Guest Gunner Posted November 28, 2009 Share Posted November 28, 2009 Is Bubble-Bursting Dubai Bankrupt? by Pierre Tristam It Was All a Mirage: One of Dubai World's disastrous investments includes the $8.5 billion CityCenter project in Las Vegas, Nev., the biggest privately financed construction project in the United States. Dubai World is near bankruptcy. (Ethan Miller/Getty Images) For most of this decade Dubai has been the Victoria Beckham of the Arab world--the biggest, glitziest, most heedless spender. It's been the sort of place that invests $7.6 billion subway system few of its 1.6 million people are likely to use, the sort of place that builds artificial islands in the shape of palm trees, the sort of place that builds the world's tallest skyscraper, the sort of place that sells designer seat-belts to encourage drivers to be safer in the very cars it wants them to trade in for a subway ride, and the sort of place where office buildings have been the Gulf's most copious crop of the decade. Dubai hasn't limited its excesses to its corner of the United Arab Emirates. Through Dubai World, the Emirate's investment arm, it partnered with MGM Mirage and invested in such projects as Las Vegas' CityCenter, a 67-acre development that includes a 4,004-room hotel-casino, 2,400 high-rise residential condos, dining and entertainment venues and its own retail district. At $8.5 billion, it's the most expensive privately financed construction project in the United States. Now the bad news. The Dubai subway has been running since September, albeit to empty quarters. A quarter of Dubai's office space is vacant. Workers have taken salary cuts of up to 30%. The Emirati government is in debt to the tune of $80 billion to $120 billion. CityCenter? It's "worth about half of what it cost MGM Mirage and Dubai World to build the massive Strip development," the Las Vegas Review-Journal reported in October. lost half its value. MGM Mirage took a $1 billion write-down already, Dubai World ate a $348 million loss (so far). "Investors have long expected (and will probably expect further) write-downs of the carrying value of its residential towers at CityCenter, especially after it reduced unit pricing by 30 percent or so," the paper quoted BMO Capital Markets analyst Jeffrey Logsdon as saying in a note to clients. "We do not expect investors to have a negative reaction to this step." So much for hail-Mary optimism. On Wednesday, Dubai World announced that it could no longer make payments on its debt for at least the next six months. The news sent European and Asian markets into a swoon on Thursday. American markets followed today, though at this writing it looks like the 2% drop of the Dow in early trading is now closer to 1.3%. Worse news for Dubai: Standard & Poor's downgraded the credit rating of three of the emirate's principal investment entities to BBB-minus, just-above junk status, one more to BBB-plus, and a fifth, Dubai Multi Commodities Centre Authority and Thor Asset Purchase (Cayman) Ltd at BB, or two notches into junk. All of this will make Dubai's debt repayments that much steeper, especially on some $50 billion that those finance firms owe in the next three years. And still the optimist-illusionists were at it today, trying to put a good face on bubble shards. Here's how Paul Schulte, head of multi-strategy research at Nomura in Hong Kong, commented in a note on Friday, according to The Times: "Dubai was a carbon copy of Thailand's disastrous foray as an 'international financial center' in the 1990s. Happily, the U.A.E. has oil. Thailand did not." The UAE has oil, yes. That is, Abu Dhabi does (92 billion barrels worth of reserves). Dubai does not. It barely has 4 billion. Oil production in Dubai has been plummeting. It relies on Abu Dhabi to bankroll its spending (the way the United States rely on China, Japan and the Social Security Trust Fund). The big question is whether Dubai's bankruptcy is the beginning of another round of falling economic dominoes. We'll leave that one to the tea-leaf readers who, a dirham a dozen from Wall Street to the Arab Street, like to call themselves analysts. http://middleeast.about.com/b/2009/11/27/is-bubble-bursting-dubai-bankrupt.htm Link to comment Share on other sites More sharing options...
Guest Gunner Posted November 28, 2009 Share Posted November 28, 2009 I have long felt this was inevitable. I have had this discussion several times since 2006 with various people, now it is unfolding in front of our eyes. Please Discuss. No trolling. Link to comment Share on other sites More sharing options...
Rajiv Posted November 28, 2009 Share Posted November 28, 2009 Dubai has a new Name Doob Gayi Link to comment Share on other sites More sharing options...
punjabi_khota Posted November 28, 2009 Share Posted November 28, 2009 The whole Dubai thing seemed really artificial to me since day 1. Something so prosperous in the middle of middle-east pagals was an anomaly anyway. :hehe: Link to comment Share on other sites More sharing options...
