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Good time to long Turkey?

F

FATCA

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May 6, 2022
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Mordor
#1
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Thesis: US, Europe and Russia are distracted with each other. So they will attack TR less (politically, economically, ...) and they will need TR more. This means a more stable TR. This should increase prices of immovable property, especially finite ones.

I am considering agricultural and residential land to bet on TR. Houses have less upside potential. Stock market is too corrupt.

What I am hoping: We'd skip a global real estate crash. We get low rates instead. I exit when Fed starts to increase rates, depending on how aggressive they are.

Upside potential
- If low interest rates return, house prices might see another 150% increase like it happened with covid pandemic. Locals don't protest so it can happen.
- Location I am looking at is safe from earthquakes. 2023 quake increased prices here significantly.

Risks
- A global real estate market crash.
- Low interest rates not returning anytime soon.
- Istanbul earthquake (and a few million deaths) might lead to cancellation of property rights.
- TRY devaluation might cause too much devaluation of local assets.
- - Carry trade situation might lead to this.
- - Government is stabilizing TRY by burning money to buy (and sell) lira. Government might decide TRY is too expensive.

What do you think? Especially about the risks? I'd highly appreciate your insight if you have experience in timing the market or understanding geopolitics
 
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#2
FATCA said:
Thesis: US, Europe and Russia are distracted with each other. So they will attack TR less (politically, economically, ...) and they will need TR more. This means a more stable TR.
Click to expand...
If you look at what Türkiye and Azerbaijan achieved in Armenia. I can confirm that your thesis is correct.

The rest generally is correct too, but mainly depends if the corruption you will see in Türkiye. Or maybe how well you are able to benefit from it.
 
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#4
HardRJones said:
Turkey is in a hyperinflationary spiral and doesn’t seem to be turning around despite the central bank pivot. There is a huge currency risk there.
Click to expand...
Could you please elaborate?
Have you seen this? She posts summarized updates about TR's economy.

HardRJones said:
economy is shaky right now.
Click to expand...
I suppose you know the average inflation of last 65 years is ~35% per year in TR? It seems high inflation is a feature, not a bug.
 
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#5
FATCA said:
I suppose you know the average inflation of last 65 years is ~35% per year in TR? It seems high inflation is a feature, not a bug.
Click to expand...
If you have been to Turkey over the past years, you would realise that reality is different from any statistic you find. Situation is bad there.

Google menu prices for restaurants and check photos from 2-3 years ago and now.
 
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#6
inector said:
If you have been to Turkey over the past years, you would realise that reality is different from any statistic you find. Situation is bad there.

Google menu prices for restaurants and check photos from 2-3 years ago and now.
Click to expand...
High inflation is a problem how? Why would TR government care about locals' pain and devalue TRY?

Average inflation in TR is 35% per year for the last 65 years.
 
#8
FATCA said:
Could you please elaborate?
Have you seen this? She posts summarized updates about TR's economy.


I suppose you know the average inflation of last 65 years is ~35% per year in TR? It seems high inflation is a feature, not a bug.
Click to expand...
I’ll make an effort post with charts when I can get to my computer. Suffice to say, a central bank boasting about 39% inflation while cutting rates is not healthy nor sustainable. It’s better than Erdogan’s prior idiocy but they have a monetary tiger by the tail. Hyperinflation tends to end with revaluation or abandonment of a currency. You have precedent in the transition to the new Lira between 2005-2008. Since 2018 there has been a 96% collapse in the strength of the Lira against the USD, the Euro, the CHF, the GBP, the Yen, etc., and it’s still collapsing even today. As far as domestic inflation, you have periods of CPI inflation above 100% YoY and periods of CPI inflation around 10% YoY, so the mean isn’t telling you the full story.

There are macro headwinds as liquidity doesn’t seem to be easing with rate cuts as expected and the EU and US are walking the line on a recession in a protectionist political climate, plus a potential ceasefire to the Russo-Ukranian war are likely to decrease capital inflows to Turkiye in the near term and worsen their foreign exchange accounts which will accelerate the collapse of the Lira’s value.

I think Turkiye is an interesting geopolitical play. I think their CBI is interesting in the long term. I also think the shorter term government bonds that are denominated in USD or EUR have periods where the risk is mispriced and can be profitable. I would personally stay away from longer term bonds, any corporate bonds, anything in the Lira, and even real estate. You might turn a profit on real estate but the risk is high, your decisions will need to be perfect, and it’s going to cause heartburn.
 
#9
HardRJones said:
It’s better than Erdogan’s prior idiocy
Click to expand...
If you believe Erdogan believes interest rates are mother of all evil, then I have a bridge to sell you :)

HardRJones said:
but they have a monetary tiger by the tail. Hyperinflation tends to end with revaluation or abandonment of a currency.
Click to expand...
How is that bad for land prices?

m2 prices of assets (in USD) cannot go below a certain level because TR isn't a closed economy like North Korea.

At worst house prices might get a 50% crash in USD. Which is why I would not invest in houses in TR.

HardRJones said:
There are macro headwinds as liquidity doesn’t seem to be easing with rate cuts as expected and the EU and US are walking the line on a recession in a protectionist political climate
Click to expand...
Yeah that sucks. Although there is a lot of room to cut.
But they are considering raising rates atm.

HardRJones said:
I think Turkiye is an interesting geopolitical play. I think their CBI is interesting in the long term.
Click to expand...
I am not interested in the passport. Btw if m2 prices of houses drop too much, CBI program would die, unless buyers are super desperate.
 
#14
FATCA said:
US, Europe and Russia are distracted with each other. So they will attack TR less (politically, economically, ...) and they will need TR more. This means a more stable TR
Click to expand...
and then the US will notice how beautiful turkey is, requests a candlelit dinner, they will have a 3 month romance before having a unexpected child, turkey considers it a blessing but the US is not ready for this and leaves, deadbeat, in an unexpected twist russia steps in as the father that would! i think you have a beautiful story on your hands

maybe you have some deeper thoughts but this is playing with dolls more than a thesis
"US, Europe and Russia are distracted with each other" because of the ukraine war? more now that the past 3 years? or because of trump being loud? this is a pretty general statement that if you said at any dinner party ever people would nod their heads

"So they will attack TR less (politically, economically, ...)" what does this mean exactly? all i can think about if how more likely you are now to get a random US import tariff slapped on your s**t.

"and they will need TR more" for what

FATCA said:
Stock market is too corrupt
Click to expand...
in what way
 
#15
@drysponge You sound american.

"US, Europe and Russia are distracted with each other" because of the ukraine war? more now that the past 3 years? or because of trump being loud?
Click to expand...
"So they will attack TR less (politically, economically, ...)" what does this mean exactly?
Click to expand...
- For the first time in more than a decade, I don't see hit pieces against TR on western media. This started a few months ago
- US is withdrawing from EU. This means EU is going to need more support from TR. TR is the only NATO country that shot down a Russian jet, and it is the country in NATO that's most friendly with Russia. What do you think EU is going to need TR for?
- Erdog consolidated even more power in 2023 and 2024 elections. Locals lost even more power. If Erdog admin decides that average flat in TR can be $1M, it would actually happen, assuming free market systems let it happen. That influences residential land prices.

FATCA said:
Stock market is too corrupt
Click to expand...
In every way. I'd never touch it

US import tariff
Click to expand...
Trivial damage:
https://twitter.com/x/status/1881326034215403557
 
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