The Straw That Broke the Camel’s Peg

Published on
April 7th, 2020
19 minutes

The Straw That Broke the Camel’s Peg

The Expert View ·
Featuring Alexander Campbell

Published on: April 7th, 2020 • Duration: 19 minutes

Here at Real Vision, we know that from crisis comes opportunity. That is why we have been laser-focused on oil and energy markets and why we've brought back Alexander Campbell, CIO and founder of Black Snow Capital. Campbell isn't just looking at commodities though. In this interview, he focuses on how the demand shock of COVID-19 coupled with a price war that is increasingly looking to be a three-party affair between the U.S., Saudi Arabia, and Russia could create a balance of payments issue for the Kingdom. He makes his case that the Saudis may be forced to reevaluate the long-standing peg between the Saudi Riyal and U.S. Dollar and lays out two different ways to play the setup.



  • NG
    Nelly G.
    27 April 2020 @ 20:33
    Market makers hedge all their deltas since they generate income from rebates from volume/providing liquidity. Can someone explain why he suggests hedging a directional bet? So you are shorting KSA and longing energy, i.e. your gains in one will be offset by your losses in another i.e. you are basically at 0. Rather just sit in USD then? What am I missing?
  • SD
    Simon D.
    20 April 2020 @ 19:25
    Does anybody know where to buy USDSAR fx options?
  • FB
    Frank B.
    10 April 2020 @ 18:27
    I'm stuck with one question, that I can't get my head around. How would a devaluation help them when they still need USD to pay for the imports? Is it that their reduced current account surplus would then simply be worth more in Riyal terms, thereby avoiding a deflation? Would be great if someone could enlighten me.
    • CP
      Curt P.
      16 April 2020 @ 19:13
      Devaluation would decrease the labor costs of the workforce for KSA.... that's it.
  • MB
    Martin B.
    7 April 2020 @ 15:37
    Very interesting perspective... thanks. However Alexander, you continual use of the filler "you know... you know... you know... you know" is very distracting from your message and the perception of your professionalism. Please take this in the constructive manner it's intended.
    • MT
      Mark T.
      7 April 2020 @ 18:25
      My early boss used to say: "I don't know, that's why you're telling me"
    • AC
      Alex C. | Contributor
      8 April 2020 @ 17:42
      Haha, totally fair. Appreciate the feedback and will try to avoid next time.
  • AK
    Arthur K.
    8 April 2020 @ 16:05
    Saw on Bloom today that wheat, rice prices are at 7 year highs so that part of thesis seems to be working.
  • NL
    Nikola L.
    8 April 2020 @ 02:16
    need to also take in consideration that Saudis have second largest defense budget in the world. Most of that spending is on US weaponry. If things escalate Saudis can cut spending on defense and hit US weapon's manufacturers hard. US may have to opt to sacrifice its shale.
  • ML
    Mehdi L.
    8 April 2020 @ 00:12
    I am not sure shorting KSA banks is a great idea. There is significant tailwind behind these banks performing that it increases of getting rekt due to collateral events. In other terms, while the idea of shorting the peg is a great asymmetric option play à la Soros, this will be much harder to execute in this case.
  • SM
    Shivani M.
    7 April 2020 @ 20:44
    Guess I'm a Joe
  • JB
    Jon B.
    7 April 2020 @ 12:38
    Great. finally some "micro" after all the "macro". Really appreciate the trade construction advice for the pros and joes.
  • GG
    Gaurav G.
    7 April 2020 @ 09:40
    Hi, when was this filmed?
  • wb
    willem b.
    7 April 2020 @ 08:50
    What about AED/USD peg or Omani Real /USD peg or QAR/USD peg? Oman probably the weakest link? Qatar probably strongest? UAE/Saudi in the middle? If in UAE you could do very simple trade Borrow AED at 6.25%/annum & convert to USD (better to hold USD in a bank outside UAE). During the embargo of Qatar in 2017, the foreign exchange transfers out of Qatar were limited to 20,000 QAR There was a run on foreign exchange offices I remember, it calmed down after a few months,