1 00:00:09,920 --> 00:00:13,240 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:13,320 --> 00:00:17,320 Speaker 1: I'm Joe Watson Ball and I'm Tracy Allowait. Tracy. It's 3 00:00:17,440 --> 00:00:20,480 Speaker 1: uh great to both be back because the last two 4 00:00:20,520 --> 00:00:23,480 Speaker 1: episodes we had to do it solo. It's been a 5 00:00:23,560 --> 00:00:27,200 Speaker 1: long two weeks. It has been along two weeks. And 6 00:00:27,320 --> 00:00:30,240 Speaker 1: in these last two weeks, while we sort of alternated 7 00:00:30,400 --> 00:00:36,640 Speaker 1: who was on vacation, a very interesting and important eco 8 00:00:36,960 --> 00:00:41,280 Speaker 1: market story has been bubbling up. Yeah, shall I go 9 00:00:41,320 --> 00:00:43,839 Speaker 1: ahead and tell everyone what it is? You can you 10 00:00:43,880 --> 00:00:47,520 Speaker 1: can do the big reveal. Thank you for anyone who 11 00:00:47,560 --> 00:00:50,000 Speaker 1: hasn't been watching the markets at all. For the past 12 00:00:50,040 --> 00:00:53,040 Speaker 1: couple of weeks, we've seen really a global sell off, 13 00:00:53,080 --> 00:00:58,880 Speaker 1: but sparked by what's been going on in Turkey. Yeah. Absolutely, 14 00:00:59,080 --> 00:01:02,840 Speaker 1: and Turkey one of these stories, the currency plunge there 15 00:01:02,920 --> 00:01:07,039 Speaker 1: or the political situation there, that seems to be jumping 16 00:01:07,080 --> 00:01:09,959 Speaker 1: out of the finance realm, by which I mean people 17 00:01:10,000 --> 00:01:13,520 Speaker 1: who don't normally pay attention to emerging markets and currencies 18 00:01:13,800 --> 00:01:16,680 Speaker 1: are sitting up and paying attention, and so I think 19 00:01:16,680 --> 00:01:21,280 Speaker 1: that makes for an excellent topic for our podcast. Yeah, 20 00:01:21,360 --> 00:01:24,240 Speaker 1: it's pretty hard to ignore when a country's currency falls 21 00:01:24,319 --> 00:01:28,679 Speaker 1: by I think on a trade weighted basis. Uh, that's 22 00:01:28,680 --> 00:01:32,880 Speaker 1: pretty amazing. And you've seen some really dramatic scenes in Turkey. 23 00:01:32,959 --> 00:01:37,320 Speaker 1: For instance, we've seen tourists lining up outside of luxury 24 00:01:37,319 --> 00:01:40,720 Speaker 1: handbag stores in order to buy those bags on the 25 00:01:40,800 --> 00:01:44,200 Speaker 1: cheap before the stores actually have a chance to adjust 26 00:01:44,280 --> 00:01:47,920 Speaker 1: their pricing. So clearly a lot going on, a lot 27 00:01:47,960 --> 00:01:50,440 Speaker 1: of human interest in the story as well, and a 28 00:01:50,480 --> 00:01:54,920 Speaker 1: lot of economic and financial interest, some people even drawing 29 00:01:55,160 --> 00:01:59,960 Speaker 1: the parallel to the Asian financial crisis right and beyond 30 00:02:00,040 --> 00:02:03,440 Speaker 1: just a vivid images, also some very interesting geopolitical stuff 31 00:02:03,840 --> 00:02:07,880 Speaker 1: given Turkeys where it's it's geographically it's a NATO member, 32 00:02:07,960 --> 00:02:12,720 Speaker 1: the antagonism between er Dowan and Trump part of it 33 00:02:13,120 --> 00:02:16,240 Speaker 1: due to the holding of a US pastor so, just 34 00:02:16,520 --> 00:02:21,160 Speaker 1: lots of interesting threads to pull on kind of a 35 00:02:21,200 --> 00:02:24,160 Speaker 1: complex situation. And so because of that, I'm very excited 36 00:02:24,320 --> 00:02:27,120 Speaker 1: about the guest we have on today who will explain 37 00:02:27,200 --> 00:02:30,200 Speaker 1: it all to us. Yeah, our guest for today is 38 00:02:30,280 --> 00:02:36,120 Speaker 1: an emerging markets veteran really and someone who has been warning, 39 00:02:36,200 --> 00:02:39,840 Speaker 1: let's just say, about the situation in Turkey for some time. 40 00:02:40,040 --> 00:02:43,200 Speaker 1: So it should be a really good discussion. Absolutely. So 41 00:02:43,280 --> 00:02:47,560 Speaker 1: today we have the pleasure of talking to Paul McNamara. 42 00:02:47,680 --> 00:02:52,040 Speaker 1: He's the investment director of Emerging Market Debt at GAM 43 00:02:52,080 --> 00:02:56,200 Speaker 1: and a long time watcher of Turkey and other emerging markets. 44 00:02:56,280 --> 00:02:58,519 Speaker 1: I can't think of a better guest, So Paul, thank 45 00:02:58,560 --> 00:03:02,240 Speaker 1: you very much for coming up. Thanks very much. And Tracy, 46 00:03:02,600 --> 00:03:07,760 Speaker 1: So Paul, before we dive into the situation specifically in 47 00:03:07,919 --> 00:03:11,280 Speaker 1: Turkey and your perspective on it. Tracy and I have 48 00:03:11,400 --> 00:03:14,079 Speaker 1: known you a long time people on Twitter. No, you're 49 00:03:14,120 --> 00:03:19,160 Speaker 1: one of these sort of more outspoken and clear observers 50 00:03:19,200 --> 00:03:21,800 Speaker 1: of emerging markets. But for those of you who aren't 51 00:03:21,840 --> 00:03:24,840 Speaker 1: familiar with you, what is your background? How did you 52 00:03:25,000 --> 00:03:28,520 Speaker 1: get into covering emerging market debt? Well, I kind of 53 00:03:28,680 --> 00:03:31,240 Speaker 1: drifted into it, um. I spent a couple of years 54 00:03:31,280 --> 00:03:34,440 Speaker 1: after university in Poland when that country was going through 55 00:03:34,560 --> 00:03:37,800 Speaker 1: all its changes, the move over to capitalism, and kind 56 00:03:37,800 --> 00:03:39,800 Speaker 1: of whetted my appetite, and then I managed to look 57 00:03:39,880 --> 00:03:44,160 Speaker 1: into a job at what ultimately became GAM. I mean, 58 00:03:44,200 --> 00:03:47,240 Speaker 1: the most memorable thing was I started the job in March, 59 00:03:49,120 --> 00:03:52,080 Speaker 1: you know, and those huge pressure to buy something, and 60 00:03:52,120 --> 00:03:55,520 Speaker 1: what I decided to buy was Indonesia, which promptly collapsed 61 00:03:56,760 --> 00:03:59,480 Speaker 1: fell from two thousand, four hundred to seventeen thousand to 62 00:03:59,560 --> 00:04:01,760 Speaker 1: the dollar. So we're going to have to ask you 63 00:04:01,800 --> 00:04:05,520 Speaker 1: about all the people seeing parallels with what's happening in 64 00:04:05,560 --> 00:04:09,880 Speaker 1: Turkey versus what happened in Asia. But before we do, 65 00:04:10,720 --> 00:04:14,280 Speaker 1: whenever we talk about emerging market investing, the thing that 66 00:04:14,320 --> 00:04:17,680 Speaker 1: always comes up is, oh, there's no such thing as 67 00:04:17,720 --> 00:04:21,839 Speaker 1: emerging markets as a