Geopolitical concerns continue as Turkey joins China, Russia, North Korea, and Iran in the Washington dog house. President Trump has doubled tariffs on Turkish metals since they still refuse to release pastor Andrew Brunson. The tariff announcement sent the Turkish lira plummeting 20% which caused the markets to grow fearful of rippling affects. U.S. investors made their way for safety and the Dow traded down 196 points and closed the week at 25,313. On the news, an iShares MSCI Turkey ETF dropped 14% and is now down about 42% for the year. Foreign bank stocks got the brunt of the whacking as the declining lira makes it more difficult for Turkey to repay their foreign currency debt. Interestingly, Amazon, Apple, Google, and Facebook all took hits as well — there must be a lot of metal in those iPhones Amazon is delivering to the Turkish people so they can Google/YouTube funny cat videos to post to their Facebook account. A delegation of U.S. officials returned today without making progress to release the pastor who has been accused of attempting a coup in Turkey.
The weakening lira has cause inflation in Turkey. While not to the same degree, the U.S. is also seeing inflation. The consumer price index rose 0.2% in July and is now at 2.9% for the last 12 months. This should keep the Fed on pace to raise interest rates a couple more times this year, which would be a total of four hikes for the year. It also tends to negate the wage increases that hourly employees have received and basically means they have not gained increased purchasing power. However, this is always a tough balance because as wages increase inflation usually follows.
David Einhorn (a.k.a. Silky Seamore) received some short shorts from Elon Musk. Silky, a notable Tesla short-seller, ironically enough, had been leasing a Tesla. In his letter to investors he said he was “happy that his Model S lease ended” due to technology defects and issues. In response, Musk tweeted that he’d send him a parting gift — some short shorts. This morning Silky tweeted back that musk was a man of his word, but the shorts did come with manufacturing defects. Einhorn’s hedge fund is having a tough year in part due to his short position in Tesla and is now down about 18%.