“What is happening now in the Middle East,” said British Foreign Secretary William Hague this week, referring to Egypt, “is the most important event so far of the 21st century, even compared to the financial crisis we have been through and its impact on world affairs. I think it will take years, maybe decades, to play out.”
Stop the presses! According to the British foreign secretary, turmoil in Egypt is more important than the market crash of 2008. You haven’t heard American politicians say that, have you? What does the British foreign secretary know?
Something big is going on. But if you consume only U.S. mainstream media, you’re not getting the story. It’s more important for the mainstreamers to discuss President Obama’s new dog, I suppose.
In a moment, I’ll have more on Egypt and Secretary Hague’s comments. First, let’s attend to business close to home.
Ongoing Opportunities in Energy and Resources
Despite all the lamentations about the “end of the resource super-cycle” in the Financial Times, we’re far from playing taps over the energy and natural resource boom of recent years. There’s money yet to be made in the right kind of ideas.
Yes, parts of the resource sector have been in the doghouse over the past year. First and foremost, a decade-long uptrend in precious metals flattened out and pulled back last year. Then again, we may already be in the early innings of a new revival for gold and silver. Good things don’t stay down for long.
As we know well, here, miners suffered due to the pullback in metal prices. Some energy guys are down, too. “Diggers and drillers” (as Australians call resource plays) look shabby, compared with the highflying Dow Jones and its big banks and crisp blue chips.
Then again, the wheel will eventually turn. Meanwhile, low share prices for great resource assets make for long-term bargains.
For another comparison, look at the small-cap resource space that I cover in Energy & Scarcity Investor. Much of the “junior” sector has been savaged during the recent down market. There’s an ongoing washout within the Toronto Venture Exchange. Hundreds of small companies — too small for their own good — are delisting and going to “company heaven.” Drums, bagpipes and weeping violins for them, I suppose.
As I see it, low current prices for metals and energy plays are not predictive of the future. We live in a world of rising human desire for “real stuff.” Plus, we live in a world of geopolitical turmoil, as a glance at the headlines from Egypt will drive home. And that gets us back to the comment by British Foreign Secretary Hague. Turmoil alters political alliances, not to mention markets. That can be bad. And it can be good, if you do the right things that are in your best long-term interest.
The Red Nile of Egypt
Still, why is Secretary Hague worried? There’s political upheaval and bloodshed in Egypt, of course. But in the big scheme of things, is the Egypt story more significant than, say, what happened with recent conflicts elsewhere in the Middle East, in places like Syria, Libya, Yemen, Mali and other locales?
Let’s stick with resource investing, which is our focus. Paid-up readers may recall that I bailed out of Egypt exposure about two years ago — even issuing a sell recommendation on Apache Oil, which is a great company other than its Egypt oil plays.
On the Apache call, I was ahead of the game. Last week brought sell recommendations from a variety of brokers on Apache, citing its Egypt exposure. Why walk away from investing in Egypt? Because the Arab world’s most populous nation — the nation that controls the Suez Canal, too — is essentially in a civil war. Invest there at your peril (although there are high-risk opportunities for the truly bold).
Egypt’s civil war is not like the American Civil War of 150 years ago. It’s not regional. It’s not as if half the country seceded and the North is going to invade the South or such. But in its own way, Egypt is a nation at war with itself. There are profound philosophical divisions rooted in the very meaning of Islam.
Also, Egypt highlights the collision between East and West. Alliances are about to alter in a big way — a grand, strategic sort of way.
Turmoil in Egypt is NOT good for the Middle East in general or the stability of one-third of the world’s oil production, in particular. This is part and parcel of that “Oil Wars” scenario we’ve worked on for several years here.
Welcome to the 21st Century
Indeed, turmoil in Egypt is a big part of why oil prices have moved up by $10 per barrel over the past two months. That’s part of Secretary Hague’s concern, but just the beginning.
Over and above oil politics, Egypt is now a case in point of how the “great power” relationships of the past three generations are clearly breaking down. What’s going on in Egypt stands for the ongoing rearrangement of the chessboard of the post-Cold War world. This is where Secretary Hague is going with his comments.
The most worrisome thing for people in the U.S. and “West” is that the U.S. is losing face and influence in the Middle East faster than Lake Nasser would drain out if the Aswan Dam burst. The failure of U.S. Middle East policy is clear in Egypt. It’s a total wreck. The political powers in Washington have made a mess of it.
In Egypt right now, it’s fair to say that pretty much everybody mistrusts the U.S. government, and certainly hates current U.S. Egypt policy. The U.S. supported former strongman Hosni Mubarak until suddenly he got inconvenient and went over the side.
Then the U.S. supported hard-line Muslim Brotherhood Islamist guys who wrecked the economy and initiated the process of tearing civil society to shreds. Now the U.S. can’t seem to make up its mind about the Egyptian army, which took over — despite the fact that we’ve been arming and training the colonels and generals for 35 years.
Confused? Well, so are the Egyptians. So are nations and leaders across the Middle East. Thus is U.S. credibility in Egypt, and across the Arab/Muslim world, shattered. They are walking away from us, fast!
The Next Alliances
Meanwhile, we see a new alliance of Saudi Arabia, Russia and China. They’re teaming up to aid Egypt. The aid ranges from the macro level to the grass roots.
For example, Saudi Arabia has opened its checkbook to the tune of $11 billion in just the past month, along with sending tankers full of fuel. Saudi aid dwarfs the piddling amounts of depreciating dollars that the U.S. sends to Egypt — much of that “aid” being military equipment, which is, at root, just money to large defense contractors like Lockheed.
Meanwhile, Russia and China are sending ships full of food aid. This is for distribution to people in Egypt who truly know hunger in the broken economy left behind by the maladministration of the Muslim Brotherhood.
The critical thing to understand is that the Saudi-Russia-China alliance is designed to break the Egypt-U.S. relationship. The new alliance reflects how U.S. influence is waning in the Middle East. After many decades of driving events in the Middle East — and spending incalculable national treasure — the U.S. is about to lose big.
New alliances in Egypt reflect Saudi-Russian-Chinese efforts to help keep hard-line Islam under control. The Saudis fear Brotherhood-style religious fervor. Russia wants to control the spread of hard-line Islam in its southern regions — Chechnya comes to mind — while China has issues with hard-line Islam in its western regions.
And the U.S.? There’s no sense of consistency coming from Washington, nor of long-term policy goals. There’s no sense of pursuing long-term American national interests. U.S. credibility is evaporating.
What’s the investment angle? Certainly expect problems with Middle East oil. Expect hard-line Islamism to strike out at targets of opportunity. Expect energy and “real” assets to hold value and offer gains over time.
I could go on. But that’s all for now. There’s plenty more to discuss in future notes.
Byron W. King
Original article posted on Daily Resource Hunter
Byron King is the editor of Outstanding Investments, Byron King's Military-Tech Alert, and Real Wealth Trader. He is a Harvard-trained geologist who has traveled to every U.S. state and territory and six of the seven continents. He has conducted site visits to mineral deposits in 26 countries and deep-water oil fields in five oceans. This provides him with a unique perspective on the myriad of investment opportunities in energy and mineral exploration. He has been interviewed by dozens of major print and broadcast media outlets including The Financial Times, The Guardian, The Washington Post, MSN Money, MarketWatch, Fox Business News, and PBS Newshour.
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