Saudi Prince Vows Thatcherite Revolution and Escape From Oil
Date
4/27/2016 3:33:07 AM
(MENAFN- ProactiveInvestors - UK) Fuller Treacy Money 08:12
Saudi Prince Vows Thatcherite Revolution and Escape From Oil
Here is a latter section of this topical column by Ambrose Evans-Pritchard for The Telegraph:
The reform blueprint is inspired by a McKinsey study Beyond Oil that laid out how the country can double GDP over the next fifteen years and reinvent itself with a $4 trillion of investment across eight industries from electrical manufacturing to cars healthcare metals steel aluminium smelting solar power and most surprisingly tourism. McKinsey warned that half-hearted reform risks disaster and bankruptcy.
There is some logic to the Vision2030 plan given Saudi Arabia's access to cheap energy. Delivery is another matter. 'We have seen these sorts of transition plans before and they never come to much' said Patrick Dennis from Oxford Economics.
'I don't think they can pull this off. The riyal peg is grossly overvalued and that makes it even harder. We think market pressures will become overwhelming if there is little evidence of real reform by 2018.'
Under the plan Riyadh will sell up to 5pc of the state oil giant Aramco to global investors and convert the secretive behemoth into a modern company with transparent accounts.
He valued the group at $2 trillion but this figure is plucked out of thin air. Investment funds have demanded a steep discount before buying into partial privatisations of this sort in Russia and other petro-states with a weak rule-of-law fearing that they may be held hostage to politics.
The aim is to transfer the proceeds into the country's sovereign wealth fund using the money to diversify into global investments. These will generate a non-energy income in the future along the lines of the Norwegian petroleum fund.
It is unclear how this Saudi fund can plausibly reach $3 trillion unless oil rises back above $100 a barrel and stays there for a long time. The country is currently depleting its foreign exchange reserves by $10bn a month to cover a budget deficit still near 15pc of GDP drawing down its overseas wealth to fund its military build-up a war in Yemen and life-support for Egypt as well as paying state salaries.
The Saudis may have left it too late to break oil dependency in time especially as renewable energy reaches parity and the COP21 climate accords signal a move to worldwide carbon pricing. India is already examining plans to switch its entire transport system to electric power.
David Fuller's view
I hope Prince Mohammad bin Salman succeeds as that would be best for a degree of stability in the Middle East. However I agree with all the reservations in this article above and also others which I have published. Nevertheless at least the Prince has ambition energy and a plan for dragging his country into the 21st Century. Good luck to him.
This item continues in the Subscriber's Area where a PDF of AE-P's article is also posted.
The Markets Now Presentations
David Fuller's view
We had a lively evening at The East India Club last night featuring the best presentations from Charles Elliott and Iain Little that I have heard to date plus some topical views on Brexit from delegates.
Two PowerPoint presentations are posted in the Subscriber's Area.
The Weekly View: A Letter to the Post-Boomer Generation
My thanks to Rod Smyth for his excellent letter published by RiverFront. Here is a brief sample:
In the earlier years do not be alarmed by market declines. Investing is an emotional experience which is where advice can help. Bull and bear markets (significant rises and significant declines in price) will likely happen during your saving years. Think about it you would probably much prefer to see declines in the early years while you have less money and are adding every year or every pay period. Assuming what you are investing in goes up over time you want to have prices at their lowest when you are buying and at their highest as you approach retirement. Emotionally we like to see our money grow even in the early years but logically we should recognize that when we are 'putting pennies in the jar' lower prices are a good thing as long as we believe markets will go up over time. If we do not believe that then we shouldn't be investing.
David Fuller's view
Inevitably there is a significant element of luck with investing. Catch a market or sector at the beginning of a long-term economic expansion and you do exceptionally well particularly if dividends are reinvested. Conversely commence investing in what eventually proves to be the top of a long-term cycle and you could be lucky to break even.
It is the same with many developed country government bond markets which have enjoyed tremendous bull trends over the last 35 years. I think the next 35 years are likely to be distinctly mediocre.
Art has always interested me but it also has a big element of fashion in addition to doing much better during inflationary rather than deflationary periods.
My children in their 40s who live in London have mainly invested in their homes and done very well despite mortgage costs. However London is not typical having tremendous bolthole appeal which has so far ensured that demand way outstrips supply. In Tokyo property investors made fortunes during the 1960s through the 1980s but have seen valuations plummet since 1990.
What can we say about investments going forward?
This item continues in the Subscriber's Area where a copy of Rod Smyth's Letter is also posted.
Roger Bootle: The Things Economists Know and Do Not Know About Brexit
Here is the conclusion of this informative column published by The Telegraph:
Meanwhile the EU would have to embark on truly momentous changes in order to make the eurozone work. Banking union fiscal union and political union must be put in place for the euro to survive.
We don't know what effects this cocktail of changes will have upon European politics and economic performance and hence on us.
''We know that inside the EU we do not have full control of our destiny.''
Roger Bootle
The overwhelming majority of the EU will be inside the euro and what needs to be done to make the euro work would be the EU's leading concern.
We do not know what things will be forced upon us by qualified majority voting. Moreover with the referendum behind us there is a good chance of a renewed push to get the UK into the euro. What have the calculations that produce the figure 4300 a year got to say about this? The answer of course is precisely nothing.
And all this is before we take account of the dynamic effects and their political consequences. Perhaps after a Brexit our leaders would become enmeshed in rivalrous infighting and it would be impossible to put together an economic programme for national renewal.
But there is surely a good chance as Michael Gove suggested last week that by contrast EU departure would be the equivalent of a shot in the arm.
