Ed Butowsky, managing director at Chapwood Capital Investment Management LLC, joins Fox News to examine the recent activity of the Egyptian Central Bank selling off over a billion dollars of treasury bills after Hosni Mubarak’s recent resignation.
Sunday marked the first day back to business in Egypt following the fall of Hosni Mubarak. Despite the easing of the tension in Egypt, the Egyptian Central Bank is selling off $1.1 billion in treasury bills at higher yields. How do investors read into this activity as Egypt tries to get back on its feet?
The yield on these treasury bills, 11.65%, has not been seen this high in several years. This is primarily being driven because of the greater the instability in a region, the higher the risk and in turn the higher the yields. Ed Butowsky comments that he is surprised that the yields are not higher considering that the government in Egypt under Hosni Mubarak has been dissolved. Furthermore, Ed tries to understand the rationale and motivation to buy up treasuries from the Central Bank in Egypt when there are many other options around the world.
In addition, when investors step back and look at the big picture, could this impact world markets? Ed explains that in terms of market capitalization Egypt amounts to approximately 0.05% of the world markets and 1/3 of 1% of emerging markets. The bigger concern is not so much Egypt’s size in the market, but rather the disruption of the transfer of oil through the pipeline. With 40% of the worlds oil supply traversing the Suez Canal annually, this disruption in the region could potentially cause a little fluctuation in gas and oil prices. Overall, the increase in cost of oil and gas is more tightly coupled to the increase of worldwide demand, and as the region is still unraveling itself from the events that have transpired there may still be some disruption.
As the global markets have transitioned over the last decade into a more unified global economy, should investors consider pulling out of emerging markets given the events of the last few weeks in Egypt? Ed explains that when dealing with international investing its important to understand that its broken down into three (3) different kinds of markets: Developed Markets, Emerging Markets, and Frontier Markets. Egypt falls under the smaller end of the spectrum under emerging markets, moreover, in recent weeks there has been a significant shift of money out of the emerging market funds. However, Ed believes that emerging markets are very good investments to hold within your portfolio as these emerging markets will eventually become developed markets and continue to grow.
Focusing back on the US, could the US economy be facing an ugly inflationary period on the horizon? Ed explains that its almost for sure going to happen, moreover, there is too much money in circulation chasing a finite amount of goods, products, and services. In addition investors should be very cautious investing in any government and municipal bonds and if possible steer clear of them.
Egypt & World Economy Facts
- 1/24 – 2/10: Tel Aviv 100 Index dropped 2.37%
- 1/24 – 2/9: Saudi Arabia’s Tadawul All Share index dropped 1.65%
- 1/24- 2/10: Nymex traded crude decreased $1.14 per barrel
Ed Butowsky is the managing partner of Chapwood Investment Management and is an internationally recognized expert in the investment wealth management industry. Ed is also a frequent guest on other networks such as CNN, NBC, ABC, Fox News, Fox Business, and Bloomberg to name a few.
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Tags: banks, billion, breaking news, central bank, crisis, egypt, egyptian, egypts, fox, hosni mubarak, resignation, tahrir square, treasury