Postcards: Misinformation, Market Concentration, and Momentum

The Three M's? Nah, we're just very uncreative due to a lack of sleep, a fleeting stomach bug, and a crash of deadlines all at the same time.                                                                                                                                                                                                                                                                                                                                                                                                                 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: Misinformation, Market Concentration, and Momentum]( The Three M's? Nah, we're just very uncreative due to a lack of sleep, a fleeting stomach bug, and a crash of deadlines all at the same time. [Garrett {NAME}]( Jan 11   [READ IN APP](   Market Update: The CPI figure came in higher than expected, fueling the argument that the market will see interest rates at “higher for longer” levels. This wasn’t surprising, given the sharp move lower in recent days from utility stocks, which seemed to telegraph the impending move lower. We’re cautious heading into earnings season as the current pathway resembles the sharp selloff in January 2022. Dear Fellow Expat: One of the key rules of the Florida Republic is our focus on transparency. We’re not in the business of sending emails suggesting there’s a “weird trick” you can do to get wealthy quickly. We don’t hide our investment strategies - as we’ve recently explained in the subject of our recent portfolios. We give away our Market Timing signal based on various momentum oscillators and assessing capital flows in and out of the market. --------------------------------------------------------------- Editor’s Note: For a more detailed breakdown of sectors, that’s part of the [Republic Risk Letter]( that comes out… every morning. --------------------------------------------------------------- Today, I want to share three things with you. The foolish focus on misinformation at a time when the world order is under stress. The ongoing market concentration of wealth into the markets. And our latest update on S&P 500 and Russell 2000 momentum, which is starting to break down ahead of earnings. Let’s be quick. The Experts, The Experts! Over at the World Economic Forum, the experts are starting to gather. The World Economic Forum runs from January 15 to January 19, and I will not be in attendance for the 42nd year in a row. My first graduate degree’s official “Major” is called “Global Security Studies.” The program - run through Johns Hopkins School of Advanced Government Studies in Washington D.C. - centers on risk management around three core world threats: Economic, energy, environmental, and military risks. I did my coursework primarily on the global economy and energy risks. After a few days in that program, your hair will stand on your arms. From my coursework on the threat of derivatives to the global financial system to the ongoing energy and mineral resource challenges ahead for emerging economies, this stuff isn’t for the faint of heart. But imagine my shock when I read that the so-called “experts” from the World Economic Forum have dubbed “Misinformation and disinformation” the No. 1 threat. And “extreme weather events” are the No. 2 threat. We have a war in Ukraine, attacks on our global shipping lanes by fanatics, and a massive threat of a deflationary spiral in China; the U.S. dollar - the global instrument of trade - on the brink; a MASSIVE shortage of minerals necessary for the forced electric transmission being thrust on us by these “experts,” economic inequality at historic levels; political division not seen since the U.S. Civil War; and a massive decline in economic and press freedom around the globe. And their answer is to rank “Twitter” and” Clouds” above these severe problems. These people cannot for the life of them understand… let alone admit… that they are largely responsible for ongoing destabilization, massive economic inequality, and the elections of Donald Trump, Boris Johnson, and Javier Milei over the last eight years. I’ll leave with [statistician Nate Silver’s take]( on this World Economic Forum report: “If the experts think that misinformation is a bigger problem than war, then a way bigger problem than misinformation is that the experts are f****** idiots.” A Rich Man’s Game Davos is a place where the rich can gather… and no one asks hard questions because the media members want to fit in, and the delegates want to be in the same room as the billionaires. While the Davos Man continues his assault on democracy and freedom - by claiming we need to destroy democracy and freedom to protect both… I can’t help but notice a disturbing trend in the equity markets. As I noted in the [Republic Risk Letter today]( the top 10% of the U.S. by wealth now own 93% of the stock market. And if we look at the chart below, it’s no coincidence that this surge in ownership aligns very closely with all of the money printing and [inflation targeting by the Federal Reserve over the last decade](. That figure is up from the start of last decade when it sat at about 80% following the 2008 market crash. Yes, a record 58% of all Americans own stocks via mutual funds or other equities; But this remains a rich person’s game. It's a Davos Man’s game. One of the big themes of the World Economic Forum this week is “Artificial Intelligence as a Driving Force for the Economy and Society.” I don’t want you to take your eyes off the ball. When it comes to AI - there’s one important theme you need to know. “Inflation Targeting.” Artificial Intelligence will deliver more deflation in the future across supply chains… So look for the Fed to continue papering it over, driving down the dollar’s value and pumping the equity markets higher. The wealthiest will continue to benefit from the Federal Reserve’s inflation targeting and the policies that put the most affluent in the driver’s seat.  This is a reminder that you must have long-term equity exposure. It’s your real protection against the ongoing debasement of our currency. Since 1993, the purchasing power of the U.S. dollar is down 52%, while the S&P 500 is up more than 750%. It’s the Fed, [the source of all our problems… and opportunities ahead](. Momentum and Equity Strength Signals And finally, this has been one of the more interesting days in the financial markets. We had a dramatic dip under that 4,750 level on the S&P 500, followed by a rebound to the 4,780 level. That first number is the Mendoza line for Equity Strength Signals as we head into earnings season. The reading for the Russell is currently 1,950 on that line as well. So, we’re barely in positive territory. We are still Yellow at this time. As I explained last week, the Banking Sector was overbought, and we’ve seen a trend of lower highs, lower lows, and strategic selling. We’re 5.2% above the 50-day moving average and 10% above the 200-day moving average. If the banks can’t deliver starting tomorrow, we could see a large decline. The risk is to the downside now - especially as we dig deeper into forward guidance. Though liquidity remains strong, the central banks continue to provide support, and earnings expectations are low enough to spur rallies with modest beats. The S&P 500 Financial Select SPDR (XLF) has been up nearly 20% since October. It’s unclear what the banks could say over the next few days that will lead this index back to the all-time highs we saw in 2021. Perhaps we should keep a closer eye on the Regional Banks, which have fallen since December 15. I’ll be back tomorrow with some insight on the banking reports. If you’ll excuse me, I have one more - a lengthy deadline left to complete. Then, hopefully, I’ve shaken off this stomach bug heading into a three-day weekend. 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]()