Gold Hits $5K — What’s the Market Afraid Of?

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2:42It is January 27th. Let's check in on yesterday's market vitals. The major indices rose, heading into a key earnings week. Treasury yields declined, the dollar tumbled, and finally silver gained the most since the financial crisis, and gold breached a new milestone. More on that in a minute. Okay, what's happening? Stocks carried their rally into the new week following President Trump's Greenland taco, but global tensions are still gripping markets. President Trump threatened Canada with a 100 % tariff over a potential trade deal with China on Saturday. Meanwhile, the dollar sank to its lowest level since 2022.

3:22That slide came amid fears of a government shutdown and talk of US intervention to stabilize the Japanese yen. And of course, the metals rally rages on. The price of gold just hit$5 ,000 per ounce for the first time ever. Joining us to break down what is moving markets right now, a lot in there. We're speaking with Robert Armstrong. Rob is the author of the Unhedged newsletter and co-host of the Unhedged podcast. You all know him. He's a regular at this point. Rob, thanks for joining us.

3:54Robert Armstrong:Nice to be back. A lot we want to get into here. I think I would love to start with your reactions to last week's taco. It feels like years ago because so much has happened in the past several days. not really markets news, but we can just set that aside for now. Let's just focus on the taco. We want to get your reaction because, as I remind everyone, you invented the term taco. We're now seeing another taco, this time with Greenland. He decided to pull those Europe tariffs after, you know, things went kind of, I don't know if nuclear is the right word, but people were pretty riled up about what was happening with Greenland.

4:37What do you make of last week's talker? What does it tell us going forward?

4:42Robert Armstrong:Well, the first thing I would note is that the markets didn't move very much on this crazy plan of Trump's, this crazy saber rattling on Greenland. So, you know, the S &P was down a couple of percent. The dollar was a percent weaker or maybe a little more. So it didn't seem like he was scared off by markets exactly. So, and that's kind of a theme that the market's reaction function to crazy Trump stuff does seem to be getting blunted over time. But maybe, you know, it's the politics. He just realized at some point that he was holding a losing hand against Europe and he folded. I mean, I think, you know, and maybe we ought to be glad this is a guy who cuts his losses when he realizes the other team isn't going to just shrivel.

5:41Yeah. He also threatened these tariffs on Canada if they go ahead with this China deal. My instinct here is we'll probably see a taco again. I mean, I'm just trying to figure out if there's any rubric or formula that you can follow as an investor or even as just a market observer when Trump comes out and makes these statements about tariffs. Like, do you just not believe them?

6:12Robert Armstrong:I think in this case, with the Canada tariffs, you can be pretty confident not believing them that they're going to end up anywhere near 100%. Yeah. Trump has shown no appetite for outright trade embargoes, which is what a 100 % tariff amounts to. If we cut off all trade with Canada, there would be howls of pain in the U.S. economy as well as the Canadian economy. And it would just be more than the president could take. So I would 100 % bet on a taco in this case. There's just no way. It's not predictable. It was just an expression of rage, I think. Yes. Not a policy proposal. I've had a thought recently after this, after last week's taco, I wonder if investors would be better off never, ever listening to anything that he says.

7:13I would love to put that question forward to you. Like, there's an argument to be made that if you just turn it off, you just press the mute button, you might perhaps make better investment decisions, or at the very least, just don't really take anything that he says that seriously. I mean, this is a delicate game to play because he's the president and, you know, he does have a lot of power.

7:38Robert Armstrong:I think you'd have to be careful to distinguish the cases where it's straight out of the truth social account and the cases where there's more voices echoing the policy, right? So, because of course, There have been highly market relevant Trump policies, you know, the tax cuts, whatever. But, you know, I wonder if just pretending he didn't have a truth social account and limiting your intake that way, I think that might work pretty well. Um, but again, there's another question, which is how much does this guy change over time? I think, I wonder if as his term wears on, second term, lame duck president, 79 going on 80, whatever, you have to take seriously the possibility that his risk appetite and his just sheer bloody mindedness is becoming more extreme over time.

8:50Robert Armstrong:You know, and we saw that in the case of Venezuela, you know? I mean, so I don't know, turn it off, but clearly a more skeptical attitude is warranted here. Yes, there should be some filter between what is a truth social post and what is a policy proposal. The line is very, it's very blurry. It's not totally clear. But I think you're right. I think there probably is a line. and if someone could figure out exactly what that line is maybe it's when scott besson said says something i doubt it yeah maybe when a plurality of officials get together and agree that this yes this is the plan again i'm not sure about that either um but it does seem very relevant if we're trying to pass out what is taco and what isn't i guess taco versus fafo as you've pointed out before i do want to get your reactions to what's happening um with the price of gold right now gold has now surpassed five thousand dollars it's up more than 50 percent over the past six months it is coinciding with murmurs of a sell america trade coming back perhaps those are related perhaps they aren't um but yeah i'd like to get your views i mean gold has had this unbelievable year they keep on setting these price targets or at least i keep on seeing these price targets that seem absurd, and then it just keeps on hitting them.

