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Trump Anoints Himself Fed Boss

07-19-2018

The SPOOs were weaker overnight, but they rallied off the lows almost as soon as the market opened and by midday the losses were only about 0.2%, plus or minus. The proximate cause for the weakness was another large tumble in the Chinese yuan, as it would appear that one of the planned Chinese responses to tariffs has been to devalue their currency.

Putting the "Bull" In "Bulletproof" It certainly is not clear to me how all this plays out. Stock bulls seem to feel as though nothing bad can happen, which of course wouldn't be my first conclusion, but we should learn more about where all this is leading soon enough.

In the afternoon, Trump gave all markets something to ponder as he criticized the Fed rate hikes, though not too aggressively (yet). I have expected him to take on the Fed at some point but thought it would be after the stock market cracked. We will need to see if this changes people's expectations on any fronts, but his comments didn't seem to matter to the stock market (though they did to the metals somewhat; see below) and it was just fractionally lower when I left, with an hour to go.

Collateral Damage Away from stocks, green paper was weaker, oil gained a percent, and fixed income was higher. The metals were splattered once again initially, with silver losing 2% and gold over 1% before they rallied on Trump's headline to cut the losses to 1% and 0.4% as of when I left (but that likely will have changed by the close). The miners once again gave ground grudgingly.

I wish I could come up with a cogent explanation for why a weaker yuan has meant weaker gold prices. I've seen a lot of kooky theories tossed out recently, but nothing I've read makes much sense. I guess I can see how the rout in base metals may have put pressure on some Chinese player who may have had positions in gold, but that is still a stretch. It is always frustrating when you can't come up with a satisfactory explanation, but sometimes that is just the way it is.

For Your Poe-rusal For those who are interested, I participated in the Quoth the Raven podcast yesterday, which you can listen to here. Be forewarned: it was a pretty aggressive rant on my part and there was a fair bit of salty language.

Lastly, I will be traveling tomorrow so there will be no Rap, but Ask Fleck will run as usual.