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Happy Opening Day... And the Morning BRRRR...We talk about the war, oil prices, and why there is ALWAYS money in the midstream.
Good morning: Happy Opening Day. Well… yesterday’s peace rally is gone. Iran rejected the 15-point plan and came back with a counteroffer that includes Iranian control of the Strait of Hormuz, reparations, and no U.S. military presence in the Middle East. Trump went on Truth Social this morning and said: “They better get serious soon, before it is too late, because once that happens, there is NO TURNING BACK.” Oil is back above $105. We now have a market back under stress, with three major voices warning about the state of affairs, all while rising yields are draining the plumbing. We break down the liquidity chain on today's show… yields up, collateral values drop, repo haircuts widen, the liquidity multiplier compresses. Futures markets are now pricing Fed hikes. Rate cuts are gone. Today’s education segment, however, is optimistic. There’s Always Money in the Midstream. We explain the toll-bridge model for pipelines, storage, and processing, and why fee-based midstream names are built for exactly this environment. Those names: Enterprise Products Partners (EPD), Energy Transfer (ET), and MPLX. Yields of 7-8%, hard assets, and decades of distribution history. This is the kind of stuff I want to be teaching on the show. There’s more… After the Morning Brrr, we’ll shift over to Money Printer Pro… breakout stocks, breakdown names, and a few ideas for today. Not a member? Here you go… Stay positive, Garrett Baldwin Full transcript Below . And it’s a great day because it is a national holiday and it is one of my favorite days of the year. It is Opening Day and it is in Baltimore, Maryland. And I am going for the first time in I don’t know how long. So I’m very excited. I hope everyone is having a wonderful morning. This is an opportunity to remember there are many, many good things in the world and to not let everything be a negative headline. Look, we’re going to go through what’s going on in the market. We’ve got some other good things we can talk about this morning as well. It’s not just about the war. The war is dominating everything, everywhere, obviously, and it’s hard to watch the financial news sometimes and not want to just run off into the woods. We’re not going to do that. We’re going to confront this market headfirst, talk a little bit about momentum, talk about what’s going on right now. Oil prices are moving higher. The optimism that existed 24 hours ago about a ceasefire is obviously fading as we gear up for a potential ground invasion. We’ll discuss that. But hey, there is a positive theme that I want you to remember today, and we’re going to talk about it soon. Right now, Dow futures down 350, S&P 500 down, NASDAQ gapping down at the open across the board. WTI up to $93, Brent at $106. The ceasefire hopes are fading fast. President Trump on Truth Social saying they better get serious soon before it’s too late. Gulf states have condemned the Iranian strikes. I was reading some interesting commentary from people who really are following the war and follow what’s happening in Iran. And it’s been really interesting to read the assessments of senior leadership in the region — that Iran’s senior leadership is gone. It’s this next man up mentality, but these people are very nihilistic, which is very difficult to negotiate with. We have to be realistic about that. It’s a reminder that when I was in graduate school at Hopkins, we wargamed scenarios. And that nihilism was part of the game. The Iranian player just happened to have been me. And when you have that mentality of just keep saying nope, nope, nope, nope — that’s legitimately exactly how the professors told us to play the game. So it’s really been fascinating to look back on that experience back around 2010 and to see the understanding of officials and how the next level of leadership would behave in an environment like this. It makes negotiation very difficult and it makes the entire concept of war that much more unpredictable. Enough commentary on that. People aren’t looking at this. They’re making an assumption for an optimistic outcome. That makes me nervous. That’s Kate Moore, Citi Wealth CIO. Brent at $106. Once again, Trump threatening no turning back. Gulf states have condemned the strikes. And we’ll talk about memory stocks in a moment. S&P in that 5,600 range. VIX around 25. We talked about crude. Gold prices at $4,442. Bitcoin under $70,000, platinum under $1,900. Today we have Opening Day in Baltimore. Jobless claims come out at 8:30, expectations around 210,000. Rising yields are really what everybody should be focusing on right now. Pay attention to the bond market. The bond market will tell us whether or not it is entrenched in long-term expectations and reshifting expectations for war. Treasuries rallied Wednesday on ceasefire hopes. Yields fell, but Iran rejected the deal overnight. Now those gains are at risk. Since February 28th, yields have been tracking oil. Remember: oil goes up, yields go up, expectations for Fed hikes go up. That’s kind of where we are. Futures markets are starting to price in Fed hikes this year, and at a point that we cannot afford that. Remember, that’s going to impact liquidity across the global