Dubai Forums Dubai Discussions Dubai General Chat

Ghalib wrote:Can any one throw light on the consequences and the effect on common man in case of Dubai default?
is it unsafe to invest in here from now on? shall one pull out their cash from Dubai banks and shift it back home?

I think you ask a fair question, mind you at this point in time I believe the answer is far from easy, whilst most of the people posting here on DF only view the problems of Dubai, you have to be honest the problem is global. For instance is it safe to take your money out of Dubai and invest it in a Bank in the USA for instance;

FDIC problem bank list hits 552 as US bank failures reach 116

http://www.risk.net/risk-magazine/news/ ... -reach-116

sage & onion wrote:
You may think it is all a joke however a few figures for you to digest;

Average Oil Price 2008 = $91.41

Oil Production average for 2008 = 2,500,000 barrels per day.

365 x $91.41 x 2,500,000 = $83,411,625,000

That is in US Dollars, when you also add in the fact that most of the oil exploration was done when the price was in the teens to low twenties, you can see huge surpluses.
The other thing that is hardly ever discussed is the amount of income the UAE earns from investments overseas.

You still don't seem the get the point MCL and I try to make. You mentioned Trillions with a T earlier on. The amount you state above is clearly in Billions with a B.

Point made.

sage & onion wrote:I was raised by my Father who was totally against any form of debt, his principle was simple if you can't afford it then don't buy it. I have to admit that I have not always followed this advice, however over the past decade I certainly have.

O really?

You rebel

RobbyG wrote:

sage & onion wrote:I was raised by my Father who was totally against any form of debt, his principle was simple if you can't afford it then don't buy it. I have to admit that I have not always followed this advice, however over the past decade I certainly have.

O really?

You rebel

This is captalism, if you don't borrow, how is growth gonna come about? At the end of the day as long as one is prudent and lives within his means, nothing wrong with borrowing.

Ghalib wrote:Can any one throw light on the consequences and the effect on common man in case of Dubai default?
is it unsafe to invest in here from now on? shall one pull out their cash from Dubai banks and shift it back home?

It is definately risky to invest here for the time being... i'm not saying tht it will be permenantly risky.. Watch out for next few months.. atleast wait till May 2010 (this is the time Dubai has asked for the repayment)...however in case dubai really defaults, then this has serious consequences for Dubai, Middle East n all the ppl livng in dubai..

In worst case scenario, this might lead to a total flight to safety of liquidity.. In face this has already begun if you observe the way today's markets have collapsed across the world esp. the emerging markets.. a lot of money would be taken out of dubai itself.. imagine all the residents in dubai decide to transfer their savings out of dubai next week.. this will create sever liquidity crunch in the banking system (n mind it, resident outflows will be a fraction of institutional outflows)..
if that happens, its the equivalent of the argentine crisis or russian crisis in 90's..
In russian crisis, the govt. imposed foreign currency payment restrictions which led to further problems..

The common investors never consider the black swan events while making their investment decisions.. all the ppl who will keep saying tht "it hasn't happened before, so it will never happen" have been proved wrong on minimum 10 occasions in 2008-09.. (black swan event is smethng which is extremely rare n unpredictable, has a large impact n can be explained in retrospect)..
(9/11, Lehman collapse, Bear Sterns.. these are some examples of Black Swan event)

At the end of day, you will find experts arguing on both sides..
so its up to each person to decide what is his risk taking ability and act as per that. in fact if you have the ability to take huge risks, just go short on some of the equities on monday and buy back before the day closes.. u will make a lot of money... but as I said, one needs to have an apetite to do this..
so be aware of the worst case scenario, n then ensure if it turns true, u r safeguarded..

Ghalib wrote:Can any one throw light on the consequences and the effect on common man in case of Dubai default?
is it unsafe to invest in here from now on? shall one pull out their cash from Dubai banks and shift it back home?

Excellent question.

Investments in Gulf States will probably go on a standstill unless there is a demand for risk. I think investors will become more conservative in emerging markets altogether, which is becoming obvious in their subsequent stockmarkets.

Your question about cash in the bank; This is a more serious one for the common man. If the UAE Central bank has issued deposit guarantees for every bank in the country, then you should try and figure out to what amount you are insured. In Europe its €100,000 and the USA is $250,000.

