 Hello and welcome to the latest episode of the Market Maker podcast with myself and co-founder of Amplified Peers Curran as we digest and review some of the main headlines in focus for this week. And before I begin, we're at 96 ratings now on our mission to 100 on the Apple podcast store. So get on there, take us out for the line. Four more is all it's century is in sight. And also for anyone in the US, because I do know we have listeners looking at the data in the states, happy Thanksgiving. With everything that's been going on, I hope that you've managed to spend some time at least with your friends and loved ones and everyone's well. So again, you've missed out on a thousand point drop in a day today, but there's always tomorrow I guess more Monday, I should say. But yeah, in terms of this week, then a quick overview of some of the main things. Biden finally has chosen the next Fed share and it's gone with the continuity choice of drone power so Brainard, which was the slight risk has not materialized she gets a promotion to kind of vice chair, if you like. And some would say that's actually a pretty decent team. The two will talk about that a little bit more in a moment markets actually did see a bit of a reaction in a slightly hawkish fashion, because of the more dovish risk associated with brain art. Then we've got Elon Musk, busy as ever, resuming the selling of his shares, he's offloaded now about half on his 10% pledge from his Twitter poll a few weeks ago. But in terms of Tesla shares themselves, I mean, it's just your usual kind of 10% weekly volatility so by Tesla terms a very quiet week. They've managed to keep their head above water, above that $1000 mark, Turkish lira, we're definitely going to talk about that in this episode in more detail that went into free fall and think it's Tuesday it fell 15% in one day. And then we've had some US data, PCE, personal consumption expenditure index, which is kind of the main data point the Fed like to look at as their measurement for inflation that came in and saw as the largest annual rise in three decades comes on the rise of course of that 6.2% hot CPI print we had two weeks ago initial jobless claims lowest level since 1969 came in at 199,000 and the FMC minutes midweek showed an openness to adapting to the speed of taper. And as we'll discuss that in combination with power and some of those aforementioned numbers on the data side, particularly around inflation and the labor market has caused quite a few more banks to fall into a more hawkish mindset with their rate calls. And then the latest thing which will kick off then was the first talking point is a new variant of the Coronavirus that causes COVID-19 called the B11529 has not yet been issued its name. Formerly, that has to come from the World Health Organization, they held an emergency press conference earlier today and they've not yet got to the point of really having enough data to make a decision and whether it's going to get escalated to that point. In fact, the World Health Organization have come out this morning and said, implementing travel measures is being cautioned against. Which is would seem slightly odd on the surface, because if you're looking at the market reaction, we recorded this in the Friday morning the dows down a fat was down 1000 points overnight, granted, it's Thanksgiving, so there's a, there's a lack of participation traditionally markets were and are always closed on Thanksgiving Day Thursday, but no one generally comes back for Friday and they book a long weekend and so price reactions can be exacerbated and not only that oils down four and a half dollars. So, you know, up a full point, gold's up 20 bucks so the markets definitely reacted to this latest variant identified specifically in South Africa. And the main cause for concern here is that the new variant is spreading rapidly there appears to be out competing other variants, much faster than previous variants of concern had done in the past, namely delta, which is the one that kind of ran rampant across the world, because it's high degree of transmissibility. The early sequence in science show that the South African one is only 100 cases at the moment, credibly small amount of data, but the slightly worrying thing is about the mutations from that specific country. I can't remember the word that they used I heard this morning in you compromised individuals, particularly the researchers say link to high cases of AIDS HIV, which South Africa has the highest proportion of I think it's about eight and a half million people. And so those people are more subject then to having catching COVID but also the mutation and effect thereafter, and that beta one, the one that really didn't see too much global spreading. That was actually kind of the most potent in many ways. I'm not going to talk about spike proteins and all these sorts of things but the idea being is that the delta variant, which was a change from the alpha variant, which was the one in Kent in the UK. So that was highly transmissible but let's say less impactful than the beta one, the South African previous one and now that's the issue that's arisen right now so they're just just what your initial thoughts and it's very early days I know but Britain's kind of locking shutting shop for any South African travel, many other countries are doing the same oils obviously reacted as well quite sharply to this breaking news. Yeah. Yeah, I mean it's definitely one of the biggest days of the entire year from a markets point of view. I'm going to talk about some individual