kublikhan wrote:No, It's not just US treasuries. They also keep some of their reserves in cash, some reserves in non dollar assets or currencies, other asset classes(ex: equities), etc. Total oil exporters own less than $300 billion in US treasuries. Even assuming the lion's share of that is Saudi Arabia, that still means less than half of Saudi Arabia's reserves are US Treasuries.misterno wrote:All SA's reserves are invested in US treasuriesSaudis to keep reserve management strategySaudi Arabia's central bank will keep its current strategy for managing the country's foreign reserves. The central bank is believed to have placed over half of that amount in conservative U.S. dollar assets such as U.S. Treasury bonds and bank accounts. "We continue to have a balanced allocation of our assets, whether currencies, geographic and other classes."
Over $100 billion of their reserves is just cash. Over 90% of their reserve drawn down has been withdrawing cash. Less than 10% has been selling investments:Saudi drawing down FX reserves to cover deficit, data suggestsThe February data showed the central bank had $540 billion invested in foreign securities, about $2 billion less than in January, and $108 billion of deposits with banks abroad, down $21 billion. That implies the central bank has been focusing on bank deposit withdrawals rather then selling U.S. Treasuries.
A fifth of their portfolio is in non dollar currencies. And of the remaining share that is in dollars, a quarter of it is invested in equities. And of the remaining share that is invested in bonds, not all of it is US treasury bonds. Some of it is higher risk bonds.The Management of GCC Official Foreign Assetsrecent estimates suggest that roughly 25% of [Saudi Arabia's] portfolio has been invested in equities.
Portfolio composition
We have also tried to estimate the portfolio composition of the funds –both their equity/bond/ alternatives split and their currency composition. Norway provides a rough benchmark for the performance of a conservatively managed fund with a relatively large exposure to euro and pound denominated bonds and the European equity market that can be compared against the Gulf funds, which likely have less euro exposure but more exposure to equities/ alternatives.
Saudi Arabian Monetary Agency non dollar share of assets: 20%
Bonds still dominate SAMA’s[Saudi Arabian Monetary Agency] portfolio but as much as 25% might be in equities. SAMA also has higher risk bonds than that of a traditional central bank portfolio.
If I was just to make some ballpark guesses on the composition of that $680 billion, it might look something like this:
$265 billion in US bonds(mostly treasuries)
$170 billion in equities
$135 billion in non dollar assets
$110 billion in cash
americandream wrote:Incidentally, good find misterno. This is pretty epic stuff. I could do with you as my news provider.
misterno wrote:americandream wrote:Incidentally, good find misterno. This is pretty epic stuff. I could do with you as my news provider.
Are you the moderator are you offering me a job?
I can not PM you for some reason
misterno wrote:I found one of the investment bankers in linkedin and emailed him, he was quoted in one of the Bloomberg articles about KSA's new debt.
Here is how he responded.
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Although Saudi still has very high reserves they cannot rely only on that as there is a risk that reserves could be depleted fast. In addition Saudi currently has very low amounts of debt therefore there is plenty of flexibility to add some new debt for the time being. Keep investing only on US Treasuries is not the safest option as yields are very low and they need to diversify their investment strategy.
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Pops wrote:I'm late here but it seems to me that facing a cash crunch the thing to do is borrow before its needed, no one wants to loan you when you're broke unless that is the only way they will have a hope of getting paid what you already owe.
What would be better in the end, a bunch of cash plus some debt or a whole bunch of neither?
StarvingLion wrote:Lol. The bankrupt investment banker doesn't know shit.
China needs cheap oil and a lot of it. It is forcing the House of Saud to sell its oil under the table at rock bottom prices. The result: Saud will be bankrupted with debt.
Paris-based IEA in its annual World Energy Outlook said the centre of gravity of energy demand is switching decisively in favour of emerging economies, particularly China, India and the Middle East, which drive global energy use one-third higher.
Saudi Aramco (officially the Saudi Arabian Oil Co.), is a Saudi Arabian national petroleum and natural gas company based in Dhahran, Saudi Arabia.[90][91] Saudi Aramco's value has been estimated at up to US$10 trillion in the Financial Times, making it the world's most valuable company.[92][93][94] (ARAMCO is state-owned and unlisted.)
Outcast_Searcher wrote:StarvingLion wrote:Lol. The bankrupt investment banker doesn't know shit.
China needs cheap oil and a lot of it. It is forcing the House of Saud to sell its oil under the table at rock bottom prices. The result: Saud will be bankrupted with debt.
Ah. Starving Lion, who posts random stuff with almost no credible citations, who consistently says no one ELSE knows "sh*t".
OK. So let's hear it.
1). China is well on its way to being the biggest oil consuming country on the planet. And HOW is it "forcing" the KSA to sell it oil at "rock bottom prices"? By needing lots of oil for its rapidly growing consumer auto fleet? By refusing to allow the KSA to order Chinese take-out food (and thus angering the KSA masses)?
2). The KSA has about $670+ billion in reserves. (See several posts and links earlier in this thread. I don't claim expertise on this point). Compared to the debt of places like the US, Japan, and good old Greece, this makes it look like a financial titan. And it apparently has a HUGE amount of oil reserves, which virtually the entire first and second world want.
So exactly how will it be bankrupted again? By wishful thinking on your part? (Hint: they plan to slow down the rapid selling of oil in the fall, and can stop the counter-productive game of selling all their oil cheap whenever they want, and wait for prices to return to perhaps $80 to $100 a barrel, all other things being roughly equal (and Chindia demand rising inexolerably and rapidly over time)).
If you're going to make claims like this, couldn't you at least cite, say, a crazy blogger?
http://www.bp.com/content/dam/bp/pdf/En ... t_2030.pdf
See figures 2 and 3 on the page numbered 30. (pp 25 - 36 included on this link). It looks like a stair stepped increase in global demand through 2030 to me, with China having significant increase in demand.
http://articles.economictimes.indiatime ... gy-outlookParis-based IEA in its annual World Energy Outlook said the centre of gravity of energy demand is switching decisively in favour of emerging economies, particularly China, India and the Middle East, which drive global energy use one-third higher.
And of course, let's pretend that the KSA's Aramco hasn't been valued at roughly $10 TRILLION dollars as recently as 2010.
https://en.wikipedia.org/wiki/Economy_of_Saudi_Arabia
See "Saudi Aramco" near the bottom of WIKI the article":Saudi Aramco (officially the Saudi Arabian Oil Co.), is a Saudi Arabian national petroleum and natural gas company based in Dhahran, Saudi Arabia.[90][91] Saudi Aramco's value has been estimated at up to US$10 trillion in the Financial Times, making it the world's most valuable company.[92][93][94] (ARAMCO is state-owned and unlisted.)
So say the economic pundits are off by several $trillion. Doesn't exactly sound like bankruptcy any time soon to me.
ROCKMAN wrote:Perhaps a simple answer to the question: if you own a finite cash generating asset do you sell it at a low price to max your cash flow or do you decide to start keeping more of it for future sales at hopefully higher prices? IOW In the middle to long term is the KSA better off paying interest on those bonds and saving as much oil as possible to sell at a higher price later? Depends on what assumptions you make in the pricing model. And the assumption that the KSA might reduce exports once they get those new bond monies.
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