What You're Really Getting...

Welcome to the many people who found us this weekend at LinkedIn.

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Good afternoon:

First, welcome to the many readers who have joined us in the last 36 hours...

I also appreciate Josh Brown sharing yesterday’s piece and starting a lively conversation about the real path behind New York City’s recent election.

I was going to shelve that piece to discuss something far more mundane.

But it’s always the stories you least expect that will end up driving a conversation.

For those of you who don’t know me, or those who are trying to get reacquainted, I wanted to share exactly what you’re getting with this letter - Me and the Money Printer.

I publish a free version every day… and a paid version called The Capital Wave Report (more on that soon).

I had a reader ask me - What am I paying for?

Well, as I wrote a few months ago, this isn’t your typical newsletter.

I have called it “The Newsletter That Can’t Be Sold.”

However, as I mentioned in that post, I received letters from people stating that our work helped them save thousands, tens of thousands, and in one case, hundreds of thousands of dollars during the recent March and April selloff.

That is beyond fulfilling… playing defense for retail traders and investors....

Of course, many larger publishers haven’t wanted to produce it because it doesn’t focus on individual stock recommendations or carry a portfolio; instead, it focuses more on risk management and what drives the equity markets… and what trends you need to follow to stay ahead of the ongoing pathway of rampant monetary inflation.

In addition to playing defense, we focus on the one thing that drives and distorts the markets: Capital creation.

Not just that the Fed and shadow banks drive global liquidity, but where it’s created, and how it finds itself in the equity markets, completely distorting valuations, blowing up traditional old school metrics, and creating massively perverse incentives.

What do I mean by perverse incentives?

Take a look at WHAT you can buy in this market…

This equity market has devolved into a wealth of perverse incentives that aim to extract money instead of build shit in America.

As I noted a few weeks ago, I can track and trade 5,514 stocks on Finviz.

There are 4,300 exchange-traded funds (ETFs).

And what’s wild - in the last month, the number of ETFs went up by 150.

That’s not rational.

That’s financialization.

We live in a world where smart engineers can make more money creating leveraged ETFs around a single stock than by investing that money in productive assets, hiring people, and building things people need.

And if you conduct enough “root cause” analysis, every problem we have in society can be traced back to monetary policy in the United States.

I prove that every single day.

What’s more important - I show you where to invest for this ongoing story…

In the same damn things that the sovereign wealth funds are buying to extract even more capital out of the American economy.

How I Got Here.

I emerged from the 2008 Financial Crisis with a very limited understanding of that crash. Even though I’d lived through the Dot Com Bubble and studied economic history… and HAD A JOB ON WALL STREET… I was as dumb as a stump on derivatives and how the Federal Reserve worked.

For 12 years, I developed a thesis, worked in financial research, and went to four schools… and it’s been one that has allowed me to avoid every major drawdown (the five… four-sigma events of the last six years) and time the bottom of all these crises (COVID, GILT Crisis, SVB Crisis, Nikkei Crash, and the most recent Trade Collapse).

It’s honestly turned into a video game—one that operates on five key elements…

• A MASSIVE Liquidity Event… think the COVID crisis...

• A Momentum Equation - that tracks the number of stocks breaking out versus breaking down… that goes negative and money moves out before something BIG happens that crushes ordinary investors.

• A Confirmation on an obscure trading instrument that highlights liquidity problems in the market… and confirmation with the king of liquidity challenges - AIG stock…

• A major policy shift that becomes accommodative in markets… whether it’s monetary, fiscal, or White House trade policy. Because AIG bottoms with every single liquidity event and what comes next…

• A confirmation that the bottom is in (and policy has shifted) by massive levels of insider buying to selling on the aggregate dollar level. When that all happens, buy every high Beta name you can, my friends… because the rally is about to resume.

As I explain in a video below… the Insiders have called every major bottom of a crisis dating back to 2008. And the surge in buying accompanies a policy pivot…

Where’d I Get All This Information?

Trial and error… and reading…

This worldview and letter emerged from my years studying Monetary Policy at Johns Hopkins, trade policy at Purdue, insider buying as part of my MBA at Indiana, and cross-border capital flows at Harvard. Plus I’m a financial journalist by trade - and I’m just generally interested in how all this stuff works…

Add my fascination with hedge funds and shadow banks, and you get this unusual combination of macro-forces that most people don’t pay close attention to.

It was a puzzle.

And it’s nearly complete.

So, if you want to know when real institutional money is getting out of the market - and something really ugly might be on the horizon - that’s what I do.

I’m the guy telling you to get out of the water before most retail and many funds start drowning. And I don’t really use any complex risk management tools.

That’s Not All We Cover

Additionally, I focus on identifying market anomalies.

I trade reversions around the fourth deviation of price on the S&P 500, particularly when we have sharp selloffs that can lead to quick snapback rallies, as we saw on Friday afternoon last week in the final hour.

I made about 30% in less than 15 minutes on Friday… I talk about that regularly on my morning show at TheoTrade - which is free each day at 8:45 am.

Tomorrow, I’ll turn my attention to Piotroski and Graham stocks that have reversion potential and teach people how to trade quality-cheap stocks around the 20-day moving average.

And, of course, we focus on educating people about the ongoing impact of the money printer (whether it’s the Fed or Treasury) and how investors need to approach the new reality of an extractive economy based on rent-seeking businesses.

As I’ve said before, all roads point toward MORE monetary inflation, more currency debasement, and less education on how the markets work.

In the paid version of this letter, The Capital Wave Report, I provide daily insights on insider buying, momentum (both at the aggregate and by sector), and liquidity by tracking the Fed and Treasury.

It might not be easy at first - but I’ll simplify it for you…

Consider this piece that I wrote recently comparing surfing to trading.

It will explain the three stools of this - it teaches patience, and I do all of the work for you.

Finally, I put together a video for everyone recently about those three influences.

• With liquidity, I focus on Michael Howell’s work to better explain the world that most people don’t know about - all that money beyond the M2.

• With momentum - I discuss the work and influence of Grant, JD Henning, and Gary Antonacci. We bring everything down to a single number every day. If that number is positive, we stay in the game. If it is negative, we look for confirmation that it is time to take a heavy stance on the short side. This has enabled me to refine Black Swan-style approaches during crises, building on the work of Nassim Taleb and Mark Spitznagel.

• And with insider buying and policy, I go back to my own work on deviation measures in terms of insider buying strength as a contrarian buying opportunity. My deep background in economic and financial policy enables me to identify short-term bottoms that are tradable.

Carrying that surfing analogy - it is simply known as “The Wave Speech” - a gentle nod to the great Hunter Thompson.

I assure you…

Once you see how the Money Printer impacts the markets, you won’t unsee it, and you’ll sleep a hell of a lot better at night.

Thanks for reading, and I look forward to learning more about you and your trading and investing styles...

Stay positive,

Garrett Baldwin