Is the Lira a Good Investment?

[Ian]

I still believe the problems are inter linked to the struggling dollar - but if the troubles in the USA abate (DJI back to 12000 points) and the lira keeps going the other way - well..............................

This article is clearly by a voyeur (possibly with a hidden agenda) but he uses lots of statistics - what do you think?

http://www.atimes.com/atimes/Middle_East/MH10Ak01.html

[Ovacikpeedoff]

The points set out in the article are a fair representation of the Turkish economy. Last week Turkey lowered interest rates which was totally against market expectations and this drove the Lira into freefall.The government has in part abndoned control of inflation and moved towards growth. They have the highest growth rate at the moment and the economy is seriously overheating. I always worry when they refer to countries as tigers. The main one in recent times being the Celtic tiger, the Republic of Ireland, look at where that is now. There is a lot of construction going on in Turkey but how many of these shops and houses are not occupied.

Is the Lira a good investment is a difficult question to answer. Anyone in the past few years who have converted their savings from sterling to TL are facing a serious depreciation in the sterling value of their capital. This is not a problem if you are going to live in Turkey. If you are thinking of returning to the Uk you could easily have lost about 20 to 25% of your sterling value.When the TL was 2.30 a £100,000 bought you 230,000TL  and that is now worth approx. £79k. If inflation is left to run unchecked then any advantage on exchange rate will be wiped out by cost of living increases.

The US economy is not really the big issue that it is being made out to be. The US is still seen as safe as houses and this is borne out by the interest rates that you get on Treasury bills and these have not changed a great deal even after the downgrade. The downgrade is a dent in pride rather than true financial instability. Saying that the US has to take serious action on the level of debt that it has or it will become a very serious problem. The main issue is still the Eurozone. The possibility of Italy and Spain needing a bailout has not gone away. The ECB are basically applying a band aid to a major bleed. There is a strong possibility that there will be big changes to the Eurozone with the weaker economies dropping out and the Euro applying only to those stronger economies.

Turkey is very reliant on foreign borrowing and they achieve this by offering high interest rates. There could be a time when Turkey will not be able to service its debt and it will be back to the old days of junk status.

[Eric]

Very informative, thanks Gerry

[stoop]

Looking at some Lloyds/TSB shares if they keep dropping. Might jump in if they get to 25p. YTL looks interesting though.

[starman™]

If I changed 100K sterling in lira when I first came here and just lived off the interest and kept the original turkish amount in the bank (890 million when I first arrived) which would now be 890 lira as they have got rid of all the zeros. Thats 320 quid left from that initial 100,000 quid. Thats an example of how inflation in Turkey can hit you.
before you ask, no I never did make that move.

[thebillet]

Yikes, that is scary and only 890 lira a year to live off!

[stoop]

quote:Originally posted by starmanTM

If I changed 100K sterling in lira when I first came here and just lived off the interest and kept the original turkish amount in the bank (890 million when I first arrived) which would now be 890 lira as they have got rid of all the zeros. Thats 320 quid left from that initial 100,000 quid. Thats an example of how inflation in Turkey can hit you.
before you ask, no I never did make that move.

Good move! It just shows how risky currency investment is.

[Rimms]

quote:Originally posted by starmanTM

If I changed 100K sterling in lira when I first came here and just lived off the interest and kept the original turkish amount in the bank (890 million when I first arrived) which would now be 890 lira as they have got rid of all the zeros. Thats 320 quid left from that initial 100,000 quid. Thats an example of how inflation in Turkey can hit you.
before you ask, no I never did make that move.

Surely that is not how the change over was handled?

[calvin 1949]

Seems strange to me also !!!

[starman™]

ok let me explain again. Some people seem to think its a good idea to change a good amount of money from sterling into Turkish lira and then put into a high interest bank account here in Turkey. They get the interest monthly and use that as an income but not touching the original amount.
ie....when I first arrived the pound lira rate was 8900. Now the rate is 2.8 (or 2,800,000 in old money).
100,000 pounds exchanged to Turkish lira at the rate of 8900 = 890,000,000 old turkish lira.
890,000,000 is now worth 890 lira in todays money. (1,000,000 old lira = 1 new lira)
890 lira changed into pounds at the rate of 2.8 = 318 pounds.
remember although you would have been getting interest monthly to keep up but you would have withdrawn it every month as that was your income.
Those people that have been living here since the Tansu Ciller days, knows how the Turkish currency can lose value by more then 50% overnight!! Nobody kept their investments in lira but rather in marks or dollars or even more popular, gold, especially cumhurriyet gold.