The Crisis In Egypt! What it means for you and me?
None of us like to see the chaos emerging in Egypt, and what seems to be a cascading effect through Tunisia, Syria, and now Pakistan. Well what does this really mean for you and me? Can we profit from this turmoil, or is it all bad?
It’s not hard for many of us to remember back to the Camp David accords that for the first time, established a stable peace between Egypt and Israel, and thus became the foundations for a relatively stable middle east. Today however, events unfolding in Egypt may threaten that stability and that will likely become a catalyst for change. But let’s look at it together, what are the likely affects of this turmoil?
First, it’s important to know that Egypt has a highly respected military class. They’re respected both inside Egypt and internationally. Since the Camp David accords, many of the highest ranking military officers have been educated in the United States and they see the United States and its’ core values as friendly. This is quite different from the local Police Forces. The local police tend to be more “Egypt centric” if you will, and not as pro-America, or pro-peace with Israel. How this plays out in terms of influence in the coming days is all important in that it sets the stage for whether or not the post Mubarak Egypt will be pro-US, and pro-peace with Israel or not.
Boiling this situation down to its core; the transition in Egypt will likely lead to more instability in the Middle East. This will have multiple effects. Regarding oil, the most direct economic concern, there is one school of thought that has suggested that Egypt’s transition could be the end of Opec, and thus lead to reduced oil prices as that cartel loses influence. Based on what I’ve read, I don’t necessarily agree with that. I think a more likely scenario is, barring significant catastrophe, and I mean war and total supply disruption, continued supplies around current levels, and thus pricing changes not based on this transition per se. Let’s remember that oil prices are set for the most part based on economic demand. And the global economy, especially in the Western world isn’t exactly on a rocket ride! I think the more immediate cause of rising oil prices, at least for those of us in the United States, is the situation of the U.S. dollar!
The second thing that’s important is that this could jeopardize Egypt’s hopes to be the “internet capital” of the Middle East. Clearly, this chaos has cost them in terms of this year’s economic growth which has been revised downward from an estimated 5% growth rate to around 3%, and that 3% assumes the chaos stops. Should Egypt become radicalized, their economic future becomes very uncertain indeed.
But for you and me, in bottom line terms, in times of chaos, it’s important to note that re-active behavior is often times filled with problems. Thus, I once again recommend that you follow investment themes and ideas that can be quantified. Let the numbers speak for themselves; don’t get caught up in the emotions of the moment. For most of us, on the journey of our Financial Path, the chaos in Egypt doesn’t directly affect us. So let’s not just change our paths because we see pictures on the news.