2016 Forecast: Turkey Collapses

iShares MSCI Turkey (TUR) has completed a head-and-shoulders pattern with a target of $4, or a nearly 90% loss from current levels. Turkey has moved into direct confrontation with Russia. As I previously linked:
The Wall Street Journal reported on August 12 that a senior US military official accused Turkey of deceiving the American government by allowing its use of Incirlik airbase to attack ISIS, as a cover for President Erdogan's war on Kurdish fighters (PKK) in northern Iraq. So far, Turkey has carried out 300 air strikes against the PKK, and only three against ISIS! Erdogan's intent in punishing the Kurds is to gain the sympathy of Turkish voters in the next parliamentary elections, enabling his party to win an outright majority and establish an autocratic presidential theocracy.
Isis sells smuggled oil to Turkey and Iraqi Kurds, says US Treasury and The Unexpected Explanation How "That Ford Truck" Ended Up In ISIS Hands are more evidence of Turkish support for ISIS. President Obama and the United States are unlikely to punish Turkey, but Russia may. The next President may take a different position as well, but I expect Turkey will be undone mainly for economic reasons, with a geopolitical risk only adding to a potential crisis.

NYTimes: The Toxic Cocktail of Crises in Turkey
The economy is still expected to grow at about 3 percent, largely because construction and domestic consumption have held up. However, this depends on credit, with households borrowing to buy homes and developers borrowing to build them.

Housing investment is fueled by rising property prices, and pushes them still higher. But if prices stop going up, the debt that has backed the purchases could weigh heavily on the economy.

The only good piece of news recently is that the European Union has agreed to re-energize talks about Turkey joining the bloc. In theory, that could lead to a series of political and economic reforms that put the country onto a positive new trajectory, as Ankara strived to meet the conditions of membership.
If Turkey is found to be aiding ISIS in any way, the EU will not be able to allow Turkey to join for fear of political backlash.

1 comment:

  1. Stratfor is always super bullish on Turkey for some reason