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Friday, March 4, 2011

Does Saudi Arabia Know Something We Don't?

With the crisis in the Middle East growing on a daily basis, Saudi Arabia recently announced that they would pick up the slack. But, they can't. They are at max output now and all they can do is speed up the pumping rate for a short time.

They can't sustain a faster pumping rate as they will run the well dry and suck sand. They must slow the pumps back down to allow the well hole to fill up again. There are reports from our government and famously leaked by Wiki-Leaks, that the Saudis may have over estimated their reserves by as much as 40%! 
Recently they announced a huge move into alternative energy sources to the tune of $130B dollars and a huge part of that is solar energy. That is a huge move!

There is no better place to be than in silver to take advantage of that move. Solar panels rely heavily on silver in their construction and will certainly cause the prices to rise in the coming years. 

With silver hovering around $35.00 an ounce and oil prices soaring it portends a bright future for silver and it makes those predictions of $100.00 per ounce more believable.But, the question begs to be asked as to why this big move into alternative energies? The Saudi's recently announced that they are moving ahead with plans to build nuclear power plants and natural gas infrastructure within the next four years. And now the addition of solar energy farms.

According to this article at the solar farm industry in the middle east is in it's infancy and Saudi Arabia is on the forefront of that technology moving to the middle east.

Before we answer the question about "why" let's look at a few more statistics from Saudi Arabia. Their stock market has dropped nearly 22% since mid-January. Essentially it's in a shambles.

From Bespoke Investments we see this

Back in late January, the TASI
saw a one-day decline of over 6% on 1/29 when tensions began to escalate in
Egypt. When things settled down in Cairo, the TASI rebounded back above its
50-day moving average, but it then began to roll over again when tensions
moved to Libya.

Not really too revealing just yet.
But, let's take a look at this snip-it from Bloomberg:

Arabia is "perfectly unstable," like Egypt, where 10-day protests
are threatening the 30-year rule of President Hosni Mubarak, Nassim Taleb,
author of "Black Swan," said today...

86-year-old ruler of Saudi Arabia, King Abdullah, has backed the Egyptian
government and condemned the protesters, while trying to address imbalances
in the largest Arab economy. The government announced in August a $385 billion,
five-year spending plan as the kingdom tries to reduce a jobless rate of as
high as 43 percent for Saudis between the ages of 20 and 24.

40 percent of the population in Saudi Arabia, which is the world's largest
oil exporter, is under 15. The country is ruled by the Al Saud family, which
relies on support from the Sunni Muslim clerical establishment under a 1744
Perhaps now you can begin to see a change in the underpinnings of things in Saudi Arabia. The Saudi's are attempting to kill two birds with one stone, move from oil dependence and create jobs in hopes of closing the inequalities that exist between the ruling class and
it's citizens.

This all means huge profits for those that tap into the technology that is about to explode in the middle east. Saudi Arabia is just the tip of the iceberg as the region begins this shift to alternative energy and they have the money to be first on the block to acquire oil independence.

Let's face it, they are in the perfect geographical location to make a lot of energy from the sun and that means huge consumption's of silver. Silver prices will continue to soar as it is consumed for solar panels and other technologies that depend on it. Warren Buffet has increased his position to nearly 200 million ounces while establishment investment advisors on Wall Street continue to tell their clients that silver isn't a good investment, it's merely an industrial metal and subject to the whims of the manufacturing industry.

Keep telling them that Jim Kramer and others, while we and our friends reap the rewards of investing in this "Industrial Metal".


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