SocGen's Exuberant Response To The Turkish Action: "Governor Basci, You Have Avoided A Domino Crisis In EM"

Tyler Durden's picture


SocGen, via analyst Benoit Anne, had an almost immediate reponse to the Turkish central bank's shock and awe action. Here it is:

Hats Off To The CBRT


The CBRT did not disappoint tonight. The CBRT just announced a massive 425bp rate hike. Governor Basci, you have avoided a domino crisis in EM. The policy response to severe financial stability risks was punchy, aggressive and credible. An amazing job overall. The CBRT is now back in the game after going through a few tough weeks during which its credibility was heavily challenged by emerging market investors. Is Turkey out of the woods? Not quite of course. There are still two major issues. On the domestic side, the political environment continues to be quite challenging, with little sign this will improve anytime soon. Meanwhile, the global  backdrop remains quite challenging for GEM at this point, and we are still very much in the middle of our Doom phase. So while the CBRT has done a great job at containing financial stability risks, there is going to be more work to do. In any case, I definitely feel much better about the TRY, at least on a tactical basis. Hence we just entered a long TRY/ZAR targeting a tactical move to 5.10. The TRY crisis is over.

So... a 3% drop in the S&P from all time highs, a $10 billion taper, and the world was on the verge of an EM "domino crisis" - is this your centrally-planned stability? Of course, tomorrow the Fed will taper another $10 billion: do we repeat the entire exercise from square one then?

As for the "TRY crisis being over" let's wait to see what the "popular" response is to this epic rate hike first thing tomorrow when Turkey awakes, shall we, and let's revisit the TRY crisis in 2-3 weeks when the country's housing market crumbles, when the economy grinds to a halt and the political crisis goes from worse to worse-est.

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Tue, 01/28/2014 - 18:51 | 4377183 jubber
jubber's picture

...sorry but haven't they created a Domino effect, surely every other EM will have to follow suit , if not their currency will be next to be Bernankeed???

Tue, 01/28/2014 - 18:58 | 4377220 Grande Tetons
Grande Tetons's picture

SocGen, how French of you to pick sides after the battle. 

Tue, 01/28/2014 - 19:02 | 4377223 Cult_of_Reason
Cult_of_Reason's picture

Re: The TRY crisis is over.

This is fucking hilarious. The crisis is over. Really? Uber high interest rates are fantastic for the economy. Really?

Get the fuck out of here!

Tue, 01/28/2014 - 19:00 | 4377232 CH1
CH1's picture

So, raising rates is the answer!

Wonder how that'll play in DC.

Tue, 01/28/2014 - 19:07 | 4377261 john39
john39's picture

seems like just a few months ago, Turkey was gripped by riots triggered by nothing noteable, other than long term pent up anger at the government.  certainly this move couldn't provoke a similar or worse reaction... 

Tue, 01/28/2014 - 19:10 | 4377266 JohnnyBriefcase
JohnnyBriefcase's picture

Apparently this type of action makes everyone want to sell their gold.

Tue, 01/28/2014 - 19:28 | 4377355 Occident Mortal
Occident Mortal's picture

This isn't a rate hike.

This is crucifixion.

4.5% to 10% ?? What does that do to a variable mortgage? Triple it?

How many retail outlets can survive that kind of violent repricng?

Tue, 01/28/2014 - 20:15 | 4377514 Scarlett
Scarlett's picture

what socgen means is "fuck yeah borrow yen long Turkish bonds; fuck the japs and fuck these turkeys too"

Wed, 01/29/2014 - 01:40 | 4378710 X_mloclaM
X_mloclaM's picture
The central bank had moved ahead of other emerging markets to adopt experimental measures designed to curb hot money inflows while maintaining a free-floating currency regime...The result, at least so far, is a soft landing for Turkey rather than the boom and bust scenario that was threatening to unfold.
Wed, 01/29/2014 - 01:44 | 4378713 X_mloclaM
X_mloclaM's picture

This guy is sick, gold at the commercial banks, Halkbank movin Au weight cross borders, no visa, 2 feed Iranian housewives (as they could store wealth outside or fiatski rial), erdem basci, you can have it in 2015 too:::::

Central Bank Governor of the Year 2013 The Banker Editors | 02/01/2013 9:33 am

The Banker's Central Bank Governor of the Year awards celebrates the officials that successfully steered their countries through the economic turbulence of 2012.

Wed, 01/29/2014 - 01:45 | 4378718 X_mloclaM
X_mloclaM's picture


as his hand was forced anyways, might as well go big, with a nice cover (good for sentiment)

seems like Turkey is playin both sides (just as their geographical location may coincidentally? indicate)

Tue, 01/28/2014 - 19:11 | 4377281 edotabin
edotabin's picture

Yeah, that's why they announced it at midnight LOL

Tue, 01/28/2014 - 20:15 | 4377515 OC Sure
OC Sure's picture

"Uber high interest rates are fantastic for the economy. Really?"


