Saudi Arabia’s Secret Plan For Global Prosperity

Friends of mine at my former employer, the Financial Times, have met with the senior Saudi leadership in recent weeks and confirmed what I already knew.

The implications for your trading account and retirements funds are nothing less than far reaching.

The Kingdom’s long-term strategic goal is to create a global economic boom.

If they are successful, the value of all assets sensitive to the business cycle will explode in value. Those include stocks, commodities real estate, precious metals, and commodities. Only bonds, and other fixed income investments will suffer.

Saudi financial planners are betting that such a comeback is only one to two years off.

They will accomplish this by creating a world wide economic recovery that will eventually take the price of oil back up to at least $70-$80 a barrel, close to the price they need to maintain the world’s most generous social service system and balance their budget.

But to get there, they have to keep the price lower for longer.

So far, so good.

Since Saudi Arabia began its war for market share 18 months ago, $40 West Texas Intermediate is 72% off its 2014 high, and 80% down from the 2011 all time high.

At today’s prices, the global tax cut amounts to $2.59 trillion a year ($77/ barrel saved X 92 million barrels/day global consumption X 365 days).

Saudi Arabia can easily add 1%-2% to global growth simply by keeping oil prices at the present level.

They can do this because they have oil reserves far beyond the understanding of all but a few industry experts.

I have traveled in the Middle East for 48 years.

I covered the neighborhood wars for The Economist magazine during the 1970’s.

When representing Morgan Stanley in the firm’s dealings with the Saudi royal family in the 1980’s, I paused to stick my finger in the crack in the Riyadh city gate left by a spear thrown by King Abdul Aziz al Saud when he captured the city in the 1920’s, creating modern Saudi Arabia.