Another Wild Waste of Saudi Money

As some of the saner elements of Saudi Crown Prince’s circle of advisors feared, investors will be perplexed to learn that a big chunk of the money raised from the Aramco-Sabic deal will be pumped into Saudi Arabia’s NEOM futuristic city project on the Red Sea, according to our high-level sources in Riyadh.

The Aramco-Sabic deal, as we have noted previously, was a scheme to get more cash for the Saudi sovereign wealth fund (PIF). Aramco bought the Sabic shares from PIF in what was a very complicated and undesirable way to raise money and which saddles Aramco with an asset it doesn’t need at all. This was a sacrifice for Aramco and a benefit for the PIF (such things happen with state-controlled entities, even when they do not make market sense).

Of all the things that could be done with the money raised by PIF from this sale, the worst fear among financial advisors was that it would be wasted on NEOM – a robot-led city that represents yet another audaciously grandiose project pushed by MBS, and which we are certain will fail miserably. There aren’t any foreign investors we are aware of who want to get in on NEOM outside of the Chinese who operate on an entirely different set of investment criteria (their only criteria being diplomacy and power footholds; for instance, as a way to break further into the Saudi arms market).

In the meantime, the Khashoggi affair is still causing problems for the Saudis, with our sources inside the PIF saying that they’re having a hard time getting anyone interested in taking their money in the form of investment.

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Taking the US-Iran Conflict to the Brink, and Then Backing Down

Watch very carefully what happens next surrounding US-Iran tensions. There are many indications that this is – again – a Trump effort to bring things to the brink before backing away to gain additional leverage. This is a tactic that is difficult for investors and analysts to grasp because the temptation is very high to consider, each time, that this means war (with trade, with Iran, etc). In the case of Iran, though, there is always the danger that Trump will take things too far, beyond the point at which there can be any backtracking, as proxies begin to take matters into their own hands.

However, the indications are back-and-forth that Trump wishes to scale tensions back again, most recently telling the public that he is not even gunning for…