worrying
Igor Loving
lovingigor@hotmail.com
Wed, 02 Jul 2003 06:58:01 -0500
<html><div style='background-color:'><DIV>
<P><BR>ART WHERE IS IT? <FONT face=Arial> <A href="mailto:austin-ghetto-list@pairlist.net">austin-ghetto-list@pairlist.net</A></FONT></P>
<P align=center><FONT lang=0 face="times new roman" size=6 FAMILY="SERIF"><B>House of Saud = House of Cards<BR></FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face="times new roman" color=#000000 size=4 FAMILY="SERIF"></B>by Bill Powers, Editor<BR><I>Canadian Energy Viewpoint<BR></I>June 29, 2003 </FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 size=3 FAMILY="SANSSERIF"><BR>
<P align=left><BR></FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 size=2 FAMILY="SANSSERIF">One of the most important political and economic events of the first decade of the 21st century is the coming regime change in Saudi Arabia. Predicting the fall of governments is very similar to shorting stocks, one gathers all the fundamental facts about the situation, checks and re-checks all facts and figures, and then takes action. While it is impossible to predict the time and date of the fall of the House of Saud, a preponderance of evidence suggests it is inevitable. Let’s examine several of the myths surrounding the current state of affairs in Saudi Arabia and what the country’s downfall will mean for investors in the Canadian energy sector.</FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 size=3 FAMILY="SANSSERIF"><BR><BR></FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 FAMILY="SANSSERIF"><FONT size=2>One of the greatest myths regarding Saudi Arabia is that it is a wealthy country. While it’s true that Saudi Arabia has the world’s largest oil endowment and a royal family that leads the world in conspicuous consumption, the country’s financial health continues to deteriorate. The country’s severe economic problems are a result of an exploding population and a lack of economic growth outside of the oil industry. The country’s population has grown from 10 million citizens in 1980 to over 22 million today. The below quote from the US Energy Information Agency’s website succinctly describes today’s economic challenges in Saudi Arabia. (The quote can be found at the following URL: </FONT><A href="http://64.4.26.250/cgi-bin/linkrd?_lang=EN&lah=9be6e942ff84f2fa39562c7c6883e7dd&lat=1057145461&hm___action=http%3a%2f%2fwww%2eeia%2edoe%2egov%2femeu%2fcabs%2fsaudi%2ehtml" target=_blank><FONT face=Tahoma color=#000099 size=2>http://www.eia.doe.gov/emeu/cabs/saudi.html</FONT></A></FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#0000ff size=2 FAMILY="SANSSERIF">)</FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#0000ff size=3 FAMILY="SANSSERIF"><BR><BR></FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000080 size=2 FAMILY="SANSSERIF">“Slow economic growth is not good news in a country with a rapidly increasing (and young -- 50% under age 15) population, many of whom cannot find good jobs outside of the public sector (which is overstaffed and a drain on the country's budget). Over the past two decades or so, Saudi real economic growth has fallen far behind population growth, resulting in sharply reduced real per capita incomes and higher unemployment (officially estimated at 15%, with the true level likely much higher). Per capita oil export revenues (in inflation adjusted dollars) remain far below high levels reached during the 1970s and early 1980s (around $2,563 per person in 2001, versus $23,820 in 1980, for instance). Saudi Arabia also has a high level of domestic debt (around 100% of GDP) which it hopes to pay down.“</FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 size=3 FAMILY="SANSSERIF"> <BR><BR></FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 size=2 FAMILY="SANSSERIF">Despite many protestations by the royal family that Saudi Arabia has invested its oil money in infrastructure, defense and an economic diversification plan, the country has little to show for all of its spending. Saudi Arabia is burdened with more military equipment than it could possibly use, woefully uncompetitive state supported industries and poor infrastructure. Where did all of the money go? It was frittered away by the thousands of dependents of the royal family and stashed in overseas bank accounts.</FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 size=3 FAMILY="SANSSERIF"><BR><BR></FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 size=2 FAMILY="SANSSERIF">With little exploration success since the 1960s and many of its fields showing signs of decline, Saudi Arabia is having an increasingly difficult time keeping production flat. According to energy investment banker Matt Simmons, head of Simmons and Company International, many of the country’s aging fields are showing increased water cuts. Water cuts, water produced along with crude oil that is later separated, are a sure sign that a field is headed into decline. The country’s largest field, Ghawar, now produces over 1 million barrels of water a day along with its nearly 4.5 million barrels of crude. With Ghawar accounting for 60% of the country’s 7.5 million barrels per day of crude production, there is little hope Saudi Arabia can keep production flat if Ghawar continues to water out. Since Saudi Arabia cannot invest the billions of dollars needed to maintain current production and develop smaller fields, Ghawar has assured the world high oil prices are here to stay.</FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 size=3 FAMILY="SANSSERIF"> <BR><BR></FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 size=2 FAMILY="SANSSERIF">Another great myth about Saudi Arabia is that the country has spare production capacity. Many believe that Saudi Arabia’s spare production capacity allows them to “turn on the spigots” at times of high oil prices. It is extremely unlikely the country has any spare capacity. There exists little incentive to restrict production at times of high prices and low inventories. Unless human nature has changed substantially in recent months, I doubt that the cash-strapped Saudis are producing much below their production capacity.</FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 size=3 FAMILY="SANSSERIF"><BR><BR></FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 size=2 FAMILY="SANSSERIF">The situation in Saudi Arabia has caught the world in somewhat of a Catch-22 in terms of oil prices. If oil prices were to fall anywhere near $20US and remain there for a significant period of time, the quality of life for the average Saudi citizen would deteriorate to such a degree that an overthrow of the royal family would be almost certain. History tells us that when a country has a sudden regime change, oil production drops precipitously. A few examples would be Iran in 1979 when oil production dropped from 6 million barrels per day to zero almost overnight, the collapse of the Soviet Union devastated oil production in Russia and more recently the regime change in Iraq halted all oil production in that country.</FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 size=3 FAMILY="SANSSERIF"><BR><BR></FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 FAMILY="SANSSERIF"><FONT size=2>Some of the best insights into the current state of affairs of a country can be gleaned from those who have gained first hand knowledge of the country through travel. World-renowned investor and author </FONT><A href="http://64.4.26.250/cgi-bin/linkrd?_lang=EN&lah=593255f3584452a6988d334151bf21df&lat=1057145461&hm___action=http%3a%2f%2fwww%2efinancialsense%2ecom%2fExperts%2f2003%2fRogers%2ehtm" target=_blank><FONT face=Tahoma color=#000099 size=2>Jim Rogers</FONT></A></FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#0000ff FAMILY="SANSSERIF"><FONT size=2>, who recently completed an outstanding book titled “Adventure Capitalist,” had the following to say about the country after his visit to Saudi Arabia: (For more information about Jim and his travels please see </FONT><A href="http://64.4.26.250/cgi-bin/linkrd?_lang=EN&lah=0f3da20fba10d6dc995dab37d43b464d&lat=1057145461&hm___action=http%3a%2f%2fwww%2ejimrogers%2ecom%2f" target=_blank><FONT face=Tahoma color=#000099 size=2>www.jimrogers.com</FONT></A></FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#0000ff size=2 FAMILY="SANSSERIF">)</FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#0000ff size=3 FAMILY="SANSSERIF"> <BR><BR></FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000080 size=2 FAMILY="SANSSERIF">“By the 1990’s the Saudis were spending much more money than they had, and the nation’s debt began to skyrocket. Today, despite its considerable assets, the country is one of the more indebted countries in the world. If the price of oil drops, the government will ultimately go bankrupt. It will no longer be able to support all of its princes much less its mullahs. Only if oil prices remain high will Saudi Arabia be able to whether the storm—perhaps.” Jim Rogers, “Adventure Capitalist," p. 225</FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 size=3 FAMILY="SANSSERIF"><BR><BR></FONT><FONT lang=0 style="BACKGROUND-COLOR: #ffffff" face=Arial color=#000000 size=2 FAMILY="SANSSERIF">The coming fall of Saudi Arabia is going to have a huge impact on investors in the Canadian energy sector. The news that the royal family has been finally thrown out will almost certainly send oil prices skyrocketing. The heights to which oil prices would climb is anybody’s guess. What is more important is that prices will climb to unheard of levels almost overnight. As I mentioned earlier, predicting regime change in a country is like shorting stocks, do your research, take your position and wait for the wheels to come off. While it might seem like an eternity for your thesis to be proven, its fruition is often well worth the wait. I believe we are already seeing signs that the House of Saud is in trouble. With the recent bombing of an American compound and the State Department’s temporary closing of the US embassy in Riyadh, it is clear that we are at the beginning of the end of the House of Saud.</FONT><BR></P></DIV>
<DIV></DIV>>From: "mpriest1" <MPRIEST1@FLASH.NET>
<DIV></DIV>>To: "Igor Loving" <LOVINGIGOR@HOTMAIL.COM>
<DIV></DIV>>Subject: RE: worrying
<DIV></DIV>>Date: Tue, 1 Jul 2003 08:11:42 -0500
<DIV></DIV>>
<DIV></DIV>>vedddddy intresting, and a good idea. i'm on it. When you wanna get
<DIV></DIV>>together? Don't have Gerry's email address, but might be able to get it
<DIV></DIV>>from the Union.