stories in a minute but yeah so that just to kind of. So basically what you're saying is, should we call it the echo variant. But anyway, basically what you're saying, if I get this right. This could be that the reason for the extreme move in markets is that this variant could be both a, it could evade the vaccines. So based on the beta variant from South Africa that that was. Yes, so, so. Yeah, so the takeaway would be is that take somewhere like South Africa, the actual amount of people who are vaccinated, certainly double jabbed is absolutely insignificant, it's like so small. That which allows them further spreading. Yeah, it's very different the emerging market and undeveloped countries and how they've been able to react and roll out vaccine so. Yeah, that's that's what's aiding and assisting the most the more spreading the other thing here is the vaccines as we know, and the reason why we have booster shots like in the UK is because the efficacy rate declines over time so as we say three, four months, they the percentage level is still relatively high, but it declines and hence the elder more vulnerable people are getting boosters. But again in some of that South Africa, they haven't even had the first round in rather than getting now top ups. So these are some of the concerns and the concerns I guess is because in mainland Europe as you and I have discussed in recent weeks. There's already an outbreak and all pretty much all European countries to varying degrees are putting much more onerous restrictions. And you know so oils off well off. It was this time last month pretty much to the day a month ago when we were at the highs and what we down now 15% in crude oil off those highs in four weeks. WCI is trading 74 74 bucks yeah the high was was back just towards the end of October was 83 so yeah we've come 83 down to 74 in the last few weeks. The risk is the one of the things that's talking about a brief in this morning is that I think in Europe, they cannot now run the risk of a new variant to then add to their already worsening COVID situation. So they were reluctant to really enforce onerous lockdowns particularly countries like Germany because the economic impact. And now it switches to perhaps now they might not even have that choice. And therefore, yeah, it's not just Europe, but this will be a thing for everyone as well as a risk factor, and then that's, that's what's getting before we kind of get into the markets here just a bit more on this because I think with with regards to let's just stick with Europe. It's been quite interesting with some noises coming out this week about the Astra vaccine and the perhaps the data showing that the UK is is I mean, you know, not intentionally but it's kind of better off. It seems having had a higher proportion I think it's about 50% of vaccines in the UK or Astra, and it's looking like that vaccine has got a longer lasting gives you a longer lasting kind of T cell immunity. And so it or actually rather than necessary, it's not as good as preventing you from getting covered, but it's better from preventing you getting seriously ill is what they were saying. And because the UK a got a high proportion of of Astra and be we've had higher case rates throughout this year means perhaps there's a larger herd immunity, which is perhaps why in the UK. Because we've had a spike, we haven't seen the death rate rise dramatically and hospitals, you know, aren't being overwhelmed but it is looking like that on mainland Europe that you are starting to see, when hospitals start to kind of get back up towards capacity and of course that's the real that's the that's when that's when lockdowns come in, it's when the, it's when the hospitalizations rise, and you know you're at the point of capacity and you can't get the vaccine down. So it's this is the problem because mainland Europe were very, or they didn't allow anyone over 65 to have the Astra vaccine, because of their concerns about some of the side effects, if you remember. So that their policy towards Astra might be now actually harming them. The vaccine take up wasn't as high anyway and I think on the booster side the UK I think we're about 20% now we 20% of people have had a booster here but I think it's like 8% on mainland Europe. Yeah, because I do I do think that that's a big part of it. I mean the UK was rapid in deploying the vaccine rollout and they are again through boosters. So, yeah I'm always a little bit in two minds when I read things about the Astra Pfizer trade offs efficacy because there's a lot of obviously political connotation that gets taken out of that. Obviously where these drugs are manufactured and so on. I don't know what you've had but yeah everything that you said I think is, is, is correct. But yeah I do think that the UK is a benefit, benefits from its success in being able to just spend money and get these agreements, take it and distribute it, which is obviously a great challenge as well another great underdeveloped countries it's like India. I mean even if you gave them the vaccines how do you, how do you service a large proportion of people who live out in the country and countryside and. Well, let's get into the market side of it because I mean as I said it's definitely one of the biggest days of the year. For sure, massive downside and particularly in, you know we're right now in that uncertain space and for markets markets hate it like the worst thing is actually uncertainty. Bad news is almost better than uncertainty that it, there might be bad news, if you see what I'm saying so