whole. That each country is special 68 00:04:22,320 --> 00:04:24,960 Speaker 1: in its own kind of way. So I guess just 69 00:04:25,080 --> 00:04:27,760 Speaker 1: run us through what it means to actually be an 70 00:04:27,760 --> 00:04:32,320 Speaker 1: emerging market investment director. I think there's there's a couple 71 00:04:32,360 --> 00:04:35,840 Speaker 1: of things which distinguish a M from developed world. I mean, 72 00:04:35,920 --> 00:04:38,440 Speaker 1: until recently, the politics, but I was supposed in the 73 00:04:38,480 --> 00:04:41,479 Speaker 1: era of Trump and Brexit, we get wacky politics in 74 00:04:41,520 --> 00:04:44,200 Speaker 1: both the M and d M. Two is that, you know, 75 00:04:44,240 --> 00:04:47,160 Speaker 1: the institutions are not as strong. You know, a contract 76 00:04:47,240 --> 00:04:50,480 Speaker 1: doesn't mean what a contract would necessarily mean in a 77 00:04:50,560 --> 00:04:54,240 Speaker 1: developed country. There's a lot more reliance on trust, and 78 00:04:54,279 --> 00:04:57,680 Speaker 1: there's a lot less trust in the system. And the 79 00:04:57,680 --> 00:04:59,560 Speaker 1: other thing is and that that kind of spills over 80 00:04:59,600 --> 00:05:01,560 Speaker 1: into how the economy's work. I mean, one thing you 81 00:05:01,560 --> 00:05:03,839 Speaker 1: could say is that a developed country is one where 82 00:05:03,839 --> 00:05:06,640 Speaker 1: interest rates go down when the country goes into trouble, 83 00:05:06,680 --> 00:05:08,680 Speaker 1: and an emerging market is somewhere where they go up 84 00:05:08,720 --> 00:05:11,400 Speaker 1: when it gets into trouble. So, just to your point 85 00:05:11,400 --> 00:05:15,919 Speaker 1: about contracts and trust, if you own a stake in 86 00:05:16,040 --> 00:05:20,160 Speaker 1: an oil company in the US or in the UK, 87 00:05:20,839 --> 00:05:25,239 Speaker 1: you feel almost certain that under that, under all circumstances, 88 00:05:25,279 --> 00:05:28,240 Speaker 1: that equity share or the debt you have will be honored, 89 00:05:28,640 --> 00:05:31,480 Speaker 1: Whereas in many e M s you have to wonder 90 00:05:31,600 --> 00:05:34,640 Speaker 1: when in a crisis a country could be nationalized or 91 00:05:34,800 --> 00:05:36,919 Speaker 1: something happens, and you have to sort of factor that 92 00:05:37,000 --> 00:05:39,960 Speaker 1: into your risk model absolutely. I mean, you know there's 93 00:05:39,960 --> 00:05:43,240 Speaker 1: a range. There's places like Brazil where the system more 94 00:05:43,279 --> 00:05:45,960 Speaker 1: or less works, but the banks will maybe cut themselves 95 00:05:45,960 --> 00:05:48,720 Speaker 1: a sweetheart deal ahead of other creditors, you know. And 96 00:05:48,760 --> 00:05:51,440 Speaker 1: in the other extent, there's somewhere like Russia where the 97 00:05:51,640 --> 00:05:53,840 Speaker 1: where the government or people connect to the government might 98 00:05:53,920 --> 00:05:59,960 Speaker 1: just outright expropriate what's a privately held company. And regards 99 00:06:00,040 --> 00:06:03,080 Speaker 1: to what you said about in a downturn in the 100 00:06:03,200 --> 00:06:06,000 Speaker 1: US or in a developed market, you do see people 101 00:06:06,520 --> 00:06:09,640 Speaker 1: pile into save havens like government debt. In the M 102 00:06:09,680 --> 00:06:12,159 Speaker 1: it's just the opposite. But what is that, why is 103 00:06:12,279 --> 00:06:15,080 Speaker 1: there there sort of mechanistic difference. I think again it 104 00:06:15,320 --> 00:06:17,560 Speaker 1: comes down to trust. I mean, it's you know, it's safe. 105 00:06:17,839 --> 00:06:21,880 Speaker 1: Safe is a relative thing. The U S. Treasuries are 106 00:06:21,920 --> 00:06:24,400 Speaker 1: the goal standard. And this is what we tend to 107 00:06:24,440 --> 00:06:27,960 Speaker 1: find is that you know that when when Americans panic, 108 00:06:28,040 --> 00:06:31,239 Speaker 1: they buy US government bonds, you know, that's their safe haven. 109 00:06:31,560 --> 00:06:35,400 Speaker 1: But when Russians or people from most other countries panic, 110 00:06:35,680 --> 00:06:38,480 Speaker 1: they also buy US government bonds, which means that they 111 00:06:38,480 --> 00:06:41,039 Speaker 1: sell the local currency, you know, and in order to 112 00:06:41,040 --> 00:06:44,039 Speaker 1: protect the currency, interest rates go up. So you know, 113 00:06:44,160 --> 00:06:47,080 Speaker 1: on top of whatever crisis is causing people to panic, 114 00:06:47,400 --> 00:06:50,560 Speaker 1: you also have you know, tighter monetary policy, which in 115 00:06:50,640 --> 00:06:53,880 Speaker 1: most cases makes things worse. So I have one more 116 00:06:53,960 --> 00:06:58,279 Speaker 1: emerging markets in general question before we move on to Turkey. 117 00:06:58,440 --> 00:07:01,960 Speaker 1: But when you're investing in emerging markets, if you have 118 00:07:02,120 --> 00:07:06,960 Speaker 1: that e M investment mandate, what do you actually choose 119 00:07:07,040 --> 00:07:10,600 Speaker 1: to invest in and how much are you beholden to 120 00:07:10,920 --> 00:07:16,160 Speaker 1: what the big benchmark indices say is emerging market So 121 00:07:16,320 --> 00:07:19,000 Speaker 1: you know what JP Morgan says our emerging market bonds 122 00:07:19,080 --> 00:07:22,640 Speaker 1: or what M. S c I says are emerging market equities. Yeah, 123 00:07:22,800 --> 00:07:25,240 Speaker 1: there's really I think two ways of trying to make 124 00:07:25,280 --> 00:07:28,320 Speaker 1: money in emerging markets. There's the one which is kind 125 00:07:28,320 --> 00:07:30,440 Speaker 1: of the center of all our presentations, which is we 126 00:07:30,480 --> 00:07:33,640 Speaker 1: take advantage of the progress stories we try and find. 127 00:07:33,720 --> 00:07:35,600 Speaker 1: You know that first you had the first round of 128 00:07:35,640 --> 00:07:39,080 Speaker 1: Asian tigers and then sort of the second round Thailand 129 00:07:39,080 --> 00:07:41,280 Speaker 1: and so on, and you try and ride that progress 130 00:07:41,360 --> 00:07:43,640 Speaker 1: up and that is part of it. But you know, 131 00:07:43,720 --> 00:07:46,000 Speaker 1: the flip side is I think kind of what we're 132 00:07:46,000 --> 00:07:49,000 Speaker 1: looking at Turkey now, which is you try and find 133 00:07:49,080 --> 00:07:53,520 Speaker 1: something which is a disaster area but still cheap. What 134 00:07:53,640 --> 00:07:56,160 Speaker 1: you tend to find is that