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1. Democrats were projected to retain control of the Senate yesterday, clinching a narrow majority as they showed strength in battleground races in a daunting midterm year that handed President Biden a major victory as he looks to his next two years in office. The final blow to Republican hopes of retaking the chamber came in Nevada, where on Saturday Sen. Catherine Cortez Masto (D) was projected to win reelection, edging past Adam Laxalt (R), a former state attorney general. Cortez Masto’s projected win ensures Democrats a 50th seat, with a runoff election still to come in Georgia on Dec. 6 that could pad their slim majority. With 97 percent of the vote in, Cortez Masto led by half a percentage point. Control of the House was still up in the air on Saturday, as vote counting continued days after an election that started with Democrats expected to sustain heavy losses, since midterm elections have historically favored the party out of power. But Democrats have held their ground and even made some gains in many key contests, leaving many Republicans unnerved. In winning back control of the Senate, they dashed GOP hopes of a full takeover on Capitol Hill. (Source: washingtonpost.com)
2. Prior to November 8th, it was more or less assumed that the Republican Party would regain control of the US Senate and the House of Representatives. It was further assumed that Sen. Mitch McConnell (R-KY) would be elected Senate Majority Leader and Rep. Kevin McCarthy would be elected Speaker of the House. Assumption #1: wrong. Assumption #2: maybe. Assumptions #3 and #4: maybe not. (Source: washingtonpost.com)
3. Down-ballot told the tale. After years of watching Republicans dominate in down-ballot races, Democrats turned the tables to their own advantage in the midterm elections, flipping some legislative chambers from GOP control and blocking efforts to create veto-proof majorities in others. If the early results hold up in states where some races remain undetermined, Democrats will not have lost control of a single legislature that they previously held, a feat not accomplished by the president’s party during a midterm election since 1934. The victories blunted Republican plans to push further restrictions on abortion, transgender rights, school curriculums and spending, and in some states expanded Democrats’ possibilities of passing their own priorities. (Source: washingtonpost.com)
4. Imran Khan said he wants to mend relations with the US despite accusing it of treating Pakistan as a “slave”, signaling a desire to work with Washington after claiming it conspired to remove him as prime minister a few months ago. In an interview with the Financial Times following an assassination attempt this month, Khan said he no longer “blamed” the US and wants a “dignified” relationship if re-elected. He also warned that Pakistan was close to default and criticized the country’s IMF program. The former cricket captain was ousted in April in a no-confidence vote he claims was the result of a conspiracy between prime minister Shehbaz Sharif and the US, a top security partner to Pakistan that has provided the country with billions of dollars in military aid. Many analysts believe that Khan and his Pakistan Tehreek e Insaf (PTI) party is the most likely winner of a general election that has to be held by next year, following a surge in his popularity thanks in part to his anti-American rhetoric. (Source: ft.com)
5. China’s central bank will extend a year-end deadline for lenders to cap their ratio of property sector loans, one of the strongest moves yet by Beijing to relieve pressure from the credit crunch roiling China’s real estate sector. The People’s Bank of China’s extension of the “collective management system for real estate loans” has the potential to affect 26 per cent of China’s total banking loans, giving lenders and cash-strapped real estate developers breathing space as they fight to survive a historic property sector downturn. According to a document signed off by the PBoC and the China Banking and Insurance Regulatory Commission, and viewed by the Financial Times, lenders now have more time to cap the ratio of their outstanding property loans to total loans at big banks at 40 per cent, and their outstanding mortgages as of total loans at 32.5 per cent. The extension is the most important in a batch of relief measures approved by central bankers and the CBIRC on November 11, according to the document. “It’s a vital pivot,” said Yan Yuejin, research director of E-house China Research and Development Institute, adding that while pressure against excessive lending remained, the measures provided relief for commercial banks and leeway to issue new loans. (Source: ft.com)
6. A pandemic-induced housing boom in the world’s richest countries is likely to be followed by the broadest housing market slowdown since the financial crash. This, in turn, could add further pressure on to flagging economies. Now, nearly all of the countries in the Oxford Economics database are expected to experience a slowdown next year, marking the most widespread deceleration in housing price growth since at least 2000. More than half are likely to register an outright price contraction — something last seen in 2009. “This is the most worrying housing market outlook since 2007-2008, with markets poised between the prospect of modest declines and much steeper ones,” says Adam Slater, lead economist at Oxford Economics. “The ongoing surge in mortgage rates in advanced economies threatens to push some housing markets into steep downturns.” (Source: ft.com)
7. US consumers are seeing home buying conditions at their worst in a generation as mortgage rates soar in response to the Federal Reserve’s aggressive tightening cycle. About four in five consumers now describe buying conditions for homes as bad, a record in data going back to 1978, according to the University of Michigan’s consumer sentiment survey for November. The number of people who attribute the erosion in conditions to higher interest rates is at the highest level in 40 years, figures showed Friday. The housing market, which is especially susceptible to higher borrowing costs, has been crumbling since the Fed began raising interest rates in an effort to curb demand across the economy and tame rampant inflation. Mortgage rates have been hovering around the highest levels in two decades, and as of last week were above 7%. (Source: bloomberg.com)
8. The Binance-Iran connection:
Crypto giant Binance has processed Iranian transactions with a value of $8 billion since 2018 despite U.S. sanctions intended to cut Iran off from the global financial system, blockchain data show.
