Jan 31. Egyptian protests spreading
Massive protests in Egypt overwhelmed all other news, sending stocks lower and treasuries higher. Demonstrations in mideast nations have the potential to spread like wildfire, sparking concerns in Saudi Arabia, Libya, Yemen, etc. Oil exploded as a result, as did precious metals.
–I wonder why now? Mubarak has been there for 30 years. Most of the American commentators I saw blather on about repressed freedoms and demand for democracy, certainly a component of current unrest. But soaring food prices combined with a lack of employment is a much more combustible combination, a fact that’s not lost on Mubarak, who told his newly appointed VP to create jobs and subsidize food. In my opinion, this situation is going to be contained just like the subprime mortgage crisis. Which is to say, it’s not. While there have been many natural disasters that have driven food prices higher, there can be no question that the US monetary liquidity pump is partially to blame for making all commodities a newly favored asset class to be hoarded in hopes of maintaining dollar purchasing power. It creates global uncertainty that is now shaking markets out of complacency. When one looks at the rapidity with which the situation turned in Egypt, sending stocks down 20+% in a week, it has to translate into a more cautious outlook for all investors.
–Reports late last week note that Spain’s inflation rate is over 20%. The next surprise could easily be more fireworks out of Europe…
