Kicking the Tires of The Freeport Investor

By TradeSmith Research Team

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The key part of my wonderful job as editor of TradeSmith Daily is to share my best ideas about the markets, as well as the best ideas of the brilliant minds that call TradeSmith home.

But I’ve also been known to stretch my legs from time to time.

Financial media is deep, expansive, and ever-growing. It’s hard to know what’s worth your precious time and – if you decide to pony up for a subscription – your dollars.

So today, I’m putting on my tire-kicker hat.

My position means I get to access a lot of financial research at no cost to me. That gives me the unique opportunity to test drive a lot of subscriptions on your behalf, as we’ve done many times before.

Why am I telling you this?

Because an intriguing new newsletter subscription just hit our network called The Freeport Investor. It has a unique goal: “to show you the number one opportunity [each month] to invest your money, time or energy to help you gain more freedom and peace of mind no matter what’s happening in markets or the economy.” Barring my bracketed edit, that’s straight from the promotional copy.

Freedom and peace of mind are something I personally can’t get enough of. And the pedigree behind The Freeport Investor – 20-year market veteran Charles Sizemore, who I introduced you to in yesterday’s dispatch – puts some weight behind this claim.

Further, the letter is at a pretty steep discount right now, roughly the cost of a fancy Starbucks coffee each month.

First impressions and value propositions aside, today we’ll delve into the most recent issue of The Freeport Investor and kick some tires.

I’ll share some key bits and pieces of the analysis, along with my thoughts on the letter as a whole. My hope is that, whether you decide to join The Freeport Investor or not, you’ll walk away from today’s issue knowing if its particular flavor of investment guidance is right for you.

The Freeport Investor, January Issue in Review

Like any good financial newsletter writer, Charles Sizemore is at his core a good storyteller.

The lead-in to the January Freeport Investor details Charles’ first-ever “grunt job,” working the popcorn machine in a wasp-infested movie theater kitchen. The kind of job I had (the exact same one, in fact, minus the threat of a giant wasp nest) and likely you had as well. The kind of job that teaches you to personally excel past the minimum-wage threshold as soon as humanly possible, without the aid of government meddling.

But the title of the issue – “2024 Election Pick #1: Bet on the Ineptitude of the Incoming President, the Recklessness of Congress, and the Partisan Fed,” beautifully summing up the tenets of any good contrarian – is decidedly not a painful reminiscence about grunt work.

It’s about the misguided push from out-of-touch politicians for an artificially higher minimum wage and its unintended consequences in places like California.

Here’s Charles on the matter:

As of January 1, the minimum wage is $16. Starting April 1, it jumps to $20 per hour for fast-food workers. While “only” $4 more, the bump is a 25% increase.

Assuming a standard 40-hour week, that’s a $41,600 annual income for a position traditionally done by high school kids with no skills or experience.

That’s also more than I earned in my first job out of college.

(Quick sidebar that I can’t resist making: that’s also about 25% more than I earned in my first “big boy” job out of college… less than 10 years ago.)

That’s the setup to this months’ issue. Artificially higher wages are coming to California businesses, whether they like it or not. And they will make unwelcome waves in the state’s economy.

But as Charles rightly points out, capitalism tends to find a way around ambitious government policy…

The layoffs are already starting.

Pizza Hut recently announced it’s laying off 1,200 workers in California. It’s also eliminating its in-house delivery service.

Other companies are investing in labor-saving technology. El Pollo Loco, a popular grilled chicken chain, is replacing human counter attendants with kiosks. It’s also reducing menu items to lower costs.

And naturally, virtually every restaurant in California will be raising its prices. That extra 25% in labor costs doesn’t just descend from the heavens like manna. To maintain profitability, restaurants will have to cut costs and raise prices.

Every Californian will be paying more for their burgers and tacos… including the low-wage workers this asinine bill was drafted to help.

California isn’t Las Vegas. What happens there doesn’t stay there. Because of the state’s size and economic heft, what happens in California tends to spill over into other states… and infiltrates the whole of the U.S. That’s why we often refer to the “Californication” of this great country of ours that threatens us all.

The theme of “Californication,” as the Freeport team puts it, is central to their investment thesis. They’re rightfully skeptical of troublesome government policies enacted by people like California’s Gov. Gavin Newsom spilling into the rest of the U.S.

Also central to Freeport are the ideas of the breakdown of globalization bringing a new American industrial renaissance, and the opportunities for exponential progress that lie within that.

But the free market is doing what the free market does: finding new ways to innovate, break through bottlenecks, and boost productivity. This is the sort of exponential progress we follow at The Freeport Society, and it’s powerful enough that not even Newsom can screw it up, try as he might.

Exponential progress is one of our core foundational investment themes, and it’s tied at the hip to a second, the rebuilding of America’s industrial empire.

As production moves out of China and back to U.S. shores, we simply don’t have a large enough workforce to handle the influx of tasks, ridiculously high minimum wages or not.

The only way we’ll survive the decoupling is via a massive investment in robotics, automation, and AI.

The trouble is, all of this – a shrinking workforce, higher minimum wages, the costs of technological development and investment – will contribute to sticky inflation that no amount of Fed maneuvering will fix

This is where Charles really starts to bring the picture together.

These trends are feeding into a long-term, hard-to-pinch inflation problem that goes beyond the Fed’s interest-rate levers and money-printing powers.

It’s the hastening trend of out-of-control government spending, with no plans to pay back the national debt. It’s the trend of deglobalization, choking off cheap products from abroad.

And it’s how all this, leading to a domestic industrial Renaissance, will push the cost of real goods and materials higher – which will trickle through to everything the consumer needs.

Charles, mindful of this, recommended a play on industrial metals in January’s Freeport Investor issue. (Out of respect for Charles’ readers, I won’t share the ticker here. But if you’re interested in joining and adding this quality play on an American industrial revival to your portfolio, this is where you want to be.)

These considerations are also what’s led Charles and team to construct a bulletproof asset allocation model that any conservative-minded investor would be happy to follow.

This is not your typical 60-40 stock-and-bond portfolio. It’s much more protective than that. With permission, I’m sharing it here.

Note the relatively diminished presence of stocks in this model… The higher-yielding and more-liquid edge of fixed-income exposure by way of short-term T-Bills rather than long-duration Treasury bonds… The inclusion of real assets such as precious metals, industrial metals, real estate… And the small but meaningful allocation to quality crypto (aka: bitcoin).

Charles and his team are betting on chaos to erupt in 2024, especially with a contentious presidential election on the docket. This portfolio, from what I can see, is designed to survive and thrive that and anything more the market might throw at us.

And if you get the impression The Freeport Investor is a little bit too defensive, you’d be mistaken.

Alongside its portfolio of rock-solid American businesses and exposure to stalwart materials, three of his current 21 direct recommendations are devoted to the exponential progress we’re sure to see in domestic technology. Those three stocks should be top of mind to readers as the market charts new upside territory.

Overall, I think The Freeport Investor is a must-have subscription for any conservative investor who believes the United States, despite its issues, will continue to stand head and shoulders above the rest of the world.

It’s got something for value investors, tech investors, gold bugs, bitcoin believers, and a lot of what intersects on those fronts.

If what you’ve read today interests you, go here to learn more about how to get your hands on a subscription.

To your health and wealth,

Michael Salvatore
Editor, TradeSmith Daily