Saudi Arabia is the longstanding largest swing producer of oil globally. In normal times, a Saudi increase in oil production would an have important impact on the market. Saudi Arabia announced in June, when oil was $134 a barrel, that it would increase output to curb rising oil prices. The price of oil promptly shot up to $147 a barrel, which was evidence of the lunacy in the oil market. (By the way, oil closed at under $50 a barrel today.)

Today, Saudi Prince Alwalid bin Talal, the longstanding largest individual shareholder of Citigroup, said he was going to increase his ownership in Citigroup from under 4% to 5%. Citigroup, the 2nd largest bank in America, is a $25 billion beneficiary of the TARP bailout and absolutely cannot go bankrupt or the US Treasury will proactively be the cause of the Second Great Depression. Citigroup shares promptly traded to a record low price — they’ve lost almost all their value in the last few weeks.

There are scenarios of course where Citigroup common shareholders might get wiped out, even if the company survives, but these do not seem likely to us, based on the hell that was unleashed by such previous folly by Paulson & Co. In our view, it seems likelier that the stock market is reacting just as foolishly in the face of this Saudi investment as the oil market was in June in the face of the Saudi supply increase announcement. Last time the Saudi action preceded a change in market direction by a month or so; we’ll just have to see what happens this time.

This entry was posted on Friday, November 21st, 2008 at 9:49 am and is filed under Democrats, General, Republicans, business, idiots!. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.