"Kee" Points with Jim Kee, Ph.D.

  • Tesla
  • Turkey
  • Midterms Elections


I don’t usually talk about specific companies in Kee Points. But the fact that Elon Musk hinted at taking his electric car company private illustrates, I think, the key point from last week’s discussion of corporate governance. Publicly traded companies face a lot of pressure to perform – to generate positive cash flow and earn a positive return-on-investment. Tesla is not doing that, and Musk, the company’s founder and CEO, is feeling the pressure. Just markets at work.


Turkey’s currency, the lira, has lost almost half of its value against the dollar this year. Part of this has been caused by economic sanctions imposed on Turkey by the US. Turkey is detaining a North Carolina pastor (Andrew Brunson) on terrorist charges, which has lead President Trump to double tariffs on steel and aluminum imports from Turkey. Part of the lira’s decline is also due to the markets’ growing loss of confidence in Turkish President Erdogan and his finance minister, son-in-law Berat Albayrak (Financial Times).

Loss of confidence creates capital flight, and Turks and outside investors are moving their money outside of Turkey, ditching the lira (driving its value down) in favor of more stable currencies like the dollar. This hurts Turkish companies and banks that borrowed money overseas (i.e. in international currencies) because they now require more lira to pay back creditors. Again, just markets at work. The last time the lira collapsed was in 2001, and Turkey was bailed out with a loan from the International Monetary Fund. This time, Erdogan plans to go to China, Russia, and/or Iran (Asian Times). US stocks are selling off but I don’t see any big movements in global financial stress measures (e.g. the Federal Reserve’s various financial stress indices, Treasury-euro dollar spreads, etc.). But of course we are always monitoring these and will continue to do so.

Midterm Elections

The ongoing threat of a global trade war continues to worry markets, and it has proven to be the key policy issue for global markets in 2018. But I’d say Trump alone is driving this, not his own party (Republican) or the Democrats (or even his own advisors!). If you think about it, that means that the US mid-term elections are neither here nor there with respect to the trade angst that Trump has initiated. In other words, the midterm elections have no real bearing on the number one issue facing markets this year. That is something to keep in mind as we head into the fall election season here in the US.