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2/23/2011

Is the upheaval of multiple regimes enough risk to shake the global marketplace…you bet it is.

In our January 31^st write-up we focused our message on how the introduction of risky events could have significant effects on the value of assets, especially those that are pumped up with air.  At that time we mentioned that the scenario of mere Egyptian uprisings were not enough to pull some air out of US Stocks but if the scenario spread to other regions…all bets were off.

Since the end of January, uprising in Egypt led to the ousting of its long standing dictator…an event which is of historical proportions.  Additionally it appears that the plight of Libya is uncertain to say the least, where a regime change or ousting of its leader would mark two major upheavals in a sensitive Middle Eastern zone, an event of extreme historic significance.  Other examples of populace uprising are on the rise and although we won't compare the plight of the middle eastern examples to that seen in Wisconsin, reality is that a trend of people power appears to be on a swift upswing.

Whether you agree with the populace movement or not, the bottom line is that it introduces noteworthy risk to the realm of global commerce.  One of the largest factors to consider in investing in foreign nations is political risk, where instability in this sector can lead to foreign exchange, interest rate, default risk and general labor issues.  The Egyptian populace triumphed, however the result is extreme uncertainty in the political leadership in the nation, where Libya could easily follow suit and the domino effect could continue. 

People power is good…let’s hope that the ultimate result is the creation of better political leadership.  And as far as the effects on Stocks…perhaps a little reality check was in order for a market that gained over 6% for 2011.  That reality check may not be over yet.