The Big Picture for the Week of January 30, 2011

After a week or so of lead time things in Egypt obviously escalated on the ground in Cairo which appeared to have a meaningful impact on equity prices in Friday's session.

Of most interest to me was that despite the slide in gold this year, at the point of genuine political uncertainty gold went up. As I've noted before we own gold because no matter the price today I expect it will go up tomorrow should there be some sort of external shock. I think the current events in Egypt would count as an external shock.

Gold going up in this circumstance is a matter of relying on the markets "working" they way they are supposed to which cannot be perfect but it is a little reassuring that to see gold react this way. We got an even larger pop from our holding in Suncor (SU) as anything that remotely threatens middle east oil makes the Canadian oil sands look more attractive.

Not surprisingly most everything else went down a lot on the day including our exposures to Chile, Israel, Brazil and a couple of thematic ETFs. I'm not terribly concerned with how long this takes to play itself out so much as understanding (and reiterating for clients) that for as long as the Egypt story does go on there will be certain market segments in a diversified portfolio that struggle. It is also useful to remember that if this were to turn into something that lasts a couple of weeks taking 10% out of the market (not my expectation) that there would be nothing unprecedented about it. And if this is not the event that scares the market for two weeks and 10% then in the future there will be an event that does.

As a side note I was puzzled by Bob Pisani's continual updates on the Market Vectors Africa ETF (AFK) which he said is 20% invested in Egypt as this story evolved during the week. I saw him give this same general update about AFK numerous times but what about the Market Vectors Egypt ETF (EGPT)? Wouldn't something that is 100% Egypt tell a more complete story than something that is 20% Egypt? I actually emailed him to point out the existence of the fund (as I'm sure many people did) but I never heard any mention of it from him. Maybe I missed it but this was pretty funny in an odd sort of way.