I'm not familiar with banking regulations in the UAE. But now you mentioned it, I can assure you some banks will probably topple because of fear from common depositors. Those banks made alot of investments and credit loans to people and businesses. I can imagine this is going to be a problem soon. Unemployment (o wait, UAE doesn't have unemployment...officially ) is increasing, so banks will probably experience more and more loan defaults as companies lay of more workers.

You see, our world revolves around confidence. If a level of confidence is at risk, people tend to move out of those related assets and when money moves out of an asset...history showes it can't be stopped. Money just moves out of an asset and finds a new (not always saver) place where it is considered save(r).

Considering the current risk averse shock that Dubai's situation created around the world, I think some banks will clearly be hit as people remove money from their gulf based accounts. If that accelerates, then a banks fractional reserves are under pressure. In accounting terms, the bank can go bankrupt and your deposit is insured if guaranteed by the UAE Central Bank.

You have some work to do my friend.

Misery Called Life wrote:

RobbyG wrote:

sage & onion wrote:I was raised by my Father who was totally against any form of debt, his principle was simple if you can't afford it then don't buy it. I have to admit that I have not always followed this advice, however over the past decade I certainly have.

O really?

You rebel

This is captalism, if you don't borrow, how is growth gonna come about? At the end of the day as long as one is prudent and lives within his means, nothing wrong with borrowing.

All fun aside, I'm raised with a savings mentality. I never borrowed a dime in my life. I have no debt whatsoever and live my life within my means. Borrowing doesn't even come to my mind MCL, unless its for a house or something like a business in the future. Banks take savings and deposits and use them for lending to businesses and other investments.

MCL, I know you are schooled by the Keynesian thoughts. Keynes obviously indoctrinated you with the concept of growth by borrowing, but I can't blame you for that. Even fooks from Harvard, Princeton and every other major Ivey leaque institution are taught the thoughts of John Maynard Keynes, who invented the postwar economic theories. But I bet that Keynes would turn in his coffin if he saw what governments have done with his theory of moderate inflation and government intervention to sustain growth. Its absurd.

I recommend you follow Peter Schiff, Marc Faber and many others that have thoughts based on the Austrian School of Economics. Those economist actually know what value is and they are not affraid to tell the world, even though they have been stoned in the past, before the crisis hit. Now they are gaining momentum fast as paper money is increasingly being abused by Central bank around the world.

Dive into history and educate yourself about savings and the Austrian business cycle. You can find alot on http://www.mises.org based on the thoughts of e.g. Ludwig von Mises (Austrian Economics).

RobbyG wrote: Your question about cash in the bank; This is a more serious one for the common man. If the UAE Central bank has issued deposit guarantees for every bank in the country, then you should try and figure out to what amount you are insured. In Europe its €100,000 and the USA is $250,000.

I don't think there is any guideline for central bank guarantee for deposits in UAE... the govt. did announce a blanket guarantee in early 2009..however it remains to be seen if it was a policy decision or once off confidence building measure... n with strained finances how does it live up to tht..
but note tht was a UAE central bank's guarantee n nothin to do wth Dubai in specific.. So it might as well be valid even if dubai goes bankrupt..

but lets see how things pan out in next few weeks//

xdude wrote:

RobbyG wrote: Your question about cash in the bank; This is a more serious one for the common man. If the UAE Central bank has issued deposit guarantees for every bank in the country, then you should try and figure out to what amount you are insured. In Europe its €100,000 and the USA is $250,000.

I don't think there is any guideline for central bank guarantee for deposits in UAE... the govt. did announce a blanket guarantee in early 2009..however it remains to be seen if it was a policy decision or once off confidence building measure... n with strained finances how does it live up to tht..
but note tht was a UAE central bank's guarantee n nothin to do wth Dubai in specific.. So it might as well be valid even if dubai goes bankrupt..

but lets see how things pan out in next few weeks//

Indeed, lets watch and learn how it will come about.

Now AD says it won't fund all of Dubai's debt!!

http://www.bloomberg.com/apps/news?pid= ... b0OA&pos=3

Not good news for Dubai!!





Abu Dhabi to ‘Pick and Choose’ Dubai Debt Support, Reuters Says

By Ayesha Daya

Nov. 28 (Bloomberg) -- Abu Dhabi, Dubai’s oil-rich neighbor, will “pick and choose” which of Dubai’s assets to underwrite, Reuters reported, citing an unidentified Abu Dhabi official.

