You should not take investment advice from cartoonists. Ever.

I'm only posting what follows as a control on my own selective memory. I'm going to publicly describe what I believe is a terrific investment idea. By going public I can't easily forget my prediction or later deny it happened.

You should NOT follow this advice. Seriously. Also, I own stock in the company I am about to mention. And I just doubled down. So I am not objective. Keep that in mind.

The stock is Turkcell (TKC), the leading Turkish phone company. The stock is getting hammered this week because of government turmoil, currency value, and whatnot.

The stock could stay depressed for years as things get sorted out. But in the long run, will fewer Turks need phone service? Not likely. And the economics of the phone business are well-understood.

I know little about Turkey except that the government seems intent on being a serious, modern country. It seems that every time I hear a story about Turkey it involves them trying to do something that sounds entirely practical. They have a secular government, capitalism, and NATO support. Now they're rooting out corruption in the government, or trying to. It seems as if they have a natural leaning toward pragmatism.

There's risk with any investment. Turkey could be destroyed by an asteroid tomorrow. Or cell phones could become obsolete. Or Turkcell's accounting could be rigged. A million things could go wrong. But that's true with every investment. If none of the worst case scenarios play out, people will continue to want cellphones and Turkcell is the leading operator in the country. I like those odds.

This investment idea is only the third I have ever had in the "can't lose" category. The first can't-lose idea I ever heard came from Sir John Templeton, a legend of investing, back in the eighties. When asked for his best stock pick in the entire world, he said to buy stock in the Mexican phone company. It was a monopoly and there was nothing that would keep Mexicans from buying evermore phone services. And they did. I bought some shares and sold after a tiny gain. Had I kept the shares, I would have made enormous gains over decades.

The second can't-lose idea came more recently, during the last big market crash, when it looked as if the United States might be heading toward a total financial meltdown. My idea at the time was to put 100% of my investment funds into Wells Fargo stock. The idea was that if the entire financial system collapses, it doesn't matter where your money is because it will be worthless. But if the economy survived, I thought, the strongest bank of the bunch would come back fast and strong. On a risk-reward basis, this was as close as you can get to free money. I didn't act on that idea, but it would have been a huge gain.

That brings us to Turkcell. In today's connected world I have a hard time imagining a leading phone company in any country failing to grow no matter what else is going on around it.

Please don't take my advice.

My new book is getting great reviews:

How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life.

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Jan 11, 2014
Just because a company makes money, it does not mean that the shareholders will benefit from it, especially when it is in a country like turkey which is totally corrupt and has very poor corporate governance. You need to keep many factors in mind when investing in a company from a place like turkey(like the ethics of the owner, what factors the government plays in revenue sharing, profitability, change of ownership when government changes etc). IF the company has passed all those criteria, then you can probably invest in it, else, not so much a worthwhile investment. And Turkey is not a secular country, it is an islamic one. There is no country in the world which has a majority muslim population and is actually secular unless it is ruled by a secular dictator. The lives on non muslims in any muslim majority country is pathetic especially in a country where the government is elected. Islam and secularism(or modern values) do not get along at all.
0 Rank Up Rank Down
Jan 11, 2014
Wells Fargo would indeed have been a good bet, at least over several years. Then again, so would most of the big players in the Dow Jones, with the obvious exception of Morgan Stanley (aka the canary in the coal mine). Most have made back their losses and then some.

So if I scalp (trade short-term, like minutes or hours, for small profits) does that make me an investor or speculator? And why would anyone care? It's a really big punch bowl, and there's enough for anyone who wants a sip or two. If you want a few gallons, that's another story.
Jan 7, 2014
The difference between investing and speculating
"Well, first of all, the difference between investing and speculating is when you're investing, I would say you're looking around trying to buy a dollar bill for 60 cents, let's say. And when you're speculating, the intrinsic value of the dollar bill has no interest to you. You'll buy a dollar bill for three dollars if you think you can sell it for four....And that works only until it doesn't. It's the emperor not wearing any clothes kind of an argument."
Bill Fleckenstein
+3 Rank Up Rank Down
Jan 6, 2014
Or, in short:
If your main source of income is the profit a company makes (paid or reinvested and added to its value), you're an investor.

If your main source of income are other traders mistakes, you are a speculator.
+1 Rank Up Rank Down
Jan 6, 2014
There is no agreed definition for speculation, but that does not make every investor a speculator.

One of the better ones I have heard is, that you are an investor when your main concern (the things you read up an learn about and so on) is the company, market environment, profitability and all these things.
If, on the other hand, your main concern are the other market players, their psychology, group behavior etc, and the company is just the tool you use to extract money from them, you are a speculator.

