Huge Death Cross Here – Would You Buy At Prices Of 2009?

Did you ever regret not having bought shares in the 2008-2009 financial crisis? May be you can do it soon, again. Today’s panic in Europe can be a bad sign.

Today, Turkey’s pound, or lira, collapsed, in some moments, the Euro was almost 22 percent up compared to the Turkish money, and the US dollars almost 23 percent. At 21.00 CET, EUR/TRY and EUR/USD were 15.40, and 16.70 percent up, that means, the lira lost about 14 percent of its value in a single day.

Leaving the sinking ship

Such a big fall is very unusual in the forex world and indicates a real panic, when all are leaving the sinking ship, all are trying to exit the room at once, through the same door. Turkish share prices were down only 2.3 percent (BIST 100 Index), but in dollar or euro terms, they was falling like a stone. Must be a nice death cross on the graph.

The US dollar based DJ Turkey Titans 20 EUR index (TR20E) was 14.7 percent down today, such a big fall you can’t see normally on stock exchanges. Mostly, trade is suspended for some time if the index falls more than 10 percent, and all day, if 15 or 20 percent of the index value is erased. But this index isn’t official.

Crash signs

Stock price index falls of 10-15 percent you see only in big collapses, like those in the Lehman Brothers crash or other black days of stock market history. (Why Turkish assets fell so deep is a long-long story, the country has though economical, political and financial problems. Some new sources here, here or here).

I won’t analyse the country’s political and economical conditions, on short term, all seems to depend on what is going on in Erdogan’s head. (Their president, or dictator, as you wish.) He could have stopped the free fall today, but he didn’t. “Erdogan's Defiant Stance Sends Lira Tumbling Says Saxo Bank's Hardy” – wrote Bloomberg.

Worst days of the crisis

I rather would like to know if Turkish stocks are a buy already. The iShares MSCI Turkey ETF (TUR) closed today at 21.42 USD, falling 14.5 percent in 24 hours. Enough for a whole year, and its one year return is –42 percent, a nice loss calculated in USD.

This ETF’s shares fell some cents below 16 USD in the beginning of March 2009, in the worst days of the financial crisis, but the price was by 22 USD again the 2 of April 2009. So, the actual price of this important Turkish portfolio is now below of the level of April 2009. That means, in a 9 years low.

Dividends income

But this ETF also pays dividends, in the last years, approximately one USD per year, about 9,44 USD in 9 years. If we add this to the price, we are still by 30,86 USD. Here was the price last time at the end of June 2009, not bad. But we have seen this price at the end of 2016-beginning of 2017, also.

I know, if something falls, that is not enough reason to buy it. Some investors think, you should never catch the falling knifes. But others think contrarian. One important question is: would the Western World really let Turkey go bankrupt? The country with the second largest army in the NATO? The keyholder of many Syrian refugees?

Second Lehman?

Let Turkey be contagious, and become something like a second Lehman Brothers? (Contagion for European banks, for example.) I’m not sure. “The time to buy is when there's blood in the streets” – said Baron Rothschild. I don’t know if it’s enough blood there, but buying in similar panics, steep falls, was many times a good idea.

Disclaimer:

I am not a financial advisor and this content in this article is not a financial or investment advice. It is for informative purposes only, or simply to make you think, entertain, increase testosterone and adrenaline level. Consult your advisers before making any decision.

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(Photo: Pixabay)