224 THE BiG DROP
at home and abroad may be undermined in the long run by the
divisions that helped him to victory. His AK Party now appears
to be involved in the same kind of corruption for which AKP
rightly criticized opposition parties in years past.
It hardly needs noting that Turkey is in a bad neighborhood,
sharing long borders with Syria, Iraq, Iran and the Caucasus.
Its southern border is in crisis, with Syrian refugees fleeing the
Islamic State and civil war. The risk of an independent Kurdistan
comprised of parts of Iraq, Turkey and Iran is another danger to
Turkey’s stability, and even the global financial system.
Longer term, Turkey is a highly attractive emerging mar-
ket with excellent growth potential based on its people, indus-
try, infrastructure and strategic locations. Yet for the next two
years, higher inflation, currency devaluation and bursting credit
bubbles are potential problems for investors, and geopolitical
danger is a problem for the nation as a whole. Investors need
to tread carefully in choosing stocks and be alert to the dangers
of devaluation, inflation and a banking crisis once the multiple
credit bubbles burst.
Turkey is a typical case of a large emerging market with
good long-run potential but plenty of short-run political and
economic problems. We’ll be watching for a good entry point
in the Turkish market in late 2015 or early 2016 if the U.S.
dollar rally starts to weaken as we expect. For now, you should
keep away despite the emerging-markets sales pitches from
many retail brokers.■ Third Time’s a Charm: The UAE’s Comeback
Story
I recently returned from Dubai, where I was a speaker at an
international monetary conference of bankers and investors
from the Middle East, Iran, North Africa and Asia Minor.
Dubai is one of seven emirates that collectively make up