Sachinism Posted November 28, 2009 Share Posted November 28, 2009 I have long felt this was inevitable. I have had this discussion several times since 2006 with various people, now it is unfolding in front of our eyes. Please Discuss. No trolling. Break it down for us not so smart folks please Link to comment Share on other sites More sharing options...
punjabi_khota Posted November 28, 2009 Share Posted November 28, 2009 Time to move ICC headquarters to Brabourne Link to comment Share on other sites More sharing options...
Guest Gunner Posted November 28, 2009 Share Posted November 28, 2009 Break it down for us not so smart folks please In simple words Dubai was built on a giant credit card. As the article says Dubai doesn't have oil reserves. People conveniently think Dubai = UAE, no sir it isn't. The UAE consists of 7 emirates - Abu Dhabi, Dubai, Sharjah, Fujairah, Ras-al-Khaimah, Umm-al-Qwain and Ajman. Abu Dhabi is the true financial and oil powerhouse, they have all the money. How then did Dubai build all those superstructures and invest across the world? Through funding from Abu Dhabi, Saudi and Kuwait. Then there were all those expats from all over the world who sunk their life's equity into this hole in the desert. When those economies started faltering through lower oil prices, the flow of investment stopped and the switch was turned off on Dubai. The massive quantity of liquidity from across the world both legal and conveniently legal had created an enormous asset bubble (large quantity of money boosting up the price of a small quantity of commodity, in this case real estate). When the liquidity dried up, Dubai without any own equity has just fallen apart. The Dubai government's claim to safety was they considered all these inflows as own equity when it is clearly just external commercial borrowings and nothing more. Now all we have to wait for is to watch the Englishmen who took control of Dubai to run helter-skelter if they haven't already done so. Link to comment Share on other sites More sharing options...
Malcolm Merlyn Posted November 28, 2009 Share Posted November 28, 2009 does this mean sachdan is homeless????:(( Link to comment Share on other sites More sharing options...
Sachinism Posted November 28, 2009 Share Posted November 28, 2009 In simple words Dubai was built on a giant credit card. As the article says Dubai doesn't have oil reserves. People conveniently think Dubai = UAE, no sir it isn't. The UAE consists of 7 emirates - Abu Dhabi, Dubai, Sharjah, Fujairah, Ras-al-Khaimah, Umm-al-Qwain and Ajman. Abu Dhabi is the true financial and oil powerhouse, they have all the money. How then did Dubai build all those superstructures and invest across the world? Through funding from Abu Dhabi, Saudi and Kuwait. Then there were all those expats from all over the world who sunk their life's equity into this hole in the desert. When those economies started faltering through lower oil prices, the flow of investment stopped and the switch was turned off on Dubai. The massive quantity of liquidity from across the world both legal and conveniently legal had created an enormous asset bubble (large quantity of money boosting up the price of a small quantity of commodity, in this case real estate). When the liquidity dried up, Dubai without any own equity has just fallen apart. The Dubai government's claim to safety was they considered all these inflows as own equity when it is clearly just external commercial borrowings and nothing more. Now all we have to wait for is to watch the Englishmen who took control of Dubai to run helter-skelter if they haven't already done so. :hatsoff: Link to comment Share on other sites More sharing options...
Sachinism Posted November 28, 2009 Share Posted November 28, 2009 Time to move ICC headquarters to Brabourne I heard somewhere they're moving it back to London Link to comment Share on other sites More sharing options...