the great returning stories 135 00:07:56,200 --> 00:07:59,280 Speaker 1: in em tend to be to buy the disasters. So 136 00:07:59,320 --> 00:08:01,640 Speaker 1: that's that's a thecent part of the job as well. 137 00:08:02,080 --> 00:08:05,320 Speaker 1: The indices are are a huge issue. There's a arrangement 138 00:08:05,320 --> 00:08:08,240 Speaker 1: investors were we do bonds, so we're probably slightly more 139 00:08:08,280 --> 00:08:12,760 Speaker 1: closely tied to benchmarks than our equity counterparts. But the 140 00:08:12,800 --> 00:08:16,440 Speaker 1: fact that Turkey this year has fallen from ten percent 141 00:08:16,560 --> 00:08:19,840 Speaker 1: of the Key Local Market Index to just three just 142 00:08:20,000 --> 00:08:22,360 Speaker 1: because of the collapse in the lira and the collapse 143 00:08:22,400 --> 00:08:26,000 Speaker 1: in the price of bonds, that's that does play a 144 00:08:26,000 --> 00:08:29,760 Speaker 1: part in our thinking. Alright, So you talked about disaster areas, 145 00:08:29,800 --> 00:08:31,720 Speaker 1: So I think we've got to get right into the 146 00:08:31,800 --> 00:08:36,600 Speaker 1: situation in Turkey here for the people who don't really 147 00:08:37,559 --> 00:08:41,480 Speaker 1: our finance people haven't really paid attention to this. Someone 148 00:08:41,520 --> 00:08:44,240 Speaker 1: else you had a bar, what's going on in Turkey? 149 00:08:44,240 --> 00:08:46,240 Speaker 1: Wire things shall bear? What do you answer to them? 150 00:08:46,720 --> 00:08:50,040 Speaker 1: They're running out of dollars. The banks have borrowed a huge, 151 00:08:50,160 --> 00:08:52,719 Speaker 1: huge amount of dollars. They've lent those dollars on to 152 00:08:52,880 --> 00:08:57,360 Speaker 1: local companies who generally speaking aren't exporters, quite often their 153 00:08:57,360 --> 00:09:00,600 Speaker 1: property and construction companies. So you've got people trying to 154 00:09:00,679 --> 00:09:03,959 Speaker 1: use lira rental revenues on a you know, a shopping 155 00:09:03,960 --> 00:09:06,959 Speaker 1: mall in a third tier town in Anatolia to repay 156 00:09:07,000 --> 00:09:09,680 Speaker 1: dollar debt. And at the same time, they're importing a 157 00:09:09,679 --> 00:09:12,880 Speaker 1: lot more than they export, even counting their tourism revenues 158 00:09:12,920 --> 00:09:16,040 Speaker 1: as exports. And just to put the icing on the cake, 159 00:09:16,160 --> 00:09:19,960 Speaker 1: they have the least adequate level of foreign exchange reserves 160 00:09:19,960 --> 00:09:23,840 Speaker 1: of any major market. So really they need another source 161 00:09:23,880 --> 00:09:27,520 Speaker 1: of dollars fast. The president thinks the population should chip 162 00:09:27,559 --> 00:09:30,439 Speaker 1: in and convert their dollars into lira, but they don't 163 00:09:30,440 --> 00:09:34,320 Speaker 1: seem terribly enthusiastic about that idea. I wonder why weird, 164 00:09:34,400 --> 00:09:38,199 Speaker 1: isn't it. So this is something that comes up again 165 00:09:38,240 --> 00:09:42,480 Speaker 1: and again in emerging markets, this idea of external and 166 00:09:42,600 --> 00:09:46,080 Speaker 1: internal imbalances, which is kind of what you're talking about 167 00:09:46,120 --> 00:09:50,760 Speaker 1: with the dollar borrowing. Why do emerging markets and why 168 00:09:50,840 --> 00:09:56,200 Speaker 1: did Turkey specifically decide to borrow in a foreign currency 169 00:09:56,320 --> 00:09:58,160 Speaker 1: because the interest rates are lower, I mean, you know, 170 00:09:58,280 --> 00:10:01,800 Speaker 1: even at their lows to interest rates wherein double digits. 171 00:10:02,160 --> 00:10:03,840 Speaker 1: You know, when you have a period of stability for 172 00:10:03,840 --> 00:10:06,559 Speaker 1: the lera, the thinking typically comes, well, I can pay 173 00:10:06,600 --> 00:10:09,520 Speaker 1: twelve from my lear alone, or I can pay two 174 00:10:09,600 --> 00:10:12,600 Speaker 1: or three percent to borrow from a European bank, And 175 00:10:12,640 --> 00:10:15,040 Speaker 1: so they go with the European banks, and against the 176 00:10:15,040 --> 00:10:18,120 Speaker 1: background of que the European banks have just been very 177 00:10:18,240 --> 00:10:21,440 Speaker 1: very keen to lend to the Turkish banks. Kind of 178 00:10:21,440 --> 00:10:24,600 Speaker 1: marriage made in health, to be honest. So when it's 179 00:10:24,679 --> 00:10:28,160 Speaker 1: going up, when when growth is happening and things are stable, 180 00:10:28,520 --> 00:10:32,199 Speaker 1: it's a pretty great trade to borrow cheaply in dollars, 181 00:10:32,840 --> 00:10:36,800 Speaker 1: build a new shopping mall or an apartment center, collect 182 00:10:37,000 --> 00:10:41,679 Speaker 1: rent in lera, which in good times maybe appreciating, uh, 183 00:10:41,720 --> 00:10:44,000 Speaker 1: you know, and then you pay back, you convert it back, 184 00:10:44,080 --> 00:10:47,079 Speaker 1: pay off your dollar loans, you make money. This situation 185 00:10:47,120 --> 00:10:49,200 Speaker 1: has been going on for a while, and it's not 186 00:10:49,280 --> 00:10:52,679 Speaker 1: like any of these imbalances are new or suddenly just 187 00:10:52,960 --> 00:10:57,800 Speaker 1: spring up on people. What catalyzes the downturn, there's a 188 00:10:57,800 --> 00:10:59,520 Speaker 1: bunch of things. In the case of Turkey, it's really 189 00:10:59,559 --> 00:11:02,040 Speaker 1: quite hard to say which is it. I mean, we've 190 00:11:02,040 --> 00:11:04,920 Speaker 1: had a little bit of an economic slowdown, which sort 191 00:11:04,920 --> 00:11:07,680 Speaker 1: of impinges on profits. It means that none performing loans 192 00:11:07,720 --> 00:11:10,880 Speaker 1: are taking up a little bit. We've had general worries 193 00:11:11,080 --> 00:11:15,120 Speaker 1: about credit globally. That's not helping either. And then you've 194 00:11:15,120 --> 00:11:18,320 Speaker 1: just got the you know, the increasingly bizarre behavior of 195 00:11:18,360 --> 00:11:22,439 Speaker 1: the politicians. There was a quote unquote coup in Turkey 196 00:11:22,440 --> 00:11:24,800 Speaker 1: a couple of years ago that's been used as a 197 00:11:24,840 --> 00:11:28,880 Speaker 1: pretext to really dismantled democracy. I think a big part 198 00:11:28,960 --> 00:11:30,760 Speaker 1: of it, and something that we haven't heard enough about, 199 00:11:31,360 --> 00:11:34,280 Speaker 1: is that there's capital flight that the political changes in 200 