Director Sorrentino tried to imagine in The Young Pope the effect that the elevation of a young American cardinal to the papal throne could have. We are not used to young popes, but historically there have been cases of popes who were also teenagers. Benedict IX (a disgrace for the throne of Peter, according to the authoritative Catholic Encyclopedia) was elected in 1032 when he was not yet twenty (according to some sources he would have been even 12), he led a dissolute life and at a certain point, wanting marry, sold his position for a large sum and resigned.
Repenting the decision, he managed to depose his successor and waged war against his successor, but was blocked by the emperor and never again managed to return to pope. John XI, son of Pope Sergius III and Benedict's uncle, had also ascended the throne at the age of eighteen, while John XII had to wait until he was twenty. Therefore, if it is wrong to think of a historically gerontocratic Church, until recently it was correct to think of the Saudi royal house as such, which has a long tradition of octogenarian and sick rulers who are usually succeeded not by their children but by their seventy-year-old younger brothers.
It is therefore an unheard-of step that King Salman, 81, has appointed a XNUMX-year-old as his son Mohammad bin Salman as his successor and is probably preparing to leave him on the throne soon. Just as it is striking that the other possible successor, the fifty-seven-year-old Muhammad bin Nayef (exponent of a minority but important faction of the royal family) publicly knelt several times in front of his younger half-brother, kissing his hand and swearing absolute loyalty. It is evident that alarm sirens are sounding in the muffled and immense halls of the royal palace in Riyadh.
They have been ringing for more than a year, but the volume must have become unbearable lately if a sleepy and ultra-conservative monarchy, accustomed to living quietly under the American military umbrella, distributing great wealth to the various branches of the royal family and large tips to the population, felt the need in a few days to welcome Trump triumphantly, to cut ties with the Al Thani of Qatar, to intensify the offensive against Isis and that in Yemen, to announce the acceleration of the economic reforms and privatizations, to choose a very young future king and to distribute more money to the population to celebrate the generational transition.
Saudi Arabia is actually fighting on three fronts. The first is as leader of the Sunni front against Shia Iran. The second, internal to the Sunni world, is as leader of the Salafi front against the Turkey-Qatar-Muslim Brotherhood front. The third, most insidious, is oil. The Saudis already understood in 2015 that American shale oil was changing the global energy landscape forever, they tried to be proactive by accelerating the fall in the price (preventing subsequent even more ruinous collapses) but they maintained the illusion of still having in hand the fate of oil. Only now are they realizing that they no longer even have control over the speed of retreat and that the retreat risks turning into a rout. They have tried together with Opec and Russia to contain production.
In the past it always worked, now we don't know. It's not that there isn't a demand for crude oil. World consumption continues to grow despite renewables. It is true that growth is increasingly slow in the West, that young people no longer have the money to buy a car and that the use of energy has become more efficient. However, it is also true that China puts 40 million cars on the market each
year, now more than double that of America, and that emerging countries consume more and more. And it should not be forgotten that the digital world, which we imagine as ethereal, virtual and immaterial, now consumes 10 percent of electricity and ultimately feeds on oil and coal like any blast furnace.
The problem is that the supply of oil, right now, is potentially unlimited if only the price appears above a certain threshold, probably close to 60 dollars. Texas and Canada are equivalent in potential to the entire Arabian-Persian Gulf and are learning to produce profits at ever lower prices. It is clear then that at this point the problems are not with the largest and most efficient American producers who, in the end, will earn less. The problems are for marginal American producers, who survived last year by going into debt, and for traditional OPEC and non-OPEC producers.
Among these, the smartest have learned to accompany the depreciation of crude oil with the exchange rate. This guarantees for some time the solvency of the debt in dollars or euros (in fact the debt/GDP ratio increases but the current accounts do not get out of control), but it is obviously penalizing for those who hold bonds in local currency. Much attention should be paid to countries with rigid exchange rates. We don't want to sound alarmist. There is a lot of oversold on oil and among the most serious analysts there is a widespread idea that a recovery, between now and the end of the year, is likely (even if the structural condition of the market in the medium-long term is now seen to slowly deteriorate) .
However, we have returned to a psychological climate in which the short-term movements of stock exchanges and bonds are dictated by oil, exactly as happened in January-February 2016. In recent months, portfolios have been loaded with emerging securities. We don't suggest going out, but doing an oil producer weight audit. A well-diversified portfolio should contain energy-related assets, it's just a matter of not going overboard. In the coming months and years, oil-related sovereign and corporate debtors will offer their card with attractive yields. It will be good to be cautious and selective.
In recent months, the markets have been concerned about possible slowdowns in growth, for the Fed and for inflation. They have never considered (apart from Le Pen and Italian banks) possible financial incidents. Oil, of these accidents, can create some and it should not be forgotten that it can do more harm a year at 40 dollars than a week at 25 (the limit reached last year). A stress test of portfolios with oil at 40 dollars may be sufficient for the time being and those who do not have even a drop of crude oil among their securities can also consider some cautious tastes, perhaps starting with the Canadian dollar.
