Bank of Turkey Does Lira In, and EV-Investors Fix Profits

Nov 19, 2021

Yesterday can hardly be called overly eventful in terms of news. Perhaps the main news can be considered another attack of economic insanity on the part of the Bank of Turkey. After Erdogan multiplied the independence of the country's Central Bank by zero, his vision of economic laws materialized in the form of a change in the vector of monetary policy in the country.

Recall, according to Erdogan, to fight inflation, rates need to be lowered. And since inflation in the country is at 20%, it is not surprising that the Bank of Turkey cut the rate for the third row in a row yesterday. This time by 1%. The main problem with this approach is that everyone in the foreign exchange market believes that the rate cut will accelerate inflationary processes in the country and further devaluation of the national currency. Accordingly, sales of the lira continued with new all-time lows. It is difficult to find today a more hopeless asset in the foreign exchange market than the Turkish lira. So, despite the fact that it has already decreased in price by 6 times over the past few years, this is far from the limit.

Another highlight is the announcement of a new stimulus package in Japan. Everyone has already begun to forget, in light of the sharp intensification of inflationary processes and vaccinations, about billions of dollars in incentives to support the economy. But since inflation is not a problem for Japan (not a problem yet), but economic growth is a problem (recall, in the last quarter, the country's GDP collapsed by 3%), the news about the plan to spend about 56 trillion yen (490 billion dollars) on the stimulus package looks logical enough. For buyers in the Japanese stock market, this is great news.

But they don't buy everywhere now. In the US stock market, investors decided it was time to take profits in the overheated EV segment of the US auto market. Rivian closed down 15.53% and Lucid down 10.47%. Note that Rivian and Lucid (in fact, two shell companies) occupy the 2nd and 3rd places in terms of capitalization in the US automotive market, ahead of such titans as Ford and General Motos.