Cumberland Advisors, which manages $1.5 billion in separately managed accounts, has shifted its portfolio to 20% cash — the highest that it has been since early 2008, over fears related to the situation in Egypt.
With Egypt on the brink, managers at Cumberland and other firms are growing more concerned about the situation and its implications for the entire region.
On Friday, President Hosni Mubarak announced that he will leave his position as president of the republic. He mandated the Armed Forces Supreme Council to run the state.
“Everyone is asking questions about inflation and interest rates, but the biggest thing going on right now is the Middle East,” David R. Kotok, chairman and chief investment officer of Cumberland Advisors, said during an interview at IndexUniverse.com's Inside ETFs Conference.
“My biggest fear is that the Middle East blows up, there is bloodshed and civil war,” he said. “Saudi Arabia is very concerned about this.”
The big unknown, Mr. Kotok said, is who will have power in Egypt. From an investing standpoint, the continuing uncertainty will be good for the energy sector, he said. Any more chaos in the Middle East will lead to higher oil prices, and Mr. Kotok said that he doesn't think that peace will take over the region.
“History is on my side,” he said.