Almost all the funds, some $7.8 billion, flowed between Binance and Iran's largest crypto exchange, Nobitex, according to a review of data from leading U.S. blockchain researcher Chainalysis. Nobitex offers guidance on its website on how to skirt sanctions.
Three-quarters of the Iranian funds that passed through Binance were in a relatively low-profile cryptocurrency called Tron that gives users an option to conceal their identities. In a blog post last year, Nobitex encouraged clients to use Tron - a mid-tier token - to trade anonymously without "endangering assets due to sanctions."
The scale of Binance's Iranian crypto flows – and the fact that they are continuing – has not been previously reported.
The new findings come as the U.S. Justice Department is pursuing an investigation into possible violations of money-laundering rules by Binance, which dominates the $1 trillion crypto industry, with over 120 million users. The transactions put the company at risk of falling afoul of U.S. prohibitions on doing business with Iran, lawyers and trade-sanctions experts said.(Source: reuters.com, italics mine)
9. This is the “crypto” story of the week:
Sam Bankman-Fried’s main international FTX exchange held just $900 million in easily sellable assets against $9 billion of liabilities the day before it collapsed into bankruptcy, according to investment materials seen by the Financial Times.
The largest portion of those liquid assets listed on a FTX international balance sheet dated Thursday was $470 million of Robinhood shares owned by a Bankman-Fried vehicle not listed in Friday’s bankruptcy filing, which included 134 corporate entities.
The document, shared with prospective investors before the bankruptcy, provides a detailed picture of the financial hole in the FTX crypto empire and suggests customers of FTX international may face steep losses on cash and crypto assets they held on the exchange.
FTX’s collapse has delivered a powerful blow to a crypto industry already reeling from a string of corporate failures this year. (Source: ft.com)
10. Most favorite paragraph from Item #9:
The vast majority of FTX Trading’s recorded assets are either illiquid venture capital investments or crypto tokens that are not widely traded, according to the spreadsheet, which cautions that the figures “are rough values, and could be slightly off; there is also obviously a chance of typos etc. They also change a bit over time as trades happen.”
The company’s biggest asset as of Thursday was $2.2 billion worth of a cryptocurrency called Serum. Serum’s total market value was $88 million on Saturday, according to data provider CryptoCompare, suggesting FTX’s holdings would be worth far less if sold into the market. CryptoCompare’s figures take into account the coin’s liquidity. (Source: ft.com)
11. Meanwhile, money is “vanishing” from FTX:
At least $1 billion of customer funds have vanished from collapsed crypto exchange FTX, according to two people familiar with the matter.
The exchange's founder Sam Bankman-Fried secretly transferred $10 billion of customer funds from FTX to Bankman-Fried's trading company Alameda Research, the people told Reuters.
A large portion of that total has since disappeared, they said. One source put the missing amount at about $1.7 billion. The other said the gap was between $1 billion and $2 billion. (Source: reuters.com)
12. Institutional investors were souring on cryptocurrencies even before this week. The sudden downfall of Sam Bankman-Fried’s FTX.com may have permanently damaged their prospects of being included in mainstream portfolios. While plenty of industry die-hards remain, many professional money managers are saying the case for crypto as a portfolio diversifier or digital gold has been debunked. The losses are too great and the market structure is too risky, they say. “What’s become clear is it will not find a home in institutional asset allocation,” said Hani Redha, a multi-asset portfolio manager at Pinebridge Investments in London. “There was a period when it was being considered as a potential asset class that every investor should have in their strategic asset allocation and that’s off the table entirely.” (Source: bloomberg.com)
13. A number of subscribers have asked where they might find an article or analysis that explains, clearly, what crypto is all about. Happily, that piece is right here. It was written by the incomparable Matt Levine, whose daily newsletter on finance is must reading even if you don’t care about finance. You can subscriber to it by clicking here. (Source: bloomberg.com)
14. U.S. Rep. Karen Bass expanded her lead on Saturday against businessman Rick Caruso in the race to be the next mayor of Los Angeles, with an updated tally putting the veteran politician 9,463 votes ahead of the developer and closer to declaring victory as the first woman ever to lead the city. The race was still far from settled, but the totals from an additional 29,000 ballots had Bass at 50.78% to Caruso’s 49.22%, according to the latest tranche of results from the L.A. County Registrar-Recorder/County Clerk’s office. Until Friday, Caruso had a tiny lead on the congresswoman of one-half percentage point, or 2,695 votes, but results from about 60,000 ballots released Friday and Saturday showed Bass overtaking and then widening her lead. Independent analysts suggest that a minimum of 270,000 ballots remain to be counted, the vast majority of them mail-ins. “We now have three ballot dumps that are right around 60-40 for Karen Bass. In each of these sets of ballots, she’s currently beating him by 20 points,” said Paul Mitchell, an expert in voting patterns who has been closely following L.A.'s election results. Mitchell said the “trend” of the three latest tranches of votes made a Bass victory more likely. (Source: latimes.com)
Quick Links: China wants to mend ties with the U.S. But it won’t make the first move. U.S. intelligence report says key gulf ally meddled in American politics. The mortgage time bomb ticking beneath Poland’s banks. World primed for economic 'storm,' JPMorgan CEO warns. It’s the Democrats’ worst nightmare: victory for Joe Biden. Nigel Farage-led party could attract more than a quarter of voters, poll reveals. Top US border official resigns as migrant crossings surge. The Sam Bankman-Fried empire crumbled. Molly White explains what happened.