we're right in that moment where there's this new possible new variant. And it's like the default reaction as a human being let's say from an investor's point of view is right let's almost like, let's just assume the worst. If you start there, then right if it's better than the worst. Okay, well that's a bonus. Okay, and that's kind of how investors behave in the real short term so what you're seeing today. As you said 1000 points down on the futures but I'm just looking at the FTSE 100. It's actually a table of the biggest losers in the FTSE 100 today and it tells the perfect story it's your it's your transportation sector that's getting hammered the most so international consolidated airlines group. The number of British Airways for example amongst other airlines they're down 14% at the moment that's a FTSE 100 company we're not talking about small cap here this is a monster company down 14% Rolls Royce is the next biggest loser down 10%. So yeah certainly transportation is the biggest loser so far today in response and that's obvious obviously because the lockdown risk and you know Europe has is now blocking travel from South Africa. As you read there are two cases in Hong Kong. And I think that's probably what's spooking things the most it's yes as a new variant, and it's from South Africa. And there aren't many but hang on a minute there's two in Hong Kong. So some things, you know, it's, I guess the fear is, it's out, right. It's actually stop international travel. So clearly airlines will be first hit but then you've got others like the oil oil companies are down big so BP's down 6%. Then you've got stuff like international continental hotels. Again, obviously same reasons 7% and then you got stuff like whip bread, who own a lot of pubs. So again, lockdown risk. What else, then you got Glencore which is big commodities trading outfits so again that's about, you know, obviously lockdowns means economically that's very bad news, if you've now got a negative economic risk well that normally leads to a reduction in commodity demand and therefore that's why you're a small drop and on all other kind of industrial commodities. You know coppers down big time today for example, then you got some of the banks as well in here so standard chartered and Lloyd's group there in the top 10 losers today. And again, you know that's just about default risk, you know if we go into lockdown again. You know, I think the big. This has always been the big, big game changing risk. Right, it's a variant that is powerful enough to evade vaccines that results in another global lockdown because governments and central markets through the kitchen sink at it in 2020 and 2021. They don't have any kitchen sinks left. So if we have another big if we have another proper lockdown. I don't know where you go with that because I don't think there's enough ammunition to kind of proper come on peers. There's always, there's always ammunition. Don't give me gloom and gloom that don't become dr doom on me well hang on so we're not. I'm not saying all of this is going to happen. It's happening in investors heads. It's you start going through the steps of possible worst case scenarios and that's the worst case scenario right now that doesn't mean it's going to happen markets today, maybe even we can narrow that to this morning. But hang on, we haven't got any clear evidence that sequence of events is going to happen of course and you know that's why I say it's knee jerk reaction bang worst case scenario panic. And then we kind of step back a bit and go hang on right let's just. Now we've panicked let's just let now we've, it's flights right we've we've run away and then you hide, and then you go right okay let's, let's just stop and think about it. And so when you think about it it's okay fine, you know, the World Health Organization is saying that don't bother banning international travel, their track record on this isn't great so I'm not sure their advice. Remember they took ages to actually declare it as a pandemic. Remember back in 2020. They weren't declaring a pandemic I think it took to the end of March for them to declare a pandemic. It's only then that governments felt they had then almost like permission to lock down society, because it's like hang on it's a, it's a worldwide pandemic, according to the who but they were so late on that call, but actually. I was just thinking as you're explaining it then if like, you did have the worst case scenario, complete global lockdown. The same as what we had to the order of what we had before. And then they create another few digital zeros on the bank account and let's just pump a few more money but then what happens to inflation then. I mean, it's at 6.2% the highest in 30 years, if that did happen, and they have to then spend. And then you've got the supply comes the whole exact same thing from a supply constraint issue. And then what what do you do as a central bank then. Well, well that's the thing right governments. Well, I guess you're right in that. You know when I say they can't they haven't got any kitchen sinks left well they'll make another one and throw it at it. Right. But, you know, short term fine maybe that works but you know you're just, you're just kind of building up that massive time bomb, even more. In terms of a debt time bomb that, you know, at some point you're just kicking it down the road a bit but when it blows up, it's going to be all the more kind of spectacular. The crypto I can hear the crypto enthusiasts they're like salivating as you're describing the situation. Well, have