Turkish lira plunged near record low 3.9/USD this morning and bond yields spiked over 12.5% for the first time in history as investor anxiety escalated following President Erdogan's attack on the nation's central bank, decrying it's "wrong path."

Currency crisis…

And bond market panic…

As Bloomberg reports, Turkish President Recep Tayyip Erdogan signaled an end to his uneasy truce with the new central bank chief, attacking the institution now run by Governor Murat Cetinkaya for its repeated revisions to economic targets and “wrong path” to tackle soaring inflation.

“They say central banks are independent so we shouldn’t interfere. This is the end result because we haven’t interfered,” Erdogan said in a speech on Friday in Ankara.

 

“Results speak for themselves.”

“We will solve this, things can’t go on like this,” Erdogan said, vowing to step up a fight against what he calls the “interest rate lobby,” an alleged cabal of financiers and lobbyists that he says is conspiring to keep Turkey’s interest rates artificially high.

“We can’t make this a taboo,” he said, rejecting the idea that central bank independence means he shouldn’t comment on interest rate policy.

The comments come as a slew of economic stimulus measures implemented in the wake of a 2016 coup attempt have helped push growth up while driving core inflation to 11.8 percent in October, the highest since 2004.

“We’re back at Erdoganomics 101,” said Cristian Maggio, head of research at TD Securities in London.

 

“I would have expected him to start shouting at the central bank only once the lira was on a more solid footing versus the U.S. dollar and euro. We’re clearly not there yet, so that makes me think that he’s more concerned about growth, a concern that we share.”

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A small savings bank in Michigan, Flagstar Bank, has come up with a genius, innovative new mortgage product that they believe is going to be great for their investors and low-income housing buyers: the “zero-down mortgage.”  What’s better, Flagstar is even offering to pay the closing costs of their low-income future mortgage debtors.  Here’s more from HousingWire:

Under the program, Flagstar will gift the required 3% down payment to the borrower, plus up to $3,500 to be used for closing costs.

 

According to the bank, there is no obligation for borrowers who qualify to repay the down payment gift.

 

The program is available to only certain low- to moderate-income borrowers and borrowers in low- to moderate-income areas throughout Michigan.

 

Borrowers would not have to repay the down payment or closing costs. But a 1099 form to report the income would be issued to the Internal Revenue Service by the bank. So the gifts could be taxable, depending on the borrower’s financial picture.

 

Flagstar said borrowers who might qualify for its new program typically would have an annual income in the range of $35,000 to $62,000. The sales price of the home — which must be in qualifying areas — would tend to be in the range of $80,000 to $175,000.

Think it’s too good to be true?  Lakeshia Wiley of Detroit’s west side begs to differ…she recently went through Flagstar to purchase her new home and only had to come up with $350 of her own money.  Per the Detroit Free Press:

Lakeshia Wiley, 35, said she wouldn’t have been able to buy her first home without the Fifth Third Down Payment Assistance program and two other grants, including one from Southwest Solutions.

 

The brick home, built in 1951, is on Detroit’s west side, needed very little work and was priced at $50,000.

 

“I’m very excited every time I think about it. It’s beautiful. I love it,” Wiley said.

 

Wiley never expected to be able to buy a home, though, because she has had a hard time saving for a down payment.

 

“I didn’t think I’d be able to do it,” said the single mother who has two sons, ages 17 and 10, and a daughter, age 6. She works at a Detroit pharmacy.

 

Thanks to the down payment assistance and the grants, Wiley was able to buy her home in April. She had to bring less than $350 to the table at closing.

The Flagstar program is available in 18 counties in Michigan, and could be used for certain homes in Detroit and Flint, along with other cities.

Of course, we would highly encourage Flagstar to take a look back into ancient history for case studies on what happened the last time banks started peddling “innovative” mortgage products.  Here’s a summary of the Lehman Brothers case study:

Ironically, South Park also did some fascinating research on the topic:

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Before the cash equity market opens, we thought these two charts may help…

FX carry is not helping…

And bonds ain’t buying it…

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Following this month’s drop in junk bond prices and the 40 bps spread widening in high yield last week – the largest since November 2016 – Bank of America has come up with an apt title for its weekly fund flow report: “Nightmare on Bond Street”…

… and with good reason: last week, US junk bond funds and ETFs reported a $4.43bn outflow this past week – the third largest outflow on record and the largest since August 2014. This follows a smaller $0.94Bn outflow the prior week. Non-US HY contributed an additional $2.3bn worth of redemptions, bringing the global junk outflow figure to -$6.7bn, also the 3rd largest ever.

