Most of the analysis we do at Deep Knowledge Investing is detailed and complicated. People often ask me how long it takes to write a post. The answer is it typically takes 1-3 hours to write something and days/weeks/months of research to know enough to have confidence in my conclusions.
Sometimes, things just seem obvious…In October, we wrote a piece titled Our Energy Policy is Going to Lead to Multiple Disasters. In that piece we described the threats by Congressional Democrats to pull military support from Saudi Arabia out of frustration that the Saudis weren’t pumping as much oil as the US desired. We wrote:
Finally, removing military assets from Saudi Arabia, hurts us in two ways. The most obvious is the Saudis won’t give up on their defense. They’ll just turn to Russia and China. Driving Saudi Arabia and OPEC into the camp of our enemies doesn’t help US interests at all.
The second issue is if we withdraw military support, we’ve broken the deal Kissinger arranged with Saudi Arabia in the 1970s that initiated the Petrodollar. So, when we withdraw the military, oil transactions will start to be denominated in Yuan, Rubles, and other currencies. Without that demand for dollars, the US is going to need to start living on a tighter budget, have much higher interest rates, or both.
Today, ZeroHedge wrote a piece titled “Xi Inks Tens of Billions in Deals With Saudis, From Huawei Cloud-Computing to Expanded Military Ties“. In the article, they describe the warm welcome Xi received from Saudi rulers, new deals for Huawei products and technology, and expanded military cooperation. The ZeroHedge article references a Wall Street Journal article which notes that there was no public mention of an agreement to sell oil to China priced in yuan. DKI would politely add the word “yet” to the end of the sentence.
If you want to know more of our thoughts on the topic, please feel free to check out the initial article here, and to see our energy portfolio here.