Thursday, February 3, 2011

Egypt - Another Perspective For Forming My Investment Strategy

Well I seem to be on a theme for the past few days - Egypt Egypt Egypt.  In all fairness to myself its hard not to give this some serious thought - in a global economy we need to pay attention to whats going on in the world and how it may effect our investment strategy.

The past couple of articles that I shared were decidedly negative.  But I need to make a conscience effort to read differing opinions and keep an open mind or risk heading down a path with blinders on. 

The thing I like about this article is that it reminds us that we were once where the Egyptian citizens are now - looking for freedom and a better life.  Now I will not lose sight of some of the other underlying issues in the middle east but I think this is a great article to look at things in a different brighter light.

And it reminds us that what we fought for in the beginning was worth fighting for and if needed to we have the will to fight for what is right now?

Who Guessed Egypt?  from School Of Markets

As we all know by now, Egypt is the latest country where its citizens want to be free.  They have seen the world grow and expand and they witness their standard of living not doing the same.

Could it be that these revolutions are being driven by technology?  Could it be that your friend on Facebook is using your life as a reason to revolt against his or hers?  We may find that is exactly the case over time as these events unfold and work themselves through the system.

The Market Reaction

The world came to a halt again midday on Friday and as we all know, sold off for the first two hours of the day.  Interestingly, if you find any intra-day chart, you will see that the “selling” pressure dissipated by midday to early afternoon with the last half of the day going basically nowhere.  What does that suggest?

Clients will recall our warning of the last few weeks–disregard the ”bullish” surveys and wait to see how the crowd reacts to the first piece of bad news.  Indeed, we saw how skin deep that bullish confidence was on Friday.  This is good news–even though I recognize most of us would prefer the same good news without the roller-coaster ride.


It did not take very long for the press reels to go full speed on nothing but Egypt.  You knew when the military sneezed if you paged through enough channels on Saturday and Sunday.   What we must realize is the fickleness of these fears are.  You can test yourself by merely asking what happened to all of the fears we had before Thursday night?

By Friday afternoon at the close, we were getting ”experts” telling us how  many sales would be missed by each industry due to the slowdown in Egypt during the unrest.  Are you kidding me?   Sadly, these events become spots on the map of time.  We go from one disaster to the next, always assured that we have arrived at the worst one we could find, sure to induce long-term disaster.

I am convinced we will find the name of this disease in the future.

The New New in Problems?

The title today had a point:  Who Guessed Egypt?  It was sort of meant to show us all that we can worry about 47 different things each day and take in all the news to reconfirm those items we are supposed to fear.  However, in the end, usually, far more often than we want to accept, the “problem” that causes the event we fear is something we never would have guessed.

Seriously, show me the report that suggested the next turn on the roller-coaster was going to be triggered by unrest in Egypt?

The point?  Let’s get a grip.  The world has many pockets where people do not have the benefits we have.  Lest we forget, there was a time in this fine land when we felt the same!  Seeing them fight for those benefits should be heralded in as a good thing–a positive step in the right direction.  Surely, given what we have to be grateful for here, it should not be deemed something to fear.

In the end, history shows that geopolitical crisis tend to be opportunities to take advantage of the weak-hand driven red ink.  Over the next few weeks, I suspect we will have found exactly the same thing.

What Next?

The powers that be in Egypt will feel global pressure to mend their ways and begin to adjust to the future of a more free world.  Their citizens, after the pressures of breaking through, will find many bumps along the way–as all newly freed people do.  It will not all be perfect but it will be better than before.

The markets will again focus on better earnings and all the benefits that existed prior to the events of late Thursday and all day Friday.  As they do, we will be able to take advantage of the red ink caused again by fear and knee-jerk reactions.

If you want my bet on what we might want to worry about, it would be the weather.  Oddly, as these notes go out, there are 30 different states with some type of winter warning alerts in place.  Our friends in Chicago seem to be the ones in the bullseye today and tomorrow.   Global cooling anyone?

For now, I am hopeful that the market works itself a little lower and chops around, proving out the thesis we shared on your video updates last week.  If it does, and we wear out some of the skin deep “bullishness”, the next rally will  likely come with more force, lead to higher prices and be followed by more money.

Recall that hundreds of billions of dollars exited the markets during the panic.  A very, very small sliver of that has returned.  

Closing Thought

Before we gasp at the horror of seeing people killed in order to fight for a belief in freedom and a desire to have same, think back on how many died in our own land to “purchase” the rights we have today.

These things are never free and never have been….ever forgetting that is a very costly thing indeed.

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