Tags: Egypt | Expect | Unexpected | jacob | wolinsky | investors

Egypt's Lesson for Investors: Expect the Unexpected

By    |   Thursday, 03 Feb 2011 08:41 AM

The protests in Egypt have been followed closely across the world for the past week. While the media seems to be excited by protests for freedom, few understand the extremely serious political and economic consequences that come with the protests.

The population in Egypt is quite radical. According to a Pew Poll conducted in December 2010, 75 percent of Egyptians favor cutting off the hands of thieves, and for converting out of Islam.

The largest opposition group is the Muslim Brotherhood, which is quite radical. They have threatened to go to war with Israel as one of their first acts. This could be a bluff but it does demonstrate how radical the group is.

Egyptian opposition figure Mohamed ElBaradei is an awful leader who the West respects because he won the Nobel Prize. There are many reports that he was bribed by the Iranians, and regardless, the Muslim Brotherhood is just using him as a figurehead to appease the West. The Muslim Brotherhood will be the ones pulling the strings.

The fact that so many Coptic Christians, who also live in dire conditions, are supporting President Hosni Mubarak demonstrates that they know what they are in for if the “peaceful protesters” gain power.

So what is the lesson investors should learn?

This could have a huge effect on commodity prices. As the instability spreads, it will likely reach Saudi Arabia, which is the most important Arab country after Egypt. Saudi Arabia has the largest oil reserves, a sick king and a population which dislikes the current government.

There could be a catastrophic increase on commodity prices if the crisis starts spreading to Saudi Arabia, Kuwait and other major oil producers.
However, there is another lesson to be learned from the whole crisis in the Middle East; the future is uncertain.

Many commentators only a few weeks ago were making bold predictions about what would occur in 2011. Many of the risks commentators cited included the PIIGs in Europe, a collapse of China, inflation in America and across the world, a downgrade of U.S. government debt, just to name a few.

No one predicted that regimes that have been around in the Middle East for decades would literally collapse overnight. Likewise, no one knows what will happen in the future.

Investors should learn not to try to predict the future since it is absolutely impossible. As Nassim Taleb warns, a “Black Swan” could appear at any time. (A black swan is a completely unexpected event, which shocks the world but in hindsight all the commentators state it was obvious. A good example would be the financial crisis.)

Investors should allocate their money keeping in mind that a massive event could occur which could decimate a country, continent and an investor’s portfolio.

One of the best ways to protect against such risks is to keep a lot of money in cash, have a small amount of physical gold or silver, and buy stocks which are trading far below their intrinsic value.

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Wolinsky
The protests in Egypt have been followed closely across the world for the past week. While the media seems to be excited by protests for freedom, few understand the extremely serious political and economic consequences that come with the protests. The population in Egypt...
Egypt,Expect,Unexpected,jacob,wolinsky,investors
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2011-41-03
Thursday, 03 Feb 2011 08:41 AM
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