It's so much easier to be a bear than a bull. You can pretty much create mischief wherever you want -- and then, when the mischief doesn't produce more than toilet paper hanging from trees, you just go to the next house.
Case in point: Turkey. About a month ago, we began to hear serious rumblings about how President Erdogan, already pretty much a wild card, started challenging central bank independence. Inflation, to use the usual clichés, had reared its ugly head and was running rampant, so the central bank took the logical step of raising rates dramatically to stem the inflationary tide.
Now, most people don't know much about Turkey other than it is a nation of 81 million people with a dictator at the helm who has spent way too much -- and thumbs his nose at the west.
Turkey has been a slow motion train wreck for ages. Its stock market, which peaked this year at $46 on the TUR when our markets reached an earlier top back in January, had plummeted to $26 coming into August, so it was hardly news that Turkey was in trouble.
Besides being an economic disaster, Turkey has long been considered one of the biggest violators of human rights on the planet and arguably the worst of any NATO nation. Unbeknownst to most market participants, at the same time that the Turkish central bank tried to rein in inflation with higher rates, President Trump was trying to secure the release of an American pastor who was arrested on disputed terrorism charges two years ago.
Evangelical christians have pushed hard for his freedom. Suddenly, at the same time that Erogan was battling the central bank, the Turkish-U.S. "crisis" reached fever pitch because the Turks ignored President Trump and, on August 8, it became the lead story in the Wall Street Journal.
The implication? Just as Turkey's frayed economy was about to collapse, so were our relations with that troubled nation.
The result? Bearish newsletter writers and saturnine pundits showed up wherever a platform was available and talked about how bulls were whistling past the Turkish graveyard, oblivious to the coming contagion out of Turkey.
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Now, it didn't matter that the Turkish central bank ultimately prevailed in its independence. It didn't matter that our peripatetic president then moved on to another issue. It didn't even matter that the pastor wasn't released, we were told by these cassandras that Turkey could bring us down.
The crisis went full blown in Turkey from the day the Journal led with it -- and the Turkish ETF, which had stood at $26, crashed to $18 over a week's time. Our Dow fell from 25,628 on August 7 to 25,136 during that same period because the bears hit hard, the media echo chamber grabbed onto it, and we had a huge fake-out -- even as some of us begged people not to sell. I am not a genius about foreign markets, but I was caught up in the 1994 lire collapse and knew that it was severe and thought it would lead to contagion. It just led to losses for my then hedge fund and nothing else.
And then what happened? The battle between Erdogan and the central bank was won by the central bank and the President moved on.
The Turkish stock market bottomed and instead of contagion from Turkey, you caught a bottom in the Turkish stock market and it has had a powerful rally back to $23.
Fast forward to earlier this week: Erdogan again refused to release the pastor and had stood his ground against the president. But he seems distracted by the Supreme Court nomination over Judge Kavanaugh and isn't paying attention to the brazen actions of Erdogan.
And our markets are oblivious again. Why? There was no contagion. In fact, in was a classic buying opportunity and our Dow has put on 1600 points from the Turkish bottom.
Why do I care so much? Because last week, the bears moved from declaring contagion about Turkey to warn about contagion from Italy because of a severe budget imbalance. We are supposed to sell now on Italy, not Turkey. The Cassandras are back, unchallenged, admonishing us for being oblivious.
I don't know about you, but I am angry about this. Meanwhile the crisis in Turkey is deepening. We just got a 25% inflation read today. But the bears have moved on to Italy; it's a big yawner.
How can this be? How do bears get away with it? Again it is the media echo chamber and the desire to have some sort of news that could pressure U.S. banks. It ALWAYS works. ALWAYS.
So, it is ALWAYS news.
Hence why it is so easy to be a bear. Here's my take: Unless it's about the U.S. banks directly -- as the exposure to Europe is pretty minimal -- the bears are giving you a buying opportunity, aided, in this case, by our president over a human rights issue.
Beware the bears -- their righteous indignation always rages. Turkey, Italy, who knows next. They are never wrong.
They always matter until they don't. And then it's on to the next contagion. I say we quarantine these guys when they scream contagion. They don't deserve the platform. My prediction: It's so easy to be a bear, and bear talk is so loved by journalists thirsting for controversy, that my judgment will never matter.
