Sponsored by

Sorry… the US won’t APE - June 2024 (#23)

Hello again dear reader. It’s been a busy week and your dude Brent is here with the commentary. Lot’s of great questions to discuss so lets get after it!

_{Advertisement}

Join the beehiiv community — the secret behind the success of top newsletters like Milk Road.

Our comprehensive suite offers more than just tools; it's a gateway to growth, monetization, and seamless content creation. 

With beehiiv, you get a code-free newsletter and website builder, alongside insightful analytics that drive real results. Experience the difference of the most powerful newsletter publishing platform on the market.

Start your journey with beehiiv today, absolutely free — no credit card needed. 

Dive in now →

Motivation

Investing is a journey of self-discovery. It reveals your relationship with money, your tolerance for risk, and your ability to stay disciplined in the face of uncertainty.

-Jeremiah Say

(Share this on Twitter)

Money

TLDR; NO I don’t think rates are dropping anytime soon even though Canada and the EU dropped theirs. I think the new Texas Stock Exchange has an uphill battle in front of it, but its creation is just a symptom of the times we are in.

Last week I got two really great questions. First, will the US ape and follow Canada and the EU in dropping interest rates? Next, WTF is going on with this Texas Stock Exchange thats been in the news? Both questions have ENORMOUS implications depending on the answer.

First, do I think the US will follow Canada and the EU in dropping interest rates? Personally, I REALLY REALLY DOUBT IT. Primarily for the reasons I laid out in issue 18. To summarize Federal Reserver chair Jerome Powell knows his history. He’d rather keep them higher for longer than get massively embarrassed by inflation shooting up after lowering them and having to raise rates yet again, as happened to Paul Volcker. So ya, don’t bet on it…

Also, historically the US Fed leads when it comes to monetary policy, not follows. As well, both Canada and EU are more confident in the inflation data coming out for their respective countries than the US is. The US has just simply not had the consistent data on steady inflation long enough to feel they can justify a rate cut. A rate cut anytime before end of summer would completely shock me, unless of course there was some sort of black swan event. With that in mind I’d say don’t bother racing out to lock in a higher interest rate on bonds or CDs, as they’ll likely be near where they are for at least another few months.

Next, WTF is up with this Texas Stock Exchange in the works? Ok, so in case you haven’t heard the two absolute juggernauts of wall street, Citadel and Blackrock, have joined forces to create a stock exchange in Dallas, Texas. They’ve raised over 120 MILLION so far to get it done.

I think this is a fascinating development that is somewhat emblematic of our times. A Texas stock exchange is actually nothing new. There used to be dozens of stock exchanges across the US and many states had one. However there’s a big reason those don’t exist anymore. LIQUIDITY. Essentially the more people participating makes it easier to buy and sell stock. Aside from that, New York has a well defined legal and regulatory base that provides a lot of certainty for companies looking to go public and raise some dough.

However, regulation is one of the big reasons why this stock exchange is getting considered. One of the big pitches is that the amount of regulation and requirements for companies to list on the stock exchange is just too much. This is also given as a reason for why so many companies are staying private right now. As an example, there are HALF as many public companies in the US right now than there were in the 1990s. There are a lot of reasons for that, but a big one is regulation.

Texas has a much lower regulatory burden, but also less regulatory certainty than New York. This is because New York has been doing this since 1792 and had a lot of cases that provide clarity on what is likely to happen if things go to court. Between that and liquidity I think the Texas Stock Exchange has a MASSIVE uphill battle in front of it. BUT, if anyone can do it its BlackRock and Citadel….

In a way, I feel that the Texas Stock Exchange push is emblematic of our times. People are calling its establishment as ‘anti-woke’ and a response to policies such as requiring NYSE listed companies to have underrepresented individuals on their board of directors. The Texas Stock Exchange is pledging to be apolitical, but sadly I’m not sure thats really possible in our day and age.

Passionate differences in politics is causing the US and many western countries to split further and further apart ideologically. If successful, the Texas Stock Exchange could solidify Dallas as a second US economic and ideological powerhouse to compete with New York. As with most things, competition is good, as long as it stays friendly…

FINAL MEMES

_{WARNING: Below button reveals an offensive meme that is intended for you ONLY if you are a horrible person.}

That’s all folks!

Have a question? Reply on this email!

Copyright (C) 2024 Ann Royal Advisors All rights reserved.
The information contained on this Newsletter and any resources available for download through this newsletter are not intended as, and shall not be understood or construed as, financial advice. I am not an attorney, CPA, or financial advisor, nor am I holding myself out to be, and the information contained on this newsletter is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation.

Question? Comment? Concern? Email me here:
[email protected]