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Good morning, Well… it’s Groundhog Day… again… Be sure to share this show with friends and enemies… And I look forward to spending the day in Washington… Any questions, just reply to this email. Stay positive, Garrett Baldwin Transcript. Good morning, everybody. Well, it’s Groundhog Day again. And here we go, just kind of digging back through what we always do. Nothing changes. It just keeps going. Private credit is still a mess. Brent crude is moving higher. Panic in the private credit space. And the Fed remains hawkish. And we can call it a day. That could be the end of the show right there. I hope everybody’s having a great day. It is Thursday, March 19th. A little bit of a rundown for you. Are we only on episode number eight? Wow. Feels like we’ve been doing this for like 67 years. Central Bank Bonanza. The Fed is hawkish. No cuts. No expectations of rate cuts for the rest of the year. Bank of Japan holding in place. SNB and the Riksbank all hold. Bank of England is today. The ECB is today as well. Private credit. Well, it’s not getting any better. Apollo looking at 20-cent recoveries and JP Morgan pulling a deal. Energy infrastructure war, problems in Qatar, problems across the region. And this is only going to get worse before it gets better. Brent crude hitting 115, Iran hitting Qatar’s Ras Laffan LNG facility. And this is a very significant event. This could bring off that LNG supply for months, if not years at this point. Oil prices are moving much, much higher. The Brent WTI spread is the widest since 2012. About $20 right now. EU gas has moved up 35%. We’ve effectively doubled since the start of the war. And that Qatari LNG facility is offline indefinitely. Stocks are selling. We are in a risk-off mode. And more importantly, the other thing that we have to keep in mind is just the fact that gold prices continue to move lower, Bitcoin moving lower. Liquidity problems abound as the 10-year pushing toward 4.3%. Today’s calendar is pretty simple. Bank of England decision this morning. I missed it. Anything could have happened. The ECB decision is coming up. Christine Lagarde will come and speak relatively soon. The U.S. initial jobless claims will come out around 8:30. We have a summit on deck between the United States and Japan and FedEx earnings after the bell. Very, very critical. We want to hear what they’re saying about fuel costs and obviously the state of the U.S. consumer. U.S. S&P 500 futures pushing under that 200-day moving average, risk-off event. Brent at 115, WTI crude at 96, EU gas, natural gas up 35%. And that 10-year, we got to keep an eye on that. The higher that moves, the more it impacts collateral quality around the markets. And that can obviously lead to lower equity prices. Yesterday, the Federal Reserve did not do anything, anybody, at all, whatever. I don’t even know what we were doing. 3.5% to 3.5%. How is hawkish the expectation? No cuts this year. So we’ve gone from four cut expectations last year to nothing. And it is a reminder that Powell has now said that the expectation of moving back toward that baseline and containing inflation is completely out the window. It was 2022 when he said that they would have everything under control by 2025. Now we’re pushing into late 2027. And the problem now is the concerns around stagflation. Interestingly enough, gold prices are not moving higher. Silver prices continue to move down. That signals liquidity issues and the possibility of central banks selling gold for the purposes of buying oil. But we’ll go from there. Oil above $90 feeds through everything right now, and that is going to be the big problem. That is going to continue to put pressure on rates all around the world. Markets are not pricing in cuts until Q4, but even then, I will be shocked if we actually cut rates this year. And once again, it’s a reminder, it doesn’t matter. The Fed funds rate is not what it used to be. It is the SOFR that we have to pay attention to. That is the Secured Overnight Financing Rate. That is basically what repo is all about. And that’s where trillions of dollars exchange hands every single day. The Bank of Japan held at 0.75%. Takata wanted to hike. They didn’t get a hike. They need to hike because inflation is continuing to be a problem there, but they are holding pat. Once again, about half of that carry trade is still under pressure. Every central bank is frozen right now. The war has taken rate cuts off the table globally. This is the other thing, and people keep saying, whoa, this crisis came out of nowhere. No, it didn’t. I’ve been talking about it since October. I’ve been warning about private credit since I had a conversation with Tim Melvin about the whole concept a year and a half ago. A consumer loan fund has gated investors, no redemptions. This is now spreading past the software space. JP Morgan pulling a private credit deal from the market. And if JP Morgan is walking away from something, you got to pay attention to that. JP Morgan is the market. Apollo is still seeing 20-cent recoveries on generic software loans. The marks remain suspect. We talked about that the other day. The idea of somebody from Apollo effectively saying everything’s mispriced. BlackRock, Blackstone, Morgan Stanley already gating redemptions from earlier this week. Western Alliance and that Jefferies blow up showing that banks are still entangled in this mess, particularly at that regional space. This is not contained. And all of these other problems that are happening at the same time compound on top of each other. Remember, we talked about the daisy chain concept, the idea that the Federal Reserve that’s not going to be able to cut rates, that has a spillover into the banking sector. That can lead to sell-offs and concerns around bonds. The Bank of Japan not able to raise rates. And then the concerns that happen and how it all starts to move rapidly. One thing hits the next and moves down the line. Bank of Japan, private credit, Federal Reserve with rates, and of course, higher oil prices. All of this is happening at the same time. And the solution every single time, going back to COVID, has been some monetary policy accommodation to help contain the crisis. We’ve seen that happen with COVID. They printed all that money. 