Citibank, Arab Investors, Bush, and Oil Psychology:

Over one year ago, after Citibank shares had dropped from about $48 to about 38-40 per share, the star-struck girls and boys at CNBC estimated that Saudi Prince Al-Waleed Bin Talal Bin Abdulaziz al-Saud may have lost over $4 billion. That was then. Yesterday the share was worth about $14.5 per share. So, how much are his losses now? And the losses of other Mideast funds and sovereign funds?

If a loss of $4 per share translates into a total estimated loss of $4 billion (CNBC), then a loss of $34 per share translates into a total loss of $34 billion. Either CNBC misstated the Prince’s Citibank portfolio, or he is richer than I thought, which also means the Saudi people, whose oil money the princes take, have been screwed much more than even I imagined, certainly more than most of them realize.

The prince was reported to be the largest individual shareholder of Citibank which is reported to account for 46.6% of the assets of his Kingdom Holdings, and he owned nearly 4% of total Citi shares (Reuters). Reuters quoted him saying (Oct 3, 2007) that the 60% decline of Citibank third quarter profits was a mere ‘hiccup’. He was quoted as saying “"With this hiccup out of the way, our journey with Citi will continue because we remain loyal and committed to it." 

Personally, and in view of what has transpired since, I believe what His Highness opined at that time was not a ‘hiccup’, it was more like hot wind coming out of elsewhere in his vicinity. I won't say from where.

Easy come, easy go, n’est-ce pas Your Highness, May Allah Grant You a Long Life, as you retainers and sidekicks would hopefully say?

One prince gone (Charlie O III), one more to go.

One star-struck western financial web site has the following bio of His Highness:

Born: 7 March 1955           Age: 53
Country Of Citizenship: Saudi Arabia             Residence: Riyadh, Saudi Arabia, Middle East & Africa
Net Worth: $20.3 billion. (Scratch a few billions off, but add a few more- oil prices have gone up).

Fortune: Self made. (Self-made ?? SELF made?? He must have started flipping burgers and worked his way up, they all do that, Their Highnesses). And how stupid can Western heathens get sometimes.
Marital Status: Married, 2 children Spouse: Princess Ameera Education: Menlo College, Bachelor of Arts / Science Syracuse University.

Bush Psychologizes:
Mr. Bush acknowledged yesterday that opening the offshore fields (OCS, or was that OCD) for drilling will not change the economic variables of the oil market. He said that it will affect the 'psycholog' of the oil market. OK Sigmund, but will it reduce the price per barrel? More telling: will it reduce the price per gallon at the pump?

Market psychology will dissipate like early morning Pacific Coast fog, as soon as it runs into market reality, as in real demand-real supply. It won't sustain any price level for long, nicht war? It may not even fool the elctorate in this election year. It may not even be enough to scare congressional Democrats into giving Mr. Bush and his oil buddies what they covet.

Now if Mr. Bush can deepen this 'slow-down' into a deeper recession (2+ quarters of negative growth I have been told since Econ.101) than some expect, then that may help reduce oil prices, especially if unemployment increases and wage increases (broadly defined) for most workers remain as stagnant as they have been for several years. Now, if they can manage to export the recession to China and India, well, oil prices may even go back to $100 or less, for a while. That would mean 2-2.5 billion people crashing from growth rates of up to 9% to negative growth. That should bring energy prices crashing down even more than scaring a gaggle of speculators.

Cheers
mhg