B. Dudley’s WSJ Op-ed piece suggesting that the Federal Reserve should not help Trump’s re-election, fuelled an overwhelmingly negative response (and an official fed rebuke) while in essence the former President of the Federal Reserve Bank of New York (and former Chief Economist of Goldman Sachs) just exposed D. Trump’s trick of instrumentalizing and exacerbating trade wars -any and all trade wars- in order to fast push the Fed into cutting the cost of debt to zero. This trick was trial ballooned back in May when Trump issued threats of new tariffs to be raised against Mexico, days before the new Trump initiated UMCA (formerly known as Nafta) was to be ratified by Congress… This came out of nowhere, on a Friday evening, after the market had closed, causing havoc in markets the ensuing Monday when several Fed officials were forced to come out of the wood, literally promising “flexibility” (to cut rates in July which they did) against the very opposite signalling of Fed minutes issued a few days earlier. B. Dudley’s exasperation may have brought him too far in a sentence or two but nothing unreasonable to us when placed in the context of the President’s amalgamation of J. Powell with an enemy of the nation and his endless efforts at market manipulation that beyond driving all asset managers crazy are also slowly bringing the world economy to its knees. Trump’s latest insult was completely over the top (following weeks and months of daily groundless insults and accusations) and anything else an ex fed official coming in defence of the Fed might do to help preserving its independence will only look like self-defence to us. The most arrogant ex future Fed Chairman L. Summers’ obfuscation against B. Dudley (“a trusted former official of the Fed, whose thinking is inevitably going to be tied to the Fed, to recommend that they raise interest rates so as to subvert the economy and influence a presidential election is grossly irresponsible – is an abuse of the privilege of being a former Fed official…”) showed he may have missed the whole point of B. Dudley’s Oped. To boot and contrary to L. Summers’ accusation, B. Dudley never suggested to “raise interest rates so as subvert the economy” ... In any case, the latest iteration of easing that will be unleashed this month is most likely unnecessary (credit card debt is still charged at 18% with only real estate agents and fully collateralized speculators allowed to tap the opportunity of zero rates; “0” rates creates zombies, monopolies and contribute to depress productivity as companies with no cost of debt act like students who do not have to pass exams, “drifting complacently and ultimately unsuccessfully” to paraphrase one L. Summers’ more pertinent viewpoints), only presented as desirable to reward the self-serving and destabilizing efforts of D. Trump. Besides being the equivalent of spinning wheels for the economy, financial markets after an initial and final spurt, might be dragged in further disarray by getting everybody to wonder what the Fed and many other central banks (now engaged to follow or front run that expected move and race to the bottom) are panicking about. What do they see that we do not see? What is wrong with a recession? Have we decided to outlaw economic cycles, forcing the economy to only inhale without exhaling? Or have we simply deemed Western government debt to be beyond repair and that the only way to survive is for debt to be free for all and forever? If so, what are savers going to do? What are pensioners and pension funds going to do in this context? What are people going to do with their money yielding expropriatingly high negative return when the alternative is to hoard cash, buy bitcoins (for the youngsters) or gold (for those with a knowledge of monetary history)? More cruelly, where is Capitalism going to go? Whatever happens in September, the next step could very well be a global currency crisis. The dollar is rising right now and investors (comprised 75%+ of automated algos) may want to accompany this movement near term but to us this is the tree that hides the forest (of everybody having too many dollars in their reserves and elsewhere as the world becomes multipolar with the petrodollar system (a system whereby the Middle East agreed to get their oil paid in dollars in exchange for reinvesting the proceeds(reserves) into the US debt and capital markets) fast decaying and therefore the need to own dollars to support trade, fast declining. The movement that might take everybody by surprise could well be a sharp and across the board decline in the dollar against which the same old hedge (stocks and gold) will be the ultimate recourse, accompanied by increasingly destabilising market dynamics. It might be too late for Argentina’s peso but FX volatility has started to rise already. Over the past week, the S&P500 rallied 2,7% (17,0% YTD) while the Nasdaq100 rallied 3,0% (21,5% YTD). The US small cap index gained 2,3% (11,2% YTD). CBOE Volatility Index dropped -4,5% (-25,3% YTD) to 18,98. The Eurostoxx50 rallied 2,8% (16,5%, Z-score 2,1), matching the S&P500 and also supported by a weaker euro. Diversified EM equities (VWO) rallied 2,9% (6,0%), outperforming the S&P500 by 0,2%. CSI300 Chinese equity index (ASHR) gained 1,5% (23,5%). Indian shares (EPI) gained 1,8% (-6,2%). Russian shares (RSX) rallied 2,4% (18,7%). The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies technically broke out, gaining 1,3% (5,6%, Z-score 2,3) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -0,5% (-1,2%). The euro was broadly weaker. EURUSD dropped -1,5% (-4,2%, Z-score -2,4). EURCHF gained 0,2% (-3,3%). EURJPY dropped -0,6% (-7,2%, Z-score -2,1) and EURGBP dropped -0,6% (0,6%). Safe havens and bonds in particular dismissed the rally in risk markets with 10Y US Treasury yield dropping -4bps (-119bps) to 1,50%. 10Y Bunds dropped -3bps (-94bps) to -0,70%. 10Y Italian BTPs rallied -32bps (-174bps) to 1,00%, massively outperforming Bunds by 29bps. Italian Banks also recovered +4.1%. In one month only negatively yielding global bonds went from USD14.1tn to USD16.8trn. In the meantime, Argentina’s 30Y yields climbed +365bps to 18.33% (while the peso sank -7.3% on the week, -37% YTD). US High Yield (HY) Average Spread over Treasuries dropped -14bps (-133bps) to 3,93%. US Investment Grade Average OAS climbed 2bps (-39bps) to 1,33%. In European credit markets, EUR 5Y Senior Financial Spread dropped -3bps (-49bps) to 0,61%. Gold dropped -0,4% (18,5%) while Silver rallied 5,5% (18,6%). SPROTT PHYSICAL SILVER TRUST rallied 6,1% (21,6%, Z-score 2,1), closing the performance gap with gold. Major Gold Mines (GDX) gained 0,7% (41,6%). Goldman Sachs Commodity Index gained 0,9% (4,8%). WTI Crude gained 1,7% (21,3%). Over the week end… China’s manufacturing PMI came in weaker than expected on Sunday at 49,5 (from 49,7). Various tariffs increase whether American or Chinese came into effect on Sunday. Italy’s premier-designate Giuseppe Conte said he plans to present a list of key ministers and a new government program to President Sergio Mattarella between Tuesday and Wednesday National Hurricane Center upgraded Hurricane Dorian to a “catastrophic” Category Five, the highest on its five-point scale.

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