Turkey - Pakistan

Is This Country An Investment Landmine? 3 “See It To Believe It” Signs

Going to new places is like breathing to me. I’ve lived in ten countries… traveled to more than 80 others… and being in the same place for any more than a month makes me feel itchy.

[REITs]

Q2 hedge fund letters, conference, scoops etc

Turkey - Pakistan

joannaoman / Pixabay

When I travel… or go to a new country… it can take a long time to figure out how things work (or, more frequently, how they don’t work). There are lots of ways to gauge the health of a country’s economy. But there are also some short cuts I use to get a handle on the investment environment, how businesses operate, whether the government facilitates or gets in the way of money, and how politics figure into the picture.

For example… I’m just back from visiting Turkey. You can read all you want about a place, but it’s different when you go there and see it in person. For example…

A terrible welcome. This was the mobbed madhouse that was passport control when I flew in to Istanbul last week…

For arriving foreigners, the total wait was close to an hour. The passport control officers – at least the one who stamped my passport and her adjacent buddy – were talking and joking and barely noticing the visitors in front of them. There was no apparent effort to add officers or otherwise make the experience a little less onerous and unpleasant.

What does that mean? First, it’s a bad sign that the people in charge of the front line of Turkey’s face to the world are so disorganised that they don’t think (or care) to rustle up some additional officers to speed things up. (It’s not as if arriving flights were a surprise – staffing passport control should be one of the easier parts of running an airport.) If first impressions matter, this is a terrible first impression. Is that how foreigners are treated – intentionally, or just because they don’t care? Either way, not encouraging.

(And I’m not picking on Turkey here. International Capitalist subscribers are familiar with my rants on air travel in the United States (and a shout out to the incompetent sloths of the security folks in the Philadelphia airport in particular!)

I’ve been to dozens of airports in so-called less-developed countries where they understand the value of a good welcome and a good first impression – where there is no wait at all. (Or, maybe there are so few visitors that there’s never a line at passport control. But still.)

Vacant buildings… downtown. I stayed in the incredible historical quarter of Istanbul, a stone’s throw (literally) away from the extraordinary Hagia Sophia. During the peak tourist season, the area is overrun with people who are wandering through the cobblestoned streets to visit carpet shops and kebab restaurants, and staying in boutique hotels, at what is one of the true crossroads of centuries of religions, cultures, and languages.

And yet… smack in the middle of the neighbourhood, was this (I took this photo from the rooftop patio of the hotel where I was staying)… a decrepit abandoned building that, from the look of it, hadn’t been touched in years (see the photo below).

Perhaps it doesn’t make economic sense to clean up the lot, and build something new. Maybe I’m completely mis-estimating the business potential of the area, and perhaps all those tourists passing through the area don’t buy anything. Maybe the owner of the lot can’t be bothered to develop it, or sell it. Maybe no local entrepreneurs have noticed the opportunity.

Or… maybe the bureaucracy involved in doing something with it, and the number of payoffs, and the regulatory challenges associated with creating something new, have deterred anyone from trying to make anything of the plot. Too often, when things that should happen given reasonable financial incentives that capitalism allows, wind up not happening… it’s because self-interested bureaucrats and poorly conceived rules have made it almost impossible to make it happen.

And if it’s so difficult to cart away some old bricks and make something new there – well, how difficult would it be to open and run a business? Or, as a minority shareholder in a company, how easy would it be for me to get a return on my investment? Not a good sign.

When prices are changingAs I wrote recently, Turkey is in the midst of a rapidly evolving financial crisis. Its currency, the lira, is down 60% percent this year, and inflation is heating up. Things are going to get a lot worse before they get any better.

How quickly are things changing? The menu of one restaurant I visited looked like this… crossed-out prices replaced with new, higher prices.

The restaurant didn’t want to lose money as the lira lost value – and they’re passing on the cost of depreciation on to the customer.

I think that’s going to be happening a lot more in Turkey in coming days and weeks. After there’s a big macroeconomic dislocation, the impact on the street isn’t usually immediate – it takes a while to filter through, as people begin to realise that their paycheck (in hard currency terms) is worth a lot less… and that prices are going up (like on this menu). (It can take longer especially in a country where the media cannot freely report on what’s really happening – like Turkey. If there’s no breathless reporting on TV from foreign exchange currency shops about the currency falling through the floor (because the government controls the media), people tend to notice it less.)

These are just three small signs of what’s going on… part of the mosaic of understanding a country, a market, and its investment potential.

Kim Iskyan

Publisher, Stansberry Churchouse Research

P.S. I’ll be talking a lot more about Turkey, and keeping a close eye on investment opportunities there as the country’s economic crisis unfolds. You’ll see some here – but I’ll be sharing most of my thoughts, and recommendations, only with subscribers to International Capitalist. If you’re not already a subscriber, go here to learn more.

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