You are a free subscriber to Me and the Money Printer. To upgrade to paid and receive the daily Capital Wave Report - which features our Red-Green market signals, subscribe here. Things I Think I Think... (Volume 3,403-B)Sometimes you just have to get everything out all at once...
Dear Fellow Traveler: I still haven’t quite recovered from the Jet Lag. I’m not sure what it is… stress… the room temperature… or the combination of West Coast dryness at altitude transformed into Maryland Swamp weather at ocean level. But I’ve been operating on a steady dose of coffee and sporadic sleep that delivers lucid dreams. We’ll get back to normal… soon. But last week’s blistering pace of editorial describing the uncommon parts of the market - mixed with the blitz of earnings have left me with a lot of thoughts… So… let’s keep it fast. Thing I Think, No. 1: Here’s How To Pitch Your AI Startup?My friend in Europe sent me a note complaining that OpenAI and other massive players in the space are gobbling up all the investment. Well, the sovereign wealth funds will likely follow the lead of the biggest players. It’s going to be almost impossible to pitch a startup AI company that competes with them to get AUM up… However, I do have an idea on how to pitch a startup to individuals who want to get into AI but don’t fully understand how it works. My advice is to sit at a table when they ask how your AI startup works, do this...
That seems to be the approach everyone is taking with AI these days… Thing I Think No. 2: I Don’t Know Where to StartA friend from high school reached out to me today… We were tough on that Freshman soccer team together… to ask me a question.
I will need to write a book about this one… The short answer is this… 2008: One financial bubble (housing). Banks failed. There was a clear cause/effect. The crash was partially influenced by shadow banking that was getting to the size of the traditional banking system. It was the worst crisis since the Great Depression, and the Fed's solution was to pump a large amount of money into the system. This marked the beginning of Quantitative Easing. However, what is interesting is that this crisis followed traditional market cycles… This was the first major market crash since the Dot-Com Bubble in 2001-02. It took about six to seven years from trough to trough in the market cycle. That’s a sign that the market still ran on fundamentals. Now: Today, we have an everything bubble (housing, tech, bonds, crypto, AI). Now, zombie companies on life support, We have +120% debt-to-GDP (vs ~70% in 2008). The Fed balance sheet exploded from $900B to $7T. We have more inequality. We now have more interconnected systems. This means contagion spreads faster. And there’s nowhere safe to hide when it all crashes together. The shadow banking system is now significantly larger than the traditional banking system and largely unregulated. Today, liquidity expectations drive the market, which appears to be front-running capital and refinancing expectations in the future… When it does all crash, it happens quickly, and the Fed has to step in to backstop it. We’ve had a major market event (even if it’s temporary) every year since 2020, and each time, the Fed and central banks have accommodated with policy to prevent a massive deflationary spiral and upheaval in the bond market. That means we’re no longer on traditional economic cycles… Janet Yellen is guilty of that manipulation… but so too were her predecessors. But eventually… all this money printing is not going to work anymore… I don’t really want to say how I think it ends… But I’ll give you a hint… So… basically… Today is 2008 with more leverage, more bubbles, more debt, and less ammunition to fight it. It’s a very dangerous system… but it’s working as designed. I’ll dive deeper into this tomorrow. It’s a long answer… Thing I Think No. 3: The IPO Window Could Weld Shut I was surprised to learn that the IPO market (Initial Public Offerings) had its best performance since 2021. But is this going to thaw… big time? As I’ve noted, private credit is on the rise. Today, groups can raise billions in the private markets… and companies can achieve insane, illiquid valuations with no accountability. Plus… more regulation that ever is mounted on top of a public company. What - aside from the liquidity exit - is the point of going public anymore? The private markets are like a parallel universe where companies can stay "unicorns…" sort of like the 45-year-old in Los Angeles who has decided to dress like he’s a 16-year-old skater dude because California allows you to pick your own age… forever… Meanwhile, here we are buying all the public companies that are trading at valuations that WE KNOW are insane. Two different Americas, due to two distinct markets. Thing I Think No. 4 - Competing With The Money Printer Has CompetitionI went to CVS yesterday to buy… something to help me sleep. I paid at a self-checkout counter. And then I received a receipt that felt like it was 4 feet long… Jerome Powell isn’t the only person without a printing problem. When the Fed prints money, they have the decency to pretend that it carries value. But CVS is basically killing a whole tree and giving me coupons to… checks the faded blue ink… 30 cents of Irish Spring? How much money does this company waste on paper? Might be onto something…
Finally, No. 5 - Retirement Isn’t EasyI’ve been having some really interesting conversations recently with people who work in financial planning and insurance for an article that I’m writing about retirement planning… I’m 44… and I’m not going to wait 10 years to start planning… even if the market is just a constant state of BRRRRRR… I’ve done well so far at getting things together, but I feel behind like everyone else. One of the biggest takeaways I’ve been told about time and again is the importance of cash management and distributions. I find it interesting - because at my age, I don’t really think about the money I’ll need to maintain a lifestyle or try to be content. And I have done nothing but finance for… 15 years. And it speaks to one of the massive mental challenges in the years ahead for many people: switching from chasing market returns to ensuring distributions to maintain their standard of living. I know a lot about finance… but some things come along now and then - especially on the behavioral front that jar me. I’ve asked - How many people who are 60 have told you that they’d wished that they’d learned about market risk at 50? The answer… every single person. That is incredible and a reminder that there is life outside of equity markets. Remember that… And stay positive, Garrett Baldwin About Me and the Money Printer Me and the Money Printer is a daily publication covering the financial markets through three critical equations. We track liquidity (money in the financial system), momentum (where money is moving in the system), and insider buying (where Smart Money at companies is moving their money). Combining these elements with a deep understanding of central banking and how the global system works has allowed us to navigate financial cycles and boost our probability of success as investors and traders. This insight is based on roughly 17 years of intensive academic work at four universities, extensive collaboration with market experts, and the joy of trial and error in research. You can take a free look at our worldview and thesis right here. 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. 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.
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