A Winter Rite of Passage
I'm full of Danish ribs, and my back hurts... but it was worth it.
What’s the Point?
Being a dad on a snowy hill…
Why state lottery copywriters are lying liars…
What’s coming for investors in the week ahead…
Dear Fellow Expat:
When I was about five years old, my brother, father, and I went sledding.
We did so at the Board of Education’s property in Towson, Maryland.
It’s a long, sloped stretch known as “The Hill.”
People drive from all over Baltimore County, Maryland (and beyond) to sled here.
Even 35+ years later, it’s still the busiest local snow attraction we know.
It’s a constant source of people crashing into each other and kids’ audible excitement with the same fervor of an overcrowded, drunken wave pool during Spring Break.
My little memory starts in 1986 or 1987.
I recall looking down the hill from that top.
I watched my brother and father on separate sleds. They both went far… and fast...
My father crashed full-bore into the drainage systems at the bottom of the hill.
He didn’t get up for a while.
Then, I watched as my then-teenage brother helped him up. My dad was limping and had an arm around my brother’s shoulders.
That image is the only memory from sledding that afternoon.
But there’s more.
My father had promised to take us that evening to a restaurant called the Corner Stable after we went sledding.
The Stable sells Danish Baby Back ribs and feels like the set of a scene in the film Fargo.
I have a flash memory of sitting in the booth with my father.
He was sore, writhing, as the restaurant’s red lights stretched across the room.
Nothing more. We had dinner.
Then my father went to the hospital.
He’d torn his anterior cruciate ligament (ACL) in his knee. He still took us to the restaurant, though.
So… it’s fair to say… that’s been my “high bar” for fatherhood.
Fast forward to Saturday.
I hadn’t been on that hill for 37 years…
But it was time to return with my daughter.
The hill’s not any safer. People told me Saturday that kids were crashing into each other during the first snow day of 2025… and that someone took a knee to the head.
At the bottom of the hill, two bumps and odd, tight slopes make it easy to snap an ankle when trying to stop one’s momentum.
As Amelia and I sledded, I didn’t brake often, fearing my knee would bend into some Tetris shape. You gotta just… “take the hit.”
During my first time down with her, we spun backward, hit the first bump, and dropped hard on my lower back.
That stunk. I was slow to get up.
Walking up the hill, I told her the story about her grandfather.
A woman nearby overheard me talking and asked when his accident happened, thinking it was recent.
“Sometime in 1986 or 87,” I said. “We still went to the Corner Stable afterward.”
Well, that restaurant’s name was the magic word.
“The Corner Stable.”
My daughter asked if we could go there for lunch after at least eight or nine more times on the next trip down the hill.
How could I turn that down?
With that now on the schedule, I did everything possible to avoid repeating history.
I broke as hard as possible, tried to take alternate routes, and let her go down alone a few times. We walked away unscathed and drove to the restaurant.
We ordered iced tea there. She colored. She wanted to play Keno.
But she couldn’t understand how I could bet $2… and only “win” $1 in the game when she looked at the payouts.
“Aren’t you losing money if you bet $2 and only win $1?” she asked…
Exactly…
I explained how their copywriters twist the word “win” and her real probability of winning an actual prize in Maryland Lottery’s Keno game.
It turned into a long conversation about probabilities… and lessons on mathematics.
I explained - and she understood. The most logical pursuit of payoffs and odds of Keno is playing just two numbers with a 1:16 odds of winning at 10 to 1. This is a breakdown of the prizes based on the number of “spots” played.
The odds on the back of the sheet tell you you’re a winner when, in reality, your odds include breaking even. (This drives me nuts.)
If you bet $1 on a 4-number game and get two numbers, you “win” $1.
But you didn’t win.
You broke even.
Yet the Maryland Lottery advertises this math as “you won.”
So, I explained to Amelia that “breaking even” is not a win (unless you’re really desperate to tell someone or convince yourself that you’re a winner).
We talked about those odds… why they mattered… and the difference between winning and “getting your money back.”
