Mid-Day Report: Consolidations Continue as Impact of Dubai’s Bailout Fades
December 13, 2009 by
Filed under Daily Alerts, Tweet
The boost from the news of Dubai’s bailout by Abu Dhabi was rather brief and markets are generally staying in range for the moment. Dollar index retreats to 76.25 earlier today but recovers in early US session. The greenback is also supported by crude oil’s weakness as it hovers below…
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Dubai: The Economically Impossible Dream Is Over
December 3, 2009 by Seeking Alpha
Filed under Investment Ideas
Original Article from Seeking Alpha Editor’s Pick
Vitaliy N. Katsenelson, CFA submits:
Virtually unlimited access to cheap money blurs lines between what makes economic sense and what doesn’t. If it can be financed it will be built. Dubai’s plan to diversify away from petrochemicals made sense. Maybe it is even destined to become the Las Vegas of the Middle East, the Mecca of business travel and luxury.
Dubai, however, is like NASA; both have proven that anything is possible when you ignore economic costs. Many technological discoveries were made in the process of putting a man on the moon; but the project did have, and was expected to have, a negative return on capital.
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Did Dubai World Credit Default Delay Euro’s Run to Higher Levels?
December 2, 2009 by Seeking Alpha
Filed under Tips
Original Article from Seeking Alpha Dollar Currencies
On the Wednesday prior to Thanksgiving the Euro was marching ever higher versus the dollar when risk appetite was suddenly reversed by awareness of the Dubai problems. This caused a hasty retreat down to the support at 1.4850. The problems with Dubai World remain unsolved, and it has been revealed that the tentacles are far reaching. For example, Dubai World owns a 6% stake in MGM casinos, as well as 50% interest in an 8B$ project in Las Vegas, called the City Center Project. Yes, Britain may have the biggest share of the Dubai loans, but the US, German and French bankers have all been sponsors of Dubai’s ambitious plans. Since currency values are relative and everyone seems to be in the same pickle, we are then back to square one, and the Euro has again appreciated above the 1.51 level.
As we enter the final month of the year, we are going to begin to hear summaries of the big events and stories of 2009. Near the forefront will be the recovery of global equities. The recovery may be lagging on main street but Wall Street is booming. If you are a fund manager, and the market has just had a 60% upside move since March, the last thing you want to reveal to your investors is idle cash at the end of the year. In a bull market idle cash is a curse for the fund manager, and this idle cash is likely to ignore the problems of Dubai, and main street and propel the markets higher. Just as markets go down too low, they also go too far the other way. What reason do we have to believe the inverse correlation between equities and the dollar will not continue?
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Dubai’s Crisis: Implications for Stocks and Global Markets
November 30, 2009 by Seeking Alpha
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Original Article from Seeking Alpha Dollar Currencies
Key Points
The biggest near term influence on the direction of risk appetite and global markets appears likely to be the Dubai debt crisis, so we need to evaluate the importance of this past week’s credit scare.
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Dubai Debt Concerns Moderate
Original Article from ACM – Newsletter
Despite the 6% slump in Dubai equity indices in early trading, global markets have shrugged off concerns surrounding the debt crisis with remarkable ease, and risk appetite has begun the week on a strong footing with most Asian equity indices strongly higher. The remedy for the most recent bout of risk aversion has been an announcement from the UAE central bank asserting they would stand behind…
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Weekly Review and Outlook: Yen Could Extend Rally after Post Dubai Stabilization
November 28, 2009 by
Filed under Daily Alerts, Tweet
The news that Dubai world sought to delay debt payments shocked the financial world last week and triggered massive flight to safety. Whether that is a significant turning point in global recovery or just an excuses for an overdue correction in risk sentiment is up for debate. But after all,…
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Dubai, the Dollar and Equities
November 28, 2009 by Seeking Alpha
Filed under Tips
Original Article from Seeking Alpha Dollar Currencies
Scott’s Investments submits:
If you have followed the news the past few days, you are already aware of Dubai’s inability to make their debt payments on schedule. The market sold off hard (albeit on low volume) on Friday in what is typically a sleepy day after Thanksgiving. It seems that US firms have little exposure to Dubai debt, with most of the direct exposure in the Middle East and Europe. Cumberland Advisors stated yesterday that they don’t see a long term impact on the US or the dollar.
In the short-term, the dollar could rally on the Dubai news as overseas institutional investors seek safety. This is significant for equity investors because the dollar and equity markets have been negatively correlated for much of the past two years. A rising dollar has meant a falling market and vice versa (see first chart comparing $USD and $SPX). This is most likely a result of the ‘dollar carry-trade’ in which institutional investors are short the low-yielding dollar and long virtually everything else. So long as the dollar continues to fall, those who are short the dollar can continue to pour funds into every corner of the market; a rising dollar could mean quick liquidations of leveraged investment positions. Hence, we have seen the market rally in the face of seemingly bad news and porous fundamentals for much of 2009. Long term the fundamentals for the dollar are not encouraging and the Fed has shown no signs of raising rates (which would damper the dollar carry-trade).
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Natural Gas: Powering the Dubai Overshoot
November 28, 2009 by Seeking Alpha
Filed under Investment Ideas
Original Article from Seeking Alpha Editor’s Pick
Gregor Macdonald submits:
You’ve seen the before-and-after pictures, like a Vegas slug of glass rising in the desert. And, you’ve read the stories about indebted foreign workers leaving their Range Rovers behind, as they flee. Perhaps you’ve seen video of the indoor ski arcade? Or, caught the gaze of the photographer’s eye on the poor, underpaid migrant workers constructing the Burj Dubai. Welcome to today’s obligatory Dubai blog post. Brought to you courtesy of some very hot, sovereign default action as the UAE’s most glittery city announced overnight a request for a stay on debt payments from Dubai World. How could a country so rich in energy resources have gotten itself into such a mess?
It’s generally assumed that just about every Mid-East oil producer is a big, net exporter of oil and while that’s also true for the United Arab Emirates what’s worth noting, or retelling today, is the means by which the UAE, principally because of Dubai (an Emirate within the UAE), started to become a net importer of natural gas. Let’s start with a chart of electricity demand (click to enlarge).
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Is the Dubai Crisis the Answer to USD Bulls’ Prayers?
November 27, 2009 by Seeking Alpha
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Original Article from Seeking Alpha Dollar Currencies
As discussed in our last article The Must-Know Connection Between Stocks and the USD, the USD moves in the opposite direction of stocks, especially the bellwether S&P 500 index, and other risk assets
What’s Needed for a USD Rally
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Dubai’s Fallout Hits Currency Trades
November 27, 2009 by Seeking Alpha
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Original Article from Seeking Alpha Dollar Currencies
Mitul Kotecha submits:
Dubai’s bolt out of the blue is hitting markets globally, with the aftershock made worse by the thin liquidity conditions in the wake of the US Thanksgiving holiday and Eid holidays in the Middle East. Estimates of exposure to Dubai companies vary considerably, with European banks estimated to have around $40 billion in exposure though what part of this is at risk is another question.
The lack of information surrounding the Dubai announcement made matters worse. The aftermath is likely to continue to be felt over the short term, with further selling of risk assets likely. Indeed, there is still a lot of uncertainty surrounding international exposure to Dubai or what risk there is to this exposure and until there is further clarity stocks look likely to face another drubbing.
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