00:11:34,320 --> 00:11:36,559 Speaker 1: Turkey have prompted. I think a lot of rich Turks 201 00:11:36,840 --> 00:11:38,959 Speaker 1: to decide that their money is better off in London 202 00:11:39,080 --> 00:11:41,360 Speaker 1: or Switzerland than it is in is stan Bull. But 203 00:11:41,440 --> 00:11:44,160 Speaker 1: it's really a bunch of very negative things happening at 204 00:11:44,160 --> 00:11:46,280 Speaker 1: the same time, and it's quite hard to point to 205 00:11:46,360 --> 00:11:51,240 Speaker 1: one specific one which is more important than all the others. Right, 206 00:11:51,240 --> 00:11:53,800 Speaker 1: But this gets to what you were saying earlier about 207 00:11:53,920 --> 00:11:59,520 Speaker 1: what distinguishes emerging markets is that weakness in institutions, and 208 00:11:59,600 --> 00:12:02,960 Speaker 1: it feels like in Turkey you kind of have that 209 00:12:03,040 --> 00:12:06,400 Speaker 1: in spades now, right. You have the central Bank basically 210 00:12:06,440 --> 00:12:09,120 Speaker 1: afraid to raise interest rates because it doesn't want to 211 00:12:09,240 --> 00:12:12,240 Speaker 1: upset Ariduan or get on the wrong side of arid Wan. 212 00:12:12,400 --> 00:12:16,440 Speaker 1: You have Aridan's son in law now installed as I 213 00:12:16,440 --> 00:12:20,640 Speaker 1: believe it's finance minister. How much has that played into 214 00:12:21,440 --> 00:12:26,920 Speaker 1: sentiment towards Turkey both locally and internationally. I mean, I 215 00:12:27,000 --> 00:12:29,760 Speaker 1: think the key thing has been the crackdown after the coup. 216 00:12:30,040 --> 00:12:32,480 Speaker 1: It's not at all clear what did happen during the coup, 217 00:12:32,559 --> 00:12:37,520 Speaker 1: but it's being used by the government both to persecute 218 00:12:37,520 --> 00:12:39,480 Speaker 1: people they're not very fond of and also to do 219 00:12:39,520 --> 00:12:42,040 Speaker 1: a certain amount of economic looting. On the side. You 220 00:12:42,040 --> 00:12:45,560 Speaker 1: know that we've seen various businesses turned over to either 221 00:12:45,640 --> 00:12:49,760 Speaker 1: the government or government collected parties, which just encourages people 222 00:12:49,800 --> 00:12:52,679 Speaker 1: to move to move their money away. We've also had 223 00:12:52,720 --> 00:12:56,680 Speaker 1: Obviously the row with the United States about the priest 224 00:12:56,720 --> 00:13:00,840 Speaker 1: Andrew Branson, and obviously American Evangelica calls are an important 225 00:13:00,880 --> 00:13:04,160 Speaker 1: votoblock in the in the US election year. It's when 226 00:13:04,200 --> 00:13:06,719 Speaker 1: Turkey's luck ran out. It's sort of luck ran out 227 00:13:06,760 --> 00:13:09,800 Speaker 1: in lots of different ways at the same time. Going 228 00:13:09,880 --> 00:13:15,360 Speaker 1: back to the currency mismatches and imbalances, this gets too, 229 00:13:15,480 --> 00:13:18,959 Speaker 1: I think kind of the nub of a very important 230 00:13:19,600 --> 00:13:24,200 Speaker 1: thesis that people put forth that tightening of central banks 231 00:13:24,240 --> 00:13:27,960 Speaker 1: in developed markets, particularly the FED and also maybe the 232 00:13:28,040 --> 00:13:31,440 Speaker 1: ECB when they go into tightening cycle, is that that 233 00:13:31,600 --> 00:13:35,080 Speaker 1: can kick off a pain and maybe sometimes crises for 234 00:13:35,120 --> 00:13:39,640 Speaker 1: emerging markets because if businesses were premised on borrowing cheap 235 00:13:39,679 --> 00:13:42,720 Speaker 1: dollars and dollars get less cheap than that hurts. How 236 00:13:42,800 --> 00:13:46,200 Speaker 1: much of this is about central banks in your view, 237 00:13:46,240 --> 00:13:48,960 Speaker 1: and how much is that just sort of used as 238 00:13:49,000 --> 00:13:54,280 Speaker 1: a story. I think it's it's mostly story one microeconomic development, 239 00:13:54,280 --> 00:13:56,000 Speaker 1: which I think is maybe a huge difference has been 240 00:13:56,080 --> 00:13:58,800 Speaker 1: dollar strengths this year. I mean, that's the one thing 241 00:13:58,840 --> 00:14:01,199 Speaker 1: that has put all the m arencies on the back foot, 242 00:14:01,320 --> 00:14:03,400 Speaker 1: so that you know that while we've avoided a lot 243 00:14:03,440 --> 00:14:05,440 Speaker 1: of damage by staying out of Turkey. We've you know, 244 00:14:05,480 --> 00:14:09,120 Speaker 1: we've been smacked around from South Africa to Brazil. That 245 00:14:09,240 --> 00:14:11,560 Speaker 1: part of it, I think, I think is genuine. In 246 00:14:11,679 --> 00:14:14,680 Speaker 1: terms of the FED hiking cycle and weakness and treasuries, 247 00:14:14,800 --> 00:14:18,120 Speaker 1: I think I think that's pretty much narrative. Emerging markets 248 00:14:18,240 --> 00:14:21,440 Speaker 1: you can find their way into trouble in any circumstance, 249 00:14:21,520 --> 00:14:23,560 Speaker 1: no matter how benign. And I think at the moment, 250 00:14:23,800 --> 00:14:27,160 Speaker 1: global interest rates are still very low, credit conditions are 251 00:14:27,200 --> 00:14:30,080 Speaker 1: still pretty loose. I mean, it's hard to say that 252 00:14:30,120 --> 00:14:32,400 Speaker 1: this is you know, this isn't like the VULCA tightening, 253 00:14:32,440 --> 00:14:35,240 Speaker 1: where you know, the US suddenly went went nuts and 254 00:14:35,640 --> 00:14:39,640 Speaker 1: really crushed global liquidity. This is a pretty mild hiking cycle, 255 00:14:40,440 --> 00:14:41,920 Speaker 1: and the e c B on the other and is 256 00:14:42,400 --> 00:14:46,040 Speaker 1: hardly doing anything at all. So just to follow up 257 00:14:46,040 --> 00:14:47,760 Speaker 1: on that point, Paul, I know you're saying that you 258 00:14:47,800 --> 00:14:51,320 Speaker 1: think the notion that the US tightening monetary policy having 259 00:14:51,320 --> 00:14:54,360 Speaker 1: a negative impact on em is overblown, at least in 260 00:14:54,400 --> 00:14:58,440 Speaker 1: this instance. But if it wasn't, do you think that 261 00:14:58,480 --> 00:15:01,480 Speaker 1: the FED would care at all about the impact that 262 00:15:01,640 --> 00:15:04,240 Speaker 1: it's monetary policy has on the rest of the world. 