Saudis may sell off billions

Why would others panic if SA started to sell off its assets? The reason for their sale would have nothing to do with the relative strengths of their investment.

Regardless of the reason for an investment decline there's a herd mentality that sometimes drives people to the exits.

Also, the vast majority of stock market trades are programmed trades based on some speculator company's algorithm. Believe it or not the average length of time a stock is now held is 22 seconds. Trust me when I say that has absolutely nothing to do with the relative strength of the underlying stock and everything to do with some big data analytics program trend lining prices.

Of course the actual results would depend on how they did their dump. If they did it over a couple of years, the impact would be marginal. If they did it overnight, that's another story.

The one thing I'm not clear about is the impact of the asset dump on inflation. They would be selling dollar denominated assets which would be inflationary. At the same time, Interest Rates on US debt would skyrocket which is deflationary...so there might even be two very different effects in short and long run.

"Regardless of the reason for an investment decline there's a herd mentality that sometimes drives people to the exits."

That's what has me doing a possible double take. We all know, some individuals are smart, controlled and logical, people the other hand are dumb and panicky.

Also the high speed frequency has caused dips on more than one occasion. From Wiki,

FLASH CRASH
This type of event occurred on 6 May 2010 when a $4.1 billion trade on the NYSE resulted in a loss to the Dow Jones Industrial Average of over 1000 points and then a rise to approximately previous value, all over about fifteen minutes. The mechanism causing the event has been heavily researched and is in dispute.

Two notable flash crashes have occurred as of August 2013:
May 6, 2010, Flash Crash
April 23, 2013, Flash Crash

In October 2013 a flash crash occurred on the Singapore Exchange which wiped out $6.9 billion in capitalization and saw some stocks lose up to 87 percent of their value. The crash resulted in new regulations being announced in August 2014. Minimum trading prices of 0.20 cents per share would be introduced, short positions would be required to be reported, and a 5 percent collateral levy implemented. The exchange said the measures were to curb excessive speculation and potential share price manipulation.[2]

Two short-lived (less than a second) movements (more than 1%) in several (40 and 88) stock prices followed by recovery were reported for November 25, 2014.[

It sounds like the perfect time to implement that transaction tax Bernie has been talking about.

What assets would Saudi Arabia replace with their US bonds? Euro bonds with negative interest rates? Or maybe South American bonds which pay handsome returns as long as the rock solid economies of Brazil and Argentina hold up. Or maybe Chinese bonds with the full backing of the reliable/transparent Chinese government.

I'm not a great poker player but I'm calling thier bluff

There's no doubt they'd take a haircut whatever course they took. It looks like President Obama doesn't think he's the poker player that PJ is though. He doesn't seem as anxious as PJ to 'call their bluff'.

I think that's a fine idea....I'd exempt trades where you've held the stock more than a year. They talk about corporations not thinking long term because they manage to quarterly profits. Allowing Wall Street speculators to 'invest' to a 22 second horizon is just plain nuts....and my statistic was just the AVERAGE STOCK HOLD TIME. There are still lots of long term investors....so a lot of these trades are buying and holding a stock just a few seconds.

They've been talking about it for awhile now, well past few years anyway. I think there should be some type of regs put in place.


BTW I never noticed what your avatar said, I didn't even knowing it was scrolling..Hilarious! I love it Mal.

The Kingdom owns vast farmlands in the West. I believe they may be the largest landowner in California and Arizona. Those are the assets I think they are referring to.

Saudi Arabia also owns a lot of US Government debt....but unlike most countries, the actual amount is actually kept secret. Remind me why should that be a secret.