The near record outflows accompanied the second most aggressive round of selling in the US junk bond market in 2017. The weakness in performance only trails a sell-off that occurred in March, when spreads widened by 61 points in less than three weeks according to FT.

“It was very much a flows driven sell-off last week and in the beginning of this week,” said Tim Schwarz, a credit analyst with Investec Asset Management. “We saw a lot of . . . pockets of illiquidity.”

According to EPFR, roughly half of the US HY withdrawals came last Friday, when more than $2bn left the space in one day. Since then, the outflows have been slowly declining each day, from $585mn on Monday to $494mn yesterday. Somewhat surprisingly, large outflows such as the most recent bout are not correlated with subsequently weak performance. In fact, out of the 15 largest-ever daily high yield outflows recorded, next 3 month returns have been positive 10 times, with an average annualized return of 7.2%. According to BofA, this is likely because most of the spread widening occurs just before the flood of withdrawals, providing an opportunity to capture excess returns should the selloff prove to be temporary. Indeed, as BofA’s credit strategist note, given Thurdsday’s strong secondary performance, “we think such is likely to be the case in last week’s episode as investors have once again embraced a buy-the-dip mentality.“

In contrast, EPFR also reports that flows for other fixed income asset classes were relatively stable. However, the large outflows from high yield and loans resulted in a net $1.32bn outflow from all bond funds and ETFs, after a $2.27bn inflow in the prior week.

Inflows to high grade were little changed at $3.31bn, down from $3.41bn a week earlier. Inflows to short-term fixed income increased (to $0.65bn from $0.27bn) while inflows outside of short-term declined (to $2.66bn from $3.15bn). Inflows were higher for high grade funds (to $1.83bn from $1.52bn), but lower for ETFs (to $1.48bn from $1.89bn). Inflows to global EM bonds weakened to $2.66bn from $3.15bn, mostly driven by local currency funds / ETFs. Inflows to munis instead improved to $0.34bn from $0.28bn. Finally, inflows to money markets were close to flat at $0.02bn, down from a $7.58bn inflow in the prior week.

Meanwhile, there were no problems in equity land: flows to stocks improved to a $3.2 billion inflow, which however once again masked an ongoing divergence, as $9.9bn of this amount went to ETFs. Active, i.e., human managers, saw another outflow, this time for $6.7 billion as the non-ETF financial sector continues to die a slow, painful death.

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Overnight saw the price of Bitcoin surge to $7997 following Zimbabwe chaos and defaults in Venezuela, rebounding from 'the world is ending' $5555 last weekend.

However, if American investors are to be believed, the cryptocurrency has a long way to go before they are selling…

As CoinTelegraph reports, a new survey among Americans indicates that the average investor will not coimpletely exit Bitcoin until its price hits $196,000…

image courtesy of CoinTelegraph

LendEdu commissioned a survey in November 2017 of 564 Americans who had invested in Bitcoin. While surveys have been done in the past to gauge the awareness of the general public about Bitcoin, this survey focused on American Bitcoin investors and their sentiments.

We have come a long way from 2015, when 65% of Americans surveyed didn't know what Bitcoin was. The questions asked in the survey ranged from their reasons for investing in Bitcoin to when they would sell all their Bitcoins.

Sell all your Bitcoin?

The average price at which the survey respondents said that they will sell all their Bitcoins is $196,166 per Bitcoin. This represents 30x the value of Bitcoin prevailing at the time of the survey. It is to be noted that this is the price at which the respondents will sell all their Bitcoins. Almost a third (32.62%) have sold some of their Bitcoins since they started investing. It is tempting to book profits, given how the price of Bitcoin has rallied in the last year.

Most of the respondents plan to hold their Bitcoins at least one year, with only 16.49% planning to sell sooner than that. According to the survey, 21% of Bitcoin investors plan to hold on to their coins for at least seven years, and 11.7% say they will hold the currency for 10 years or longer.

Store of value or speculative investment?