system. The five-year auction was weak. The seven-year auction is today — $44 billion of paper needing a buyer, and it could send a huge signal to the market. On the liquidity chain, as we’ve explained, rising yields don’t just raise borrowing costs. They shrink the entire financial system’s capacity to lend. Collateral values drop when yields rise, bond markets fall, and funds use treasuries as collateral. Lower collateral leads to less borrowing capacity. Repo haircuts will then widen. Lenders demand bigger haircuts on collateral. A 2% haircut becomes a 3% to 4% haircut. In the BIS report that I was talking about, they were saying that somewhere in those positive periods, 60% to 70% of lending had no haircut at all. So in an environment of very loose lending standards, when you start to tighten those restrictions, that makes it harder to refinance, harder to lend, and that is what can lead to contraction events very quickly. The liquidity multiplier will compress. Every dollar of collateral used to support $10 to $15 of lending. Yikes. Rising yields shrink that multiplier. Less leverage leads to less liquidity, which leads to tighter conditions everywhere, and that will impact equity markets very quickly. Both sides are asking for an unconditional surrender. Once again, in the world of game theory, the new leadership in Iran are absolutists. That is the cleanest way to put it. The unwillingness, the statements that are made — now we don’t know what’s going on in the background, but the reality is that that nihilism makes this an extraordinarily difficult thing to even begin to discuss psychologically. So I look at this the way that I have from the very beginning. Those game theory issues are kind of out the window at this point. The U.S. is demanding that Iran dismantle three nuclear sites, end their ballistic missiles, and reopen the strait. Iran is demanding that the U.S. get rid of all their bases in the Middle East, pay all war reparations, stop bombing Lebanon, no more wars in the region, and Iranian control of Hormuz. Those are the type of demands that a country makes if they have won a war. And this war is not over. Trump is saying they better get serious soon before it’s too late. Gulf states have issued a joint statement. The big risks right now are the fact that the Gulf states are very heavily leveraged economies in the middle of very hot, dry environments operating on desalination. And if Iran continues to attack desalination plants, we have issues with drinking water for millions and millions of people. This can escalate very quickly. We’re sending 3,000 more U.S. 82nd Airborne in route. Israel says it needs weeks more to complete its war goals. The question is what other nations may or may not get involved. Energy, again — $93 on WTI, Brent going to $106, gasoline pushing to $3.06. Consumers are starting to feel this. Yesterday’s crash on the 15-point plan was erased. Iran rejected it. Oil ripped back. BlackRock saying oil could still spike to $150 even if the war were to end tomorrow. This is the supply chain story that we’ve discussed — supply chains take time to rebuild. Oil production that was being brought offline in places like Iraq is not going to come back overnight. But we are seeing those energy names all outperforming. We talked about this a couple of weeks ago. When this first started, what was the play? Upstream E&P. Occidental, APA, EOG, COP, Chevron, and the name that I have been in — Devon, DVN — all continuing to show very strong moves. Devon Energy now at $50.80. That’s about a 10% move since the entry. On top of this, there are still a lot of warnings out there. Lloyd Blankfein, the ex-Goldman CEO, coming out and saying tinder is piling up on the forest floor, eventually a spark will come — talking about what’s happening in the broader markets. A lot of concerns around private assets being overvalued, suggesting the next story in private credit is on the way. Capito at BlackRock, the president, saying oil may spike to $150 even if we announce tomorrow the war is over. Higher oil, higher yields. Higher yields, collateral problems. Collateral problems, liquidity problems. Liquidity problems hit private credit. And Kate Moore at Citi Wealth, the CIO, saying people are just making the assumption for an optimistic outcome. That makes me nervous. That’s something very similar that happened during the Ukraine war, the expectation that it was going to be quick. The other time we got really optimistic — COVID, 14 days to stop the spread. Twelve months later, we’re still shut down across the United States. You have to be realistic about this. And we go back to our momentum screen, our momentum number. Our momentum number went negative on January 28th. Gold and silver crashed two days later. Momentum broke down the following week. South Korea imploded. And then this war was the last major thing that dropped on top of a massive amount of problems in the market, including private credit, including the Federal Reserve having to inject $40 billion a month to keep banking reserves stable during tax season. And by the way, tax season isn’t over yet. All of these things matter. And we go back to what Larry Fink said on Monday — people are trying to pull their money out in private credit and Fink said nope, there are rules, you have to live with those rules. When it