you seen Bitcoin today. Yeah, well there we go. The classic safe haven that is Bitcoin. Yeah, down 8% today. That's now what what did it top by that about 67,000 68,000 was it when I down to 54, but quite sure what that is in percentage terms what's that 60 to 54. Yeah, the futures market with that's over 20, that's like 25% isn't it. Right, 23. Yeah, 23%. Yeah, but look, this morning big panic. And then, look, the ultimate question is do you buy the dip, because that's like the default blind response that investors have gone with basically for the last decade. Is it by the dip or I mean most likely it is right, but with now the extra kind of risk factor in there that this this kind of variant people are going to like next week over the weekend next week will probably assume this isn't going to be that nightmare scenario. So I'll probably start buying the dip. I mean, I'm just looking at SMP chart at the moment, and really it's a bit incorrect. It's sensationalizes the narrative by saying the dows down 1000 points. Yeah, the reason for that is that proportionately now the index trades at 35,000. Many years ago it was no near that and so 1000 points sounds like a lot. It is a lot against a daily average move but if I'm looking at the SMP. I mean we were trading. I mean we're still up. We're still at about one and a half percent from where we were four weeks ago, even with the sell off that's been seen this morning. And so the market is still up at all time high territory still and US US markets US markets when you look at I'm looking at the DAX chart right now and the DAX has come off. You can see very sharply I think we bottomed out 15,280 we just bounced a little bit now but this puts the low today I'm looking on the futures here. We haven't traded that low since October the 13th, but the prices we're trading today are exactly the same prices we're trading back in the summer even late spring, like you can go back to actually mid April. The DAX hit levels that we're trading back mid April this morning, whereas obviously the SMP is still miles above the mid April levels to give you an idea on that. Hang on I'm just trying to work out my chart here which is now just broken. What was the mid April level in the SMP. Well, I mean, a key level on the downside was 45, 48. We're trading around 4620 at the moment in April in the SMP we were down at 3900. Right. So we were a lot. I mean, that's just we've gone an incredible distance since that point but I kind of shifting this along then to talk about the Fed. And, you know, barring today and the new COVID variant shock almost. Otherwise, the dominant theme had been really initiated on Monday, Biden announced that he had re nominate Jerome Powell it's all seen as a formality now that that will get passed through so he gets another four years. And one thing is, as far as markets are concerned, markets love continuity goes back to Pierce's point. You just made earlier about the idea of markets react very badly to uncertainty. The other thing that was hard was not particularly unsan uncertain individuals she's been around operating under power for a while. But this kind of was like the idea of the show goes on under Jerome Powell and worst case averted no shocks or surprises. And it was as we've said on the podcast many weeks as we were anticipating. The main thing then is is that what we have seen are a few things from a data perspective I mentioned earlier, we had US personal spending rose in October from a month earlier by more than expected. And most of this largest annual increase in three decades jobless claims, lower since 1969, the FMC minutes came out. And I actually didn't think the minutes would yield anything of interest, because it was a starting gun of taper I didn't think it would really show much kind of detail around their openness or flexibility to adapt that speed I thought it would be more like let's just get it going in their normal cautious approach, but it wasn't they actually stressed the need for flexibility and how quickly they'll scale it back, and the timing of interest rates, and all of that came before the inflation metrics that we've seen which have spiked up to multi decade high so they're already saying that stuff, which further cements that idea then that they're probably going to speed things up a little bit. What it led to then is banks like Goldman for one has caught quite a few of the headlines and they've talked to the idea the Federal Reserve will likely double the pace of this tapering of monthly purchases from January, from the current 15 up to 30 billion and then wind down then their pandemic era scheme by March, allowing them a bit of like a see how she goes approach for for three months and then commence then rate lift off of what would be in their opinion three rate hikes in 2022 commencing June. June September December. And those months obviously, not just calendar quarters they fit within that summary of economic projection timetable of which, historically, the precedences they like to act when there's more trans transparency to the market about their kind of economic thinking and forecasting and hence the reason for those dates. So yeah I mean what do you think about this this shift I mean certainly the, the Fed officials have generally been supporting this, this change of subtle change of direction I would say. I think the direction of travel on this is the same in that we've been moving. We've seen the Fed moving to a more hawkish stance, and that movement is ongoing. They keep going even more hawkish and I think