Then she ate a hot dog and beat me in Tic-Tac-Toe three times, and we continued to talk about ties and wins (as I would tie her, then lose, and then tie her, and lose because I was testing her reactions).
More than ever, she could tell the difference between tying and winning…
And that was that.
A simple Saturday…
It seems unimpressive.
It was just another day.
When a stranger asks me what I did this weekend, I’ll probably say, “Watched football.”
And yet, it was one I’ll never forget. And I’m sure she’ll remember the math lesson (she remembers everything…)
It was, quite remarkably, a rite of passage.
When you ask, I’ll tell you my heart filled up like a balloon. It all happened: That early memory of being a son… and that present moment of being a father.
37 years later.
Don’t they go by in a blink?
The Week Ahead
It was an interesting week for the markets.
If you’re an investor and not a member of Republic Risk, I’m not sure what to tell you. We played this very well again—with inflows and outflows—and warned that Monday’s morning pop was just a head fake.
More importantly - we knew why.
On Monday, the Washington Post got everyone excited again. A report - that President-Elect Trump challenged - said that the incoming administration was considering a policy that only target import taxes on strategically important sectors. Markets rallied Monday morning. Then, once the media got wind of Trump’s rebuke, they sold off… and did so for the rest of the week.
This is a reminder that the purpose of the market is to sell…
On Friday, for example (after the news of Russian energy sanctions), traders pumped oil production stocks in the premarket hours, then sold to willing buyers trying to ride prices higher.
I continue to implore traders and investors to stop trying to trade headlines - and understand that sellers WANT YOU to buy.
I learned this lesson in 2008 from two traders at Goldman Sachs.
Monday was a sell-the-news day… Friday was the same.
What will next week bring?
Let’s discuss…
Monday, January 13, 2023
Event: Treasury Budget
Why It Matters: Are we solvent as a nation?
Republic Speak: The last time we got a Treasury budget, we learned that the U.S. budget deficit expanded by (checks notes) $367 billion in November. What in the sam living hell is going on in this country?
Tuesday, January 14, 2023
Event: The Producer Price Index report.
Why It Matters: Inflation numbers are rising, and expectations keep pushing out rate cuts until later this year.
Republic Speak: Once again, China matters on the PPI side. We want to focus on raw materials if the world’s second-largest economy engages in any QE later this year. China’s monetary policies have a causal relationship with the global economy and materials/commodity prices. The reason is pretty simple. It’s a global manufacturing powerhouse. Stimulus will spur economic activity that requires real production of products. In the U.S., when the Fed engages in QE, it benefits banks - because we’re a financialized economy.
Wednesday, January 15, 2023
Event: The December Consumer Price Index arrives as earnings reports emerge from JPMorgan Chase (JPM), Wells Fargo (WFC), BlackRock (BLK), Citigroup (C), and Goldman Sachs (GS).
Why It Matters: Inflation and interest rates… what is the path forward?
Republic Speak: Here come the banks… the companies that never lose.
They’re getting their hefty investment banking fees and looking forward to a robust period of M&A activity. The trading income looks solid. The Federal Reserve has a blank check whenever they need it. With Trump coming into office, the expectation is deregulation across the industry and plenty of capital for deal flow that will see more community banks get gobbled up.
But - in the short term - watch the Direxion Daily Financial Bear X ETF (FAZ).
Some weakness has built since our signals went negative in mid-December. This sector is desperately trying to reverse in the face of rising interest rates.
Meanwhile, the inflation situation is a serious problem. Janet Yellen (Treasury Secretary) has left the financial conditions in chaos, and we haven’t even seen robust stimulus from China yet (that would drive up materials costs). Oil markets are tighter now that Yellen’s team has put even harsher sanctions on Russia.
Markets have now kicked the net rate cut forecast out to late in the second quarter.
Thursday, January 16, 2023
Event: Bank of America (BAC) and Morgan Stanley (MS) report earnings
Why It Matters:… interest rates are rising… and there is no more outrageous balance sheet in banking than the exposure of higher rates than the one owned by Bank of America.