While pundits debate whether people are investing in Bitcoin because they treat it as a store of value or as a speculative investment, the survey results indicate something completely different. According to LendEdu:

“The most popular selection, chosen by 40.78 percent of respondents, was "I believe Bitcoin is a world changing technology." It is interesting to see that the plurality of Bitcoin investors are backing the technology as the primary reason for investing. Often, financial professionals speculate that Bitcoin investors are chasing a big payout.”

It seems that the naysayers are wrong, and these aren’t merely “greater fools” chasing huge gains. Instead, American Bitcoin investors are apparently sophisticated enough to realize the value of the project’s technology.

The next largest group of respondents see Bitcoin as something akin to digital gold:

“The second most popular reason why investors liked Bitcoin, chosen by 21.81 percent of respondents, was for the possibility of long term storage of value of it. Many financial professionals often compare Bitcoin to precious metals like gold, silver, and platinum. For centuries, investors have used precious metals as a way to diversify away from government backed currency.”

Worried About Safety

Another big takeaway from the survey is that almost half (44.15%) of the respondents were worried about the technological safety of their Bitcoins. This isn't surprising, considering high profile cases such as Mt. Gox. That exchange, the largest in the world by volume, went bust and its former CEO was arrested in Japan on embezzlement charges. He has pleaded not guilty.

In addition to the ill-fated Mt. Gox, numerous other exchanges have faced security problems. Multiple exchanges have been hacked and their customers’ Bitcoins have been lost. While Bitcoin holders can follow certain practices like keeping their Bitcoins in cold storage to increase security, the survey shows that ordinary investors continue to worry about the safety of their coins.

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India’s Continued War on Gold Causes a Monstrous Increase in Silver Imports

Written by Nathan McDonald, Sprott Money News

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Following September's storm-driven tumble, October has seen a big rebound in Housing Starts (+13.7% MoM) and Permits (+5.9% MoM) both beating expectations, as multi-family starts explode.

Housing starts printed above all analysts' guesses (4 standard deviations above expectations) for the biggest monthly jump in a year.

The surge in starts was driven by a major rebound in multifamily units…

That is a 37.4% increase month over month in October multifamily starts with only a 5.3% increase in single family starts. However, multifamily starts are still down 9.6% YoY (single-family starts are up just 0.7% YoY) and overall housing starts are down 2.9% YoY.

Single-family permits reached a new cycle high…

Finally some context for the recovery – these are the same level of starts/permits seen in 1993…

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It’s been just over eight weeks since Stephen Paddock hauled an arsenal of weapons to his suite on the 32nd floor of the Mandalay Bay hotel in Las Vegas where he opened fire on an outdoor concert and killed 59 people while injuring more than 500. With the shock, grief, and disbelief, comes an overwhelming question: how do we stop this from happening again? It’s a question that’s been asked countless times after national tragedies like in Sandy Hook, Virginia Tech, and Orlando. The question is so vexing because it requires us to learn from our mistakes and to forge a better way forward. Unfortunately, in an age of deep skepticism, fierce political division, and 24/7 media attention, the pursuit of the right solution is often muddled by our preferred answers and our entrenched talking points. More specifically, in the wake of a tragedy like the one in Las Vegas, the national attention quickly turns to gun-control laws in an effort to ensure that something like this never happens again, but this is a misguided approach that is short-sighted and lacks the nuance truly required to solve such a potent problem.

Nationally, violent crime has been on the decline for more than two decades. While the last two years have shown increases in the violent crime rate, The New York Times and others have concluded that this is primarily the result of significant spikes in violent crime in certain neighborhoods in specific cities including parts of Baltimore, Chicago, and Las Vegas. While the violent crime rate is rising slightly, this isn’t indicative of a less-safe America. Moreover, it’s challenging to draw comparisons between gun-laws and public safety because places like Chicago feature some of the most prolific gun-laws in the country but they also suffer from one of the worst crime rates in the nation.