263 00:15:04,920 --> 00:15:07,200 Speaker 1: Absolutely not. I mean that you know, The FED has 264 00:15:07,240 --> 00:15:10,360 Speaker 1: always been very clear in the past. I remember that 265 00:15:10,440 --> 00:15:12,520 Speaker 1: it was last raised. I think in Argentina was going 266 00:15:12,560 --> 00:15:15,080 Speaker 1: down the tubes in two thousand and one, you know, 267 00:15:15,200 --> 00:15:18,840 Speaker 1: and the Feds very clear. It's the old thing. You know, 268 00:15:19,120 --> 00:15:21,600 Speaker 1: it's our currency, but your problem. The FED is not 269 00:15:21,680 --> 00:15:23,440 Speaker 1: interested in what happens in the rest of the world 270 00:15:23,800 --> 00:15:25,880 Speaker 1: except to the degree to which the rest of the 271 00:15:25,880 --> 00:15:28,440 Speaker 1: world affects the US, which means that you've got a 272 00:15:28,440 --> 00:15:32,080 Speaker 1: super strong dollar maybe affecting trade. That makes a difference 273 00:15:32,080 --> 00:15:34,200 Speaker 1: at the margins. But you know, the Fed's not going 274 00:15:34,200 --> 00:15:38,760 Speaker 1: to rescue anyone here, Paul, what is the data that 275 00:15:38,840 --> 00:15:42,040 Speaker 1: you look at? I mean, in some sometimes you get 276 00:15:42,080 --> 00:15:43,960 Speaker 1: these crazies that are kind of simple. Maybe it's a 277 00:15:44,000 --> 00:15:48,080 Speaker 1: sovereign debt crisis and the country is the government debt. 278 00:15:48,400 --> 00:15:51,720 Speaker 1: Maybe they're running out of money. But obviously it's not 279 00:15:51,920 --> 00:15:55,680 Speaker 1: nearly as simple when it's about banks and private sector 280 00:15:55,760 --> 00:16:00,080 Speaker 1: borrowing and the reserve data. What are the data a 281 00:16:00,160 --> 00:16:03,880 Speaker 1: point that you look at as a fund manager to 282 00:16:03,920 --> 00:16:08,600 Speaker 1: sort of gauge the health and vulnerabilities of a given country. 283 00:16:08,880 --> 00:16:11,040 Speaker 1: In Turkey, it's very clear. All we're looking at is 284 00:16:11,080 --> 00:16:14,360 Speaker 1: the rollover rate. You know, that. I think the Turkish 285 00:16:14,360 --> 00:16:18,640 Speaker 1: banks have about seventy billion dollars of loans coming to 286 00:16:18,880 --> 00:16:22,080 Speaker 1: this year, and so they need to borrow seventy billion 287 00:16:22,120 --> 00:16:26,360 Speaker 1: plus to keep that going. So we use the the 288 00:16:26,360 --> 00:16:31,880 Speaker 1: syndicated loan search function on the Bloomberg terminal. That's the 289 00:16:31,880 --> 00:16:35,560 Speaker 1: the single most important data we look at. We appreciate 290 00:16:35,640 --> 00:16:41,480 Speaker 1: the plug that justifies today's entire episode. So I mean, 291 00:16:41,560 --> 00:16:46,600 Speaker 1: on that note, Turkey facing this wall of debt that's well, 292 00:16:46,640 --> 00:16:49,720 Speaker 1: that will need to be rolled over in some way. 293 00:16:49,760 --> 00:16:53,640 Speaker 1: What are the chances that international investors step up to 294 00:16:53,680 --> 00:16:56,640 Speaker 1: actually do that. I say the chances are a lot 295 00:16:56,640 --> 00:16:59,200 Speaker 1: lower now. I mean, I think the thing that really 296 00:16:59,800 --> 00:17:03,320 Speaker 1: the really sent things spiraling on Friday was the report 297 00:17:03,320 --> 00:17:06,200 Speaker 1: in the Financial Times that the ECB is concerned about 298 00:17:06,200 --> 00:17:09,320 Speaker 1: the level of European banks exposure to Turkey. I mean, 299 00:17:09,359 --> 00:17:11,679 Speaker 1: in particular b b v A, which owns one of 300 00:17:11,720 --> 00:17:14,359 Speaker 1: the biggest private banks in Turkey. I think b NP 301 00:17:14,480 --> 00:17:17,520 Speaker 1: are involved as well. The thing that has I think 302 00:17:17,600 --> 00:17:20,479 Speaker 1: been frustrating for us, given that we've been quite negative 303 00:17:20,480 --> 00:17:23,119 Speaker 1: on Turkey for a long time, is that the people 304 00:17:23,119 --> 00:17:26,240 Speaker 1: who make these syndicated loans were quite happy to keep 305 00:17:26,320 --> 00:17:29,800 Speaker 1: rolling them over. I think what's really going to change 306 00:17:29,840 --> 00:17:33,119 Speaker 1: now is when it's embarrassing for a bank CEO in 307 00:17:33,160 --> 00:17:35,959 Speaker 1: Europe to explain how much exposure they have to Turkey, 308 00:17:35,960 --> 00:17:37,840 Speaker 1: and they they're going to try and take steps to 309 00:17:37,960 --> 00:17:40,879 Speaker 1: roll that back. And we're beginning to see signs of that. 310 00:17:41,080 --> 00:17:44,320 Speaker 1: Even you know that the prime brokers are looking to 311 00:17:45,359 --> 00:17:48,919 Speaker 1: reduce the amount of lear exposure they have on the 312 00:17:49,040 --> 00:17:51,760 Speaker 1: on the prime broking books. So it does begin it's 313 00:17:51,800 --> 00:17:53,919 Speaker 1: beginning to look as if European banks are beginning to 314 00:17:53,920 --> 00:17:57,240 Speaker 1: wind this in a little bit. So then what does 315 00:17:57,640 --> 00:18:00,959 Speaker 1: recovery or stemming the bleeding or stubboring the crisis look like. 316 00:18:01,040 --> 00:18:03,960 Speaker 1: Because one of the things that I think has been 317 00:18:04,000 --> 00:18:07,760 Speaker 1: interesting about watching Turkey is a certain I was going 318 00:18:07,800 --> 00:18:11,600 Speaker 1: to say unwillingness to adopt the sort of traditional crisis 319 00:18:11,600 --> 00:18:14,520 Speaker 1: fighting measures you often see, But it's not just an unwillingness, 320 00:18:14,520 --> 00:18:18,440 Speaker 1: it's a very aggressive antagonism towards those we don't see, 321 00:18:18,440 --> 00:18:22,200 Speaker 1: those massive emergency raid hikes and the sort of typical 322 00:18:22,280 --> 00:18:26,159 Speaker 1: things you would see in the playbook. Given what we 323 00:18:26,280 --> 00:18:30,560 Speaker 1: know about the er Douan administration and what they've said 324 00:18:30,600 --> 00:18:35,280 Speaker 1: about economic policy, what could a crisis fighting measure look 325 00:18:35,359 --> 00:18:38,080 Speaker 1: like like, what is the endgame here? Well, I mean, 326 00:18:38,200 --> 00:18:40,639 Speaker 1: Turkey's problem is a shortage of dollars, and you know, 327 00:18:40,680 --> 00:18:42,280 Speaker 1: and and to be fair to it, and you know, 328 00:18:42,359 --> 00:18:45,679 Speaker 1: they've hiked quite aggressively. That hasn't helped. The Argentinees have 329 00:18:45,760 --> 00:18:48,480 Speaker 1: hiked even more aggressively and it's not done them any 330 00:18:48,480 --> 00:18:50,960 Speaker 1: good at all. If Turkey needs more dollars, there's really 331 00:18:51,000 --> 00:18:53,000 Speaker 1: two places that can come from. Number one is the 332 00:18:53,000 --> 00:18:55,119 Speaker 1: I m F and and our base cases that we 333 00:18:55,119 --> 00:18:58,680 Speaker 1: get an IMF program, which unfortunately that's a big loss 334 00:18:58,680 --> 00:19:01,080 Speaker 1: of faith and that's quite different call to sell politically. 