Oct

16

Saudi Arabia has announced the Rise Tower that is likely to have a height twice that of Burj Khalifa! 2000 meters up from the ground! It is likely to cost 5 Billion Dollars. One is left wondering in a world where everyone manages to almost manages to get decent enough sleep every night with Trillion Dollar deficits, what is Hubris doing having been left so far behind!

Nils Poertner writes:

Wondering what to make of this though, Sunil. Saudi Arabia's main stock Index (TASII peaked in 2006. and never fully recovered properly. Any idea how to express it into some trading idea so we can test our hypothesis?

William Huggins comments:

The 2006 Saudis run is very similar to the soul al manakh run up 20 years before. In particular for Saudis though, it's a market that forbid ahoet selling so when the bulls got started there was no guardrail until they simply could find no bigger fool.

Nils Poertner responds:

Thanks William. Maybe one needs to look at oil (bearish oil story?) - oil doesn't move forever and then it moves a lot. (not an oil trader though - just something that came to mind)

Alex Castaldo offers:

For those too young to remember the events of 1981:

The Souk al-Manakh Crash

From 1978 to 1981, Kuwait’s two stock markets, one the conservatively regulated “official” market and the other the unregulated Souk al-Manakh, exploded in size, growing to the point where the amount of capital actively traded exceeded that of every other country in the world except the United States and Japan. A year later, the system collapsed in an instant, causing huge real losses to the economy and financial disruption lasting nearly a decade. This Commentary examines the emergence of the Souk, the simple financial innovation that evolved to solve its rapidly increasing need for liquidity and credit, and the herculean efforts to solve the tangled problems resulting from the collapse. Two lessons of Kuwait’s crisis are that it is difficult to separate the banking and unregulated financial sectors and that regulators need detailed data on the transactions being conducted at all financial institutions to give them the understanding of the entire network they must have to maintain financial stability. If Kuwaiti officials had had transaction-by-transaction data on the trades being made in both the regulated and unregulated stock markets, then the Kuwaiti crisis and its aftermath might not have been so severe.


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