2022, the Bank of England went from effectively raising rates to printing money in a week. The Silicon Valley Bank crisis, we saw a new facility created for lending purposes. Every single time, they have done something different to kick the can down the road, but there’s no can to kick when it comes to energy prices, and that is exposing all of these problems in a very aggressive manner. The energy infrastructure war is very problematic. South Pars has been struck. Israel hit Iran’s giant gas field. Ras Laffan gets hit. That’s Qatar’s LNG. That’s the world’s largest LNG facilities and production point, and it is now offline. And this is where you’re going to now see deep concerns around what’s happening with LNG prices over in Asia, what is happening with fertilizer prices. This is going to compound, and this is now no longer, hey, this is a couple of weeks. This now goes into next year, particularly on the fertilizer side because there’s about a six to 12-month lag. So we’ve entered a new phase. Risk-off is going to be the key thing here, and I honestly, I’m very surprised that this market has held up the way it has. But I will remind you, the Federal Reserve is pumping $40 to $50 billion a month into short-term bills. That’s providing support to the market. That’s what people keep asking. They say, how is this market holding up? They’re holding up because they’re printing money. Liquidity matters. If they were not doing that, I don’t know where we would be. I’m going to put it somewhere down around the 5,600 level. But we’re not. We’re still finding that support. And it still is a trader’s market. You’re seeing these moves off third standard deviation lines. You’re seeing bounces. You’re seeing small pops. And you’re seeing the trend of lower highs and lower lows. And oil prices continuing to move higher. People have asked me, how high do I think it can get? I have to defer to my friends who were former oil traders. They’ve said somewhere in the 150 to 180 level. And if it really gets bad, then you’re really starting to talk about $200 oil. And at that point, we’re looking at a 1990 situation type of recession. This is not the best news. This is not what I want to be talking about in the morning. I want everybody to have a great day. I’m taking my daughter down to the National Spy Museum today. We’re going to have a great day. But the reality is we’re in a difficult place financially. So the things that you have to do is focus on what you can control. We have created the portfolio around choke points at Postcards from the Edge of the World. Those things are what can provide 8% to 10% in yield and then have 5% to 10%, maybe 20% upside in terms of total return. And that’s what we’re looking for at this point. We have to manage our money right now because this is a tough part of the liquidity cycle. Stay positive, everybody. It’s going to be OK. But right now, momentum is negative. We’re minus 30 on our figure. And this has been negative since January 28th. And once again, this reading is the number of stocks breaking out versus breaking down. And the weight number is still negative as well. So even at the equal weight, we’re at minus 30. At capped weight, we’re probably around like minus 16 percent. We have a sell signal. This is not a dip to buy. This is an energy crisis. And it’s very difficult for people to just walk away and — you want to be engaged. You want to be active. You want to manage your money. But I’m telling you right now, it’s a really good opportunity to get away from your computer the next two to three days. Tomorrow is third Friday and also quad witching. So there’s going to be a lot of action. There’s going to be a lot of activity. We can start to think about resetting on Monday and Tuesday. We’re also going to start to dig a little bit deeper into how do we invest on the backside of tax season? And that is obviously coming up. There’s still money that’s being pulled from the money market funds. There’s money that’s being pulled from reserves. My overall expectation is that the Federal Reserve is probably going to have to create some new facility at some point to provide support to this market. Otherwise, it’s going to get a little gnarly. But we can’t bet on that yet. And we’re seeing that across the board with the regional banking stocks that are under pressure. The one thing that I will note about this number, it was minus 49 a couple of days ago. It just means that conditions haven’t actually gotten better. What has actually happened is the number of stocks that are breaking down, the ones that are down X percent on the week, has just kind of calmed. And we’re going to see how this behaves tomorrow. I think you should be focusing on volume-weighted average price tomorrow because there’s going to be opportunities with the SPY, with a lot of those names like NVIDIA, and FedEx is going to be a tradable stock tomorrow as well. All right. That’s the show. It’s so easy when you don’t have a predetermined period of time. I don’t have to go from like 8:30 to nine. I can just say what I got to say and get out of here. Me and the Money Printer is available for free on Substack. So is Postcards from the Edge of the World. You have to pay a little bit more for Postcards for the portfolio, but obviously I give everybody sovereign ideas each week. Insider Stock Buys and Insider Report is available on Substack as well. I know it can be a little confusing, but we write a lot. We like to provide everybody with a lot of different ways to make money and to find what suits your risk tolerance. You may like insider buying because that gives you confidence to buy. If CEOs and CFOs are buying, you might want to follow along. If you want to follow how liquidity cycles work, that’s one of the primary things that I study as well. And Postcards is a little bit more political science, but that is a much more conservative targeting around a 10% to 20% total return for the year. And once again, in this environment, even the safest stocks aren’t safe if there is a rush to cash. I hope everybody has a great day. If you have any questions, obviously hit me in the chat or reply to this message and we’ll catch up with you on the other side. Stay positive, everybody. 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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