335 00:19:01,800 --> 00:19:05,800 Speaker 1: The other one would be that Turkey tries to sign 336 00:19:05,880 --> 00:19:09,560 Speaker 1: up some of their international allies, places like Russia or 337 00:19:09,680 --> 00:19:13,880 Speaker 1: China or Qatar and kind of get kind of substitute 338 00:19:13,960 --> 00:19:17,359 Speaker 1: I MF substitute for an IMF package source of dollars 339 00:19:17,359 --> 00:19:20,520 Speaker 1: out of those countries, which are very significant reserved. But 340 00:19:20,640 --> 00:19:22,520 Speaker 1: as far as we can tell, those countries are may 341 00:19:22,520 --> 00:19:25,120 Speaker 1: be slightly less enthusiastic about that than the Turks are. 342 00:19:26,640 --> 00:19:28,720 Speaker 1: We said earlier that you are, of course an emerging 343 00:19:28,760 --> 00:19:33,560 Speaker 1: market investing veteran. Is there anything that surprises you about 344 00:19:33,640 --> 00:19:38,119 Speaker 1: the Turkey situation. Is there anything highly unusual compared to 345 00:19:38,800 --> 00:19:42,679 Speaker 1: other em crises in history? Not really. I mean, I 346 00:19:42,720 --> 00:19:45,160 Speaker 1: think the big surprise for us was that it went 347 00:19:45,200 --> 00:19:47,600 Speaker 1: on so long. I mean, you know, we've been bleeding 348 00:19:47,600 --> 00:19:50,159 Speaker 1: money for you know, for months before this began. This 349 00:19:50,240 --> 00:19:53,080 Speaker 1: began to work for us. It's a very patient world 350 00:19:53,119 --> 00:19:55,320 Speaker 1: at the moment, you know, with very low interest rates, 351 00:19:55,800 --> 00:19:59,240 Speaker 1: you know, and banks were willing to take you unsuitable 352 00:19:59,320 --> 00:20:02,800 Speaker 1: risks for of four and a half five percent yields 353 00:20:02,880 --> 00:20:06,080 Speaker 1: that maybe they wouldn't have been in another environment, but 354 00:20:06,160 --> 00:20:10,080 Speaker 1: otherwise it's you know, you've got the nutty kind of 355 00:20:10,440 --> 00:20:17,160 Speaker 1: semi dictator. You've got obscure activities and state banks. You've 356 00:20:17,200 --> 00:20:20,359 Speaker 1: got the president's son in law has made finance minister. 357 00:20:20,600 --> 00:20:23,840 Speaker 1: You've got an unsustainable property boom. I mean, you're really 358 00:20:23,880 --> 00:20:26,119 Speaker 1: ticking an awful lot of standard boxes that we've been 359 00:20:26,119 --> 00:20:30,719 Speaker 1: seeing all the way back to say Thailand. So I 360 00:20:30,760 --> 00:20:33,280 Speaker 1: think if there's one word that's on a lot of 361 00:20:33,320 --> 00:20:37,840 Speaker 1: people's minds these days with regards to Turkey and what 362 00:20:37,880 --> 00:20:40,520 Speaker 1: it means for markets, it's the word contagion. And everyone's 363 00:20:40,560 --> 00:20:44,320 Speaker 1: trying to figure out whether Turkey and again to use 364 00:20:44,320 --> 00:20:46,960 Speaker 1: a word that you hear lad is an idiosyncratic case, 365 00:20:47,000 --> 00:20:50,399 Speaker 1: where as you say it's just about the quote nutty 366 00:20:50,520 --> 00:20:53,800 Speaker 1: dictator and so forth, or whether it says something about 367 00:20:54,040 --> 00:21:00,480 Speaker 1: other vulnerable emerging markets like South Africa, like Brazil. How 368 00:21:00,480 --> 00:21:03,160 Speaker 1: do you think about this question? I mean, generally we'd 369 00:21:03,200 --> 00:21:05,640 Speaker 1: looked at something something like this happens, we try and find, well, 370 00:21:05,720 --> 00:21:08,479 Speaker 1: what other markets have the same problem, especially that blend 371 00:21:08,480 --> 00:21:11,040 Speaker 1: of a lot of private sector debt, a big current 372 00:21:11,200 --> 00:21:15,320 Speaker 1: count deficit, and inadequate effects reserves. And really I mean 373 00:21:15,440 --> 00:21:18,240 Speaker 1: Argentina kind of takes two out of three, but otherwise 374 00:21:18,720 --> 00:21:21,360 Speaker 1: the rest of EM you know, it has problems with growth, 375 00:21:21,560 --> 00:21:24,880 Speaker 1: they have problems with exports, but they don't have this 376 00:21:24,960 --> 00:21:27,680 Speaker 1: kind of debt pile up. They don't have this financing 377 00:21:27,720 --> 00:21:31,800 Speaker 1: problem that Turkey has. So EM is having a very 378 00:21:31,880 --> 00:21:33,680 Speaker 1: rough patch at the moment. But we think that's got 379 00:21:33,680 --> 00:21:35,639 Speaker 1: a lot more to do with just the strength of 380 00:21:35,680 --> 00:21:38,280 Speaker 1: the US dollar, because e M currencies always do badly 381 00:21:38,320 --> 00:21:41,520 Speaker 1: when the dollar is strong. We don't think Turkey specifically. 382 00:21:41,520 --> 00:21:44,080 Speaker 1: I mean, you know, Venezuela has been blowing up for years. 383 00:21:44,160 --> 00:21:49,280 Speaker 1: We've seen Ukraine default contagion doesn't look like it's it's 384 00:21:49,480 --> 00:21:52,840 Speaker 1: a major thing at the moment. We did see a 385 00:21:52,840 --> 00:21:55,960 Speaker 1: little bit of weakness in the South African rand, for instance, 386 00:21:56,000 --> 00:22:01,080 Speaker 1: once the Turkey situation started really deteriorating, So some people 387 00:22:01,080 --> 00:22:03,200 Speaker 1: were pointing it at that as a sign of contagion. 