that's, I mean, I don't know I'm very surprised if you go back like four weeks. This is definitely not what I was expecting I wasn't expecting the Fed to be this hawkish. We were taught we've been saying you know, chances of them accelerating tapering are very low, you know they'll probably keep the tapering pace as it is they might start talking more about hiking and bring that rate hike expectation nearer but you know here they are, they were wrong they were, they are talking about accelerating and Goldman's, you know, forecast on that obviously reflects it I mean what I, what I would say is obviously what's happened today with markets and this variant. You know, means we kind of step back a little bit from the idea they're actually going to accelerate tapering obviously if this, this new variant properly becomes a thing, then actually we should start expecting them to decelerate tapering right but let's just put the breaking news to the kind of one side. Yeah, they're really hawkish and you know we're seeing that in markets the dollars continued, you know to strengthen against all currencies. And the Euro dollar got down, well it's almost the one, yeah it got down below the 112 handle yesterday I mean it's on the up actually we've kind of traded quite sharply back higher almost back up to the 113 handle today. So this is kind of part of that sort of covert panic thing. Yeah we got below the 112 handle on the Euro dollar yesterday which is another new low in this kind of very steep trend that we're seeing so and look you know you're looking at the bow and fine they've come off heavily but you know they're very high there's a lot of profit taking going on right and so yeah they continue to be more hawkish I think with the I think with Powell getting another term yeah even though he is dovish relatively brainard is even more dovish right so the fact that Powell's got another term and it's not brainard stepping up that's why you've got that slight hawkish reaction to confirmation that Powell's going to stay because the alternative was even more dovish in brainard. But yeah, I continue to be surprised by how hawkish the Fed are willing to get at this point in time given covert uncertainties generally you know even the last 24 hours aside, you know the winter was always going to bring another covert situation as people are forced indoors due to cold weather and you know that's how the virus can spread more easily. Yeah and that's not forgetting as well that obviously it's Thanksgiving. Yeah, and US cases, although not a particular focal point right now have been ticking higher. More recently in the last couple of weeks, not to the scales they had done before but that are going higher and the pattern would be then those exact reasons to kind of indoor gathering and travel. These types of things are not a good combination in terms of the controlling of the virus so people will be interested to see if this is the South African variant aside as we go into this period ahead for the next quarter whether or not then the job situation and confidence and can continue when one of the good points I saw was from a lady called Mary daily, and she's the head of the San Francisco Federal Reserve Bank. So she's one of the FMC officials, and she's quite a well known dove. And she was talking about, yeah, I'm feeling you know definitely like this is a conversation, the labor market inflation, appointing in that direction, but her general theme was, I need to see this. Next month, before then I am convinced that this is actually the best course of action, in terms of an acceleration. And I guess that's the internal divide at the moment is things have actually switched the labor market is now falling into play, if you like with the inflation side of things which has been waiting for the labor market to catch up to trigger these things there's definitely much to watch I think as we go forward in the next couple of weeks, but yeah let's let's change it up then and talk about the Turkish lira. As I said earlier, got absolutely hammered earlier in the week, down 15% in a day. Eddie and I put out a YouTube video which you can watch if you want to check it out on the Amplify Me channel but we were looking at the lira over the course of several years. And it's just progressively got worse and worse and I guess it kind of capitulated in a way on Tuesday and the wills came off a little bit and then you get those kind of momentum moves. And then you come in spectatively and it really got, got her quite bad so a lot of this is coming after the President Erdogan reiterated his commitment to what is seen as an unorthodox view on high interest rates that cause cause inflation. So perhaps you could start peers but just kind of talking through like, how does Erdogan's view come under the unorthodox category. So the, the main school of thought of monetary policy, the reason why the central banks exist, what is monetary policy, even for. Well, it's basically to control inflation. The reason why that's so important is because if you want, like certainly developed advanced economies is about consumption, right, and to put a number of really rough ballpark about 75% of GDP in a developed economy is consumption. Okay, so that's people and businesses and the government spending money right so consumptions keep. I just think simply as a consumer, you're buying stuff right and inflation of course is measuring how quickly goods in the system how quickly their prices are rising. Okay, so if you got inflation prices are going up it's more expensive right. It's