Once upon a time about a decade ago, some hedge managers went to the bank and tried to withdraw funds sufficient to cover redemptions and learned to their clients’ and their dismay that that would be somewhat problematic. Those attempted transactions soon turned into the proverbial sweater with the protruding strand of wool that, pulled on, unraveled. It has taken all this time to investigate what exactly happened, and why it was that nobody saw it coming.  In fact, even in 2007 we still hadn’t arrived at completely clear answers for the dot com bust at the turn of the millennium. Many comparisons are made between those two crashes. And many comparisons are made between today’s market conditions and each of those two crashes. These discussions are fascinating but there are still more questions than answers, one aspect being that the high times of 1999 really did reflect an enormous level of euphoria—textbook top levels. The 2007 top? Not so much. After all, there couldn’t be another 1999 type feeling after 9-11, right? There was also a tremendous amount of “bad vibes” in the U.S. (and elsewhere) over the war in Iraq and for those old enough to remember, it was feeling a lot like Vietnam. That kind of killed prospects for a euphoric feeling at the top for the duration. And yet, a top it was, with or without the euphoria, and the mortgage meltdown trip downstairs was huge. Now we’re at all-time highs again, and the usual debates have ensued, chief among them “the market they love to hate.” This is meant to address the idea that “it can’t be a top because there isn’t sufficient euphoria.”

The other big difference between the dot com crash and the mortgage meltdown was that the dot com crash was a logical value correction reflecting the fact that companies with no earnings were selling at gigantic valuations, whereas in the mortgage meltdown, it was the infrastructure of the financial system itself that was collapsing. All by itself, AIG, because of its derivatives insurance activities, experienced losses so large that they threw the entire S&P 500 into an aggregate earnings loss, something that hadn’t happened since the Great Depression.

Then trillions of central bank activity followed all that and now we are wondering where we are, seeing huge amounts of sovereign and other debt and equity on central banks’ balance sheets, much of that issued or trading at negative yields. It is an entirely new world that can only be described as weird, as money from all over the world seeks safe haven in the United States, the locus of the derivatives’ creation that created the chaos.

Having said these things in a sort of hodgepodge style recap, I think the big question remains what it always is: what is the sentiment that signifies a top, and what is the sentiment that signifies a bottom? Is it really about fear of the world disappearing at bottoms and the euphoria that the party will never end at tops? Or are there other ways to recognize tops and bottoms? Other kinds of sentiments? Or other indicators entirely?

One of the topics that discussion of why the financial infrastructure came unglued in the mortgage meltdown got me to look into was how banks, brokerages, investment bankers, venture capitalists and insurers view and measure risk. Because one of the few unambiguous sets of data that came out of both the dot com crash and the mortgage meltdown was leverage in the financial industry itself, and how high it had gotten. This is what directly led to the demise of both Lehman and Bear Stearns. And those were huge hits to the system, as well as huge hits to personal income once these firms bit the dust and the big paychecks earned at these outfits stopped getting cut. When hearing that a lot of people will say “how big a hit can it be to lose the payrolls of just two firms?  And the answer is “a lot bigger than you might think.” Even if you’re only talking about a couple of thousand people averaging $50 million in average annual income, that’s a $100 billion hit. That adds up to a big reduction in dinners out, shoes sold, Broadway shows seen, trips to the Bahamas taken; a major loss of tax revenue, and immense ripple effects.

There are two ways business—and individuals, for that matter—can take on the kind of leverage that creates this sort of exposure. The first kind is when they are so giddy that nothing can go wrong, they just blindly figure that the more the leverage, the more the cash register rings. That could be said to be a very quantitative measure of euphoria. The Hunt brothers did it back in the 1970s in a vain attempt to corner the silver futures market in a very worrisome environment marked by the Arab oil embargo, the New York bankruptcy, and inflation, and they nearly pulled it off. Unfortunately, they also brought down the predecessor to Bache Halsey Stuart Shields, eventually swallowed by Prudential in the interest of systemic stability.

In the late 1990s, there was still an old-soul breed of cat populating the traditional partnerships of Wall Street that was incontrovertibly opposed to leverage levels exceeding 3:1. This was true of the largest firms on the planet, including Goldman Sachs. At that time, Goldman’s profitability came from bond transaction commissions, investment banking and other advisory fees and trading for its own account, and partners had large levels of their personal net worth in the firm.

It’s ironic that the lingering effects of central bank stimulus are what caused Goldman and others to worry about leverage in 1998, as rising asset values sent Manhattan commercial rents to such lofty levels that these firms had to increase their leverage to pay the landlord. And so Goldman went public in 1998, and those leverage-fretful ex-partners had a much improved night’s sleep.

So that’s my takeaway on how you should think of sentiment when gauging tops and bottoms. Is it really adjectives and adverbs like “euphoria,” or is it about who is buying, and what are they buying, or who is selling and what are they selling, and who among these buyers and sellers are the smart money?

If Goldman’s ex-partners no longer wanted to have skin in the game just two years before the dot com crash, that should have been a neon sign on the forehead of the proverbial canary in the coal mine.

Two deals stick out like a sore thumb today. One is the Aramco IPO, and the other is Amazon’s purchase of Whole Foods, and the attendant debt Amazon is taking on to finance it. I don’t like Tesla’s debt either. But I will focus on Aramco.