Yes, both are traders because they trade, and they trade the same securities. But both are mammals too and neither makes them speculators.
+2 Rank Up Rank Down
Jan 6, 2014
Sorry for the tangent, but Phantom II opened the door...just a few random thoughts about the old "investing vs. speculating".

Just like all lions are animals, but not all animals are lions, here is my own axiom:

"All investing is speculation. Not all speculation is investing."

I say this because you cannot predict the future, and neither can anyone else. It's ALL speculation.

I can speculate about 1 stock or I can speculate about the whole market. The difference is context and usually, volatility. One is not more respectable than the other. Remember, Warren Buffet "invests" in individual companies.

I think the word/concept of speculation in the financial sense has a tinge of "ick" to it. It sounds like gambling. You are a greedy s.o.b. if you are speculating. You don't "care" about the underlying business if you are a speculator. The speculator is seen as someone who only scratches the surface of understanding things, is in it for short-term gains, and somehow mucks with the markets. But investing...this is much better. When you invest, it's because you believe in the future of the company. You act as if you are an owner (which in a way you are, by owning shares), and you are in it for the long haul. No one has ever heard of "investing addiction". This somehow makes the investor much more benevolent. But, in reality, the investor and the speculator are still after the same thing: to make money. They just stem from different beliefs about what drives the market. The investor studies the fundamentals and believes (wrongly) that they can correlate the direction of the price to the fundamentals. So this means what? That the investor can predict the future because they have studied the fundamentals and say they will hold long-term? Even Buffet sells. And he even gets it wrong sometimes. The speculator is just relying on herd mentality, hopes the price goes up, and gets out when things don't work out. I don't see how this is any less useful or somehow a morally inferior way to go. The only other difference in perception I can see is that the speculator is somehow taking more risk (e.g., we have terms like "wild speculation"), but that the investor is taking on less risk (i.e., "sound investments). Again, it's like the investor has predicted the future, and the speculator is rolling the dice. This is false. The only real truism is "the market is always right".

FYI, you can google how Buffet, the wise sage of stock investing, mucked with the silver markets. And I don't mean speculated, I mean manipulated. Not the same thing.
+3 Rank Up Rank Down
Jan 6, 2014
Scott, you paint far too rosy a picture of the Turkish government's stability. I'm sure you saw all of the recent protests in the headlines, the government's brutal crackdown, etc. Erdogan is in trouble, and he's resorting to increasing violence to stay in power.

Plus, there's always the possibility that the government will decide to fully nationalize the company and wipe out the shareholders entirely. It happens regularly in Russia, Venezuela and others. Heck, it pretty much happened here with AIG, and to bondholders in GM -- when the government screwed secured creditors (i.e. bondholders) to give shares to the labor unions who had no legal claims. And that's in the U.S.!

It may be a fun speculation, but it is very HIGH risk.

[In the short run (even the next ten years), high risk indeed. But unless someone invents a technology that makes radio frequencies infinite, the companies controlling that limited resource have a license to print money. Demand will never decrease. And Turkey, as I said, has a practicality gene that should protect against lurching toward anti-capitalist decisions. -- Scott]
Jan 6, 2014
For shame, Scott. For shame. And you know why as well as I.

[I do? -- Scott]
+3 Rank Up Rank Down
Jan 6, 2014
Scott, there are an incredible number of rules about what recommendations you can publish about an individual stock, even in blog form. Your typical disclaimer won't cut it and you should seriously consider having a chat with your lawyer, especially given your recent outbreak of credibility.

On the other hand, never take legal advice from a software engineer.
+2 Rank Up Rank Down
Jan 6, 2014
Just had another look at turkcell and compared it with its country index: http://tinyurl.com/ko6bon8

There you can see that for pretty much the last 5 years it (blue line) hasn't outperformed the msci turkey (red line, represented by an iShares index fund). Even if you sart the comparison later, there's not much outperformance to see, if at all. And right now, ALL stocks in turkey get "hammered", not just turkcell.

For a "can't lose" idea, it's a pretty unspectacular performance.
0 Rank Up Rank Down
Jan 6, 2014

Your blog is losing its slot for humor in cyber space.

Can't recall when I had a good laugh last after reading your blog.

Are you taking your humor too seriously or is it just me?

Jan 5, 2014
If you are going to buy stocks in rigged countries, try to buy the ones that the bureaucrats themselves are invested in. Then sell when/if you see headlines of said bureaucrats being thrown in jail, shot with anti-aircraft guns, eaten by dogs, etc.
Jan 5, 2014

Just an example:

India is a politically stable country (All our politicians are fit to be housed in stables). No riots, no uprisings, no wars...

