CASH COW

[mick]

excerpt; My Meeting With the Chairman of the Egyptian Stock Exchange

I'm writing this to you from the Egyptian Stock Exchange (EGX), located in the heart of Cairo.

Last week, I decided to make an impromptu visit to North Africa to get a "boots on the ground" impression of the situation in the region.

Needless to say, this is a nation very much in flux at the moment. Just two months ago, the Egyptian people engaged in a mass uprising to remove the "Last Pharaoh" – their reference to former president, Hosni Mubarak.

They succeeded… but the path to prosperity isn't yet clear…

Egypt's Double Revenue Stream

Geographically, Egypt's northern port of Alexandria borders the Mediterranean. To the east sits the Red Sea, with Sudan to the south and Libya on the west. Egypt is also very close to Israel and Jordan, which makes it a strategic point of interest to the United States and the rest of the world.

There's no doubt that large parts of Egypt are wealthy and the country boasts two consistent revenue streams…

~ Tourism: This is perhaps Egypt's most notable attraction, with over 4,500 years of advanced civilization behind it. I visited the Pyramids at Giza on camelback strolled through Old Cairo and of course visited the downtown Financial District.

~ Trade: The Suez Canal gives Egypt a major trade route. This major waterway shaves more than 23% off the time it takes for a tanker to pass through without having to navigate through the southern tip of Africa.

However, Egypt's main problem is one that also plagues its neighbors…

Politics and Poverty

In short, government corruption.

If the "new" Egypt is to work, it will have to rid itself of the hangover from the Mubarak regime and start over.

That presents a massive opportunity… but also a risk. As you may know, there's a possibility of "extreme" Islamic influence taking over. From being there, however, my take is that there isn't a high chance of this occurring. Yes, the Egyptian people are religious, but nobody I talked to was fanatical. Secularism is still very strong and it's important to remember that the revolution was because of financial reasons, not religious ones.

The bigger issue is Egypt's poverty problem. Despite being largely resource-independent, fully 40% of the population of lives in squalor. I visited some families in the poorest Cairo neighborhoods, where muddy, trash-strewn, sewage-filled streets were the norm. Yet barely five miles away lay the treasures of Tutankhamun in the Egyptian Museum.

As for the economic and investment situation…

Egypt: Open for Business… But Should You Invest?

Part of my visit included a meeting with the new Chairman of the Egyptian Stock Exchange, Mohammed Abdel Salam.

Among my pointed questions…

~ I asked about the pressured re-opening of the exchange, due to Egypt's possible exclusion from the MSCI Index. He admitted that pressure played a part – a very candid answer that his predecessor wouldn't have given.

We also discussed safeguards and security measures to prevent future closures of the EGX. He was publicly adamant that it wouldn't happen again unless by Act of God. Of course, that answer was expected, but his candor was not.

~ Given that the market had been closed for seven weeks, we also talked about inflows of foreign and domestic funds and he noted that they're increasing after the sell off.

The Egyptian Stock Exchange in Cairo

Investment-wise, here's my take: I'm not saying that it's time to invest "whole hog," but with Egypt down more than 20% from its highs, the country does represent a compelling opportunity.

Remember that in a region where resource-rich economies rule the roost, Egypt could emerge as a "future Turkey." That is, a secular powerhouse that can grow its economy much faster by reinvesting the huge foreign inflows that it receives into sectors like education, infrastructure and tourism.

The cards are now in Egypt's favor and once the political dust truly settles and a new government is formed, Egypt may well be the best play in the region. As such, it probably wouldn't hurt to take a small position in Egypt during the next Middle East crisis… which could happen any day. You can do this easily through something like the Market Vectors Egypt Index ETF (NYSE: EGPT).

And on a personal note, let me tell you that it's amazing what revolution can do to prices! I stayed at the five-star Nile Kempinski Hotel for less than half of what I've paid to stay a similarly fancy hotel in India or the United States.

As for the Kempinski itself, in my opinion, it's one of the best hotels I've stayed in. Super staff, with excellent rooms and amenities, plus an attention to detail that surpasses that of even the Four Seasons in New York.

As I said earlier, Egypt is open for business and if it's on your bucket list, get there fast before all the tourists find out, too.