It doesn’t take a particularly profound observer to notice that, without guns, there would be an absence of gun-related deaths. That’s the basis for comparisons between countries like the U.S. and Australia where residents are far less likely to be injured by a gun. According to CBS News, Americans are 10 times more likely to be killed by guns than people in other developed countries.” Therefore, the argument supposes, to eradicate the atrocities like the one we saw in Las Vegas, we must also eradicate guns. However, in addition to our right to own a firearm being enshrined in our constitution, that data doesn’t tell us everything that we need to know. As The Guardian reports, “enforcement and culture may also play important roles in preventing violence.” In short, the answer to gun violence is far more nuanced and far more involved than sweeping generalizations about fewer guns equaling less violent crime.

In many ways, the epidemic of mass shooters and our collective desire to prevent their destruction is a separate debate from the general conversation about anti-gun laws. As Congressman Jeff Duncan writes in Time Magazine “practically none of the then existing legislation made a difference in recent attacks.” Instead, turning our attention towards vigilance, reporting, and screening might be the best and most practical way forward. According to NPR, “Two recent studies provide evidence that background checks can significantly curb gun violence.” Background checks are a legal check on gun ownership. They ensure that only those who are mentally and legally fit to own a gun can legally purchase one.

More importantly, background checks are fortified by a vigilant populace that takes its reporting job seriously. On the New York Times’ popular podcast, The Daily, John Markell, a gun store owner, was interviewed by host Michael Barbaro. He explains that enough people aren’t reporting their concerns to the authorities to ensure that background checks are a safe and effective method for ensuring that weapons are purchased by people who can safely own and use a firearm. By reporting concerns, infractions, and altercations, we have the power to ensure that dangerous individuals will not have the opportunity to purchase weapons.

Tragedies like the one in Las Vegas drive us toward a desire for action and improvement – and they should. Action is required, but it’s often not what we expect. The liberal media demands sweeping changes to gun-laws, but, as always, the truth is more complex and more nuanced. However, we can begin right away by ensuring that we are adequately supporting state and federal background checks for all owners. Most importantly, we can engage in the process by reporting our concerns and giving our skilled and entrusted law enforcement officials the opportunity to do what they do best. It’s not a flashy solution, and it probably won’t make headlines on CNN, but real solutions rarely do. Nobody wants another Sandy Hook, Virginia Tech, Orlando, or Vegas – and more than we know, we already have the power to prevent that.

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• Senate Panel Approves Tax Plan as GOP Leaders Gird for Fight (BBG)
• U.S. towns, cities fear taxpayer revolt if Republicans kill deduction (Reuters)
• After House Victory, Tax-Overhaul Fight Now Goes to Senate (WSJ)
• Analysts flee Wall Street with gallows humor as research changes loom (Reuters)
• Tesla Unveils ‘World’s Fastest Production Car’ and Electric Big Rig (BBG)
• Bitcoin Emerges as Crisis Currency in Hotspots (BBG)
• Ivanka Trump and the fugitive from Panama (Reuters)
• Murdoch Empire in Play as Suitors Line Up for 21st Century Fox Assets (WSJ)
• Franken Case Puts Both Parties in Bind on Misconduct Response (BBG)
• Crime Wave Engulfs Sweden as Fraud, Sexual Offenses Reach Record (BBG)
• Google Has Picked an Answer for You—Too Bad It’s Often Wrong (WSJ)
• Saudi Arabia swapping assets for freedom of some held in graft purge: sources (Reuters)
• Metal recyclers prepare for electric car revolution (Reuters)
• Despite Big Push From Beijing, Electric Cars Struggle in China (WSJ)
• Harvard’s Days as the World’s Richest School May Be Numbered (Reuters)
• Sears Dials Up Discounts to Record Levels as It Copes With Slump (BBG)
• Zimbabwe’s Mugabe Makes First Public Appearance Since Military Takeover (WSJ)
• Hassett Bets on 3% U.S. Growth That Summers Sees in Fairyland (BBG)
• Two Weeks of Frenzied Negotiations Led to Bank-Relief Deal (WSJ)

Overnight Media Digest

WSJ

– The House of Representatives passed a bill that would usher in the most far-reaching overhaul of the U.S. tax system in 31 years, a plan that would reduce the corporate tax rate to its lowest point since 1939 and cut individual taxes for most households in 2018. on.wsj.com/2j1JjUr

– New suitors are circling Twenty-First Century Fox Inc , affirming that the media empire built by Rupert Murdoch is now in play. Comcast Corp has approached the media company. Verizon Communications Inc and Sony Corp are also kicking the tires. on.wsj.com/2j0i38O