Abu Dhabi won’t fund all of Dubai’s debt, the official said, according to Reuters.

Markets around the world have been roiled since Dubai World, with $59 billion of liabilities, said Nov. 25 it was seeking to delay debt payments.

To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net

Last Updated: November 28, 2009 04:56 EST

Tom Jones wrote:Now AD says it won't fund all of Dubai's debt!!

http://www.bloomberg.com/apps/news?pid= ... b0OA&pos=3

Not good news for Dubai!!





Abu Dhabi to ‘Pick and Choose’ Dubai Debt Support, Reuters Says

By Ayesha Daya

Nov. 28 (Bloomberg) -- Abu Dhabi, Dubai’s oil-rich neighbor, will “pick and choose” which of Dubai’s assets to underwrite, Reuters reported, citing an unidentified Abu Dhabi official.

Abu Dhabi won’t fund all of Dubai’s debt, the official said, according to Reuters.

Markets around the world have been roiled since Dubai World, with $59 billion of liabilities, said Nov. 25 it was seeking to delay debt payments.

To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net

Last Updated: November 28, 2009 04:56 EST

There are two things that should be noted.

First, Dubai World holding was never implicitly backed by the full faith and credit of the Dubai government, although investors around the world did believe so. Hence the 'shock' that triggered investors to reassess some of their emerging market holdings.

Second, Abu Dhabi has indicated that it would be backing Dubai's sovereign money problems if needed, but never had the intention to bailout the private sector businesses and activities of Dubai. That are two seperate things to understand clearly.

Current state of affairs are that the free market will take care of a debt restructuring process so that Dubai World is able to focus on its core activities. Part of that process is to sell some of its assets overseas. As some of you might know, Dubai World has investments in real estate all over the world, especially in the UK, which will probably be going on a firesale to raise capital.
AD will try to help with that process by taking over some assets or investing in them to keep funding costs low for Dubai. AD Sovereign Wealth Fund has hundreds of billions of dollars, so they have a free pick and choose game to play.

Nevertheless, Dubai is going to learn a huge lesson from this debt-spurred 'growth'. Today, its saving what can be saved without losing everything borrowed from overseas.

ps: I think the 'Eye of London' will be sold first. Useless investment

Abu Dhabi certainly isn't going to just hand over bailout money without conditions and securing an interest as to where the money goes, as well as having a say in where it goes and how it is to be distributed. Abu Dhabi is pretty much going to dictate to Dubai what it needs to do, and that dictate has already been put in motion. I think Abu Dhabi is saying this is what you need to do, start to implement it, and only then will we turn over the money. Abu Dhabi is the only emirate that has the money to help Dubai. Abu Dhabi only started flourishing in recent years, in spite of always having had the money to have done it sooner.

It is with great interest that I have been reading this amusing chapter in the recent history of Dubai.
Who is Dubai World Holdings ? Is this related to Dubai World Investments Holdings Inc recently stated to be looking at buying into Liverpool FC ?

Dubai World Group did not and does not own the London Eye or even Madame Tussaud's, that would be DIC (and a right bunch they are too ...)

As one of the main sources behind Bloomberg and NYT amongst others I am still amazed at the ability of people to miss the main point ...

And that being, DW used the refelcted security of the Dubai Government (sic) to hoodwink banks into lending ever increasing amounts to them. The banks were local, regional and international - so no discrimination there then !

Dubai does not issue sovereign debt - that is the sole remit of the Central Bank of the UAE on behalf of the Federal Government. And that is reflected in the fact that the credit rating of Dubai debt issues is less than that of debt issued by the Central Bank.

Abu Dhabi on the other hand because of its level of liquidity, issues debt at the same rating level as the Central Bank.

What is going on now is what I think they call "brinksmanship" i.e. Dubai is betting that the mushroom cloud of a default in Dubai will cause too much negative impact on their cousins down the road and that it would be easier to bail them out than spend the next 5 years in the minor leagues AND on the other side of the coin BB is correct AD wants more control in return for a bail out.

The loser in all of this at the end of the day is Dubai World.
Credibility = Nil Point
Credit rating = Nil Point / Junk
Viking = ROFLMAO

viking-warrior wrote:It is with great interest that I have been reading this amusing chapter in the recent history of Dubai.
Who is Dubai World Holdings ? Is this related to Dubai World Investments Holdings Inc recently stated to be looking at buying into Liverpool FC ?