Population Distribution in the Middle East:

Egypt                                     90,253,760                          

Iran                                        78,778,000                           19.12%

Turkey                                  78,214,000

                                                247,245,760                        60.02%

Iraq                                        36,575,000                           8.88%

Saudi Arabia                      31,521,000                           7.65%

Yemen                                  26,745,000                          

Syria                                      23,270,000                           5.65%

United Arab Emirates     10,000,000                          

Israel                                     8,372,000                             2.03%

Jordan                                  6,837,000                            

Lebanon                              6,185,000                            

Oman                                    4,181,000                            

Kuwait                                  4,161,000                            

Qatar                                     2,113,000                            

Armenia                               2,977,000                            

Bahrain                                 1,781,000

                                                411,963,760

If you are thinking about the Aramco IPO and assuming like everyone else that this is the slam dunk of all time that no one will be able to keep their hands off of, and for that reason alone you must own it yourself, I would strongly advise you to familiarize yourself with the above numbers and try to spend some of the time you spend in the bathroom with a stack of magazines reading up on the basic factors of Middle East history since World War II, some of the changes that are going on there currently, the numbers surrounding these changes and how they affect valuations in the energy industry—and this deal.  To me, these Saudi princes look a lot like the ex-partners of Goldman looked in 1998.

If anyone understands what Aramco is worth, it is they. If anyone would be more persuaded that this is something you have to own, it is they. They DO own it.

So why are these folks, one would have to wonder, the most knowledgeable about the deal—this enterprise’s owners—the sellers? Why do they no longer like this business “that everybody in his right mind has to have a piece of?”

And the howls from Madison Avenue and Wall Street will ring through Manhattan’s caverns between the tall buildings from downtown to midtown: “Diversification!”

The Middle East is a very odd place taken in through the eyes of most westerners. There’s nearly half a billion people there. And while most Americans are capable of acknowledging that it is a place of huge economic and geopolitical importance, and also recognize that their own government and much of their own economy is up to its eyeballs in Middle Eastern matters, financially, as well as blood, flesh, and sinew, they don’t know much else. The Aramco deal is going to be the biggest deal by far of any IPO ever floated, twice the size of Jack Ma’s Alibaba, the current record-holder.  The Wall Street bigs are salivating over it. So are their equivalents in London and Singapore. And yet this enterprise is nestled in a country that by population measures is less than eight percent of the region’s headcount. Just three of those 16 nations—Egypt, Iran, and Turkey—comprise about 250 million or 60% of the region.  And just think of how things have changed. Once upon a time, the Saudi royal family laughed about the hardline radical Shia ayatollahs of Teheran; they never worried about their economic standing nor did they fear any military threat. They just kept pumping the oil, living as no one else can live, and the Shah ruled over the ayatollahs, and they even dreamed of being able one day to dispose of their enemies in Syria.

Now, look at the situation. The radical Shia run Iran, and ever since the Russians moved into Syria that nation has become nigh to untouchable, even by the Saudis’ most important and powerful ally, the United States. The Saudi leadership is no longer so happy, and it’s also in flux.

And how does that fundamentally impact how you look at this deal? In one important way. Like any real estate, it’s nailed to the ground. Real estate isn’t portable. It reminds me of a New York landlord I know who lives in Connecticut, who says to me, “I hate having to come into the city and wish I could take all my properties home with me so I didn’t have to go down there.” Well, you can do that with a stock or a bond, even with a lot of gold bars if you have a big enough truck, but you can’t do that with real estate.

Consider these other numbers, which are rather illustrative. Aramco not only owns 260 billion barrels but, because it is owned by the Saudi government, also owns exclusive exploration rights to every yet discovered drop of oil in the kingdom. On the other hand, when ExxonMobil and Shell go around with their truffle pigs, they have competitors breathing down their neck with THEIR truffle pigs.

ExxonMobil has less than a tenth of the oil holdings of Aramco, and yet if you adjusted that company’s market value to approximate what Aramco would go for based on assets in the ground, it comes out to $4.2 trillion. Despite that, Aramco is going to Wall Street looking to get a $2 trillion valuation (initially $100 billion for five percent), and some analysts say half a trillion less would still be more than fair value. I say, raise your eyebrows and ask yourself, is this the deal of the century that no portfolio should be without, or is it a fire sale that even at a huge markdown will still make for some big grins in New York, London, and Singapore? Oh, and by the way, nobody knows what Aramco owns, because they don’t disclose it. It’s all educated guesswork. They won’t even tell you how many rigs they have or how many of them are running. And that’s why New York, London, and Singapore are all busy considering exemptions to their disclosure rules in order to accommodate competing for the listing.

We have touched a little upon the geopolitical risk that may bear on the implied discount, but what about the fundamentals of the oil business itself, and the internal affairs of Saudi Arabia’s fiscal condition. Well, industrial demand worldwide is still pretty uninspiring.  Shale is still coming on to overall supply, and that production continues to improve its breakeven levels. LNG now has a presence that means U.S. production isn’t limited to what moves around in just pipelines. That opens up Europe, which may explain both Putin’s presence in Syria as well as the recent gangbanging of Qatar, the largest gas producer of the region. On top of that, Saudi Arabia is now paying out benefits to its citizens for everything from housing to gasoline to health care that as recently as 2014 were predicated on oil at $104 to make things come out even. Today a barrel of oil is $47 in New York and $51 in London, and the Saudis are borrowing their way out of fiscal imbalance and the rate of sovereign debt accumulation is increasing. The population rate is also increasing at north of 1.5% compound. If you were a Saudi royal, might you be thinking of ways to walk away?

Bottom line, I’m seeing a lot of similarities between the ex-partners of Goldman in 1998 and today’s Saudi princes. “Everybody’s gotta have a piece of this deal” (except the sellers who know it best and want out). Warren Buffett had to bail out Goldman a few years after that. I’m thinking of the look on Michael Corleone’s face when he explained to Fredo that “the Corleone family was getting out of the olive oil business” and going to Vegas. Fredo rejoined that Moe Green wouldn’t be a willing seller, but Michael assured him “we’ll make him an offer he can’t refuse.” And that offer was an eyeful, to coin a phrase.