Ten years challenge!

As time goes by, Russian musician Vysotsky’s “Koni”* comes back to my memory. It shouts “Stop!” to this life running at full gallop like wild horses. But they just seem unstoppable.

When looking back, I can say that the developments which occurred in markets over the recent years are about to back to square one. While the financial crisis in the US spread to all over the world during one year, from 2008 to 2009, people’s morale seemed to be totally collapsed, then markets began to rise suddenly as if they were touched by a magic wand. National and local elections took place in Turkey and throughout the world, leaders changed while we witnessed movements of unknown causes, such as Arab Spring, terror attacks in unlikely places.

You know what they say, “A man’s life revolves around his possessions”. Accordingly, I felt the need to offer a brief analysis regardless of what all investors in Turkey, amateur or professional, are going through. In the process, I tried to find an answer to the “What have we achieved so far?” question based on last 10-year performance of primary financial instruments.

Let’s tackle BIST first. Obviously, index is not the only indicator of stock performance. Just to give you an idea, stock market which closed at a level of 28.864 on the last day of 2008 finished 2018 at a level of 91.270. There’s been an appreciation by 240%. A considerable amount indeed. And it’s also above the cumulative inflation in the same period.

Given the fact that the dollar is currently the most popular financial instrument, it should also be considered, right after the stock market. Dollar stood at 1.53 at the end of 2008, but it hit 5.29 at the end of 2018, surpassing BITS slightly. As a matter of fact, this rise by 246% didn’t exactly bring inflation under control.

Although Euro doesn’t rise as fast as dollar, it doesn’t go unnoticed either. While Euro finished the last day of 2008 at a level of 2.15, it closed the previous year standing at 6.07. It means a 182% rise. If one, who changed euros and invested them in TRY-denominated assets, could make profit at BIST and would not suffer any problems, but the same does not go for those who changed their dollar savings.

“Gold Price per Gram is the undefeated champion…”

If one bought gram bar of gold at 42.6 TRY on the last day of 2008, s/he would have 218 TRY at the end of 2018: 419% profit. The fact that gold price per ounce has risen considerably in international markets and TRY/USD’s swift ascent helped gold investors make huge profits.

If an investor changed their dollars to TRY to buy gram bar of gold, s/he would make considerable over a course of 10 years. It was difficult even for the most skilled analyst to predict such big amounts of profits. Besides, I do not think that there are investors patient enough to wait for making such big profit, obviously except for those who save gold for rainy days. Surely, some of them wanted to realize their savings in the event of financial struggles.

As far as I understand, those who continued to invest in gram bars of gold for the last 10 years keep on making money, and I think this trend will not stop unless USD/TRY starts to fall.

*The film score of “White Nights” movies featuring Baryshnikov includes this song by Vysotsky crowned by a magnificent dance choreography.