Big Changes Are Coming!
Before I dive into this week’s letter, I want to give you a heads up that big changes are coming for us here at January Financial – I’m very excited. You may have noticed it’s been a few weeks since you got an email from us, and the changes will help to explain why. I’m not quite ready to make the big announcement, but I did want to give you a heads up that it’s coming and ask that you keep your eyes peeled for our next message.
What Does Egypt Have To Do With My Portfolio?
Unless you’ve been clued to MSNBC lately, or happen to follow these things, you know all about the changes in Egypt but probably don’t understand how they’re affecting your portfolio. The world is a small place, and even if you’re only invested in US companies (which I seriously doubt you are) you are more exposed to the world at large than you may even realize. Not only are many large US companies multi-national (meaning they have operations and revenue streams in many different countries), but companies with no overseas exposure will still typically be affected by large, geopolitical events.
One thing that stocks and the markets they make up thrive on is regularity – investors and traders like to know what’s going to happen. Volatility is the enemy for most investors and traders. When you know what to expect from certain stocks and markets, you can plan accordingly and manufacture profits. However, when things start happening that you don’t expect it can really mess with your future and cause serious losses. Which brings us to Egypt – uncertainty there has the effect of increasing uncertainty across the globe because Egypt and the Middle East are integral parts of the world market.
Egypt is a large producer of oil, meaning any disruption there can (and did) increase the price of oil worldwide. Egypt has a large part of its GDP derived from tourism, which obviously suffered in the latest protests, and sinking GDP in Egypt means less trade with their neighbors. There was a very real fear that uprisings in Egypt leading to real change could cause turmoil in other nations in the area, which is indeed happening and increasing uncertainty. All of these are bad things for markets, in that they’re a drag on growth and increase uncertainty for investors.
On the upside, if you’re one of our clients or have been taking our advice you’ve got a good portion of your portfolio invested in hard assets (oil, gold, metals and the companies that produce them) and have benefitted accordingly. In times of uncertainty people like to know they own things they can feel, things that will do well in times of inflation, and hard assets are a great place to be right now.
A Grab-Bag of Links
Foreclosures, debt and a must-read on why the US should be following Egypt’s lead:
- Foreclosure issues – Judge declares MERS invalid, essentially calling into question millions of foreclosures across the country.
- Ballooning US debt – The massive and increasing US budget deficit, and how it could affect the price of bonds.
- Consumer prices rising – Prices will soon be rising on everything from washing machines to cold cuts.
- China is now number 2! – Following continued growth in China and a big dip in Japan, China is now the world’s number 2 economy.
- Bahrain facing protests - “Day of rage” expected after gift of over $2K fails to pacify protesters.
- Should America follow Egypt? – Excellent article on why perhaps the US should follow Egypt’s lead.
