<p>Saudi Arabia is on the brink of financial disaster, with only two or three years until ;bankruptcy. ;At least that&rsquo;s what PointState Capital&rsquo;s CEO Zach Schreiber thinks.</p>
<p>Schreiber was one of few who foresaw the epic oil crash, making a prediction in 2014 (when oil was over $100 per barrel) that led to a $1 billion profit for his firm. Now he warns that Saudi Arabia is in trouble.</p>
<p>As if the oil crash wasn&rsquo;t bad enough for the world&rsquo;s largest oil provider, Saudi Arabia is also embroiled in the turbulent politics of the Middle East and is a breeding ground for terrorists. The kingdom has slashed spending and is scrambling to raise cash amidst painfully low oil prices. ;The country&rsquo;s longtime oil minister Ali Al-Naimi was fired this past weekend. ;</p>
<p>&ldquo;Saudi has two to three years of runway before it hits a wall,&rdquo; said Schreiber last week, noting that cheap oil and huge spending commitments will lead to structural insolvency. &ldquo;No wonder they&rsquo;re now issuing tons of debt.&rdquo; ;</p>
<p>Saudi Arabia has plans to take out a $10 billion loan from a collection of banks, potentially paving the way for the kingdom&rsquo;s first international bond sale.</p>
<p>The country ;needs oil prices of $100 or more just to break even on a national budget that was created during years of immense profit. ;</p>
<p>The country&rsquo;s &ldquo;lavish social spending program is on a collision course,&rdquo; with cheap oil, says Schreiber. Along with a 50% gas price hike, the country has started to withdraw many of the benfits enjoyed by its enormous population in recent years. ;</p>
<p>The kingdom cut defense spending by 3.6% this year, but can&rsquo;t afford much more considering the ongoing conflict with Iran and the threat of civil uprising. &ldquo;Saudi is the last bastion of stability, but they hold that position at ever-expanding salary cost,&rdquo; says Schreiber of the country&rsquo;s massive military budget. ;</p>
<p>Saudi ;has roughly $600 billion stored away for emergencies, but has burned through $140 billion in the past 16 months. The country&rsquo;s balance sheet is &ldquo;overstated and misunderstood,&rdquo; argues Schreiber, pointing to $340 billion worth of liabilities that minimize the size of the emergency fund. ;</p>
<p>These concerns may be part of the reason Saudi has decided to sell a 5% stake in its most treasured possession: Saudi Aramco. ;</p>
<p><em>Saudi Aramco, based in Dhahran, is the world&rsquo;s largest oil company. ;</em></p>
<p>&ldquo;If they sell the golden goose, how do they fund anything? It&rsquo;s insane. Saudi is mortgaging away its future to buy time,&rdquo; says Schreiber. ;</p>
<p>Schreiber is bearish on oil prices in the long-term. He notes that the strengthening of the US dollar would make oil and other commodities more expensive for foreign buyers. ;Coupled with the &ldquo;explosion of debt&rdquo; in China and the rising popularity of electric cars, Saudi Arabia&rsquo;s future looks grim indeed. ;</p>
<p>Schreiber encourages investors to buy the US dollar while betting against the Saudi riyal. &ldquo;Let&rsquo;s hope for the best and hedge for the worse,&#8221; he says. ;</p>