We are seeing stress in global markets and commodities return this week. I know that all people are talking about right now is the fact that US Treasury yields are spiking up and the US stock market has been weak the past few days.
I don’t think the drop in the US stock market is over yet, but I don’t think it’s going to crash.
However, a stock market just dumped 10% in the past three trading sessions AGAIN and no one is noticing, because American TV only talks about what is happening in America.
I’m talking about Egypt. Take a look at the EGPT ETF:
The stock market in Egypt had a drip drop dump in September and just did it again this week for another 10% drop.
It’s a disaster that is a part of debt problems causing turmoil in emerging markets.
The Egyptian economy breached the crisis generating 5% of GDP current account deficit level months ago.
And so the market has declined and declined so far this year.
And this week reports are margin calls hit to cause wipeouts.
According to a Reuters story.
Exchange data showed Monday’s selling was heavily concentrated among local investors, who were hit by margin calls. Non-Arab foreign investors were net buyers by a considerable margin, the data showed.
“It is a mixture of both emerging market weakness and margin trading, and the closure of some margin trades,” said Radwa El-Swaify, head of research at Pharos Holding said.
Again this is part of what is emerging as a global risk-off trade. I expect it will spread at some point to even the US stock market and that’s why I bring it to your attention.
However, in a strange way, it also helps the US financial markets, because it is causing the US dollar to rally – which enables money flows to come into the US and keep things going for now. It makes it so our own coming trillion dollar deficit debt problems don’t matter so much right now and it is also part of the reason gold isn’t getting big buying.
I think we’re going to see the VIX go above 20 this month to bring some buying entry points. Now is the time to prepare.
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