Egypt Makes No Sense

Emerging markets are on the precipice of calamity, or at least that is what those driving money flows are trying to signal. China is slowing down, Turkey's currency is in a free-fall, Brazil, India, Russia, South Africa, Argentina and virtually every other leading developing country economy is suffering a crisis of some sort. In industrialized economies, the situation looks marginally better, but fears prevail about the pending end to the Federal Reserve's lax monetary policy.

Defying gravity

So what about Egypt, a country that in the past three years has gone through three constitutions, six prime ministers and seemingly endless acts of political violence, where there are shortages of basic commodities and falling exports, where a bloated public sector and unsustainable subsidy system plod along unreformed? No crisis here, at least if you believe the equity markets. The stock market is at an all-time high, flush with cash from friends from the Gulf and beyond whom, for a variety of reasons, remain desperate to prop up the country. Times are so good, and the line of donors so long, that Egypt can afford to return billions of dollars in concessionary loans from out-of-favor parties. 

Does any of this make much sense? No, but nothing in Egypt makes much sense. Enjoy the ride while it lasts.