Worries in the Middle East

The Middle East is not immune to the problems around the world and to some degree it’s probably more vulnerable as these countries have not faced a crisis in a while.

Worries in the Middle East

The Middle East is not immune to the problems around the world and to some degree it’s probably more vulnerable as these countries have not faced a crisis in a while. Thus they are likely to have more excess fat around the edges. We are finding from headlines that Kuwait is having a bank crisis.  Meanwhile Dubai, the city of construction cranes, will likely to soon be called the city with half finished projects as hundreds of billions in construction projects are canceled due to a slowdown in the economy.

So why do we care what is taking place in the Middle (of nowhere) East? Two reasons:

  1. Oil. Our “friends” in the Middle East cannot afford to cut their oil production to support high oil prices. They have billions of dollars of debt coming due that they have to refinance. Though the logical thing to do to maximize the value of their reserves in the long-run (long run is the key word) is to cut oil production, they cannot afford to do that as they need oil revenues (any revenues) NOW!
  2. Countries of the Middle East will not big buyers of US Government debt, as they’ll need money at home. Another natural buyer of US Treasuries is going away.

Please read the following important disclosure here.

Related Articles

From Bull to Sideways Markets to Nvidia

I discussed my condensed views on the stock market, economy, and our investment strategy in a letter to IMA clients.

Traditions, Investment Conferences and Presentations

Investment conferences are the constants in my life. This year, we heard 24 presentations in three days at VALUEx Vail.
The Slippery Slope of Student Loan Forgiveness

The Slippery Slope of Student Loan Forgiveness – Edition 2024

My daughter Hannah was just accepted to University of Denver. She might take out student loans. Why wouldn’t she?
Hedging the Portfolio with Weapons of Mass Destruction

Hedging the Portfolio with Weapons of Mass Destruction

Uber's business is doing extremely well. It has reached escape velocity – the company's expenses have grown at a slow rate while its revenues are growing at 22% a year.

Leave a Comment