fine though if inflation is kind of low and steady, and it's fine if, especially if wage growth is is greater than inflation, then great, because fine prices are going up. And that's important from a psychological point of view because it incentivizes people to buy now, right, because hang on if I wait well the price is going to go up. So it'll be more expensive so I don't want to wait I'm going to buy it now right so that incentivizes consumption. But if we're earning more. If our wages are going up faster than the rate at which prices are going up then we were getting more wealthy relative to the cost of living, and that means we're going to buy more right and that's that kind of virtuous cycle that drives a, you know, sustained economic growth trajectory. So now anything that threatens that if prices go up too fast right so if inflation is too high, and actually really key if inflation if inflation rates are greater than wage growth rates, or then your consumer is becoming poorer relative to the cost of living right and that now really puts a risk consumption. So if inflation is too high, it damages consumption if you if your consumption is dropping, then your recession risks. Okay, so the whole point is the central banks there to control inflation now the theory is that if inflation is too high, you raise interest rates. And the whole kind of if you go through the steps and the sequences this is how it's supposed to work you, you raise interest rates, that means borrowing becomes more expensive. This means people borrow less, they're borrowing less they're spending less. So that consumption gets dampened by you raising the cost of borrowing that that dampening of consumption that's demand for goods right one of the reasons why prices rise is demand. So if it's just dampening off demand. It kind of brings inflation back down. That's the theory. Okay, vice versa if inflation is too low bad news again could threaten consumption deflation. Big no no, because then consumers start holding off spending right well actually if prices are going down I'm not going to buy I'm going to wait. But you got another recession scenario. So when inflation drops you're supposed to cut rates to then fuel more consumption, more demand, pushing prices back up. Right so some figures that I'm pretty sure wages are not going up at 20% a clip in Turkey right now, which is the annual inflation rate is at 20%. The interest rates are 15%. Food price inflation is over 27%. At this point in time. Yeah, yeah so so those low income households are getting really hit at the moment. So the thing, the thing is about this monetary policy theory. Erdogan thinks that's nonsense. It's not exact opposite. So he thinks the way to deal with high inflation is not to raise interest rates. It's actually to do the opposite and cut interest rates. Okay, there aren't many people on the planet that share his stance on this. Let's just call it a very unusual take on how to use monetary policy to manage your economy. And Erdogan is all powerful. And he's got this in his head. It's his strategy. And he is going to deploy it to give you an example of exactly what lengths he's prepared to go to terms of the central bank. There's actually been, there's been five central bank governors in the last five years. You know, we're just talking about Powell, you know, getting another term. Well that will mean he'll have been in office for eight years by the time he finishes as was Janet Yellen before him eight years as was Bernanke before him eight years before her whatever eight years right. You tend to get a change in central banker in the US once every eight years in Turkey is every year. And there was a guy called Agba who was brought in in November 2020 as the new central banker. He kind of got settled in waited a bit waited a bit in April 2021. He basically committed career suicide because he raised interest rates. Conventional thought inflation is too high. Let's start bringing it down. Let's start raising interest rates. Okay. 36 hours later, he got fired. And got fired for raising interest rates. So now there's a new guy that's come in and he's not going to commit career suicide and he's going to do what he's told thanks very much. And what he's told is let's cut. And this is breeding. An alarming spike in panic about Erdogan is at control. And this has then major implications for obviously Turkey internally and major implications potentially for international investors. And I was just looking at kind of three points that really defined this emerging market idea. So with that kind of other countries like your Brazilians and South Africa and and so on. The government as you said so Erdogan obviously unpredictability of governments is not what investors like. And that's definitely one and just generally relaxed approaches to fiscal spending the implications on debt. It's a kind of common theme amongst EMS for that. Secondly, one we talked earlier which was the COVID situation, getting hold of the supply agreements and the money to have them and then deploying them, and then having education to the public to then have them take the vaccine. And then the third one is these are currencies where obviously it's against the dollar and the dollar is pretty rampant at the moment in the other direction, which is exacerbating. Then this this kind of downside pressure, all at the same point so I guess my question is then for the lira, how far can this go, and at what point do authorities in Turkey then have to step in. And what does that look like if they do. How far can it