388 00:22:03,640 --> 00:22:07,800 Speaker 1: When contagion happens, is it about people doing that fundamental 389 00:22:07,840 --> 00:22:11,280 Speaker 1: analysis that you just explained and looking for parallels with 390 00:22:11,320 --> 00:22:15,919 Speaker 1: the Turkey situation, or is it about people having portfolios 391 00:22:16,000 --> 00:22:19,280 Speaker 1: of correlated emerging market assets that they now have to 392 00:22:19,320 --> 00:22:22,679 Speaker 1: do something with. There's an element of both, But I 393 00:22:22,680 --> 00:22:24,720 Speaker 1: mean we you know, we haven't had time to see 394 00:22:24,760 --> 00:22:28,480 Speaker 1: significant withdrawals from EM funds, so I don't think it's 395 00:22:28,480 --> 00:22:30,639 Speaker 1: that what's triggering. I mean, the South African rand is 396 00:22:30,680 --> 00:22:34,200 Speaker 1: always a high vall currency. Also, I think there's something 397 00:22:34,200 --> 00:22:36,400 Speaker 1: of a fat finger trade in Asia, which we saw 398 00:22:36,520 --> 00:22:39,680 Speaker 1: much bigger move than we normally expect. I mean, South 399 00:22:39,720 --> 00:22:42,320 Speaker 1: Africa goes all over the place. It rallied nearly fifteen 400 00:22:42,320 --> 00:22:48,520 Speaker 1: percent earlier this year on some fairly minor political changes. Yeah, 401 00:22:48,680 --> 00:22:50,840 Speaker 1: I would have to concede that there is clearly an 402 00:22:50,840 --> 00:22:53,439 Speaker 1: element of this, you know, I mean especially kind of 403 00:22:53,480 --> 00:22:56,439 Speaker 1: macro hedge funds. Well, what other EM currency can we 404 00:22:56,560 --> 00:23:00,240 Speaker 1: short But for the moment, I think we don't see 405 00:23:00,240 --> 00:23:03,760 Speaker 1: a lot of contagion and we don't expect to. But 406 00:23:03,880 --> 00:23:06,960 Speaker 1: as I said, we've been wrong before, Paul. I mean 407 00:23:07,000 --> 00:23:09,639 Speaker 1: you mentioned the South African rand, you know, moving by 408 00:23:09,720 --> 00:23:15,800 Speaker 1: fiftcent is emerging market investing just inheritently, let's say, more 409 00:23:16,080 --> 00:23:21,360 Speaker 1: entertaining or more dramatic than developed market investing. Oh yeah, 410 00:23:21,560 --> 00:23:24,600 Speaker 1: I mean, I do remember when the Swiss frank revalued 411 00:23:25,000 --> 00:23:27,959 Speaker 1: a couple of years ago, and you know, everybody was, 412 00:23:28,160 --> 00:23:30,000 Speaker 1: everybody on the on the d m end of our 413 00:23:30,040 --> 00:23:32,680 Speaker 1: floor was jumping around. But you know what is the 414 00:23:32,720 --> 00:23:35,000 Speaker 1: sort of thing that we see every few months. It's 415 00:23:35,040 --> 00:23:39,080 Speaker 1: definitely more entertaining. It's probably harder on the nerves though. Well, 416 00:23:39,200 --> 00:23:43,080 Speaker 1: you said something earlier in the conversation that I thought 417 00:23:43,200 --> 00:23:47,080 Speaker 1: was interesting when you said that you try to look 418 00:23:47,119 --> 00:23:51,040 Speaker 1: for this point where bankers start to feel embarrassed about 419 00:23:51,040 --> 00:23:53,520 Speaker 1: the idea of extending further loans into Turkey, or they 420 00:23:53,520 --> 00:23:55,800 Speaker 1: can't justify it, or they don't want to be associated 421 00:23:55,840 --> 00:23:59,320 Speaker 1: with it. In the world of investing, how much does 422 00:23:59,400 --> 00:24:04,040 Speaker 1: that fair dire into decisions and opportunities where maybe the 423 00:24:04,080 --> 00:24:07,439 Speaker 1: best opportunity has come about because just nobody wants to 424 00:24:07,480 --> 00:24:12,040 Speaker 1: say they have exposure to ex country, even if the 425 00:24:12,080 --> 00:24:15,880 Speaker 1: fundamentals may start to be turning around. I think it's 426 00:24:15,920 --> 00:24:18,560 Speaker 1: massively important. I mean, it does tend to happen nearer 427 00:24:18,600 --> 00:24:21,199 Speaker 1: the end of a crash than the beginning. But you 428 00:24:21,200 --> 00:24:24,040 Speaker 1: know what you'd call kind of career risk, or you know, 429 00:24:24,200 --> 00:24:25,920 Speaker 1: when you get to the point where the chief investment 430 00:24:25,960 --> 00:24:28,879 Speaker 1: officer has seen something in the ft about Turkey, you 431 00:24:28,880 --> 00:24:30,840 Speaker 1: know that it that it begins to reach out that 432 00:24:30,920 --> 00:24:35,080 Speaker 1: I do think it's not that we can't justify losing money. 433 00:24:35,240 --> 00:24:38,720 Speaker 1: We can't justify losing money in Turkey when everybody knows 434 00:24:38,720 --> 00:24:41,600 Speaker 1: Turkey is terrible. And that tends to be quite close 435 00:24:41,640 --> 00:24:43,800 Speaker 1: to the turning point because people are When people stop 436 00:24:43,840 --> 00:24:47,280 Speaker 1: looking at the economics, things overshoot and value opens up. 437 00:24:47,640 --> 00:24:50,160 Speaker 1: But it's usually better to be a little bit late 438 00:24:50,200 --> 00:24:52,879 Speaker 1: to that process than a little bit early. You also 439 00:24:52,960 --> 00:24:56,560 Speaker 1: mentioned earlier about the idea that some of the biggest 440 00:24:56,680 --> 00:25:01,639 Speaker 1: gains from em investing can come when you're buying you know, 441 00:25:01,680 --> 00:25:05,560 Speaker 1: the deep wreckage that finally gets cheap. So I'm not 442 00:25:05,680 --> 00:25:08,840 Speaker 1: saying we're very yet, but in a situation like Turkey, 443 00:25:09,000 --> 00:25:12,639 Speaker 1: as an investor or maybe going back to Asia after 444 00:25:13,560 --> 00:25:16,480 Speaker 1: crisis or after the taper, tantrent, whatever it is, what 445 00:25:16,560 --> 00:25:20,480 Speaker 1: do you look for to say, Okay, this is what 446 00:25:21,160 --> 00:25:23,159 Speaker 1: true wreckage looks like. This is what blood in the 447 00:25:23,160 --> 00:25:26,720 Speaker 1: street actually looks like. It's usually just the sign of 448 00:25:26,840 --> 00:25:30,240 Speaker 1: a sign of extreme distress and having a decent grasp 449 00:25:30,280 --> 00:25:32,600 Speaker 1: and what we think the fundamentals of the problem were. 450 00:25:32,640 --> 00:25:34,320 Speaker 1: So I mean, if you go back to say two 451 00:25:34,359 --> 00:25:37,239 Speaker 1: thousand and fourteen on Russia, it was you know, there 452 00:25:37,280 --> 00:25:39,119 Speaker 1: was a little noise about Ukraine, but it was mostly 453 00:25:39,119 --> 00:25:41,639 Speaker 1: about the oil price. Once the oil price turned, you 454 00:25:41,720 --> 00:25:44,359 Speaker 1: buy the ruble in Turkey. As I said, I think 455 00:25:44,400 --> 00:25:46,760 Speaker 1: it's the dollar shortage. I think an I MF package 456 00:25:46,760 --> 00:25:49,400 Speaker 1: would be the time to buy Turkey. Well, on that note, 457 00:25:49,440 --> 00:25:52,680 Speaker 1: I think there's a good place to stop. So we'll 458 00:25:52,720 --> 00:25:56,280 Speaker 1: see how this crisis progresses and if there is a 459 00:25:56,480 --> 00:25:59,760 Speaker 1: I m F package at some point. Paul mcnamaric, so great, 460 00:26:00,000 --> 00:26:03,120 Speaker 1: you get your perspective. Always loved talking to you, and 461 00:26:03,240 --> 00:26:07,400 Speaker 1: thanks for finally coming on the odd lot of Thanks 462 00:26:07,480 --> 00:26:26,320 Speaker 1: very much for having me on. Just trivy so Joe, 463 00:26:26,320 --> 00:26:28,480 Speaker 1: I thought Paul was really