The Dubai Financial Nuke

[sunskyfan]

Re: The Dubai Financial Nuke

Oracle I am not. Only History will know correctly about AIG. I was just point out that people dismiss the Dubia default yet claimed the sky was falling when AIG was about to do the same thing at about the same magnitude.

[GRG55]

Re: The Dubai Financial Nuke

Thanks for posting that. It has quite a bit more detail of the financial involvements of Dubai World. They weren't just building tall buildings in Dubai.

To quote from the article:

Dubai is a central player in the world economy. It is the mother of all sovereign wealth funds. (Sovereign wealth funds are run and backed by sovereign national governments.)

Dubai is not a central player in the world economy...unless you happen to be in the business of money laundering. I can't believe anybody would write something like this. First, Dubai is one tiny emirate in the United Arab Emirates [UAE], which itself is one of six members of the Gulf Cooperation Council [GCC]...an entity that I'd bet most North Americans have never heard of [iTulipers being an exception, of course].

The very fact that these little sheikdoms have to band together to have any sort of voice on the world stage should be ample evidence that no one of them is "a central player in the world economy". The World Bank estimated total UAE GDP in 2008 at US $160 Billion, which is about one-third that of Belgium or Poland...and nobody is about to accuse either of them of being "central players in the world economy".

I'd bet five square blocks in any significant US city [Detroit excepted] generates more GDP than the UAE or Dubai...;)

[LargoWinch]

Re: The Dubai Financial Nuke

The very fact that these little sheikdoms have to band together to have any sort of voice on the world stage should be ample evidence that no one of them is "a central player in the world economy". The World Bank estimated total UAE GDP in 2008 at US $160 Billion, which is about one-third that of Belgium or Poland...and nobody is about to accuse either of them of being "central players in the world economy".

And me who was hoping to quit work tomorrow pending global financial Armageddon, while hitting the hyper-stagflation jackpot (thats gotta be an oxymoron). oh well...

[GRG55]

Re: The Dubai Financial Nuke

And me who was hoping to quit work tomorrow pending global financial Armageddon, while hitting the hyper-stagflation jackpot (thats gotta be an oxymoron). oh well...

It could still happen LW

I have no idea to what degree the idiot banks lent indiscriminately to Dubai Inc. Certainly they were falling all over themselves throwing money at the place. Could be there's a world of hurt in store for them as Dubai clearly won't make good on all the debt. And maybe it'll trigger another banking crisis, for all I know.

Nevertheless that fact alone does not make Dubai a central player in the world economy any more than subprime borrowers in Visalia, California are central players in the global economy just because they brought down Countrywide, WaMu, Wachovia and their ilk. ;)

[LargoWinch]

Re: The Dubai Financial Nuke

It could still happen LW

Morton's awaits all iTulipers then! ;)

More on the subject at hand:

Counting the Cost - Part I (13min.)



Counting the Cost - Part II (11min.)

[Rajiv]

Re: The Dubai Financial Nuke

It could still happen LW
Nevertheless that fact alone does not make Dubai a central player in the world economy any more than subprime borrowers in Visalia, California are central players in the global economy just because they brought down Countrywide, WaMu, Wachovia and their ilk. ;)

I couldn't agree more with that sentiment. However, the problem arises from the other aspects of the story. In other words, the unwise and large investments made by Dubai inc. -- mostly on borrowed money and the leveraged dominoes that are the banks that lent to Dubai inc.

The rumor mill tells me that one of the major reasons that Sheikh Mansoor al Nayahan of Abu Dhabi will not come to the complete rescue of Dubai inc. is that he wants the banks that lent irresponsibly to take a large haircut -- he sees this as a problem compounded by the unrealistic expectations of Dubai inc. and those of the banks that lent to it.

[goadam1]

Re: The Dubai Financial Nuke

Sheikh Mansoor al Nayahan of Abu Dhab, him and what Army are going to decide who takes a haircut. The Anglo banks who lent all this money may not have real money or oil, but the do have guns. It will be interesting to see who holds the cards in this one.

I suspect they can settle it like gentlemen.

