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House of Saud: Screwball Scheme

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The heat is on and Saudi Arabia must be re-thinking its bet; it could crash the global oil market and end up as the last man standing. As I’ve written before, this gambit will result in a Pyrrhic victory at best, but it might take the Middle Kingdom to a place from where it will never completely rebound. The Saudi stock market is in a complete meltdown, largely following the change in crude oil prices.


Saudi Arabia Stock Market






52-Week High


Jan 2014


The pressure from crashing oil prices, which could in no way be this low if Saudi Arabia had tightened the spigots instead of opening them, is impacting all big oil-producing nations.

A lot is being made if sovereign wealth funds (SWF) are forced to dump assets, including stock holdings. There is no doubt that these funds and their obligations are under immense pressure. If oil stays at current levels for a couple of years, progressives will not be able to use that Norway welfare model, as one we should aspire to use in this country.

SWF Key Numbers

  • 26 Sovereign wealth funds
  • 4.5 Trillion In assets
  • 73 Percent income from oil


The market put in a remarkable session Wednesday led by NASDAQ, which saw its greatest intraday reversal since November 2008. That suggests there could be more sessions like Wednesday's. If that wasn’t classic capitulation, it was part of the process. There was pure fear, panic, and loathing.


The mix of stocks that rebounded Wednesday might give some experts pause since Twitter (TWTR), Square (SQNXF), and Etsy (ETSY) aren’t bellwether names. However, there were large-cap names, especially in the building/housing space- that should tell me something despite the disappointing news in that industry.

Hold onto your hats boys and girls! This ride is just getting started.

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