MTNL - leading telecom company in India. Was the sole telecom monopoly until a few years ago when the industry was liberalised. Still controls about 80 per cent of the market.

Since 2008, the stock has lost 90 per cent of its value, while the broad market has more than doubled.

The company has largely managed to hang on to its market share but profits have taken a dive. Since the majority owner is still the government, there is no incentive to perform. If your Turkey telecom company is largely owned by the government, prepare for an unpleasant surprise.
+4 Rank Up Rank Down
Jan 5, 2014
Well while I can see where Scott is coming from, I also think he is underestimating the risk posed by a crazy nationalist government or movement,

We are not talking about Alabama, where a bunch of morons might take over the local govt and make crazy laws until they are voted out, get bailed out by a strong federal government, then goes back to kvetching (is the B word allowed in this forum?) about the people who saved their a holes (I figured neither a or hole can be considered a swear),

2 countries come to mind, Afghanistan which was a moderate country and relatively peaceful until the Soviet union, then the Taliban invaded, and much more aptly Zimbabwe, which was considered to be "the bread basket of Africa" (most economically prosperous) until Mugabe took over

Also less dramatically who would have thought Greece would suffer such a downturn due to misnagement? Govt does not have to fall for it top be a bad bet, economies can contract significantly without collapsing (I was thinking of writing a penis joke here, but was too lazy)
Jan 4, 2014
Don't worry. I won't. But you already knew that, didn't you?

Investing in individual stocks is not investing. It's speculation. You should only speculate with money you don't need. Think of it this way: if you could take the money to Las Vegas, lose it all, and not have it affect your long-term financial plan, then go ahead.

If you are a multi-millionaire cartoonist with a recent best-seller, that amount of money might be in the tens- or hundreds-of-thousands of dollars. For the rest of us, it might be between $100 and $500.

Buying individual stocks has the same emotional appeal as gambling. It's exciting to watch your stock go up, and horrifying if it goes down. That's why it shouldn't be considered investing. It's not.

As to Turkey: it's true that Turkey is a parliamentary representative republic, but it is also an Islamic country. Besides the secular nature of the goverment, there is both an Islamic sharia element as well as a Kurdish separatist insurgency group called the PKK. That group has accounted for around 40,000 deaths since the '80s.

Turkey's government is in many ways a repressive one; they routinely intimidate or jail journalists for anti-government or anti-Islam writings. They have more journalists jailed than China, but that may be a misleading statistic.

Overall, investing in an Islamic country, even a relatively (and that's relative to other Islamic countries) stable one, is not where I would put my speculation money.

At the same time, Scott's advice is excellent, to wit: Don't take investment advice from cartoonists. Ever. Even if this were investment advice, which it isn't.
+3 Rank Up Rank Down
Jan 4, 2014
Turmoil is ideal for other companies to move in an offer phone service. The thing about mobile is that the infrastructure is easy to install - you don't need to dig large holes, just bolt little towers to the roofs of buildings.

Most countries had an incumbent 'monopolist' just before mobile phones took off in a big way. Very few of those monopolists remain at the top now (certainly not in Germany, France, Spain or other countries where I roll).
+3 Rank Up Rank Down
Jan 4, 2014
Just so, here (http://www.ariva.de/deutsche_telekom-aktie/chart?boerse_id=16&compare=290&savg=0&t=all&volume=1&size=XL) is a chart of a comparable company, Deutsche Telekom, the former german monopolist.
You can see the blue line (Deutsche Telekom) ending up much lower than the german share index (Dax).

Lesson: The fact that a company is a monopoly does not guarantee outperformance, particularly, if that monopoly gets lost. Which it should, and most countries have some sort of antitrust commission which is supposed to prevent or split monopolies. The turkish one is called Rekabet Kurumu.
Jan 3, 2014
Don't take investment advice from anonymous comments either, but I prefer Turkiye Garanti Bank: its down 40%, shareholders are more stable, and its a well run bank.

Note: Long Garanti
Jan 3, 2014
If you want to know why this is bad investment advice, then search "Skype illegal in Ethiopia."
Jan 3, 2014
[There's risk with any investment. Turkey could be destroyed by an asteroid tomorrow. Or cell phones could become obsolete. Or Turkcell's accounting could be rigged. ]

Or they could get a new government, one that has no qualms about giving foreign investors/monopoly stockholders the shaft. That has been known to happen to governments in turmoil. And could be why the stock has been getting hammered.
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