Friday, August 05, 2011

The Grim Reaper Is Pleased - Saudi Arabia Attempts To Dislodge Tower Of Babel Title From Burj Dubai

When oil was raging into the peak oil fervor prior to the 2008 collapse, we said oil was a massive bubble and that it would implode and then rise again with an eventual  bust.  (Loosely, the same ABC pattern we have written that I expect financial markets to follow from the peak in 2007.)  Our downside price target for that first fall in oil came within a few dollars of where oil actually ended up in the 2008 financial collapse before rising to its current price.   In other words, the A component of the pattern completed in the 2008 collapse and we are either in the end of the rising B component of the pattern or I believe we could be by the end of the year.   A lucky call on the implosion and downside price of oil?  Maybe.  More likely “In the fields of observation, chance favors only the prepared mind.”.    

And in 2008 we also wrote that the Middle East oil states were going to experience an economic bust as their main source of revenue collapsed.   And we called out the Burj Dubai (And many similar projects in China)  the modern day Tower of Babel while writing of the Skyscraper Indicator.  We compared the two as examples of  humanity’s endless arrogance and belief that man had become God via his belief that he had achieved dominion over the earth.   As an aside, most people don’t realize many of these oil states are some of the most fiscally-mismanaged, indebted states on earth as their plutocracy endlessly pilfers from the people to fund their decadent and often hedonistic lifestyles – arrogant manifestations of power and greed. 

Mind you, we wrote all of this was when Goldman Sachs, other global financial firms and multinational corporations were building grand palaces in Arab states to serve their newly cash-rich oil states with oil expected to reach $200-300 a barrel as supply shriveled.  All basked in their own brilliance.   And just about every financial mind in the world, be they bull or bear, every politician and every media outlet was consumed in the same belief.  My  point?  These conspiracy theorists who assign brilliance to a global cabal of goons who have a master plan to kill us all is ridiculous.   Bureaucrats are some of the most unstable and most incompetent minds in society.   These people are idiots.  This global mess was driven by systemic and delusional incompetence of the bureaucrat as we have ranted incessantly.

Now most of the Middle East is on fire both economically and socially as some of the most corrupt thugs on earth begin to reap what they have sown.  (Instability in manmade institutions is also part of our long term theme as we traverse the cycle of volatility.)

Saudi Arabia arguably isn’t even a country.  It’s a fiefdom run by an intricate web of organized crime families that has sprung forth from the sand for one reason; to thieve some of the largest oil deposits on earth.  And just like in any plutocracy anywhere, including Europe, the U.S. and China, they pilfer their way to great riches.  To no one’s surprise, the teachings of  the Quran and obedience to virtue, humility and morality are used to control impoverished and underprivileged so the organized crime families in Saudi Arabia can keep control of their fiefdom and continue its endless pilferings.   As we have written, the plutocracy is always attempting to divide society with meaningless issues, racism, hatred and other forms of control in order to continue their thievery.  Seems a bit like feudal Europe and its use of religion many hundreds of years ago, eh?  Not too surprising since the unstable mind of power and control is completely predictable.

One of those plutocrats in the Saudi fiefdom runs Kingdom Holdings in Saudi Arabia.  That is, Prince Alwaleed.  (Who, by the way, is a favorite of the plutocratic sycophants at CNBC.  That reminds me, one of our calls is that CNBC’s biggest clown will no longer be on the air by the time this crisis has passed.  Unfortunately, the Federal Reserve bailed out systemic incompetence not just on Wall Street and the corporate state but also the shills on CNBC.)  The great prince, part of the global “investor class”, considers himself to have the Midas touch when it comes to investing.   Of course, that’s quite easy to delude yourself into thinking when the Saudi TASI market index ran up 800% over the prior decade into the 2005-2006 blow off top.  And so did many of the international markets where he invested his pilferings.  It was easy to delude oneself of their investing savvy over the last fifteen years when you take almost everything from society to make your riches.   You know, just like Wall Street has done in the United States.  

Now the grand prince is telling us it takes guts to build the next Tower of Babel, what will be the largest building on earth by eclipsing the current Tower of Babel, the Burj Dubai, by 173 meters

I guess the prince didn’t learn anything when Dubai collapsed a few years ago and had to be bailed out by its neighbor.  Or that the Burj, the Palms Jumeirah and other equally hedonistic real estate ventures in the Middle East have come crashing down.  Or that Dubai vacancy rates are hovering around 50% while lease rates have fallen 75%.  And this is after their economic recovery.  What happens if oil heads back to $10-20 dollars a barrel?  Or that Saudi’s real estate market is now the hottest in the world and the great Prince Alwaleed now has the appearance of the world’s greatest dunce as he announces he will build the new Tower of Babel in what may very well be the top ticking of the biggest real estate bubble in the world.

I guess this is all as it should be.  Remember, one of our anticipated outcomes is that the investor class is going to living on heating grates before this cycle ends.  The great prince is doing his part to ensure that outcome  becomes a reality.  

To all of the peak oilers out there, we are in the midst of the largest oil glut in my adult life time.   We have more excess oil aka unsustainable supply/demand imbalances than when oil was selling for about $10 a barrel in 1998.  It was all predictable although at some point in the future incompetent bureaucrats will again remark who could have predicted it.  The informed mind doesn’t need to pay an endless stream of systemically-incompetent Wall Street economists or rely on the Federal Reserve’s thousands of Soviet bureaucrats to realize this fact.  All of the data has always been there.  Wall Street is holding the bag in oil, commodities and financial assets.  And so is Saudi Arabia’s Prince Alwaleed.

It’s good to be the king. (or prince)  Not much longer though. 

posted by TimingLogic at 9:42 AM