"FLAGS, VEILS, AND SHARIA"

‘The Economist’ wrote a controversial article with the aforementioned title on July 19th, 2008. At the time, prospects for Turkey’s ruling AKP party were under fire, and Prime Minister Erdogan had plenty of back pedaling to do. Anti-secularism would have spelled the death of his bid for European Union acceptance.

This week the Constitutional Court rejected the proposed ban of Erdogan and his political party. Instead, they fined him for “anti-secular” behavior, and the stocks in Istanbul celebrated big time.

On Friday, the Turkish stock market flashed a very positive divergence versus weakness across equities, globally. Turkey’s ISE National 100 Index closed up +1.9% on the day, taking its ramp up 10,000 feet from the thralls of potential political disaster on July 1st where the market was trading at 33,208,-29% lower!

I’ve attached the roller coaster 3 year chart of Turkey as it tells many stories within the “it’s global this time” stock market narrative. On October 15, 2007, at the peak of global equity euphoria the ISE Index closed at a nosebleed height of 58,231.The levered long community saw no tail risk to Ataturk’s long standing secular Republic coming under geo-political fire – why would they? Did they even know what it meant?

Obviously, there were winners and losers coming out of those October 2007 highs. Turkish stocks ended up losing -43% of their value from that peak to the July 2008 trough. Ouch.

I model all country level stock index performance daily (globally) as it often issues me clues as to where tail risk lies. I am in the camp that the global economy is an increasingly interconnected and complex system of factors that need to be respected before they are fully understood.

Understanding Turkey’s domestic arm wrestle between their dominant Islamic faith and secular aspirations to be accepted into the European Union is a fascinating one as it pertains to global geo-political tail risk. It may not be a widely known statistic on Wall Street that there are approximately 1 billion Muslims in a world of 6 billion people. But that certainly doesn’t mean that the reality of these numbers cease to exist.

It is global this time, indeed. America’s grip on “leading” the world is loosening, and we need to pay attention to all of the critical factors underlying where the world is headed next. Turkish politics have the Europeans on their toes – the “Caliph” of Istanbul’s return would wake American’s up in a hurry too.
KM

  • The ISE National 110 Index
(Chart courtesy of Stockcharts.com)

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more