DAILY MARKET REPORT
Gold is up $2.50 at $1186 in today’s early going. Silver is up sharply (25¢) at $14.51.
Here is an interesting snippet from Bloomberg opinion columnist Robert Burgess published yesterday:
“[JP Morgan’s Marko] Kolanovic, who has dominated Institutional Investor’s annual rankings of top strategists for a decade or so, was out with a research note Thursday arguing that President Donald’s Trump’s isolationist foreign policy is a ‘catalyst for long-term de-dollarization.’ Put another way, the dollar is in jeopardy of no longer being the world’s primary reserve currency and all the benefits that go along with that, such as interest rates that are lower than they otherwise might be and the government’s ability to fund budget deficits in perpetuity. ”
At the moment, no one wants to believe that the current market paradigm can come to an end, but, unless history is stood on its head, end it will. JP Morgan’s Marko Kolanovic may have put his finger on what could turn out to be the catalyst – trade policy and its effect on the dollar. Overshadowed in the political tumult of the past week was President Trump’s address to the United Nations. In it, he outlined what might come to be known as the Trump Doctrine.
Here in part is what he said:
“Each of us here today is the emissary of a distinct culture, a rich history, and a people bound together by ties of memory, tradition, and the values that make our homelands like nowhere else on Earth. That is why America will always choose independence and cooperation over global governance, control, and domination. I honor the right of every nation in this room to pursue its own customs, beliefs, and traditions. The United States will not tell you how to live or work or worship. We only ask that you honor our sovereignty in return.”
And. . .
America’s policy of principled realism means we will not be held hostage to old dogmas, discredited ideologies, and so-called experts who have been proven wrong over the years, time and time again. This is true not only in matters of peace, but in matters of prosperity. We believe that trade must be fair and reciprocal. The United States will not be taken advantage of any longer.
And, last. . .
America is governed by Americans. We reject the ideology of globalism, and we embrace the doctrine of patriotism. Around the world, responsible nations must defend against threats to sovereignty not just from global governance, but also from other, new forms of coercion and domination.
Whether you like Trump or not, whether you agree or disagree with his trade and tariff policies, the UN speech outlines something other than business as usual and it should be taken into account. That something has yet to be reflected in asset prices. Many will discount the UN speech as more presidential bombast and go about their business. Yet, these are policies that are already in place – realities not proposals.
In a separate article, Bloomberg’s Cecile Gutscher passes along one of the conclusions from Kolanovic’s study: “Gold, which tends to benefit from a weaker greenback, also offers a hedge for any tentative push to de-dollarize. And it’s looking decidedly cheap right now . . . U.S. unilateral policies risk bringing major powers of China, Europe and Russia closer, and such an alliance could profoundly impact the dollar-centric financial system.”
Quote of the Day
“We are hurtling towards a financial crisis in the next couple of years as sure as night follows day, and even with 4 per cent growth it doesn’t get you out of this. We had this massive tax cut and we now have trillion-dollar deficits as far as the eye can see. I have been a huge supporter for tariffs but I find it ironic that on the day that we actually sign the [Article 301 investigation into China’s practices] we pass a bill that is going to create these deficits and China is the financier of last resort for those deficits.” – Steve Bannon, former White House advisor
Chart of the Day
Chart courtesy of HowMuch.net
Chart note: “You can see the same top-heavy trend when looking at which continents have the highest reserves,” says HowMuch. “Asia clearly leads the way on the right side of the map, second to the green countries from Europe (thanks only to Switzerland). Every other continent is comparably tiny. Take a look at North and South America compared to Asia. It’s not even close. And where is the entire continent of Africa in our visualization? Since we excluded countries with less than $5B in reserves, only four orange countries made it onto the map.”