10:15What do you make of what's happened with gold over the past few weeks and the past few months?

10:20Robert Armstrong:First of all, I should note for the benefit of your listeners that the Association of Financial Pundits and Forecasters ought to erect a monument to how wrong I have been about gold for the last couple of years. I mean, I was a skeptic at$2 ,500, right? A hundred percent ago. So I don't like it as an asset class. I don't think it's been great over time. I've articulated again and again my skepticism, and I have been wrong as it is literally possible to be. So with that said, that's your health warning to everyone listening to me.

11:02Robert Armstrong:I think that there are three theories. One, what this shows you is about the debasement trade, right? That the dollar is going to weaken over time and there's going to be inflation, et cetera, et cetera. U.S. assets in particular and paper assets in general, that's bad for them. There's another theory that gold always goes up on political instability. It's not so much the inflation stuff, it's the politics. Third theory is that it's a meme stock now. and people are just piling in. All three of these can be true to different degrees. I don't like the debasement theory because we just don't see it in the bond market.

11:47Robert Armstrong:People love to huff and puff about how the dollar is so weak now, but if you look at a 10-year chart, sort of average. Inflation expectations, however you measure them, any market-based measure of inflation expectations, 100 % fine. So how could you have massive debasement that gold is picking up on and the bond market just doesn't see it at all? That strikes me as crazy. That leaves us with, then we go to the politics. Yeah, the world does seem a bit insecure right now. But again, why wouldn't that express itself in sovereign bond yields somewhere? Same argument. That leaves us with meme stock, which has been my favored theory.

12:40Robert Armstrong:You know, it's like people are chasing the momentum. But the longer you're wrong, the more you start to doubt yourself. So you've caught me at a moment of self-doubt. And I'm actually writing today trying to look again at the politics theory, the debasement theory, and see what can be salvaged there. Yes, it is very interesting. It's like gold has turned out to be everything that Bitcoin wanted to be. And it's remarkable how Bitcoin has not performed. And it's just while they have the Bitcoin president in office, while the world appears to be going politically to shit in various ways, this is Bitcoin's year, but it isn't.

13:19It's gold's year instead.

13:20Robert Armstrong:I mean, there is a theory, by the way. I mean, I think there are people out there saying that crypto people are realizing that crypto is actually correlated to the stock market. So it's not a hedge against your other assets. And so they're switching to gold, right? They're like, oh, you know, there's no diversification benefit to crypto. It's just an amplifier of the returns on the rest of my portfolio. But I can't find anyone who says they see that happening, that they see out of crypto and into gold trades. Yes, I would love for someone to come forward if that is really happening. You will lose all of your pride and reputation having loudly talked about why crypto is exactly the investment for this situation.

14:09But still, it would be very good for us, or at least for me as a crypto skeptic. final final uh thing i'd like to get your reaction to um we are the the contenders for the fed chair has been an ongoing race last week we learn um i learned on calci actually on one of these prediction markets that there is a new contender this guy rick reader his chances have soared to nearly 50 after trump had a call with him he called him very impressive they had a meeting at the Oval Office. He is very much in favor of cutting rates. He is a former BlackRock executive. He's expressed concerns about the labor market, etc.

14:53I haven't looked into him very much yet, but any reactions or thoughts on the possibility of not Kevin Hassett, not Kevin Walsh, but Rick Reader as Fed chair?

15:05Robert Armstrong:I've spoken him to a lot. I've interviewed him for the newsletter. He's an extremely clever man with a very deep knowledge of markets. I mean, he's arguably the most important bond trader in the world, given the sheer amount of assets he manages at BlackRock. So he knows the market as well as anyone you can possibly imagine. And I think he's a very smart guy. Does that mean he has the temperament to be the chair of the Fed or that Trump will pick him? I have no idea. It is important to notice, to note, however, that on several occasions, quite consistently, Reeder has said he doesn't think rates at, you know, call them 5 % now or whatever they are, or when rates were at 5%, now the base rate is a little lower, you know, whatever.

15:58Robert Armstrong:He's consistently said, actually, I don't think these highest rates are doing very much to control inflation. And in that context, he's used the example in the past of the housing market, right? Where if you brought the cost of mortgages down, houses would get cheaper. So that would actually be anti-inflationary. So he says these kinds of things you can understand why the president would be interested in at least talking to him. He has also said on at least one occasion that maybe the Fed should, or suggest, I emphasize the word suggest here. He suggested that maybe the Fed should help, uh, the treasury control interest costs.

16:45Robert Armstrong:Maybe he was misconstrued. That is a left field, the idea. I'm not sure if you really meant that or whatever, but it's out there. Uh, and so I think he is a guy who might naturally appeal to the president. I mean, it's clear what the president is afraid of, right? Which is that he'll appoint somebody who will give him a lot of sweet talk in the appointment process and then turn out to be his own person or her own person. Yes. Which is of course the whole point of the structure of the Fed chair's job. And my sense of Rick Reeder is that he's a market vet who's going to have his own views. And I wonder if Trump might not get that sense from him too and back off.