Nor did the study have anything to say about the congestion and social costs implied by uncontrolled immigration which are at the heart of so many people's concerns about the EU.
Although the future is beset with uncertainty about this issue we do know some things. We know that over recent decades the EU has been a comparative economic failure.
We know that unless something really radical happens it is set to fall sharply in relative economic performance over the decades to come. We know that the EU is set to embark on a course of integration from which we aim to stand aside. We know that inside the EU we do not have full control of our destiny.
We know that inside the EU but outside the eurozone we will be marginalised.
I cannot say what all this means in terms of pounds per annum for the UK average household in 15 years' time. But I can recognise the difference between a situation of opportunity and a pig in a poke.
David Fuller's view
For myself and also my three-generation British family staying in the EU feels like the inertia of running a loss on a trading position hoping that it might improve but without any analytical evidence or conviction that it is likely to do so.
Email of the day on stops
The piece that you wrote on Tesla immediately made me think of the "stop loss" technique that you teach at the seminar. It seems to me that Tesla shareholders who are worried about its share price would do well to use stop losses now and in the future.
Eoin Treacy's view
Thank you for an email of general interest. I have to admit I feel increasingly conflicted about the use of stops. On the one hand they are useful because they force us to think about when to decide to get out. On the other they represent siren calls to increasingly sophisticated programs informing them of where people have decided to exit positions.
Too often I have placed stops where I believe it is reasonable to do so taking the consistency of the price action the potential for a drawdown and volatility of the instrument into account only to see it triggered and prices rally subsequently. Einstein's definition of insanity is doing something over and over again and expecting a different result so I have felt under pressure to evolve my attitude to stops.
Genetic Superheroes?
This article from 23andMe may be of interest to subscribers. Here is a section:
A Few Examples Of How Resilient Individuals Have Already Helped Researchers
Human Knockout Project Daniel MacArthur started this project out of his lab at Massachusetts General Hospital and the Broad Institute. He's looking for healthy individuals with so-called loss function variants genes that do not code for a protein. Researchers routinely 'knock-out' the function of a gene in mice when studying what a gene does.
PCSK9 The gene regulates the level of LDL cholesterol but researchers found that certain individuals with loss function variants in the gene were protected against high lipid levels. Since the discovery several pharmaceutical companies have used this discovery to develop new therapies for combating high cholesterol.
Alzheimer's Escapers 'Escapers' are individuals who have the genetic variants that put them at very high risk for disease but for whatever reason never develop it. The Washington University School of Medicine is looking at families that are genetically predisposed to
Alzheimer's Disease looking for individuals who have 'escaped' getting the disease for insights into new treatments. 23andMe has also found escapers.
HIV By identifying rare mutations in the gene CCR5 that provide resistance to HIV infection researchers hope to find a vaccine against AIDS.
Diabetes A few years ago researchers discovered that a variant in the gene ZNT8 protects even obese people from diabetes. Since then researchers have been using this as a possible drug target to protect against diabetes.
Eoin Treacy's view
The movement to study healthy people as a way to identify how to treat illness is quickly gaining ground in the technology community. After all when you go to hospital it is full of sick people but the wider world is full of people who are healthy. Doesn't it make sense to find out why some people get sick and others don't?
Bob Diamond Confirms the Rumors: He Wants Barclays Africa Back
This article by Richard Partington for Bloomberg may be of interest to subscribers. Here is a section:
Staley is putting one of Barclays's more profitable businesses on the block at a time of low commodity prices and political turmoil in South Africa. He's preparing to sell an initial 10 percent stake in the Johannesburg-based business to several large investors while keeping the option to divest its entire holding people familiar with the matter have said.
'There will be some people who would be slightly nervous about selling a business to somebody who was an insider before'
Piers Hillier who helps oversee about $123 billion including Barclays shares as chief investment officer of Royal London Asset Management said in an interview with Anna Edwards on Bloomberg TV. 'We'd want to see not just one candidate who's effectively a former insider as the only available candidate to purchase. It doesn't tend to mean you're going to be able to secure the best price.'
Atlas Mara said its board of directors 'supports the exploration of the potential combination' of the company with Barclays's African operations while Diamond and Thakkar will 'recuse themselves' from the firm's internal discussions over the potential approach.
Atlas Mara stock gained 7.3 percent at 3:10 p.m. in London trading. It has still fallen about 16 percent this year amid a reversal of the commodities boom that made Africa the last great growth frontier.
Atlas Mara also reported its first annual profit today as lending jumped 15 percent and deposits rose 12 percent.
'Strategically the building blocks are falling into place and I fully expect that 2016 will demonstrate further progress on our journey towards building sub-Saharan Africa's premier financial institution' Chairman Arnold Ekpe said in the statement.
Eoin Treacy's view
With Africa expected to account for the bulk of population growth over the coming decades the continent represents one of the few remaining big growth stories for the banking sector. The decline in commodity prices and the associated uptick in political discontent is not going to stop young people from growing up and wish for a better standard of living.
The Chart Seminar 2016
Eoin Treacy's view
Thank you to everyone who has expressed interest in The Chart Seminar this year. Our plans are to hold a webinar sometime in June and I will share details of this as we firm up how best to conduct it. The timing of the seminar will be catered to where the majority of delegates sign up from but we'll try to pick a time when the most possible people can tune in live.
We also plan to hold two seminars in physical locations this year. From some subscriber feedback I was thinking of holding one in Los Angeles during the summer and another in London during the fourth quarter. If you would like to express interest in any of our events please message Sarah Barnes at [email protected]/* */
Fuller Treacy Money