Republic Speak: Bank of America’s bond holdings make the institution look insolvent. There are well over $100 billion in “unrealized losses” on paper because their bonds have slumped in value while interest rates have climbed.
But - so long as they’re holding their bonds to maturity and allowing them to roll off at a 6% to 8% rate, they won’t implode.
Bank of America is too big to fail.
I get the outrage.
I understand - that, on paper - this is almost an insolvent bank. But that doesn’t matter. People need to realize that Bank of America is part of a club - and you’re probably not part of it. Plenty of voices told investors and depositors to pull their money out of BoA last year.
I am a client of BoA. I put MORE money into it. I’d rather have my money in BoA than in a savings and loan based in Dundalk, Maryland.
There is no shortage of printed money and digital stimulus for this institution.
So, for all the arguments that BoA will go under and that you should pull your money out… get to know the system. It’s rigged. And it’s NOT GOING TO CHANGE, no matter how hardcore of a libertarian you are.
Stop trying to scare people.
Because if BoA did fail?
You’d better have plenty of canned meat and shotgun shells.
Friday, January 17, 2023
Event: Schlumberger Limited (SLB) Earnings
Why It Matters: This is the front of the oil supply chain. With interest rates rising, China in trouble, and other unknowns, what’s the outlook for oil and gas production?
Republic Speak: The decision by the Treasury Department to hit Russia with new sanctions is the latest escalation for the Biden administration as its leadership walks out the door. I’m unsure that the Trump Administration will reverse this, as I assume there was some consulting on the matter before Friday’s announcement.
What threw me off is how the Treasury Department announced these sanctions on the energy companies and “shadow fleet” that was skirting price caps on oil.
If you recall, Western leaders capped Russia’s oil price at $60 for the global market. The point was to undercut their profitability and starve the revenue sources used to pay for the war against Ukraine.
But - as people do when incentives exist - Russia and various trading partners found ways around those caps.
On Friday morning, this sanctions announcement was getting attention around 9 a.m. The media was embargoed until 10:30 a.m (the Financial Times released insight from that release right on the dot).
Here’s the thing - the European and Asian traders had this press release - it looked official. They likely had this document for a few days as officials sought to get a reaction on how the markets would handle these sanctions.
Oil prices shot up on Friday morning due to the expected announcement.
What followed was utterly crazy. At 10 am, when the links went live in the Treasury Press Release, oil prices sold off. Why? Because the Asian and European traders sold the news - having already made profits that morning. And American traders - trying to trade that headline - got smacked. Oil didn’t fall hard - but it fell just enough to allow those traders to make a profit - while American traders got screwed.
I don’t understand this at all. But then again, what is there to get…
We’re still long midstream companies. We anticipate that U.S. production will continue rising in the years ahead, and all that oil has to go somewhere.
Calling It a Day
The Buffalo Bills play this afternoon against Denver. And my annual playoff anxiety will start as usual. If the Bills win, I’ll have to feel nothing as they square off against Baltimore next week. The Ravens will probably win that game.
And for the first time, I’ll be rooting for the Houston Texans, who play Kansas City next weekend. Enjoy the games and your Sunday.
I need not to eat ribs today.
Stay positive,
Garrett Baldwin
Secretary of Sledding
GB, had a sleddin' hill like yours a loooonnngg time ago in a Galaxy far,far away! Crandall Park-Youngstown Ohio. Made more interesting by a dozen very large trees interspersed all over the downhill slope! I became horizontally integrated with at least six of them. But wait....there's more! At the very bottom of the slope, a creek ran perpendicular to the entire width of the hill and then some. A little 3-4 foot,vertical plunge and then.....Immersion!! Water around or at freezing, 1.5- 2 feet deep so hypothermia was more likely than drowning. Dipped myself once and it cured Me....found a new "Hill". TIP: Bring a wood handle, short tined garden rake. Extend out the back left or right side, resting on the flat horizontal bar. Need to stop? Flip over, Tines dig in.....VOILA!!! BRAKES! Stay frosty Cochise. JM Saginaw MI