– A federal judge declared a mistrial in the corruption trial of U.S. Sen. Bob Menendez, giving the Democrat a political lifeline and preserving his party’s control of the seat for the near future. on.wsj.com/2j1LebB

– Meredith Corp has made a takeover bid for storied magazine publisher Time Inc in the range of $17 to $20 a share, according to people familiar with the situation. on.wsj.com/2j0Ht6p

– An activist investor in Barnes & Noble Inc has proposed a transaction that would take the bookseller private with the help of current shareholders and a hefty dose of borrowings, an effort that could face formidable obstacles. on.wsj.com/2j0EvP6

– Emerson Electric Co boosted its takeover offer for Rockwell Automation Inc, ratcheting up an effort to bring its reluctant rival to the negotiating table and forge a new giant in industrial automation. on.wsj.com/2j21qd2

NYT

– With 227 Republican votes, the House passed the most sweeping tax overhaul in three decades on Thursday as U.S. lawmakers seek to enact $1.5 trillion in tax cuts for businesses and individuals and deliver the first major legislative achievement of President Donald Trump’s tenure. nyti.ms/2hDqQRs

– The cable company Comcast Corp is in preliminary talks to buy entertainment assets owned by Twenty-First Century Fox Inc, including a vast overseas television distribution business. nyti.ms/2hxkbof

– Tesla Inc has aimed to reinvent the automobile and the way electricity is generated for homes. In a presentation by its chief executive, Elon Musk, Tesla unveiled a prototype for a battery-powered, nearly self-driving semi truck that the company said would prove more efficient and less costly to operate than the diesel trucks that now haul goods across the country. nyti.ms/2zJPgzU

– The senior American diplomat at the United Nations climate talks in Germany told world leaders on Thursday that the United States would remain engaged in global climate change negotiations even as it planned to exit the Paris agreement “at the earliest opportunity.” nyti.ms/2ySE1Bd

– The Federal Communications Commission voted on Thursday to allow a single company to own a newspaper and television and radio stations in the same town, reversing a decades-old rule aimed at preventing any individual or company from having too much power over local coverage. nyti.ms/2zN7YpA

Britain

The Times

* Prudential Plc is scaling up its ambitions in Asia with plans to open a fund management venture in China and to double in size in the region every few years. bit.ly/2jxRjAk

* WPP said it was prepared to increase its stake in Asatsu-DK, one of the largest marketing services companies in Japan, to about a third after requests from other shareholders. bit.ly/2jwULvg

The Guardian

* The business secretary, Greg Clark, has been urged by the GMB union to block the proposed merger of German energy group Innogy’s British unit, npower with SSE’s British retail supply business .bit.ly/2jxZCMG

* The chief executive designate of GKN, Kevin Cummings, has been ousted from the FTSE 100 company weeks before he was due to take up the top job at the aerospace and engineering firm. bit.ly/2jz3GvX

The Telegraph

* Jaguar Land Rover has quietly started testing driverless cars on British roads that are simultaneously being used by the general public, in a clear indication that Britain’s biggest manufacturer is determined the country will play a leading role in the race to develop autonomous vehicles. bit.ly/2jyNx9Z

* The Serious Fraud Office has made its first charges against Unaoil employees in relation to a corruption scandal that has engulfed the oil and gas industry. bit.ly/2jy7he2

Sky News

* The boss of U.S. investment bank Goldman Sachs, Lloyd Blankfein, has used his latest Twitter post on Brexit to suggest a second referendum is held. bit.ly/2jyVwnr

* The GMB union’s Scotland secretary, Gary Smith, has told Sky News a dispute threatening 1,400 jobs is a battle for the future of skilled manufacturing in Scotland. bit.ly/2jy60U4

The Independent

* Rail passengers on the UK’s leading long-distance network face disruption and cancellations after Virgin Trains staff belonging to the RMT union voted to strike by a majority of 10 to one. ind.pn/2jvIwil

* Retail sales continued to grow in October according to the latest official data, easing some of the fears of a plunge in consumer spending. A survey of retailers by the CBI had suggested the fastest rate of decline in sales in October since the UK’s last recession in 2009. ind.pn/2jyWfFb

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Authored by Gary Galles via The Mises Institute,

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