[misterno]

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.
------------------------
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.
------------------------

[misterno]

All SA's reserves are invested in US treasuries

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.

Saudi 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."

Saudis to keep reserve management strategy

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:

The 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.

Saudi drawing down FX reserves to cover deficit, data suggests

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.

recent 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.

The Management of GCC Official Foreign Assets

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

Sorry to respond late on this one

In many articles I have been reading, SAMA's top guy was officially quoted that they don't want the reserve to be actively managed like Norway's. Yet the link you provided shows otherwise. It shows equities and non dollar assets which bear risk of all kinds. So there is conflicting information here. When it comes to Middle East who knows what is right or wrong? Whoever has been to middle east, lived there worked there will understand what I am saying.

outcast_searcher I think the above info is what we have been looking for.

The last time I checked SAMA's website, after a quick search, I was not able to see the composition of their investments or it is there but I did not see it.

People in oil and gas business should understand, Saudi Arabia's finances is the single most important factor in oil prices. Yes there is shale oil and yes Iraq and Iran has so much oil etc etc

But at the end for now, Saudis are the most influential in oil markets. What they say and what they do can alter the market in a second. They have most swing capacity after all. They are a long time ally of USA, and seems like these 2 beasts keep supporting each other in international politics and finance whether this is publicized in the media or not but people knows.

So if SA's reserves keep dwindling, they can take measures that can shock currency/commodity/bond markets very quickly.

[americandream]

[quote="misterno"]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.
------------------------
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.
------------------------[/quote]

Makes sense.

[misterno]

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

[americandream]

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

Haha. No. Not a moderator. I day trade forex on my own account.

Whats your background? You any good at technical analysis?

I turned off my PM due to concerns with certain unstable types.

If you are interested in forex, just a quick heads up here and I will pm you in due course if interested.

[StarvingLion]

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.
------------------------
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.
------------------------

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.

The House of Saud is about as powerful as the City of London who have to bulldoze their towns and frack to keep the "hard working people" (they mean financial sector, politicians, doctors, lawyers) from starving to death.

Lesson: Manufacturing matters, unlike the dunce bankers who gave it away.

[americandream]

SL...The industrialists are as heavily invested in false money as are the bankers.

[Pops]

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?

[Outcast_Searcher]

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?

Somehow, I think it's a bit early to call the KSA "broke" or forecast that it will be.

NOT that I think what it's doing now (selling lots of oil dirt cheap to keep its share of the market in bad times to be a seller) is smart.

Despite all the claims on this site that people can no longer afford oil, crude oil averaged north of $90 for a good four years before the recent price tumble started, and the global economy has tended to make slow but meaningful progress throughout the past five years.

If prices stay low for a decade and the KSA has not meaningfully diversified its economy or stopped selling cheap oil full tilt AND it hasn't done things like greatly reducing the size of their national budget via things like greatly reducing the massive subsidies on things like oil for its citizens -- then this will certainly deserve another look. In the mean time, its massive sovereign investments should sustain it just fine, even if they carry significant budget deficits.

Oh, and I'm FAR from ready to bet that oil will stay at or below, say, $50 for a decade, much less far longer than that. For one thing, it's not like Chindia transpo oil demand is going away, no matter how much the greens prattle on about solar energy.

[zoidberg]

I seriously doubt sa has all reserves in us treasuries. Theres no reason to do it and many reasons not to do it.

If that's what you read it's a scam or propoganda article.
https://www.imf.org/external/np/sta/ir/ ... cursau.htm

It's not all us treasuries

[Outcast_Searcher]

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-outlook

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.

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.

[misterno]

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-outlook

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.

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.

value of Aramco when oil is $100 = 10 trillion

value of Aramco when oil is $48 = ???

My 2 barrels..

[StarvingLion]

The international prices are bullshit.

Saud gets whatever it can for its oil which isn't very much these days.

Saud always sells below cost to the industrial manufacturing giants otherwise they get 'Nicky'ed' in the corn field like Saddam and Mooamir.

Cripes, even the saudi people don't pay anything for their oil and you believe the people with the bigger sticks do?

[zoidberg]

Lol. Yes the quoted price is bullshit.


No its what the giants pay. The US military still protects sa at least for now. But they import oil from there at market prices too. Their populace is bribed but that doesn't mean everyone gets it for free.

[ROCKMAN]

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.

[zoidberg]

Reminds me of guns and butter that started the US leading the debt charge during Vietnam. Cant fight and give cushy jobs or useless royals everything they want on what they earn so they borrow.

My bet is they find themselves in quicksand and losing their assets to dollar peddlars ie wall street. Just another emerging market economy trapped. Maybe they got plans to sell oil higher it's a good idea but I think they won't win the debt race. Low oil prices will mark peak oil because consumers can't bid anything.

[misterno]

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.

I love your approach, how come I never thought about it?

So they borrow now to avoid selling oil for cheap and keep the oil underground to sell for a more price in the future

So the interest they pay on debt is miniscule compared to price difference.

This is very smart.

OTOH, I am desperately looking for an investment vehicle linked to oil price. If you have any ideas please post it to below thread please. I need to hurry up and invest before oil starts to go up again.

where-would-you-invest-if-you-think-oil-prices-will-go-up-in-t71716.html

Oil WILL GO UP. I am %100 sure.

[zoidberg]

Friendly advice don't get married to a trading position...nothing is 100 per cent you think that your going to get taken to the cleaners because you'll only believe and listen to info or other people's opinions that jive with your assumption. Lot of connected rich ppl been burned betting on the oil price.