comes to momentum and liquidity and the way that markets operate and capital flows, people are trying to force money back into this market right now. And the reality is we’re still extremely weak. There’s still extraordinary stress in a lot of consumer defensive names and in the financial space, particularly in the insurance industries. Those problems have continued to compound, showcasing the weakness in the consumer and the problems still linked to private credit that are part of the insurance industry. Google. Let’s just add one more thing. Oh, my gosh. Thank goodness baseball is today. I can’t take anymore. Google crushing memory stocks. Medea gets the big tobacco treatment. Google’s memory reduction for LLMs — hey, that’s good, right? We like Google. Everybody should like Google. But SK Hynix down 6%, Kioxia down 6%, Micron and SanDisk already falling. The memory demand question is back. But anyway, Google is basically becoming the big dog. That’s why we talked about Warren Buffett stepping in and buying Google when he did. The reason that I like Google and the reason we like a lot of these names tied to this is, remember, we laid out how markets are today. A significant amount of the flows in markets are passive. Google is part of more than 1,500 ETFs. That’s consistent demand across the board. Nobody’s going to dump this stock in the passive space. It’s in all different types of ETFs and funds that are either trying to replicate the performance of the S&P 500 or the technology sector or the software sector or whatever thematic thing we want to toss out there. That’s the first part. The second part is this is where leverage lies. These are the types of stocks with very strong bid-asks, very tight liquidity, ability to trade options with tight spreads, very highly preferred by brokers, something people are willing to take as collateral. A stock that is very easy to borrow or buy based on margin debt. This is where the leverage positions operate. And then the last 15%, that value-arbitrage investor who wants highly capital efficient companies with strong moats capable of operating in a near-monopoly environment — Google represents that. That’s the Warren Buffett angle. So it checks all the boxes: one for scale, one for leverage, and one for good old-fashioned capital efficiency with a high moat. And Google became the market toward the end of the year. Right now, what you’re seeing is a company that already has a massive moat starting to drastically improve in other areas, and that’s going to sweep up more potential market share against some of these other players that have dominated the space for years. On top of this, the Meta and Google jury outcome. The jury found that Meta and YouTube are liable for addiction design harming children. This is the first of thousands of lawsuits. Welcome to the jungle, everybody, because there will be lawyers representing various states, and those lawyers will ultimately come to own baseball teams, like Peter Angelos did here in Maryland, by representing the class action. We’ll see what happens, but this is very comparable to big tobacco. Don’t be shocked if we go state by state and see these lawsuits start to emerge over time. Both stories hit at the same time. Memory stocks are selling off globally, Meta facing regulatory tidal waves. Tech’s not immune, but if I’m going to pick one dog, it’s going to be Google. Gold has sold off. Silver was crushed. All four metals are down. Remember, I said yesterday I was back in silver. I’m back in silver — Wheaton Precious Metals. I’m being cautious. I’m keeping some tight stops. I was optimistic that the worst was over in this area, largely because the bulk of the selling we had seen recently, particularly in gold, was heavily tied to forced liquidation happening in Asia, according to Eurodollar University. On top of that, oil is really the only green commodity. Energy is the only green we’re seeing right now. Materials had a nice day, but we’re seeing materials pull back on the momentum line. Platinum down, silver down, gold down. I still like this for the very long term, and I firmly do anticipate that there is going to be more monetary accommodation in the future. So you have to start to think 12 to 18 months out. I think silver should be in the $75 to $80 range. Gold, I’m content with anywhere over $4,000. Now here’s some reason to be optimistic. There’s always money in the midstream. A lot of people are asking where to put cash, what to do with money, what becomes a relatively good place for investors. And I continue to argue over and over again, whether it is here at Money Printer or at Postcards — the midstream of the energy sector. So what is the midstream? It is a toll bridge for the energy sector. There are three components to the supply chain of energy. Upstream is exploration and production, and of course some of the drilling names as well. You have the drillers like Halliburton, and then the producers. Now, Chevron and Exxon are producers, but they are vertically integrated, meaning they own their midstream and downstream capacity as well. Pure upstream players include names like Occidental, APA Corporation (which used to be Apache), Devon Energy, and EOG Resources. Those companies that pull oil out of the ground in places like the Permian Basin in Texas have to move it to either refinery