Great. This is the best for everyone, including China.
How disappointing for CNN and the Lefties.
China is loathsome.
It is a little bounce. Up 100 after falling 800 isn’t much of a bounce but still. I wondered last night just how the market priced this change in exchange rate? Whatever bad news the reaction is always extreme and the peeking out of the closet is always slow and timid. So it goes. Such is the market.
It may not always work 100%, but the last president on the Republican side who had the same ability was President Reagan and on the Democrat side President Kennedy. Since Reagan no other President from either party could make the other side pause, until Trump came along.
I am not sure how all of this will end. The world economy is WAY overdue for a recession (several market signals don’t look too good), thus a month or twelve from now things might be different. But that doesn’t take away the fact that President Trump can cold stare the enemy, and the enemy will look down.
Much as I’d like to see the silver lining here, I’m at a loss as to how this is China blinking. The market is grasping at straws. Devaluations aren’t completed in a single day. It’s been at 7.0x for the entire day.
Yesterday's decline wasn't the result of a massive sell-off due to changing market fundamentals. It was the result of a large informal "write-down" for every major company that has assets in China that effectively lost a lot of value in U.S. dollars simply because of the change in the yuan-dollar exchange rate.
If I have a manufacturing plant in China that is valued at 500 million yuan and the exchange rate is 6 yuan per $1 U.S., then this plant is listed on my books as a an asset with a value of just over $83 million.
If the Chinese government decides tomorrow to devalue the yuan so it is now exchanging at a rate of 7 yuan per $1 U.S., my asset is now worth less than $72 million even if the factory is still humming along producing the same volume of products.
Damn, should have bought some Yawns when it was over 7.00.
China is financing continued cheap exports on the backs of it’s citizens now, who are about to get smashed with hyperinflation.
Anyone paying attention knew this was China’s last big weapon, which is why trillions of dollars of capital has fled in the last 6-9 months, being taken overseas and converted into dollars and euros.
Now that China has pulled the trigger, they can only continue to do so, making things worse.
Imagine that......
For all the criticism Trump got, he knew, again, what he was doing.
And now it will be dropped into a black hole of forgetfulness, never to see the light of day again as they focus on something else Trump has allegedly done bad or wrong.
I wonder what Xi’s trading account looks like.
Sunday night. “Wong, I am selling the Dow short. How about we devalue just a tad.”
Monday afternoon: “Wong, I am all set now. Put it back where it was.”