We interrupt your regularly scheduled Thanksgiving

Dubai World won't repay its debt on time and the government of Dubai won't pick up the bag, raising doubts about its credibility.  Who would bail out Dubai itself?  Maybe it will be an "interesting" weekend:

Banking stocks tumbled on concern about their potential exposure to
Dubai. Indeed, the cost of insuring against default by the emirate
jumped, with Reuters reporting the Dubai five-year credit default swap
being quoted as high as 500-550 basis points. This means it would cost
about $500,000 a year to insure $10m of Dubai’s debt. On Tuesday it
would have cost about $360,000.

Funds are surging into Germany and Japan, etc.  For purposes of comparison, Dubai CDS contracts now cost more than for Iceland.

If you're feeling a little down today, and looking for something to be thankful for, be thankful you have not lent money to Dubai.  Unless, of course, you have lent money to Dubai.

Comments

Er, how do you know if you (or a bank whose stock you own) has lent money to Dubai, or is on the hook for its CDS? Unless you have the resources to monitor that stuff full time, you probably don't.

Actually you should be out of stocks and stock indexes entirely right now as they are radically overpriced. ;-)

Any country, and investor, that builds indoor ski areas in the middle of the desert deserves no sympathy from anyone when they go broke:

How do you know? Sure, operating an indoor ski resort in the middle of a desert has got to be expensive, but I'm assuming that the demand is high enough that they could get away with it. Did you check the company's financials?

Do I get this right: A partial, if major, owner of a derelict entity is expected by somebody in the financial press to put up more money when the entity tanks? Where do they live?

Happy Thanksgiving.

Where is John B. Chilton on a day like today? I hope he didn't think he gets to go home for the holidays...

Watch this space: http://emirateseconomist.blogspot.com/

Remember, John Chilton is physically resident in the UAE, thus he is unable to speak as frankly as he might about what's going on there, under threat of jail and deportation.

I am stunned that someone posted UAE should go down because they built an indoor ski slope in the middle of a desert. How lame is that?

Well, Dubai has effed up for sure, but who hasn't? The whole thing is that they are asking for a standstill agreement, the bondholders have to still ratify that, let's not forget about. It could be a negotiation tool. Afterall, the Arabs are born negotiators, what if the bondholders agree you get some breathing space why not use it.

The impact of this will be for a couple of weeks because this is a season of holidays do not forget once Dec 20 rolls in the markets start to close for Christmas and New Year.

I guess this is HH Sheikh Mohd teaching a lesson to his boys, he knew very well what impact it would have on the markets, someone would have had to blind and/or dumb to not predict this reaction and he ain't either. Bin Sulayem of Dubai World has been fired from the Board of Directors of Investment Corporation of Dubai, just like Mohamad Alabbar of Emaar and the Governor of DIFC (forgot the dude's name). There is some serious rejig happening at the top and this is a fallout of that.

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