networks along the Gulf Coast or to Cushing, Oklahoma, which is the delivery point for WTI crude. The downstream is the refineries, the chemical companies, ultimately the retail spaces, the companies that own the gas stations selling fuels and other byproducts to consumers, businesses, or airlines. Midstream are the people that actually move this stuff, store this stuff, and process this stuff. They run a pipeline. They collect a toll. They are a toll bridge for the energy sector — pipelines, storage terminals, processing plants, export facilities, two and a half million miles of natural gas pipeline around the United States alone. And every barrel that goes through, every thousand cubic feet — the price of oil goes up or down, they still get paid. That’s what matters. So if we look at this toll bridge model, this is fee-based revenue. Most midstream revenue comes from long-term fee-based contracts. Volume matters more than price. If demand remains robust for natural gas because of AI and electricity demand, great — there’s your buffer, there’s your moat, there’s your ability to play defense. Hard assets — you can’t email a pipeline, you can’t download a storage terminal. These are physical assets with decades of useful life. And the regulatory moat — you can’t just start building pipelines in your backyard. Existing infrastructure is almost impossible to replace and replicate. When everything else is red, the toll bridges are still collecting. That’s why you’re seeing things like Plains All-American Pipeline, PAGP, and Kinder Morgan all doing exceptionally well right now while everybody else is freaking out about the AI trade. The U.S. has record oil production. We are producing more oil and gas than at any point in history. All of it has to move. That’s the midstream’s job. More production equals more fees equals more cash flow. Geopolitical hedge — when oil goes from $100 to $70 to $105, upstream names swing wildly. Midstream barely moves because the revenue is fee-based. You’re getting paid for volume, not price. That’s the hedge. Dividend yields — these things have 6% to 8%, sometimes higher yields in a world where the 10-year yields 4.3% and equities are gapping down. These MLPs are paying strong yields with decades of distribution history. Income investors are starving, and this becomes the answer. And then inflation protection. Pipelines and storage terminals are hard assets that appreciate in value with inflation. Their contracts have built-in inflation escalators. When everything else is losing purchasing power, these are keeping up. Just the big three. If you’re just getting started on this, I highly recommend you do some research. Obviously talk to a broker, but these are the names I continue to always come home to. Enterprise Product Partners has 50,000 miles of pipeline. They’re the largest natural gas liquid system in the U.S. — 26 years of distribution increases, great distribution, 11 times earnings, and a relatively low enterprise value to EBITDA compared to other players in their space. Lots of insider buying recently. Energy Transfer is my favorite name. It’s not even close. This is America’s energy highway — 125,000 miles of pipeline. I think the number is actually higher. Kelcy Warren, their executive vice president and CEO, has just been loading up on this stock for years. One of the largest insider buying campaigns in the last 20 years. Largest natural gas pipeline in the U.S., significant amount of refined products. And MPLX is fantastic. This is the MLP of Marathon Petroleum — gathering, processing, and transporting from the Marcellus and the Utica shale backbone. Very strong balance sheet, very little leverage, and very strong buyback history. There is always money in the midstream. Three things to watch today. The jobless claims come out in a little bit. Oil prices — we’ll be watching. And escalation as well — 3,000 more troops from the 82nd Airborne are en route. After the Burr, we go to Money Printer Pro. We’ll talk breakout stocks, breakdown names, and give a full understanding of what we are doing with our signal — what does it do, what does it mean, how does it tie to liquidity, and what exactly is happening when this goes positive or negative. We do a couple of shows around here. The Morning Burr is your free show. Me and the Money Printer is our daily dive into what’s happening in the financial system — that’s a free letter. I did some covering yesterday on the Bank for International Settlements. I just like to record and give people the option of either hearing me talk about things or reading it. One of the things I always want to do when I’m on air is make sure that you can hear my voice so you can tell if I’m being sarcastic. And finally, Money Printer Pro, our morning letter for paid subscribers. This covers breakout and breakdown stocks, our momentum reading (which is red right now), and does a deeper dive into insider buying, liquidity conditions, what’s happening with bond yields, and opportunities as they emerge. I want to thank everybody for taking the time to listen to me this morning. You could be doing a lot of other things, but here you are. I appreciate it. Enjoy your Opening Day and I will catch up with you tomorrow. Stay positive. 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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