Why Egypt Should Concern Investors; Three Yield Ideas for the Week

As Americans, most of us watch the news from Egypt and, at least, a little pride swells in us as we watch a huge group of people unite to demonstrate collectively against a long standing, repressive dictatorship. But as investors, are the events truly THAT important? If you’re holding the Egyptian ETF (EGPT) or Total (TOT) or GDF Suez (GDFZY.PK), yes, you should be concerned. Oil prices are a bit nervous. But the bigger issue is the Suez Canal. Since 1859, the canal has saved time and money for global ocean freight trade. Today, about 10% of all world ocean cargo passes through Suez. 10% doesn’t sound like much. But, any disruption could really screw things up. Some background on Egypt politically. Since 1952, Egypt has had 4 “presidents”. All four started as career military officers. All four “ascended” to the “presidency” through some form of violent, non-democratic process. And while the Muslim Brotherhood has played an adversarial role in Egyptian politics all along the way, obviously, they haven’t been too successful over the course of almost 60 years. So, basically, dictatorship in Egypt has been the norm since the end of World War Two. In 1956, Egyptian “president” Gamal Abdel Nasser, who had directed loyal followers to kidnap his predecessor during a power struggle and then mandated a single party system shortly thereafter, nationalized the Suez Canal. A brief war pitting Egypt against an alliance consisting of France, Israel, and Britain ensued. Britain and France wanted the canal back, Israel just wanted the land. Israel was successful although sent back to the post 1948 war lines by the U.N. Britain and France, again, saw more sunsets on their shriveled empires. Again, the Suez Canal was the centerpiece of conflict. During the Six Day War of 1967, Israel’s light speed preemptive strike took their western flank all the way to the canal. In 1973, Egypt used the Suez Canal as the springboard for their initial assault during the Yom Kippur war.... Read more