Tue, 01/28/2014 - 18:59 | 4377225 WayBehind
WayBehind's picture

The US economy would collapse just by hiking the overnight rate by 1% ... can you imagine double digits?

Wed, 01/29/2014 - 00:15 | 4378522 OC Sure
OC Sure's picture

My imagination exceeds you; the US economy would not. Please quintuple US interest rates now (or, at least release them and let them go)! Then, you will understand what the US economy is.

Laissez-nous Faire.

Tue, 01/28/2014 - 19:01 | 4377235 kaiserhoff
kaiserhoff's picture


Wait until they see the spike in defaults this will inevitably bring.

And of course, money won't flow to the highest bidder, as in out of the EU's overleveraged, about to be bailed in hedge funds, er, cough, cough, banks.  Whatever the hell a bank is these days.

Tue, 01/28/2014 - 20:10 | 4377500 Matt
Matt's picture

How does this compare to Volcker, and what were the results of his rate hike(s)?

Tue, 01/28/2014 - 20:29 | 4377570 kaiserhoff
kaiserhoff's picture

Opinions will differ, but that was mainly to kill off inflationary hangover going back as far as Vietnam.

Worked surprisingly well given the scale, but real estate was a mess.  Valuations were good, even cheap, but to get a deal done you had to do seconds, thirds, wraps, warps;).  I had a good friend who was the creative financing guy at a large S & L.  Lost all his hair and started selling insurance instead.

Tue, 01/28/2014 - 20:32 | 4377573 thelibcentury
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Asking for straightforward facts, while using the internet.


Tue, 01/28/2014 - 21:40 | 4377806 williambanzai7
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Tue, 01/28/2014 - 18:51 | 4377184 Fix-ItSilly
Fix-ItSilly's picture

So Turkey goes the way of Greece.  How historically fitting!

Wed, 01/29/2014 - 02:19 | 4378766 X_mloclaM
X_mloclaM's picture

pledged countries gold to get more euro loans rolled for eurobankers?

Tue, 01/28/2014 - 18:52 | 4377186 kill switch
kill switch's picture

The CBRT did not disappoint tonight. The CBRT just announced a massive 425bp rate hike. Governor Basci, you have avoided a domino crisis in EM.



You gatta be shiting me!!!!!!!!!!!!!!!!!

Tue, 01/28/2014 - 18:53 | 4377187 AreaMan
AreaMan's picture


Tue, 01/28/2014 - 18:53 | 4377188 BullyBearish
BullyBearish's picture

"If you'd like a 425bp rate hike you can't have a 425bp rate hike!"

Tue, 01/28/2014 - 18:52 | 4377190 lasvegaspersona
lasvegaspersona's picture

I say there is an excuse for 'taper delay' or the tapered taper...

Tue, 01/28/2014 - 19:06 | 4377258 El Hosel
El Hosel's picture

Carefully remove the tip of the Taper, wipe it off, put it in Jannet's back pocket for safe keeping.

Tue, 01/28/2014 - 18:54 | 4377201 Rainman
Rainman's picture

Turkey is really a black swan fixing to land.

Tue, 01/28/2014 - 19:10 | 4377275 kaiserhoff
kaiserhoff's picture

Or a moose, looking for a windshield.

Tue, 01/28/2014 - 19:12 | 4377276 joego1
joego1's picture

Black Turkey on final to two niner advise no landing gear down.

Tue, 01/28/2014 - 19:27 | 4377346 kaiserhoff
kaiserhoff's picture

Is that better or worse, than no nose gear down?

Hard to know, isn't it?

Tue, 01/28/2014 - 19:34 | 4377368 unrulian
unrulian's picture

ffffttt. Black Turkey you are clear to crash; please navigate to the most heavily populated area...over

Tue, 01/28/2014 - 18:55 | 4377205 HpDeskjet
HpDeskjet's picture

Bullish for TRY, well... yes... But what about turkish growth? (and EM/world growth in general if more countries take similar measures?)

Tue, 01/28/2014 - 19:12 | 4377285 Pareto
Pareto's picture

This could surprise.  Strong currency position - implies real savings and investment to real productive areas of the economy.  Input prices will be cheaper providing more flexibility on top line pricing.  I mean isn't that what we preach here at ZH all the time?  Strong currency implies real interest rates >0....much greater.  Intertemporal choice finally has a an interest rate vehicle that actually allows this to work!.  Now there is an incentive to save and steward wealth rather than borrow and piss it all away.  So rapid price inflation and total capital dislocation, v. "suck it up butter cup" price deflation and now, adding color, a new incentive to save, providing capital to and for entrepreneurial pursuits.


I'm simplifyinh, but, whats not to like?