17:37Robert Armstrong:He's a really serious person. Yes. Rick Reeder is not a toady. Yeah. Which is, it's very interesting because Because it's hard to see the right fit for the job as anyone but a toady and a sycophant. I agree. I mean, it appears that the best person would not be a seasoned Wall Street executive. It seems like the best person would just be a guy who doesn't have many thoughts and just is willing to say yes and bring things down. With a small number of exceptions, Trump has appointed for loyalty rather than competence. Yes. You could argue within the case of Rubio or possibly Besant, that's not true.

18:20Robert Armstrong:But as a general rule, the main thing about getting appointed to something important in the Trump administration is saying yes, as loud as you can. Exactly. So I guess I'm hopeful for Rick Reader based on your explanation. But I have to say, the fact that he's taking the meeting and the fact that Trump really likes him for the job, it just naturally makes me skeptical. and I think that would be reasonable to most people. Rob, we'll have to have you back very soon. Thank you very much. Rob is the author of the Unhedged newsletter and co-host of the Unhedged podcast. Thanks for joining us as always.

18:57Thanks, guys. After the break, TikTok seals the deal. And for even more markets content, you can subscribe to my weekly newsletter

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21:39We're back with Prof G Markets. TikTok's fate in America is finally settled. After years of legal battles, the US and China have approved a deal that sells TikTok's US business to a group of non-Chinese investors. Under the agreement, ByteDance's ownership will fall to 20 % of the US business, with the remaining ownership spread across primarily American investors. Oracle, Silver Lake, and Abu Dhabi-based MGX will each take 15 % stakes in the company. Okay. Here to help us unpack the terms of this deal, we are joined by one of the reporters who broke this news. We're joined by Reid Albogotti, technology editor at Semaphore.

22:20Reid, thank you for joining us on Profit New Markets. Absolutely. Good to be here. So TikTok has closed the deal. It's official. you actually reported that this was going to close before it actually closed i'd be interested to know how you got that uh that scoop but before we get there what do we know about the deal what are the terms where are we on tiktok yeah i mean you know well it's basically a you know this this joint uh this joint venture you know with oracle and silver lake in the u.s they're going to basically take over the u.s version of tiktok um i think the really interesting part honestly less than the the business deal itself is is like what's going to happen with the algorithm in the u.s and from what i understand i mean this is and this is something i you know reported on back in december is that you know there's they're going to retrain the algorithm on u.s customers and this way they'll be able the oracle will sort of administer this they'll actually be able to tell you know if if there's any manipulation from the chinese government essentially uh on the algorithms i I thought that was sort of fascinating.

23:30Yeah, I mean, the reason this is happening is there was a national security concern that dates back many, many years. The idea was to not have China influencing the algorithm, the TikTok algorithm that millions of Americans use. Have they solved that, actually? Like, do we know that this new TikTok is free of Chinese influence? Well, I think this is actually the big question, right? I mean, we've gone through all of this, you know, Congress and now this huge complicated deal, which, you know, the U.S. and China had to sign off on all for, you know, essentially for China to still kind of have a hand on this, right?

24:17Now, if you talk to people at Oracle, there's a no. I mean, they literally are going to be able to oversee this and make sure that there's, you know, that there's no manipulation. But I've seen, you know, there's been chatter since December when this deal, you know, was originally sort of came out and most of the terms came out like a month ago from critics who think that, no, actually, you know, unless there's a complete break between China and the U.S. version of TikTok, there's always some danger that there's going to be manipulation. Now, like the technical feasibility of that or, you know, whether whether that's actually the case, I don't know.

24:55But I mean, to some extent, perception is reality. Right. If people are worried about it, then I think it may it may continue to be a big question mark. Just looking at the new owners, so we've got Oracle. It sounds like Oracle is really the one who's dealing with the technological side of the whole thing. We're interested to hear more about that. Also, Silver Lake, American investment firm. MGX, based out of Abu Dhabi. So that's not an American owner. I think some people would maybe say, well, why are we having non-Americans come in, these Middle Easterns come in and control the algorithm? What do you make of the ownership?

25:37Who's really in control here? Yeah, I mean, that's another interesting. I think that's going to definitely raise some questions. Now, if you've been following the Gulf region, which, you know, Semifor has, there have been a bunch of deals between U.S. tech companies and, you know, MGX and G42 and other Abu Dhabi entities, UAE entities, really. So this is and this has been what the Chinese relationship with the UAE has been this big sort of question mark around there. Should we even allow, for instance, NVIDIA chips to be shipped there? The U.S. government now, you know, has. It's been, it's sort of under Trump, has been a bit more open to dealing with those entities.

26:21But I think the question is like, well, you know, how much are they, like you said, Oracle is actually going to be administering this on the technical side. So how much is this just a monetary investment? Do they actually have any influence? I think if you talk to Oracle, they'd say no. If someone from MGX calls us up and says, can you make a little tweak to the algorithm here? It's not like they have the power to do that. But again, you know, these are just even just, you know, the original ownership, right, of ByteDance owning TikTok was enough. I mean, ByteDance always claimed that they were not manipulating the algorithm as well.