go. Very much hesitate to try and answer that question. So it's trading above 12 now, right, so 12 liras to the dollar, so it's broken 12 above 12 to this, this, this week to give you an idea. Just back, I don't know let's just go back let's say start 2018 trading below four. So it's, it's, it's lost 75% of its value in the last three or four years. I'm just looking at the chart if you go like, yeah if you go further back, you know go back to like, well I'll go back to 2013 it was trading at two, right, the point is we're on of, since Erdogan's been in office. The other word unpredictable. It's actually in this sense it's probably not right. He's very predictable. This is the point. He's predictably reckless and unconventional, right. And so you've seen the lira weakening and weakening and weakening where does it stop I honestly got no idea. You asked me back in 2016 when it was trading 2.5 where could this lira weakening cycle end mean what what would you have said four, six, eight, I don't know. It's now trading above 12 so you're asking me the question now where does what what could happen I mean, I'm not. I'm not so what so people enough to try and predict that, because the idea of say capital controls is being mentioned. What does that constitute and why would the government so that that type of strategy. Yeah, so the. Okay, so one of the reasons the currency is devaluing sharply is because money is coming out of the country so here we're talking about international investors. Okay, we'll talk about internally in a second but mostly when an emerging market currency sharply collapses. Because internationally something there's been a risk event and international investors want their money to hell out of there. Okay, so to do that. Let's say you own simple example Turkish stocks. Right, let's say you've invested in the Turkish stock market will to buy shares in Turkish companies that there's a as a foreign investor there's an FX transaction first if I'm taking pounds. I can't buy Turkish Turkish shares with pounds. They are lira denominated assets. So I've got to take my pounds I've got to sell my pounds by lira. Then I can buy the asset right. So think about the reverse. If I now want out. I need to sell my shares. Then I've got lira. I need to sell my lira to convert it back to pounds. It's that selling as people pull cash out of the country but they're also selling assets and then converting it to get the money out. So this is what drives that panic sharp self you've also got speculators are all over this right who are shorting lira because they think it's going to go down and it is so everyone's contributing to this kind of downside for that currency. The kind of negative feedback loop is you know we're pulling it out because hang on inflation is out of control but of course the weaker your currency gets that's inflationary because the cost of imports goes up right the prices of imports go up and up and up so this is that this is where it gets a vicious cycle that could lead to Turkey defaulting. If, and this is how international markets work, you know they, it's almost like, you know they sniff out where there's trouble on the way international markets work is they basically accelerate that problem area towards its catastrophic end, because pulling all your money out just makes the inflation problem even worse. So that's, that's one thing like international, and on this I'd say on the international investor front there was. Interestingly, there was a big bond auction, literally about eight weeks ago, where Turkey, Turkey's government issued two and a half or no 2.25 billion dollars worth of Turkish bonds now here's here's the point. So Turkey are issuing dollar denominated debt. Okay, not not lira denominated. That's because lira denominated debt the international community will not buy that. They're not interested in buying. They're not interested in taking on lira exchange rate risk. And that is in terms of how the foreign ownership percentage of Turkish lira denominated debt is now down it's about 3% now. So the total amount of lira denominated government that only 3% of it is owned by international investors go back three years that figure was 20%. 18, 20% of that debt owned by international investors now is only three. That's because in the last few years, lira exchange rate risk is just it's just one risk too far. So, but here's the thing right in this zero interest rate environment we live in, when you look at Turkey's interest rate, which is like 15%. That that looks super attractive right I want some of that 15% interest action please so as an as an international investor, how can I take advantage of that high interest rate without having to take on the exchange rate risk well this is the dollar denominated Turkish bonds. Now, international investors in mid September hoovered up this stuff 2.25 billion, and it just flew off the shelf. Okay, at a 6.5% yield. Okay, so international investors bought this stuff at 6.5% they think look we're safe. We're not lira exposed here, except, I mean fine 6.5% looks great but now you're now you've got genuine default risk on your hands. So this is literally eight weeks ago they hoovered this stuff up and now they're thinking oops. Maybe this is going to come back to haunt us to give you an idea on that that exchange rate risk. So a 12 year bond that got auctioned eight weeks ago dollar denominated has a yield of 6.5%. The lira denominated 10 year government bond has a yield of 16%. So that's your yield gap differential that is exactly prices that exchange rate