Thanks to David for passing this along.
This year, in the run-up to the expiration of QE2 and a possible correction in the commodities markets, Burbank has been more cautious. Wary of a sell-off in gold, Burbank in January liquidated his position in the metal, which had amounted to 7 percent of Global Strategy in December, according to investment reports. Gold hit an all-time high of $1,577. 57 on May 2, an 18 percent gain since Jan. 31.
Burbank’s big idea this year is Saudi Arabia. Mindful that the world’s No. 1 oil producer might put its massive cash surpluses to work domestically, Burbank and his team started visiting the country and meeting with officials and local investors in 2007.
Opening to Foreigners
He’s betting that the Saudi ruling class will invest its petrowealth inside the kingdom with more wisdom than government leaders and investors did in neighboring Dubai and Abu Dhabi, where runaway real-estate markets crashed in 2008 and 2009.
“Saudi is not Dubai,” Burbank says.
As the Saudi monarchy pursues a massive infrastructure program, Burbank sees the country opening to foreign investors in much the same way that other emerging markets such as India did over the past decade. Less than 1 percent of equities traded on the Saudi Arabian Stock Exchange are controlled by outsiders. This year, King Abdullah Bin Abdulaziz has directed more than $80 billion to be spent on home building, and his advisers approved changes to mortgage laws to permit private investment in housing loans.
Hypervolatile Market
Burbank says the regional outcry for greater economic opportunities is likely to drive Saudi Arabia to spend even more domestically. While the U.S. government’s killing of Osama bin Laden may prompt followers to strike at targets in the Gulf state and spur oil prices higher, his death will have little long-term impact on the politics or economy in Saudi Arabi, Burbank says. If more capital flows into the country, valuations of Saudi equities should rise. “It’s a fantastic, idiosyncratic risk,” Burbank says.
