The threat is that as the lira loses value, it becomes more expensive for Turkish companies to repay their dollar-denominated loans. Indeed, a growing number of companies in Turkey already have said they cannot repay these loans.
“Companies there just ignored all the risks and kept borrowing in dollars,” Mr. Lee said.
And that has the potential to spread far and wide. American investors, for example, own nearly 25 percent of outstanding Turkish bonds and more than half of publicly traded Turkish stocks, according to the I.I.F.
Mr. Lee these days is far from the only one warning about the Turkish economy and financial system. The thing that really worries him and other bearish investors is that Turkey could be a signal for what lies ahead for assets and economies that were inflated by cheap debt.
......
Yes, he might have been right on Turkey. But his persistent gloom was wearing thin, especially as the markets continued to soar.
“It has been some hard sledding,” Mr. Lee admitted. “I have lost a lot of clients because I have been too bearish.”
Yet he is doubling down on his doomsday message: The river of global cash will dry up, the dollar will spike and there will be a series of financial seizures. Investors, he thinks, will flee developing economies, then Europe and eventually the American stock and bond markets.
“It won’t be a banking crisis this time around — it will be a financial market crisis,” Mr. Lee said. “And I am very confident that it will happen.”
Source: https://www.nytimes.com/2018/08/11/business/turkey-lira-crisis.html
Good read. Thoughts for those here?
Submitted August 13, 2018 at 12:49AM by WalterBoudreaux https://ift.tt/2MeF5u7
