Egyptian-American and Pacific Investment Management Co. Chief Executive Mohamed El-Erian on CNBC Monday:

“How Egypt evolves in the next few days and weeks matters a great deal — and not just for Egyptians but also for the world economy. It matters in ways that are unusual and, for many, unfamiliar.  Unlike China, Egypt is not a major source of global demand nor is it a major exporter. Unlike commodity-rich countries, Egypt does not directly influence world prices. But Egypt is a critical enabler and, as such, indirectly touches many other nations.  With its control over the Suez Canal, Egypt is a major gatekeeper of global trade. Even more important, its role and standing in the Middle East makes it a critical participant in promoting geo-political stability in an area prone to volatility.  Where the country goes from here will have an impact on the wellbeing of the global economy and stability of the world’s financial markets. In analyzing this, there are four things to remember.

First, the concept of so-called managed change, or what some people in Washington are calling orderly transition, is critical. Everyone, including the Egyptian government and opposition movements, agrees that the country cannot simply reset to where it was seven days ago; and all wish to avoid chaos. But they differ widely in the meaning of change, and the associated journey. As such, Egypt needs a mechanism to reconcile very different views of managed change.  Second, it matters how the opposition evolves from here. Their vocal protests must now be channeled into an actionable and detailed, forward looking agenda. This is critical not only for Egypt’s internal stability. It is also essential to counter concerns outside Egypt that what is unquestionably a secular movement could be hijacked by theocrats.

Third, Egypt is not helpless. It has solid economic foundations, large international reserves and minimal external debt. More importantly, the armed forces are respected and liked by most citizens. The military understands what is at stake. In contrast to many other developing, the armed forces, if asked, can help facilitate economic and political reforms, including free and fair elections.  Finally, while the instability in Egypt is being driven mainly by internal factors, it would be foolish to ignore external contributors. Egyptians are feeling the pain of surging commodity prices and food inflation. This problem will become more acute as some other governments around the world boost their stockpiling of foodstuff to guard against social unrest.

No one can predict what will happen in Egypt. The situation is unprecedented, and there are many moving pieces and legacy issues in play. My gut tells me that, over the next days and weeks, the country will find a way to manage change. And whether my gut is right or not, governments around the world would be well advised to draw lessons from these historic events.”

File the above, perhaps, under the “new normal” for global food prices, i.e. yet another reason (a hedge against social unrest) that demand and supply fundamentals across many-to-most agricultural softs will remain dislocated for the appreciable near-future.  Also pay close attention to the relatively new Egypt ETF.  The multiple gaps coincided with a huge swing in volume last week.  A return to its 200MA may be a positive sign to begin building new positions, while breaking the 50 day on strong volume (while closing somewhere above 20; look at that first initial gap as a resistance point going forward) and perhaps news of a newfound coalition would be a bona fide green light.

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