Sears or Turkey?

Every now and then a small country seeps its way into our financial engine. A few years ago, it was Greece, today it’s Turkey. Turkey is in crisis with the Lira falling 30% and its stock market dropping 17%.[1] The Turkey ETF (TUR) is down 50% for the year and it is inflicting havoc on emerging markets despite accounting for less than 1% of the index.

Turkey’s stock market has always been volatile. From 1998 to 2017 it generated an average annual return of 22.89%. The range, however, has been wide. In 1999 it rose 252% and fell 62% in 2008. Investors who commit capital to this market must be bold and courageous.

As an American investor should you be concerned about Turkey? I don’t think there’s much risk as most individuals only allocate a small percentage of their holdings to emerging markets. A bigger concern for Americans should have been the downfall of Sears, Roebuck & Co., and if we can survive a crisis in Sears, we can certainly survive one in Turkey.

In 1969 Sears Roebuck was the largest retailer in the world, employing over 300,000 people. We relied on Sears for almost everything because they carried almost everything. Their massive catalog offered thousands of items from underwear to log cabins. Their real estate footprint was massive and in 1973 the Sears Tower was completed. It was one of the largest buildings in the world, fitting for a gigantic company like Sears. A visit to the Sears store was an event. You could drop off your car at their auto-center and stroll their store aisles munching on their tasty popcorn.

Sears had 555 stores at the end of April 2018. In May the announced they were closing 72 stores, followed by another 78 in June.[2] In 2005 they had 3,500 locations.

Sears housed iconic brands like Kenmore, Craftsman, Dean Witter, Coldwell Banker, and Discover. In 1984 it launched Prodigy with IBM and CBS. Prodigy was an early precursor to the internet and it offered email and games.[3] They were on the front lines of all things new.

Sears stock was once a juggernaut. It was part of the Nifty-Fifty, a group of stocks that were never expected to fall in price. They were considered one-way trades in the ‘70s. In 1998 Sears had a market cap of $22.5 billion. Today it’s $206 million, a drop of 99%.  The current stock price for Sears Holdings is $1.90 and Morningstar classifies its stock as distressed.

Turkey and Sears are where they are today because of poor financial decisions and hubris. Unlike Turkey, Sears was a major player in our markets and a member of most indices, including the Dow Jones Industrial Average. If you’ve been a long-term investor, it’s likely you had substantial exposure to Sears stock without knowing it.

If you survived Sears, you’ll survive Turkey.

My dad’s idea of a good time is to go to Sears and walk around. ~ Jay Leno

August 11, 2018

Bill Parrott is the President and CEO of Parrott Wealth Management firm located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog.

Photo Credit: Brunomili

[1] https://www.bbc.com/news/business-45113472, Andrew Walker, 8/9/18

[2] https://en.wikipedia.org/wiki/Sears

[3] https://www.techrepublic.com/blog/classics-rock/prodigy-the-pre-internet-online-service-that-didnt-live-up-to-its-name/, Michael Banks, 12/18/2008

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