Guest Gunner Posted November 28, 2009 Share Posted November 28, 2009 Dubai's Debt Reckoning The credit problems of a unit of Dubai's state-owned investment company have given financial markets a scare, but put us down as thinking the event is left-over business from the mid-decade mania more than it is a sign of immediate new economic troubles. Like subprime mortgages and Citigroup's off-balance sheet "structured investment vehicles," Dubai's debt binge was made possible by the Federal Reserve's global subsidy for credit. As a Middle East outpost without oil wealth, the city-state used easy credit in an effort to build itself into the next Singapore. And it has made some impressive strides as a tolerant entrepot for traders and investors looking for an entry into the Arab world. Its openness to the world's money and people is certainly a better model for Middle East development than is Saudi Arabia. On the other hand, the city-state clearly got carried away during the boom, and its property market in particular became a bubble as overbought as condos on the Las Vegas strip. In the wake of Wednesday's request for a debt holiday, investors immediately put on their post-Lehman Brothers "contagion" hats and fled for safety. The otherwise sickly dollar rallied, while gold, oil and stock markets world-wide all fell. Nevermind that no one could say who except the creditors of Dubai World's real estate subsidiary would be harmed by the request for an interest-payment moratorium. European banks have nearly $84 billion in exposure to all of the United Arab Emirates, of which Dubai is merely one, while U.S. banks seem less vulnerable. Stocks in particular have had an historic rally since March, and the Dubai debt blowup may have been the excuse investors needed to pocket some of their winnings and protect against a correction. One irony is that Dubai's debt problem is likely to reinforce the determination of the world's central bankers, especially those at the Fed, to keep the money spigots wide open to prevent any new credit crunch. In the near term, this will help gold and other riskier assets that are rising on the surge of greenbacks. In the longer run, it may feed new asset bubbles and lead to future credit problems once the Great Reflation inevitably stops. Thus could one bursting bubble end up feeding another. Printed in The Wall Street Journal, page A14 http://online.wsj.com/article/SB10001424052748703499404574562110147450316.html Link to comment Share on other sites More sharing options...
Rajiv Posted November 28, 2009 Share Posted November 28, 2009 Just a thought, Dubai can offer citizenship to everyone living there for a substantial fee AFAIK, the never charged income tax , they can start charging ppl income tax. Afterall, people have prospered in Dubai all these years Link to comment Share on other sites More sharing options...
Guest Gunner Posted November 28, 2009 Share Posted November 28, 2009 Just a thought, Dubai can offer citizenship to everyone living there for a substantial fee AFAIK, the never charged income tax , they can start charging ppl income tax. Afterall, people have prospered in Dubai all these years Why would you settle down in Dubai and pay taxes? What is the gain for the people? Link to comment Share on other sites More sharing options...
SachDan Posted November 28, 2009 Share Posted November 28, 2009 does this mean sachdan is homeless????:(( :(( I'm serious. Dubai is in big trouble and second financial wave is here it seems! Everything depends on how Abu Dhabi responds to the situation. Early this year they bailed out Dubai with close to $10 billion. Now all indications are that they won't be helping them this time around. Link to comment Share on other sites More sharing options...
Guest Gunner Posted November 28, 2009 Share Posted November 28, 2009 :(( I'm serious. Dubai is in big trouble and second financial wave is here it seems! Everything depends on how Abu Dhabi responds to the situation. Early this year they bailed out Dubai with close to $10 billion. Now all indications are that they won't be helping them this time around. They will, there is no option. If they don't help the emirates will fall apart. Further, Nahyan and Al-Maktoum are related families, right? Link to comment Share on other sites More sharing options...
flamy Posted November 28, 2009 Share Posted November 28, 2009 No trolling. Dubai has a new Name Doob Gayi :rotfl::rotfl::rotfl::rotfl::rotfl: Link to comment Share on other sites More sharing options...
Guest Gunner Posted November 28, 2009 Share Posted November 28, 2009 ^^ Its the capo, can't do nothin'. :dontknow: Link to comment Share on other sites More sharing options...
nikred Posted November 28, 2009 Share Posted November 28, 2009 :(( I'm serious. Dubai is in big trouble and second financial wave is here it seems! Everything depends on how Abu Dhabi responds to the situation. Early this year they bailed out Dubai with close to $10 billion. Now all indications are that they won't be helping them this time around. Is this the reason why you have your location as hell in your profile? :(( Link to comment Share on other sites More sharing options...
Rajiv Posted November 28, 2009 Share Posted November 28, 2009 Why would you settle down in Dubai and pay taxes? What is the gain for the people? For those who are living since x many years, established businesses. They won't leave, or atleast wouldn't want to leave Link to comment Share on other sites More sharing options...
Guest Gunner Posted November 28, 2009 Share Posted November 28, 2009 For those who are living since x many years' date=' established businesses. They won't leave, or atleast wouldn't want to leave[/quote'] I agree with your point Rajiv but they are a small part of the expat population. Large majority are people who are economic migrants who have taken up a job. They are going to do a runner. Link to comment Share on other sites More sharing options...
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