risk and that would have gone up that that that data is eight weeks old, by the way so that lira denominated government debt yields have now gone spiking even higher up to 20%, I believe. Am I right in saying that yeah broke 20% this week, so that that yield is now above 20%. So look, that's from an international investors point of view. You got to think about this domestically and this is really where it gets ugly I mean you know often you think well international investors you know if you're going to lose money because of Turkish exposure is your fault. You know you took the risk and all right you pay the price right and no one's going to cry about that. Unfortunately where it does get difficult is internally. And that's because there's a huge amount of dollar denominated borrowing not just from the government but actually from companies. Okay they've been borrowing money in dollars which means they've got to pay their interest payments in dollars which means they've got to pay back the loan in dollars. But if you took out if you took out a five let's say let's say you borrowed money on a five year basis in let's just figure this out in 2016. Right, you were borrowing when the dollar, yeah it was about 2.8 liras to the dollar. Okay, so if you borrowed a million dollars, you'd have to pay 2.8 million liras to pay that money back. Okay, so when you convert it into lira they were borrowing 2.8 million, but the currencies collapsed so that $1 million bond would now mean that company has to pay back more than 10 million lira to repay the loan. So this is where you get huge default risk because of dollar denominated debt exposure from companies in Turkey, of course, as we know from the 2008 crisis, when you start getting companies defaulting well who's lending them the money well it's the banks right so then you're going to get bank default risk. And then what happens while the government needs to step in and bail out the banks but hang on the government's got too much debt already in any way they've packed full of dollar denominated bonds as well by the way and all of a sudden the house collapses. So, you know, internally, this is, I mean, Erdogan, I don't know what experiment he thinks he's trying to pull off. I mean he thinks, I guess that by cutting rates he's encouraging more exports, which for an emerging market exports is a big part of our economy and maybe he's trying to think right if we can increase exports and economic growth will increase, and people will learn more money and we can deal with this inflation, we can afford it. It's just, I think this is going wrong. So even though there's like shared characteristics of across emerging markets, is this, as you said, the fact that he is predictably unpredictable, almost the fact that that's not new. Obviously, it's really come to come to a head this week. Does that limit, and as well as some of the exposure numbers that you are saying of decreasing to say 3%, does that limit the contagion risk. Is this, does this keep it concentrated in a way more so now than it would have done say before. Yeah, it limits it, but it doesn't, it doesn't stop it because it's the even the dollar denominated debt. People have been hoovering that up because they don't want the lira risk I get that right, but even that debt now is that risk of defaulting right. So, you know, I guess ultimately, people are so desperate for yield, so desperate for having to take ever more risk to get it. I was willing to buy. I think that there was a reading an article in the FT about this that was a, when that bond auction is happening there was a quote about someone was saying, some investors are willing to hold their noses despite all the risk it's like this thing stinks, but I'm going to buy it anyway. It's because they're desperate for yield. And unfortunately that desperation in the end can come back to really bite you when you take on too much risk and it defaults. And we may be, we may be heading, I don't know, we may be heading in that direction with Erdogan at the helm. And COVID is obviously just kind of ratcheted up the problem because the government debt like all governments debt has just gone through the roof right so COVID and Erdogan together may well be the kind of straw that breaks the camel's back here. Well he could always draft in Andrew Bailey, if he gets in a tight spot. Well, well, we'll wrap it up there and just to also bring it to people's attention. If you go to amplify me.com if you've not already done so really encourage you to take part in one of our finance accelerator simulations doesn't cost anything. It all fits into our kind of mission. We want just everyone and anyone if you're young and aged between 16 to 21 whether you have finance on no financial experience then it's a simulation that will run you through what it's like to be a trader a bank or an asset manager, right from the bottom up, and it's all down to then your performance, and it's some cool metrics and stuff you'll find out what you're good at what you're bad at and hopefully a bit of intel about what you could do for a future in the future to check that out. There's been some adjustments as well to the content hub that comes alongside that. We're introducing a new discord community that will be accessible via the hub. Love to have people are engaged as well, so that you know you can fire questions to us, and we can obviously address them in the podcast at the end of the week. But with that, again, happy Thanksgiving to the people in the States, and have a great weekend everyone thanks peers. See ya.