<DIV></DIV>>
<DIV></DIV>>miguel sacerdote
<DIV></DIV>> -----Original Message-----
<DIV></DIV>> From: Igor Loving [mailto:lovingigor@hotmail.com]
<DIV></DIV>> Sent: Tuesday, July 01, 2003 6:55 AM
<DIV></DIV>> To: mpriest1@flash.net
<DIV></DIV>> Subject: RE: worrying
<DIV></DIV>>
<DIV></DIV>>
<DIV></DIV>>
<DIV></DIV>> Possible senario you go to Real and rent our room and take care of the
<DIV></DIV>>place while we are mired in Austin? Take care of the cats etc. for a month
<DIV></DIV>>of Sundays. We need to talk about that senario.
<DIV></DIV>>
<DIV></DIV>> Take all your stuff to the club and store it, I doubt Mr Planet would sell
<DIV></DIV>>any of it and Henry wouldn't either. So that is a positive way toward
<DIV></DIV>>extrication from the living hell which is Austin. PUT MY CARTOON ON THE WEB.
<DIV></DIV>>SEND IT TO GERRY STORM
<DIV></DIV>>
<DIV></DIV>>
<DIV></DIV>> >From: "mpriest1"
<DIV></DIV>> >To: "Igor Loving"
<DIV></DIV>> >Subject: RE: worrying
<DIV></DIV>> >Date: Mon, 30 Jun 2003 11:00:34 -0500
<DIV></DIV>> >
<DIV></DIV>> >Thank you, man ....i needed that. Did that Vivian ever come back to Real?
<DIV></DIV>>I
<DIV></DIV>> >got a phone message from her once from California, and i called er back
<DIV></DIV>>and
<DIV></DIV>> >left a message but got no response. I wanna go to San Antonio some time
<DIV></DIV>>and
<DIV></DIV>> >see the sights.
<DIV></DIV>> >
<DIV></DIV>> >Tryin to get mo positive. Goin to see a counselor on weds. free from the
<DIV></DIV>> >Sims foundation.
<DIV></DIV>> >
<DIV></DIV>> >vaya con queso,
<DIV></DIV>> >
<DIV></DIV>> >miguel
<DIV></DIV>> >
<DIV></DIV>> >
<DIV></DIV>> >
<DIV></DIV>> >-----Original Message-----
<DIV></DIV>> >From: Igor Loving [mailto:lovingigor@hotmail.com]
<DIV></DIV>> >Sent: Friday, June 27, 2003 8:57 AM
<DIV></DIV>> >To: mpriest1@flash.net
<DIV></DIV>> >Subject: worrying
<DIV></DIV>> >
<DIV></DIV>> >
<DIV></DIV>> >You hsve got to relax and stop allthis worrying. Go with the flow a
<DIV></DIV>>little
<DIV></DIV>> >more and stop being so damn negative. Just smile and blunder on. That has
<DIV></DIV>> >always worked in my case. When you negativeatise you become a bundle of
<DIV></DIV>> >negative energy and it radiates and recreates and you start thinking
<DIV></DIV>>about
<DIV></DIV>> >all the possible things that can mess your life up. The ones that aren't
<DIV></DIV>> >happening right now should be ignored like the Iraq situation, the
<DIV></DIV>> >Afganistan War, Bush, redistricting, etc. Those things have no bearing on
<DIV></DIV>> >what is happening right now this minute. Forget women they have no
<DIV></DIV>>bearing
<DIV></DIV>> >on anything, and in your case from observation they create negative
<DIV></DIV>>energy.
<DIV></DIV>> >Look at life as fun and enjoy the bad things as if they were good. Look
<DIV></DIV>>at
<DIV></DIV>> >the car wreck as a good lesson in car wrecks and wasn't it fun to survive
<DIV></DIV>> >and to hell with the ticket wasn't it fun that it was only for careless
<DIV></DIV>> >driving instead of manslaughter. A sort of strange attitudeal change.
<DIV></DIV>> >
<DIV></DIV>> >What about JFKLN?
<DIV></DIV>> >
<DIV></DIV>> >Went to Saxon Pub and saw good music.
<DIV></DIV>> >
<DIV></DIV>> >Need more input.....
<DIV></DIV>> >
<DIV></DIV>> >_________________________________________________________________
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<DIV></DIV>>
<DIV></DIV>>
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