Wealth Building Lessons

Even though the markets were down today, my stock portfolio was up 3%. This was mainly because I’m heavily weighted in Oil and Gas Canroys and they were all buoyed today on news of a major takeover. Abu Dhabi’s state-owned utility company, National Energy agreed to buy out PrimeWest Energy(PWI) in a deal worth $5 Billion. PWI was up 30% on the news and all other canroys were up around 5% as well.

What I find interesting is that Abu Dhabi, the wealthiest of the United Arab Emirates and reported to be the richest city on earth, is buying Canadian Gas. Abu Dhabi gets ALL of its wealth from oil money. Because of oil, each of its 420,000 citizens are worth $17 million (although its population is significantly higher, non-citizens do not share this wealth). So why are they buying Canadian Gas again?

Could it be that they are sitting on a lot of US currency that they think is rapidly becoming worthless?

Do they think that Oil prices are heading to $150/barrel and Natural Gas is going to $10/mcf?

The day-time temperature in Abu Dhabi between April and September is around 100 degrees Fahrenheit. The rest of the year is slightly cooler. I doubt they need the Natural Gas for heating in winter! Their 1.8 million population probably doesn’t need $5 billion worth of Natural Gas for cooking either.

So I think its safe to assume the acquisition is purely an investment made on sound fundamentals.

They’re not the only Arab country to doubt the strength of the dollar. Recently Saudi Arabia announced that it would not be cutting interest rates. Their Riyal is pegged to the US Dollar. Along with that, their interest rates mimic the Federal Funds rate. But recently, Saudi Arabia decided to decouple the interest rates citing inflation at home. So keeping the rates high should strengthen the Riyal. Sounds like a stealth decoupling from the Dollar!

Borse Dubai, a government-controlled exchange, announced yesterday it plans to buy 19.9% of the Nasdaq(the exchange, not the index). And the Nasdaq’s entire 28% stake in the London Stock Exchange.

Dubai’s Sovereign fund also just announced a $1.3 Billion deal with Carlyle Group.

China has also announced plans to diversify its foreign currency holdings. (And it already bought $3 Billion worth of Blackstone).

Basically it sounds like all the rich countries are getting rid of their US Dollars and buying hard assets instead. Even Greenspan said his savings was well diversified amongst various foreign currencies.

Don’t you think its time you diversified your assets out of the US Dollar and into hard assets and foreign currencies too?

If we are headed for an inflationary period, foreign currencies (you can buy ETF’s like FXA, FXC, FXE and UDN), Gold and Silver will do well (you can buy coins or mining stocks, precious metal ETFs or mutal funds), as will income-producing Real Estate (provided you can afford to hold on to it during the inflationary period, since rates will be rising and it will be difficult to sell or refinance). Oil and Gas investments and related Canroys and stocks (PTR is my favorite and has been on a tear lately - wait for a pullback) should also do well.

Bookmark / Email This