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Endeavoring to get into context the emerging political risk in several Arab countries;
There is clearly risk emerging for financial markets and it has particularly been linked to the US and the US currency, if not the broader financial system. I find the risk however to be somewhat muted relative to previous risks that have emerged around Arab concerns, and in reality.
I can see that there will be a fear factor and risk premium apply and I can see risks say with oil and maybe fears of potential supply disruptions. But unless I am mistaken, it is not as if there is a threat of political risk extending beyond certain Arab borders and beyond what we understand already of terrorist elements located elsewhere. That is, there is civil unrest contained within certain Arab countries. I guess when it comes to the words - "Arab countries", "Arab politics", "unrest" and "violence", markets shake a little, which is understandable, but.............!
On a best case scale, if the upshot is political reform toward increased democracy through some Arab countries, what is the risk?
I can also see that equities markets held up for a lot longer than I would have expected - Dec-Jan, with the help of Fed liquidity perhaps, which I rate as purely liquidity with little effect on the real economy in the short to medium term, although there is the "wealth effect". That is, it is basically cash, or promised cash looking to find a home - most likely in speculative assets. A strong market protective mechanism across forex, fixed interest, equities and maybe even property markets, at a time when some political and market nervousness pervaded - eg. CNY-USD exchange rate. To cut a long story short, markets may be looking for any reason to sell-off a little.