Hi again everyone. I’m back from Egypt. Excited to dive back into everything Strawy, including the recent reporting season.

Thought I’d drop a few notes about my experience in Egypt. It was awesome. We didn’t love Cairo as a city - overcrowded, polluted, dreadful traffic, crazy drivers, and my wife and daughters felt uncomfortable on the streets. But simply amazing to dive into humanity’s first big attempt at civilisation. And a pretty successful first superpower, lasting 3000 years, albeit including some “dark" periods. I strongly recommend Egypt for everyone’s bucket list.

Given our Strawman interests, I thought I’d reflect on 3 finance-related experiences.

Tipping

Oh how I hate tipping. Our travel agent told us before we left (although after we booked!) that tipping was a huge part of the Egypt’s culture and tourist industry. This was reinforced by our guides while we were there. I haven’t come across a country where tipping is so ingrained, and (supposedly) retail and tour staff depend so heavily on tips. The US was previously top of my list, but Egypt takes the cake.

Following suggested guidelines, tipping cost us about US$2500 across our 17 days, with it flowing out for waiters, porters, drivers, tour guides, tour managers, concierge staff, cruise staff, airport handlers. We chose to tour Egypt with private guides and vans (for efficiency and safety) and fancy accommodation, so that inevitably involved more people providing us a service, and hence more tips. But no one can escape it even if you did Egypt on a shoestring.

In addition to a 14% VAT, hotels and restaurants also automatically added a 12% “service fee” to their bills. But it was made clear to us this was NOT a gratuity. What it was, no one could fully explain. If I'm reading between the lines correctly I think it was once a gratuity, but it has simply been absorbed into low base pay for staff. Nowadays an additional 10% tip is expected.

And I learned how Egypt has a unique form of math where 5 + 5 = about 12. Eg 2 x $5 notes were more valuable to me than 1 x $10 note because they gave me more tipping flexibility.

Loss of faith in fiat currency

Despite the local currency being Egyptian pounds (EGP), most of the tourist industry revolves around US$. Although inflation has come down to around 12% at present, it has been 20-30% pa in recent years. Hence there’s not much trust in EGP. Gives perspective when we’re frothing about our < 4>

We saw this play out with large numbers of people crowding ATMs on the day the Government transferred welfare payments. No one wanted to hold onto cash, they’d either spend what they needed straight away, or try to convert to US$, gold or some other store of asset. Yes, Bitcoin came into the conversation, but it wasn’t a favourite, with most people wanting more traditional hedges.

Massive apartment overdevelopment

One of the ways that most families try to store their wealth is in apartments. But this has ballooned the price and led to massive overdevelopment. While I was there, visually I was guessing 25% of apartments looked vacant (most just brick walls and no windows installed). Chatty says 10-15% of housing stock is vacant and unowned, and another 15-20% of housing stock is vacant but partially owned, so roughly 30% vacant.

If there’s any positive to this overdevelopment, it’s that there isn’t massive leverage supporting the bubble. The most common model for purchasing an apartment is through instalments where buyers pay over a number of years and developers progressively complete the apartments as the instalments are paid.

Still, it feels like a house of cards. There are a lot of building projects that have clearly been half constructed but abandoned. There’s a reckoning coming for Egypt’s housing industry.

If you’re interested, here’s some explanation of the Egyptian housing market from Chatty: https://chatgpt.com/share/699e4c39-ecb0-8013-82fe-16064a3f3f41.

Despite its challenges, it's still a fascinating place to visit. Pop Egypt on your bucket list if you haven’t been. And I’m happy to share more specifics about travel agents, places to go and stay, etc if anyone’s interested.