postcards from the florida republic - may 24

postcards from the florida republic

Wednesday, May 24, 2023

Dear Old Friend,

The locals arrive today to replace a 20th-century farm fence. At their request, I had to hack away at 100-year-old vines with a machete to clear a pathway through the brush and overgrowth. No sweat. They tell me that machete swinging is good for the abdominals…

Now, let’s get swinging on Wednesday’s market…

Risk On, Risk Off? And Market Risk of Media Overload

Yesterday’s selloff happens when no one has an answer as to what comes with a debt ceiling success… or failure. We’re down in premarket hours – just a few days after EVERYONE was SOOOOO BULLISH and momentum turned positive last Tuesday.

Now, S&P 500 momentum is about even – and the S&P 500 SPDR ETF (SPY) has slumped from 420 to 412.50 in three sessions. Beware the broader narrative… as funds will always – gladly sell to willing buyers at resistance levels like the 4,200 on the S&P 500. Remember, everyone: The purpose of a market is to sell…

Are Short Sellers The Unluckiest Fellas in 2023?

While the S&P 500 and Russell 2000 are under pressure, oil prices are rising again. The short-sellers in the equity market got smoked last week. Now, they’re back in the cross-hairs of the Saudis over oil prices. Yesterday, OPEC+ leaders warned they would make short sellers feel “ouching” if they continued to bet against the global commodity. I don’t know what “ouching” is, so I asked Midjourney (an AI art generator) to imagine the term.

While I assumed that OPEC+ meant financial pain, Midjourney apparently deems it as “nautical loneliness surrounded by crows.”

In addition to bullish Saudi comments, U.S. inventory levels declined, something I have discussed as we head into the summer driving season. Brent crude will likely test $80, while WTI may push toward $76.50.

Common Sense or Desperation Hits Europe

Ah, Florida. Where our energy grid isn’t insane. We run heavily on natural gas – lower emissions, a cleaner burn – and hold a string of nuclear plants. If only Europe had any common sense.

After two brutal winters around fuel supply – and collapsing electricity demand, France is bucking the EU’s Green New Deal policies. Germany is following suit. The Center-Right party is hammering away at the German government because Zero emissions plans fuel inflation and massive energy costs spikes.

All of this was predictable. While global growth continues to slow, governments keep turning to debt and more regulation, a toxic blend that stymies innovation and productivity. I ask how they plan to pay for the massive amount of copper, aluminum, cobalt, graphite, rhodium, palladium, lithium, nickel, chromium, and zinc… for their transition to “Green” energy systems?

All while they are sanctioning Russia (a massive exporter of most of these commodities) and building even higher deficits.

It’s like they didn’t have a plan (they didn’t.) Germany – perhaps the Greenest of Europe’s policy fever dreams – went heavy on Russian natural gas as a bridge fuel. But they had more ambitious energy plans that thought big and underdelivered.

I encourage you to explore the failed Desertec project that was immensely overhyped when I visited Germany’s Ministry of Energy as a graduate student. The goal was to spend much money and turn Northern Africa into a giant solar panel. But – like most things that involve central planners and people with no business experience – it just turned out to be a ceremonial reason to pat oneself on the back without any logical follow-through.

Here in the U.S., we do similar things with public money. Consider California’s high-speed rail project, which has been a money sink. And the countless energy projects that delivered big on promise but turned out to be financial swindles. This transition will be highly inefficient – because no one allocating the money understands how things actually work. Meanwhile, we’re banning gas stoves in New York and gutting nuclear power in California. Good luck to them…

See you out there,

Garrett Baldwin

Florida Republic Capital

About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

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