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Dear Fellow Traveler: Good morning. Today… I want to talk to you about the words… priced in… It means…
Now… undo all that reading. “Priced in” is a term that always confuses me. I think we tell ourselves that things are priced properly to justify taking action, just to take action. I won’t bore you with the Efficient Market Hypothesis… Instead… I’ll tell you some stories. Up front, know that I view the markets and the world very differently than most other people… I’m not saying that I’m right… and I’m not saying that these extreme examples mean that markets don’t run well on information… especially in calm times. I have been on a quest for an alternative theory to explain these markets… especially after 2008. I’m also pointing out that tail risks are there and clearly mispriced… but people start claiming that things are efficient… that’s where the EMH concept falls apart to me... My stories don’t make the market… But my stories shape my experience and worldview. Back in January 2020, I was running a trading service for a Baltimore-based publisher. We had many technology stocks in the portfolio. And at the time, we were running at all-time highs in the market. Still, I was keeping an eye on a brewing crisis in China, a pandemic that was spreading exponentially each day. A former colleague was out there talking about COVID and issuing some pretty serious warnings about the spread of this virus… the nature of exponential spread. I reached out to him and said, “Be honest, what is the worst-case scenario right now?” He said, “Garrett… when this hits… There won’t be any planes in the sky in late March.” It was largely a gut feeling then… momentum was strong. I started selling most of the tech portfolio names that week, stocks that would ultimately lose 50% of their value over the next 60 days. I didn’t do so because I was afraid. I was taking gains… and a few small losses… but I didn’t like the thought of the associated tail risks, as I’ve always ascribed more with the world of Nassib Taleb and Fat Tail analysis than I have with Burton Malkiel and A Random Walk Down Wall Street. If I was wrong… oh well… I took gains… and people could laugh at me while the markets burned to new all-time highs. Which they did. But then… something happened. On February 21, 2020, the S&P 500 signal we use turned negative for the first time. And I started to feel a sense of concern that, even though we were near all-time highs, the markets were miscalculating something. That was still in the early stages of the COVID downturn… I’d hedged that week (February 28). I’d largely shifted to cash. I’d then watch as a demand shock cratered the equity markets, fueled shutdowns, and raised questions about how serious the downturn could go. March 2020 was a very strange time. But here’s the thing I remember most about the beginning of that selloff… On February 25, 2020… some of the top bulls in the market were telling us that all of this situation… that the downturn and the worst of what COVID bad news could be… That it was “priced in.”
It wasn’t priced in. Yes, it’s easy to mock the risk-averse… the people who bail on equities first in fear… It’s easy to say that markets do have a bias to the up and the right, and that monetary policy helps fuel that. But… markets are heavily behavioral… and best and worst case scenarios - drive a lot of sentiment - especially at the retail level… which has been buying the dip over and over again for the last few months. Look… I write this calmly. I don’t like Doom and Gloom. I look for upside… But my job… my No. 1 job here… is risk management for my readership. This isn’t your only letter… I know that. I’m trying to show you the optimal times to buy many of the recommendations other people make. Because if we’re in red territory on momentum… that’s dangerous… and there are underlying reasons for this. That’s the entire purpose of measuring momentum, liquidity, and insider buying for you here and at the Capital Wave Report. So… let’s talk about this current cycle. Our signal turned negative again on January 28, 2026, and we’ve seen gold/silver have a deep correction, momentum turn sharply sideways, private equity stocks fall out of the sky, and South Korea experience a massive drop. There’s palpable fear out there… But that’s all happened while the S&P 500 has held within 4% of all-time highs. I argue markets have seen support from the structure of the market and from ongoing monetary and fiscal support in financial markets. When I was on the other day with Michael and Josh, we talked about things that could really break this market. And I forgot to mention my argument from previous issues in Capital Wave and views for 2026. That’s the threat of foreign money going home fast again. Foreign demand for U.S. stocks has been ample, despite all the deeper concerns about broader geopolitics and rate worries in Japan. But when money starts to move out of the U.S. market and go home, that is where market shock can amplify… cross-border flows can lead to selling in MAG7 and AI stocks that have been the darlings of this liquidity cycle. Foreign capital loves to flow into the United States when we are engaging in Quantitative Easing (QE) or QE-like programs (which seems like a paradox but has shown up in several key academic studies in the last decade, as foreigners chase equity returns, since there’s a relationship between QE and valuation expansion). But those outflows can cascade through leveraged funds… and even passive funds, which may be forced to sell. These things happened in 2008 and 2020. And that happened again in 2025… during that April “trade” downturn. What Happened in 2025… It Wasn’t Priced InThat downturn… we caught it on February 21, 2025… again… and the FNGD had confirmed on the 24th that leverage was starting to unwind. Then… on March 5, 2025, after a downturn that followed that negative reading event… Tom Lee went on CNBC again and said much of the bad news was already priced in…
I have nothing against Tom… he takes a lot of heat as a market bull. But I’m just using these calls as evidence that saying markets are “priced in…” doesn’t mean they are. Sometimes they could be… but sometimes… they definitely aren’t. Here’s what ended up happening in March-April 2025. We saw the 1% Pattern playout again… instead. In March 2025, the market wouldn’t find a bottom for another week… on March 12, when we called a Short Squeeze coming…
Before then cratering yet again above that 20-day moving average on March 26…
That line at the 20-day EMA marked a time when funds used strength to resume selling.