Tue, 01/28/2014 - 19:18 | 4377316 reload
reload's picture

And in the meantime.............anybody want to buy a house?....a car?.......anybody?

Tue, 01/28/2014 - 20:08 | 4377498 Pareto
Pareto's picture

Well,  prices fall.  rapidly.  isn't that what we want?  In the absence of a Volker move (which is what this is), what was Turkey's solution?  I agree its tought times for a bit, but isn't this where the least productive assets exchange hands to the more productive?  When you protect your currency, its an asset reset, not a currency reset.  Isn't this what we want?  As ZH'ers isn't this what we believe?


I mean, if I am wrong, then what the hell are we doing here?  Either one is in favor of strong currency policy, or, you are a Keynesian.  So, which is it?  What do we want?  In some sense, the answers I've read so far are discouraging - that this was the wrong move.  I can't help but think it was their ONLY move.


Somebody tell me I'm wrong.

Tue, 01/28/2014 - 20:38 | 4377593 thelibcentury
thelibcentury's picture

Being in favor of having a "currency policy" is rather Keynesian, wouldn't you say? Strong and weak currency approaches beget each other, because at the end of the day they are dictated by a small number of people with inevitably incomplete knowledge of the system.

No policy, now that's the ticket!

Tue, 01/28/2014 - 20:54 | 4377656 kaiserhoff
kaiserhoff's picture

I think letting the market price interest rates, housing, and everything else is what most honest people want.

Now finding a politician, central banker, or economist who agrees with that may be difficult.

Wed, 01/29/2014 - 03:48 | 4378871 highly debtful
highly debtful's picture

I understand your point, but I think we are now in a "damned if you do, damned if you don't" type of situation. Like I said in a post somewhere else some time ago: "this isn't the eighties or Paul Volcker anymore".

I don't have to explain to this crowd what will happen if the Fed continues its policy of near zero intrest rates, because we're all waiting for the hangover when that party comes to an end. But I suppose we all know equally well what will happen if the Fed would "do a Volcker" at this point and substantially hike up the rate --> that would be a death sentence for US sovereign expenditure - the national debt would become impossible to service in no time. So to make a long story short:

I think we're stuck, period.  



Tue, 01/28/2014 - 20:52 | 4377654 Wahooo
Wahooo's picture

The price of Iranian oil on the black market priced in lira.

Tue, 01/28/2014 - 20:58 | 4377670 mobydick
mobydick's picture

What's not to like, you fucking moron? Regular people and businesses paying 4.25% more than they did the day before.

Tue, 01/28/2014 - 18:54 | 4377206 Truther
Truther's picture

Basci......Go fuck yourself.... you MORON

Tue, 01/28/2014 - 18:55 | 4377207 jcamargo
jcamargo's picture

As if nothing bad happens when you raise interest rates 4.25% overnight.

Tue, 01/28/2014 - 19:45 | 4377398 ThirdWorldDude
ThirdWorldDude's picture

Look at the bright side, at least Erdogan is turning into a truther:

"Mr Erdogan had sounded a defiant note earlier on Tuesday, vowing that the economy would continue to grow despite attempts at “sabotage” and that the beneficiary would be the population as a whole, not the elites.

Speaking ahead of the extraordinary meeting of the central bank’s Monetary Policy Committee, Mr Erdogan said the economy’s recent troubles were the result of a conspiracy.

“I want those who can’t stand our success inside the country and abroad to know that over the last 11 years the economy as been based on solid ground,” he said, accusing unnamed foes of seeking to damage his government by weakening the economy, partly by using the international media. “The Turkish economy will not be driven down by sabotage...”


On a serious note, someone is getting really desperate to light the fuse in the ME.

Tue, 01/28/2014 - 18:56 | 4377209 dominmoscow
dominmoscow's picture

I assume this is the same Benoit Anne that was screaming "SELL EVERYTHING IN EM" yesterday? 

Tue, 01/28/2014 - 18:56 | 4377215 Frank -THE COIN -
Frank -THE COIN -'s picture

George Soros just turned his Bloomberg on.

Tue, 01/28/2014 - 18:58 | 4377217 lordbyroniv
lordbyroniv's picture

This aint gunna end well.  :(

Tue, 01/28/2014 - 18:58 | 4377218 icanhasbailout
icanhasbailout's picture

There is no interest rate in Baghdad.

Tue, 01/28/2014 - 18:59 | 4377221 doggis
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Tue, 01/28/2014 - 19:02 | 4377231 Goldilocks
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INSANE Domino Tricks! (Hevesh5 & MillionenDollarBoy) (3:53)

275,000 Dominoes - Enjoy Your Life (Guinness World Record - Most dominoes toppled in a spiral) (10:01)

Guinness World Record - Longest / Biggest Domino Line Ever (3:49)

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