Dubai World Group did not and does not own the London Eye or even Madame Tussaud's, that would be DIC (and a right bunch they are too ...)

That is correct. I probably misread that Dubai World (or subsidiaries) would hold that asset.

As one of the main sources behind Bloomberg and NYT amongst others I am still amazed at the ability of people to miss the main point ...

And that being, DW used the refelcted security of the Dubai Government (sic) to hoodwink banks into lending ever increasing amounts to them. The banks were local, regional and international - so no discrimination there then !

You obviously didn't read my last post above you.
Don't go running with my primer here

Correct I did not;

but

The core business of Dubai World is the borrowing of money ! Even the money that they put down on investments as "equity" was borrowed from either local banks or internal group entities.

viking-warrior wrote:Correct I did not;

but

The core business of Dubai World is the borrowing of money ! Even the money that they put down on investments as "equity" was borrowed from either local banks or internal group entities.

Agreed

Valid points!
first
this was not a soverign debt..it was a corporate debt with an assumed backing of the only shareholder.. but one mustn't forget tht even though the largest shareholder (in this case dubai govt) has a limited liability..

second
AD is not ready to throw money at everythng in dubai..

ppl who assumed these things blindly (where none have been officially stated) have burnt their fingers..

Its pretty simple really. The rich are not rich by being stupid. AD will let alot of companies collapse and then buy up what they want for pennies on the dollar. Its just a cycle that repeats itself over and over. The more things change the more they stay the same.

canuckbid wrote:Its pretty simple really. The rich are not rich by being stupid. AD will let alot of companies collapse and then buy up what they want for pennies on the dollar. Its just a cycle that repeats itself over and over. The more things change the more they stay the same.

Sure is. Hence the terms: Smart money. Buy low, sell high. A value play.

A big problem has been announcing this just before eid/thanksgiving when people about to go for holiday!

Dubai is in deep shit ,i'll give you that but you guys are worried a lot about this issue where the rolling family is at ease having fun here and there. ppl things between AD& Dubai happens mostly under the table , it's been like this since ever, there is no need for any announcements ,Ad is knowing to be the silenced type for some reason ! my brother told me that this deal http://www.thenational.ae/apps/pbcs.dll ... 59967/1005 happened with a only a phone call and in less than 4 hours... not only Dubai but the US and UK are among the guys who seeked AD help in one way or a another. and I'm sure 100% sure that what ever AD pays to Dubai it will be wiped out in less than 1 years from AD side. no matter what the amount is, AD can generate it in a blink of an eye. but they will interfere with Dubai future vision and management thats for sure.

and I'm carious, ppl who wants to leave else where !! where is that place that will give you more than here ? as much as it will make me happy to see that … you know me LOL

Adu Dhabi isn't going to "interfere" as you put it. What they will do is force Dubai's hand to sort out the internal problems, which in all reality are people, which is already happening. And why shouldn't they have a say in how their money is distributed. If someone came to me and asked to borrow say, $100,000, to pay off some bills they had, and should I choose to help, I would be the one writing the checks to the creditors, not them!

Abu Dhabi is the financial emirate. Has been in finance forever. They know how to manage money.

Ghalib wrote:Can any one throw light on the consequences and the effect on common man in case of Dubai default?
is it unsafe to invest in here from now on? shall one pull out their cash from Dubai banks and shift it back home?

A little update on the regional banks. Moody's investor service is in the process of rating the banks in their current state. Clearly overall, the balance sheets are deteriorating and downgrades look inevitable.

Read below to find out if your bank is involved. And make up your mind whether to find another one, or spread your money over multiple banks that are considered save(r).

http://www.ameinfo.com/217371.html

Ciao.

Update: UAE Central Bank intervenes to avoid run on the regional banks

RobbyG wrote:

Ghalib wrote:Can any one throw light on the consequences and the effect on common man in case of Dubai default?
is it unsafe to invest in here from now on? shall one pull out their cash from Dubai banks and shift it back home?

A little update on the regional banks. Moody's investor service is in the process of rating the banks in their current state. Clearly overall, the balance sheets are deteriorating and downgrades look inevitable.

Read below to find out if your bank is involved. And make up your mind whether to find another one, or spread your money over multiple banks that are considered save(r).

http://www.ameinfo.com/217371.html

Ciao.