Another negative turn on that 20-day period took us into our April collapse on Liberation Day.
A week later, everyone was an expert on the next Great Depression…
48 hours later… however, things changed…
The story then was a policy shift, massive insider buying, and a stock market that was off to the races.
Again… I want to remind people that “priced in” doesn’t mean what people think it means. On March 18, 2020, Yahoo Finance ran an article again saying that the market had already “priced in” a COVID recession. It didn’t. The market didn’t bottom for another week… and what did it take to pull the equity markets out of the worst downturn that it’d seen since 2008? The largest Quantitative Easing shift in history. Markets weren’t pricing in banking threats efficiently on March 9, 2023… Or the threat of a Japan crisis on August 1, 2024… Or the threat of the GILT Crisis in August 2024… This is why I keep saying that something significant has shifted in the world - especially in the post-COVID era. We’re seeing way too many “four sigma” events, yet people continue to argue that somehow all of this is efficient and risk is “priced in.” It’s clearly a broken market… reliant on more and more accomodation. So… what do you do now?First… you calm yourself. You recognize that this market isn’t one for the meek. I’ve said there is an opportunity moving toward investment-grade bonds… corporate bonds… and duration. There will be strong opportunities in owning the chokepoints in the economy, even if they see some valuation contraction. Next, remember… cash is a position. If there is sudden monetary accommodation… then we’d need cash to take advantage of buying opportunities. This is a hard market because there really isn’t much room to hide. About 95% of all assets are trading above their long-term trend, according to James Lavish, CFA. Finally… make sure you ask yourself these questions… Why do I own this stock? Would I be willing to hold it through a lengthy downturn? I laid all these questions out a few weeks ago when our reading went negative… I’ve seen this movie before. Understanding This SituationI’m not saying all of the things I’ll be talking about later today will happen… We have to think in probabalities and scenarios… I’m simply pointing out the risks of this market… and how they work. The longer this drags on, the higher the chance. With Iran… I expected this to be another short-term series of military operations. I didn’t think this was going to turn into a bigger conflict… These are hard to measure. But, it has now turned into a cluster… The Iranian Guard is saying they can fight for at least five weeks. They are targeting airports, refineries, and other critical infrastructure. They’ve shut down the Strait of Hormuz, which is where 20% of global oil passes through, plus a massive amount of other critical things like natural gas and fertilizer. And in markets, it’s not the rational thoughts that drive prices or reactions. So every five days… we lose a full GLOBAL day of supply. Do that for five weeks, and tight distillate markets (oil byproducts) get very tight, potentially leading to price caps or rationing… (The former is on the table in South Korea). You are seeing the headlines and reading the same things I am. The fear is starting to kick in… money started to flow to the exits fast on Thursday and Friday. And our Momentum Reading fell from about -10 to -33, signaling much greater weakness. If you’re new here, I will provide a deeper video of how our signal works and explain exactly what we’re looking to determine when there may be a market squeeze or even a market bottom. I want to stress that when you see these projections of $230 per barrel for oil… or 40% increases in food in certain nations, these are the tail risks… the extreme probabilities that may happen. But it’s important to note that those risks may be more likely than most people expect. We don’t want to speculate and trade… we need to be playing defense right now. But those things MUST be discussed, because people must be prepared and informed. The idea of European fuel rationing… It’s on the table. Asian nations rationing and price caps… It’s on the table. Most Americans don’t remember or know about fuel rationing periods in the 1970s. They also don’t know much about the “rationing” economy of World War II. It’s not a very pretty world. Meanwhile, airline stocks continue to drop… the other day, another man was on CNBC saying that all the fears about profitability are “priced in.” In a world like this… nothing is “priced in.” So, you have to determine if you’re an investor or a trader right now. If you’re an investor, you signed up for these tail-risk events. If you’re a trader… well, that’s a different animal. You may wish to target inverse funds… But I prefer to be away from my computer when the signal is red… Tonight, I’m going to do a presentation on scenarios for Capital Wave Subscribers. It will be released after 7 pm… as I need to see the futures market open. I want to talk through what most of the top shops and commodity analysts are saying right now… and reinforce some of the things we’ve discussed in this issue and in recent issues of the Capital Wave Report… If you’re not a member… there’s a discount for today… We’re not going to panic. We’re going to remain calm, enjoy our lives, and focus on what we can do to ensure we are 1) prepared for any scenario 2) know what technical levels are critical right now, and 3) focus on what to do in the event that we do have a bigger drawdown. I know that I’m not the only newsletter you subscribe to… which is why I try to seperate myself by acting as your goalie… and playing defense as necessary. 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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