[goadam1]

Re: The Dubai Financial Nuke

Zerohedge some interesting stuff today on their CRE investments in NYC...

http://www.zerohedge.com/article/mor...square-w-hotel

"The WSJ reporting that Istithmar, the investment arm of Dubai's royal family, has lost the foreclosure auction for the Union Square W Hotel, which as we pointed out a month ago was the most likely next CRE casualty. The winner: mezzanine specialist LEM Capital. We wish them all the best. Presumably this means the bottle service at the Underbar has all but dried up. Do you see what happens Larry when the bouncer doesn't rotate the B&T crowd to keep the banker-folk happy? And this happening even with all-time record bonuses? Travesty.

...

In more serious news, and as we speculated this weekend, look for the Mandarin Oriental Columbus Circle hotel to be the next foreclosure property, which just so happens is another Istithmar property, as is Times Square Six.

Some more on the crumbling hotel CRE situation from the WSJ:

...

The foreclosure comes as Dubai World, the government-owned fund, is struggling with a mammoth debt load. As a result of its debt crisis, Dubai World is expected to sell some non-core assets including Central Park South landmark the Jumeirah Essex House, and the Knickerbocker Hotel in Times Square as it asked for a six-month freeze of its debt. "

Will this event, as it spreads, see gold + as a safe haven or gold - as a source of liquidity?

Trouble in Richistan.

[goadam1]

Re: The Dubai Financial Nuke

Wow, thanks.

A. I have to watch al jeezera on youtube to get reporting on Dubai? Sad.

B. There is no honor among thieves. Everyone is out to get everyone. Lie and steal is the order of our times.

C. The joke on us. They went into crazy debt and built the great city of the 21st century. What did we do?

D. A war will be fought of this place, boardroom war or one with guns. Great cities must be defended to be kept. What kind of security apparatus did they build for that place?

Morton's awaits all iTulipers then! ;)

More on the subject at hand:

Counting the Cost - Part I (13min.)



Counting the Cost - Part II (11min.)

[Rajiv]

Re: The Dubai Financial Nuke

The problem is that Abu Dhabi was not a party to the debt -- Dubai has no oil -- only debt.

The bankers expectation was that Abu Dhabi would come to the resue of Dubai if things turn sour -- and Abu Dhabi is not ponying up 100c to the dollar -- it says that the debt is not worth that much -- which is in fact quite true -- it is probably not worth 30c on the dollar -- But they will probably offer 60c to the dollar in order to save face (and the family - Mansoor is Sheikh Mohammad of Dubai's son in law)

[GRG55]

Re: The Dubai Financial Nuke

I couldn't agree more with that sentiment. However, the problem arises from the other aspects of the story. In other words, the unwise and large investments made by Dubai inc. -- mostly on borrowed money and the leveraged dominoes that are the banks that lent to Dubai inc.

The rumor mill tells me that one of the major reasons that Sheikh Mansoor al Nayahan of Abu Dhabi will not come to the complete rescue of Dubai inc. is that he wants the banks that lent irresponsibly to take a large haircut -- he sees this as a problem compounded by the unrealistic expectations of Dubai inc. and those of the banks that lent to it.

One of the problems is this situation crosses the opaque world of global finance with the opaque world of an Arab Ruling Family...:cool:

Who's to know what is really going on.

Abu Dhabi has been critical of much of Dubai's activity for some time, going back to the late Sheikh Zayed. In particular Abu Dhabi has been uncharacteristically vocal about Dubai's decision to allow land to be sold to non-nationals...an idea that was exported to Qatar, Bahrain and beyond.

My information from the Gulf, as this situation has been unfolding all year, is that Abu Dhabi has extended no funds to Dubai that are not strictly collateralized...and the type and valuation of the collateral has largely been dictated by Abu Dhabi. Further, the GCC governments will do what's necessary to put their own banking systems back on a stable footing, but I don't see any reason any of them, including Abu Dhabi or even Dubai itself, would feel compelled to rescue any of the foreign/international banks from the consequences of their foolishness - particularly given the demonstrated proclivity of other governments to repeatedly bail out their big banks.

[dcarrigg]

Re: The Dubai Financial Nuke

Thanks for posting that. It has quite a bit more detail of the financial involvements of Dubai World. They weren't just building tall buildings in Dubai.

To quote from the article:

He also claims that oil will fall to below $10/gallon. Highly unlikely.