Long time readers know one of my favorite sayings is it does not matter until it matters. Today's selling is being blamed on Egypt, because the series of disappointing earning reports this morning were completely ignored, as was the miss in GDP. But Egypt was not a surprise. We noted when Tunisia flared up in a post on the 16th.
We waved the flag on Egypt Wednesday. No one cared. Indeed, oil was down yesterday even as the Suez Canal happened to be in... well, Egypt. Today, oil is surging on the same issues that the 'efficient' market ignored yesterday.
Some facts about Egypt, 40% of the population live on $2 or less a day. They have had 30 years of dictatorship, so what suddenly triggers these things? The rise in food prices is not the ENTIRE cause but a large cause....
The TeeVee is saying the Kuwait government is quickly running to hand citizens $5000 each to make sure nothing like that happens there. Amazing what desperation does for both constituents and governments. Unfortunately many of these countries are not oil rich and can't afford what Kuwait can.
Again this is not *all* about food, but its a trigger. And the surge in food prices is not ALL about QE2 and our financial speculators running rampant with nearly free Fed money, but it's a substantial factor - reasonable people can argue about it, but the huge run up in commodities in 2007 til mid 2008 and then a huge drop off immediately after argues that the crazy prices have less and less to do with supply and demand, than the 'financialization' of every commodity on earth. I wrote in Sep 2010 when Bernanke made it clear he was going to flood the world with another Quantitative Easing program we were going to sell ill effects.
It is no coincidence when the speculator class levers up with easy money, we have dislocations in pricing. Those dislocations exist in every part of our market as central banks and governments have created a parallel reality. But when gold flies up it doesnt really hurt anyone other than those who enjoy buying jewelry. However, when it causes foodstuffs (and energy) than you begin to affect the lives of billions. But who cares right? As long as everything is cool in Davos, that's all that really matters to the 'important people'. The fact these events are happening as the world's elite spend hundreds of thousands a ticket so they can
strike business deals solve the world's problems, is a dichotomy of epic proportions.
As an aside, as rich as America is, if we did not have our modern soup lines (food stamps) which now surpress 1 in 7 Americans you'd be seeing Tunisia and Egypt in our streets, I truly believe that. Nothing pushes people to desperation like a hungry family. For those who believe otherwise, you are watching the John Galt free market at work overseas...