Update: UAE Central Bank intervenes to avoid run on the regional banks

Basically the answer to the question is that as previously stated the UAE Central Bank will back both local and foreign banks in the Emirate.

sage & onion wrote:For those who like to bash Dubai at every given opportunity try this on for size:

http://mwhodges.home.att.net/nat-debt/debt-nat-a.htm

The total debt of the USA $ 57 Trillion - - and soaring

or how about;

£2trillion - the terrifying total of our national debt... that's £33,000 for every man, woman and child in Britain

http://www.dailymail.co.uk/news/article ... itain.html

Sage, you usually have pretty level headed posts... until this one.

I'm going to give you the benefit of the doubt, in which you are not really comparing the US (its structure, population, ability to repay etc.) with Dubai (which is a grain of sand in comparison)?

Say it ain't so.


Back on topic,
I (like many others) would love to see Dubai pull out of this and become a true global player. However, I don't think that is going to happen with it's current methodologies. Perhaps a 'shakeup' up top is in order and someone else pulls the reins... for now.. (I'm not insinuating that Sheik Mo step down, but rather to take a back seat and allow someone else to approach the issue from a different angle).

Thank you sage & onion, xdude, RobbyG and all others for the insight.Really appreciate ur wisdom sharing

Ghalib wrote:Thank you sage & onion, xdude, RobbyG and all others for the insight.Really appreciate ur wisdom sharing

Glad to be of service. Hope you were able to make a wise decision regarding your bank balances.

Cheers.

Update: Dubai stock market 7% down in morning trading

http://www.smh.com.au/business/markets/ ... utostart=1

The stock markets recovery has started already.

Jokes aside, I would like to pose a few questions.
Would you holiday in Dubai?
Would you live in Dubai?
Would you invest in Dubai?
The first question is nearly always yes.
The second questionn is invariably a yes, but Dubai needs to foucus on property ownership laws and residence visas to boost the population, including part-time residents.
With this in mind, you would be forgiven for answering yes to the third question.

benwj wrote:http://www.smh.com.au/business/markets/shares-soar-as-dubai-worries-abate-20091130-jzlu.html?autostart=1

The stock markets recovery has started already.

Jokes aside, I would like to pose a few questions.
Would you holiday in Dubai?
Would you live in Dubai?
Would you invest in Dubai?
The first question is nearly always yes.
The second questionn is invariably a yes, but Dubai needs to foucus on property ownership laws and residence visas to boost the population, including part-time residents.
With this in mind, you would be forgiven for answering yes to the third question.

This is called deception, the stock market has recovered its losses only for the Aussies and because quote" The threat has clearly been contained and our big four banks have very little material exposure to it,'' Mr Taylor said." basically they are safe because they had not invested in the toxic Dubai World.

dresden wrote:

sage & onion wrote:For those who like to bash Dubai at every given opportunity try this on for size:

http://mwhodges.home.att.net/nat-debt/debt-nat-a.htm

The total debt of the USA $ 57 Trillion - - and soaring

or how about;

£2trillion - the terrifying total of our national debt... that's £33,000 for every man, woman and child in Britain

http://www.dailymail.co.uk/news/article ... itain.html

Sage, you usually have pretty level headed posts... until this one.

I'm going to give you the benefit of the doubt, in which you are not really comparing the US (its structure, population, ability to repay etc.) with Dubai (which is a grain of sand in comparison)?

Say it ain't so.

I must be missing something. I would expect the ability for a country to pay off its debts has something to do with its GDP? The figures make interesting reading regardless of what you think:

DUBAI
GDP $174.6 billion
Debt (estimated) $85 billion (48.7% of GDP)
Debt per capita: $68,493

USA
GDP $14.26 trillion
Debt $13.454 trillion (94.3% of GDP)
Debt per capita: $43,793

Germany
GDP $2.918 trillion
Debt 5.208 trillion (178.5% of GDP)
Debt per capita: $63,263

France
GDP $2.128 trillion
Debt 5.021 trillion (236% of GDP)
Debt per capita: $78,387

UK
GDP 2.226 trillion
Debt 9.087 trillion (408.3% of GDP)
Debt per capita: $148,702

And the winner is...
Ireland
GDP $188.4 billion
Debt 2.386 trillion (1,267% of GDP)
Debt per capita: $567,805