the perfect guest to come 464 00:26:28,480 --> 00:26:31,720 Speaker 1: on and talk about emerging markets and the situation in 465 00:26:31,800 --> 00:26:34,440 Speaker 1: Turkey and what he was saying about the point at 466 00:26:34,520 --> 00:26:40,359 Speaker 1: which it really really becomes disaster when international investors have 467 00:26:40,560 --> 00:26:44,679 Speaker 1: to start explaining to their bosses why they invested in 468 00:26:44,720 --> 00:26:47,960 Speaker 1: a country that has these kind of problems. That that 469 00:26:48,040 --> 00:26:52,320 Speaker 1: seems spot onto me. Yeah, I love Paul's explanation, and 470 00:26:52,400 --> 00:26:54,520 Speaker 1: I have to admit, you know, my first question name 471 00:26:54,520 --> 00:26:57,840 Speaker 1: about Turkey was like, explain it to someone who's kind 472 00:26:57,840 --> 00:27:00,919 Speaker 1: of doesn't pay attention and maybe you're explaining it to 473 00:27:00,920 --> 00:27:03,040 Speaker 1: someone in a bar. But I have to admit that 474 00:27:03,080 --> 00:27:05,160 Speaker 1: was actually kind of for my sake because as much 475 00:27:05,200 --> 00:27:07,600 Speaker 1: as as much as I purport to pay attention to 476 00:27:07,640 --> 00:27:10,320 Speaker 1: this stuff or talk about this stuff, I still find 477 00:27:10,600 --> 00:27:13,600 Speaker 1: the mechanics of a lot of these things, particularly the 478 00:27:13,680 --> 00:27:16,439 Speaker 1: sort of currency imbalances and the role of the banks 479 00:27:16,440 --> 00:27:19,520 Speaker 1: and the rollover it's not easy stuff to wrap my 480 00:27:19,560 --> 00:27:22,040 Speaker 1: head around. But I like, I feel like Paul is 481 00:27:22,080 --> 00:27:24,600 Speaker 1: really good at the crystal clear explanations of this stuff. 482 00:27:25,200 --> 00:27:28,280 Speaker 1: Oh absolutely, And I mean to your credit, not that 483 00:27:28,320 --> 00:27:31,200 Speaker 1: I'm making excuses for you, but there's a lot going 484 00:27:31,240 --> 00:27:34,200 Speaker 1: on and it's still happening. So Paul was mentioning this 485 00:27:34,240 --> 00:27:36,600 Speaker 1: notion that some of the prime brokers, you know, these 486 00:27:36,640 --> 00:27:40,679 Speaker 1: are the big financial institutions that provide services to hedge 487 00:27:40,680 --> 00:27:43,720 Speaker 1: funds and other investors that actually allow them to trade. 488 00:27:44,119 --> 00:27:48,399 Speaker 1: When they start retreating from providing you know, liquidity and 489 00:27:48,480 --> 00:27:52,240 Speaker 1: financing for Turkish trades, it has the potential to be 490 00:27:52,800 --> 00:27:56,760 Speaker 1: a self fulfilling sort of downward spiral. Yeah, there really 491 00:27:56,800 --> 00:27:59,320 Speaker 1: are a lot of moving parts to all of these 492 00:27:59,600 --> 00:28:03,920 Speaker 1: Chris Ease, and I think Turkey is a particularly confusing one. 493 00:28:04,320 --> 00:28:07,440 Speaker 1: The other interesting thing I think that maybe people don't 494 00:28:07,480 --> 00:28:10,400 Speaker 1: appreciate is they might look at Turkey and they see 495 00:28:10,600 --> 00:28:14,320 Speaker 1: rapid growth, and they see all these apartments going up, 496 00:28:14,320 --> 00:28:16,879 Speaker 1: and like, oh, this is a country developing. This is 497 00:28:16,920 --> 00:28:20,440 Speaker 1: a country that's becoming richer. And what they don't appreciate 498 00:28:20,600 --> 00:28:24,159 Speaker 1: is that the process of becoming richer comes at the 499 00:28:24,160 --> 00:28:29,280 Speaker 1: expense of these financial imbalances, which really makes sort of 500 00:28:29,320 --> 00:28:32,480 Speaker 1: the conventional approach to looking at a country I think, 501 00:28:32,800 --> 00:28:36,240 Speaker 1: very difficult for the average person. Yeah, it's one of 502 00:28:36,240 --> 00:28:38,480 Speaker 1: those things where you can kind of keep borrowing as 503 00:28:38,560 --> 00:28:42,080 Speaker 1: long as you have the economic growth narrative to support 504 00:28:42,160 --> 00:28:46,120 Speaker 1: that borrowing. But again, it it gets back to the bankers, 505 00:28:46,200 --> 00:28:48,960 Speaker 1: Like if you can no longer go to those lenders 506 00:28:49,040 --> 00:28:51,600 Speaker 1: and say, oh, look how fast we're growing, give us 507 00:28:51,640 --> 00:28:54,600 Speaker 1: more money than the whole house of cards kind of 508 00:28:54,640 --> 00:28:58,600 Speaker 1: starts to fall apart. Absolutely, Well, the Turkey story is 509 00:28:58,640 --> 00:29:01,160 Speaker 1: definitely I don't think it's going to be over for 510 00:29:01,240 --> 00:29:02,800 Speaker 1: some time. I don't know, maybe like in a month 511 00:29:02,880 --> 00:29:05,120 Speaker 1: or two, we should have a Paul back again and 512 00:29:05,160 --> 00:29:08,480 Speaker 1: sort of get an update because I need that. I 513 00:29:08,560 --> 00:29:10,600 Speaker 1: think we'd have a lot more to talk about. To 514 00:29:10,640 --> 00:29:13,560 Speaker 1: be honest, I don't see the Turkish headlines and new 515 00:29:13,600 --> 00:29:16,840 Speaker 1: Slow going away anytime soon. Yeah. I don't think Stue either. 516 00:29:17,680 --> 00:29:19,800 Speaker 1: Al Right, should we wrap it up there with that? 517 00:29:20,080 --> 00:29:25,880 Speaker 1: With that pessimistic thought, yeah, let's do it. Enough talking Turkey. Sorry, 518 00:29:27,080 --> 00:29:30,000 Speaker 1: this has been another episode of the Odd Lots podcast. 519 00:29:30,040 --> 00:29:33,479 Speaker 1: I'm Joe Wisenthal uh and I'm Tracy Alloway. You can 520 00:29:33,520 --> 00:29:36,120 Speaker 1: follow me on Twitter at Tracy Alloway. Oh, and you 521 00:29:36,160 --> 00:29:39,320 Speaker 1: can follow me on Twitter at the Stalwart. And you 522 00:29:39,360 --> 00:29:42,600 Speaker 1: should follow our guest Paul McNamara on Twitter. He really 523 00:29:42,800 --> 00:29:46,320 Speaker 1: is one of the best people on Twitter, and that 524 00:29:46,440 --> 00:29:49,480 Speaker 1: is no exaggeration because he really knows his stuff and 525 00:29:49,520 --> 00:29:53,360 Speaker 1: he's very forthright in a way a lot of investors aren't. 526 00:29:53,400 --> 00:29:57,920 Speaker 1: His handle is m Underscore Paul McNamara and follow our 527 00:29:58,000 --> 00:30:02,680 Speaker 1: producer tofur Foreheads Twitter at for hiss T, as well 528 00:30:02,760 --> 00:30:07,600 Speaker 1: as the Bloomberg head of podcast, Francesco Levie at Francesco Today. 529 00:30:07,640 --> 00:30:08,400 Speaker 1: Thanks for listening.