...would you rather I didn't post this....?Investing Around the...

...would you rather I didn't post this....?

Investing Around the Long, Hot Egyptian Summer
Here?s What the Crash of Egypt and Middle East Turmoil Means to You...


Byron KingDear Resource Hunter,
The so-called ?Arab Spring? is quickly morphing into a long, hot summer.

Egypt is a disaster in the making. Events in Egypt will soon affect the price of oil, gold and much else that touches our lives in the collective Western and world economies.

Things are rapidly deteriorating in Egypt. A fellow with the title of Field Marshal, a certain Mohammed Tantawi, is currently running the Egyptian government. Marshal Tantawi has an interesting resume, including a long stint in the 1980s as Egypt?s defense attach? to Pakistan. That is, he oversaw the supply of Saudi-funded, Egyptian-sourced weapons to the Afghan Mujahidin during the war against the Soviets in Afghanistan.

Here?s the bottom line. Marshal Tantawi is well connected with the inner circles of Saudi Arabian power, as well as with the Pakistani secret service called the ISI. According to a delightful gentleman with whom I occasionally correspond, Pepe Escobar of the Asia Times, Marshal Tantawi is a ?Trojan Horse? for the House of Saud ? a nice, if mixed, metaphor. Thus, says Pepe, we can expect ?much more Muslim Brotherhood than secular Tahrir Square.?

You might be thinking that there are worse things in the world than Egypt being run by a cabal of army generalissimos, with a nominal civilian government overseen by Islamic factions. After all, isn?t that the Pakistani model? It works so well in Pakistan, right? (Just kidding.)

The Crash of Egypt

OK, here?s where it gets worse. The problem is that Egypt is broke. Beyond broke, it?s insolvent. Egypt is truly a failed state. Over the coming months in Egypt, I believe that we?re going to see an utter social and governmental collapse.

The crash of Egypt will make the demise of the former Soviet Union look like a picnic in the park. That is, when the USSR imploded, most people understood that Communism had outlived its time. Not so in Egypt, where there?s a rising militant Islamist philosophy taking root, and a lot of people actually buy into it. It?s going to be trouble, big time.

Don?t overlook the reports of retribution and revenge being visited against former Egyptian leader Hosni Mubarak, his family and colleagues. This ?French Revolution? approach sends a clear message to the Egyptian equivalent of the Russian oligarchs. Get out, save your skin and take everything you can carry, if not haul.

Among other things, the Egyptian oligarchs are taking food stocks and selling them on foreign markets. Right now, food supplies in Egypt are minimal and dropping quickly. And as for growing more, any time soon? Well, Egyptian agriculture is a wreck, comprising the worst aspects of inefficient small-scale operations and inefficient state-controlled holdings.

It?s a similar story with Egypt?s energy supplies. From what I?ve heard, the fuel that was formerly sitting in massive storage tank farms along the Suez Canal has been pumped into tankers that then sailed away. There?s not enough fuel to go around, not by any stretch of the imagination.

Back to that Soviet analogy, what?s going on in Egypt is like what happened in the months after the collapse of the former USSR. Trainloads and cargo ships full of, say, lumber or aluminum castings or copper ingots magically appeared out of nowhere. For sale, cheap. For cash. No questions asked. No questions answered.

Bottom line is that Egypt is grinding to a halt. The gas stations are already drying up, with day-long waits for motorists to fill their tank ? halfway. The food stores and bread stalls are emptying fast, and there will soon be mass hunger. Indeed, in time there will be starvation. We?ll see mass migrations of desperate people.

Who Benefits?

Of course the West, and some across the Middle Eastern world ? Saudi Arabia in particular ? will express sympathy over the Egyptian tragedy. Something called the ?CNN Effect? ? the label we used at the Naval War College ? will kick in. High-level national and international policy will be driven by shock-video of hungry people rioting in the streets.

The West and the Saudis will send nominal amounts of food and other aid to Egypt. It?ll look good for the cameras, what with ships and cargo planes hauling pallets of grain and such.

But really, feeding 80 million people over the long haul, in a nation where the productive economy has collapsed? It?s something that the rest of the world cannot do for long. It?s not something that the rest of the world can afford to do in the best of times, and these are not the best of times. It won?t work in the short run, and it sure won?t work over the long haul.

As an aside, on this point, the U.S. will likely continue the farce of borrowing money from China, and then sending funds to Egypt as ?aid? ? which Egypt will never repay to either the U.S. or China. But the U.S. ?full faith and credit? will be on the line for the long-term debt.

Who?s the winner in all this? Well, the Saudis will maintain their hegemony in the Arab world. Just in this respect alone, the Saudis have a strong interest in keeping Egypt politically insignificant. Another way of looking at it is that, no matter how bad things get in some places, other things work out alright for other people.

The Resource Investment Thesis

So what does this bad situation in Egypt have to do with you? I?d urge you to have minimal exposure to the Middle East. In other words, invest around the Middle East turmoil.

In my view, there are just too many high-risk, unpredictable things going on there. At the same time, when things fall apart in the Middle East (and I mean when, not if), we?ll see prices for oil, gold, silver and more go upwards. So ? and it?s sad to have to say this ? turmoil in the Middle East indirectly improves the prospects for non-Middle Eastern investment plays.

Of course, it?s not as if the West ? and the U.S. ? is doing such a great job, either. To use a concept made famous in a well-known book about the ancient Middle East (Matthew 7: 3), there?s a mote in our own eye.

The U.S. is over three years into a long-term recession, with no end in sight. One attention-grabbing line from this week?s news feed ? from the business network CNBC ? is that ?What we?ve got right now is almost near panic going on with money managers and people who are responsible for money,? according to Yastrow Origer, who added that ?We?re on the verge of a great, great depression.?

Wow. That?s quite a comment. Is it hyperbolic? Maybe. Or maybe not. We?ll find out, if we live long enough. Yet this kind of economic smack-talk serves a purpose. It lays the cards on the table.

The 2008 crash wasn?t just another episode of the business cycle taking the economy on a joyride south. No, it?s more like the 2008 crash exposed the cancer within the national balance sheet. A half century of hard living ? of bad tax policy, misguided spending policy, ill-conceived regulation and loose-goose monetary policy ? all came home.

Today we live with never-ending news-cycle that reports on how there?s no recovery in most sectors of the U.S. economy. We see report after report of persistently high unemployment and chronic weak growth. And these are just the ?official? statistics, which are cooked to look better than the reality that?s far worse.

In the past couple of years, we?ve lived through the standard, modern, big government, ?Big Brother? answer. We?ve watched the futile attempt to reorganize the U.S. health care industry and the finance industry, with a side-trip into ?saving? the auto industry. Oh, and we?ve seen the effort to kick-start the home-building industry, which has worked so well, right? And how about that precipitous decision to shut down the offshore energy development industry? Brilliant, eh?

Thank you, big government. Oh well. I guess we know what doesn?t work ? so that we can invest our money someplace else. On that happy note, I must bid you adieu.

That?s all for now. Thanks for reading. Best wishes...

Byron W. King




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My own personal view, is that Puntland, politically, may affect RRS in time, but the 'bread and butter' is about to become a reality within a few weeks, if not days! We have plenty to get the sp above a dollar a share...Puntland was not my reasons to invest in RRS (FOR ME, THAT IS)