest Doctor Alive. YouTube star - and board-certified family medicine physician - "Doctor Mike" Varshavski leads insurance company Aflac’s Wellness Matters campaign - and has provided Americans with survey data on what gets people to the doctor. This sentence stood out… The study found evidence-based ways that can help, including that men respond well to encouragement from friends and family. Men were more likely to see a doctor if nudged or urged by a loved one to go (73% vs. 65% of women) That’s interesting data… But can we define “encouragement?” Does “encouragement” include… daily questions like “Have you talked to your doctor?” or “Have you called your doctor… are you going to call your doctor.” And on Day Four of a lingering cough, the orders: “GO TO THE DOCTOR…” which is said in a less “encouraging” tone and delivered in a more authoritative “or else” manner that lingers in the man’s mental hallways for days one end? “You need to see a doctor… when is your appointment… have you put your appointment on the calendar… do you want me to go to the doctor with you… GO TO THE DOCTOR…” It’s all… so encouraging… More on Aflac this week and other events in the market… But first… Tariffs Dominate Market Talk True story… The first time President Trump sought someone to help shape his economic policy toward China… [he relied on an Amazon product search](. In an Amazon book search, his son-in-law found the book Death By China, written by noted China hawk Peter Navarro. During Navarro’s term, Trump pushed tariffs on China, escalated trade tensions, promoted protectionist economic measures. Now… Trump is coming on harder. Over the weekend, he suggested he’d slap a 100% tariff on nations attempting to circumvent the U.S. dollar… a nod directly to the global trade bloc known as the BRICS. I assume he found the advisors advocating for this policy at Substack or the bargain bin of Barnes and Noble. For years, financial publishing outlets (every single “expert” with a newsletter) has warned about the End of the Dollar, the rise of the BRICS (Brazil, Russia, India, China, South Africa), and a bifurcated world. A lot of people have said that the U.S. dollar is backed by the world’s strongest economy and “trust.” Others have said it’s backed by the U.S. military and aircraft carriers. But no matter what - there is no shortage of people arguing that the dollar’s demise is inevitable. I guess they haven’t met Scott Bessent - the soon-to-be U.S. Treasury Secretary. The entire platform of the Trump years ahead centers on one thing: A strong dollar. We’ve covered this subject here in the Republic - especially the note that China’s economy relies more on the U.S. dollar than ever before. I’ve said it makes little sense to hit China on tariffs if the other option is to send them a strong, yet depreciating currency that’s propped up by China’s demand for it in exchange for real assets (rare earth metals) or useful things like Solar Panels. The problem with these sorts of ideas - hitting people with tariffs, taking nations off of financial systems, or preventing them from accessing certain products… It leads them to turn to alternatives or move toward other solutions. In this case - it may accelerate the BRICS development - not slow it down. How many examples do we need? The U.S. attempted to hit Russia with sanctions and cap oil prices. It fueled Russia to easily circumvent the sanctions by allowing the blending of Russian crude elsewhere in the world, all while they established robust oil trade with China (which bought lots of gold to backstop the exchange). With China, the Biden Administration established technology rules that prevented China from accessing specific types of semiconductors and military products. The FCC said that Chinese technology giant Huawei was a threat to U.S. national security (true). The U.S. canceled Huawei export licenses and hit the company with sanctions. But Huawai [ended up growing]( And last week, the company announced it had developed its own self-operating system (OS). The company now hopes it will be a major independent OS that doesn’t rely on Apple or Android. It’s easy to debate about how tariffs hurt customers and strain relationships among nations. The 1999 Banana dispute between the U.S. and Europe happened after the former hit the latter with a tax on luxury goods? Why, because the U.S. didn’t like the policies in Europe impacting America’s banana producers. The tariffs didn’t help the banana producers, and it became a major source of stress among trade partners. But the more important note here is that in a global economy - one that has experienced incredible properity since the fall of the Berlin Wall - nations will find a way around these tarriffs or they accelerate the process that they’re aiming to stop. In this case - the broader adoption of something that isn’t the U.S. dollar. Trump’s statement is a clear escalation of the ongoing currency wars that we’ve discussed time and time again. Demand for U.S. dollars keeps our currency strong and boosts the purchasing power of the consumer. All the while, I’m paying a lot more attention these days to the word “deflation” or “disinflation” instead of worrying about inflation. Despite all those Nobel lauraetes writing that letter saying that Trump’s policies would lead to massive inflation, they ignored that Trump’s trade policies partially fueled an average PCE of just 1.7% during the pre-COVID years. And they ignore how these sort of things play out during escalation. Tariffs worries are being used for negotiation purposes, obviously. But also keep in mind that Trump’s planning to deregulate and cut government spending at levels we haven’t seen in decades. The U.S. government was the bulk of job growth (plus the pseudo-government jobs in healthcare second) over the last three years. We saw government add more than 40,000 jobs per month in those 36 months. Deflation can rear its head quickly in a trade war due to supressed purchasing power, overproduction, and falling investment. Disinflation can come when you cut government to the bone and eliminate the artificial wage growth created by all this government spending for 36 months. But it won’t be as big as some expect - as it’s going to be VERY difficult to get any reform or cuts in mandatory spending. Things are about to get really interesting. Monday, December 2 Event: ISM Manufacturing PMI for November Why It Matters: The PMI tells us what’s happening in hte manufacturing world… Republic Speak: How did U.S. manufacturing behave in the wake of the 2024 Election? Are companies ramping up production in hopes of a strong economy, or deterring investment due to concerns about tariffs and a trade war? Tuesday, December 3 Event: Aflac Annual Meeting Why It Matters: Don’t you want to hear about wellness matters? Republic Speak: I just wanted to highlight above that People Magazine actually had a “Sexiest Doctor Alive” category. I know very little about supplemental insurance, and I am not a fan of that duck. Wednesday, December 4 Event: Barclays Annual Eat, Sleep, Play, Shop Conference. Why It Matters: It’s a good opportunity to get an assessement of the U.S. customer and what’s happening in the retail and hospitality space. Republic Speak: Good news everyone… The Cheesecake Factory (CAKE) will take part in this conference. Giving us a chance to ask the very important question: Why does this place still exist? They should have invited a company that makes GLP-1s and had their executives sit on the stage with the executives at Cheesecake Factory. And then, every time that the Cheesecake Factory executive talked about their next innovations in food… the GLP-1 obesity drug manufacturing executive just says… “Thank you…” Thursday, December 4 Event: OPEC+ Will Discuss Oil Output Levels Why It Matters: Did we forget that oil dropped 3% last week? Republic Speak: Yeah, so things are getting pretty interesting over in the Middle East. Haven’t discussed this in a bit… but Iran is weakened, Russia is distracted… and Syria is about to fall. The geopolitical risks are fading… as are supply concerns. This is why it’s very hard for investors to speculate around geopolitical risk. Things change quickly… and often. This is also why we remain adament about focusing on the midstream part of the supply chain instead of trying to wish for oil price swings in the upstream market. Friday, December 5 Event: The November Jobs Report Why It Matters: The fight against wage inflation continues… Republic Speak: Something tells me that the rosy job numbers and the surge in government figures are about to cool off. Stay positive, Garrett {NAME} Secretary of Sunday 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]()