The 2010 Investment U Conference is underway! And even if you couldn't make it, now you can "bring home" more than 30 breakthrough presentations from the conference... Order the Deluxe MP3/Video Library for $99 to listen and view on your computer, or the Premier CD plus MP3/Video Library for $149 to listen to and view anywhere.
Dubai’s Debt Crisis Primes the Panic Pump
by Ryan Cole, Investment U Research
Dubai reminded the world last week: this crisis isn’t over.
With a surprise debt restructuring request by Dubai World – Dubai’s corporate front – and a plea from the tiny UAE for creditors to accept delayed payment, nervous global markets swiftly headed into reverse.
The announcement was timed to land during an extended American holiday, but the markets didn’t care. And while prices have stabilized, investors are just now starting to come to grips with the shock – and the meaning – of this latest development.
Yes, There’s Good News
First, the good news: This hasn’t yet reached default status. Should banks agree to extend Dubai World – and, by extension, backing the Dubai government – with a six-month moratorium on interest and payments, Dubai believes that it can escape this trap without a default.
Also, the numbers we’re talking about are relatively small – only $60 billion, roughly one-third the market cap of Apple (Nasdaq: AAPL).
Finally, most of the risk is limited to the UAE and Middle East – home to most of the banks that have lent to Dubai World. Barclays Bank, with $200 million in exposure, leads banks outside the region. However, Barclays says that position is well hedged.
These Four Countries Are in Trouble
Now, the bad news: The $1.7 trillion in credit write-offs that the world has already suffered isn’t about to end – and we may be entering a larger, more dangerous phase.
Dubai officially opens default season for countries – or, in this case, large political bodies. With governments around the world racking up unprecedented debt and the first domino now falling, the “Who’s Next?” guessing game has now entered into the financial pages.
Popular choices include:
- Japan (worst debt-to-GDP ratio – nearly 200%).
- The U.K. (worst deficit-to-GDP ratio – over 14%).
- The U.S. (highest debt and deficit in real terms).
- Italy (perennially struggling with a large, unwieldy debt).
To be clear, we’re not saying that these countries are about to default. Japan owes almost all its debt internally. Britain had a relatively low debt starting point. America largely controls the exchange rate of the currency its debt is held in – and can always print dollars – while Italy has actually faced the crisis with decent discipline so far.
Speculation Killed the Cat
In itself, Dubai’s crisis isn’t that bad.
However, the news has opened the doors to active speculation. And by extension, banks and other bodies that have lent to these countries (and others) may see votes of no confidence in their shares.
In addition, investors are on edge again and possibly primed to panic. If another domino falls sometime soon, look out.
Ryan Cole
- Japan’s Historic Moment Creates Historic Confusion
- What is Toxic Debt and How Much is There?
- Why Even Debt Looks Better In Emerging Markets
|
The Company Set to Dominate a $60 Billion-a-Year Market
$60 billion is spent on cancer treatment in the U.S. - each year. And one company is poised to receive the lion's share of it.
The medical director at the Alta Bates Comprehensive Cancer Center says, "...possibly a third of our cancer patient population will soon be undergoing this [company's] treatment."
Another doctor at the University of Texas MD Anderson Cancer Center says he intends to treat over 1,000 patients a year with this technology.
Here's how you can claim your stake in the company before this cash infusion sends shares soaring.
One Response to “Dubai’s Debt Crisis Primes the Panic Pump”
Comments
**By submitting your comment you agree to adhere to our Comment Policy and Privacy Policy.Check out our selection of daily Investment Research:
 |
 |
Investment U RSS Feed
November 30th, 2009 at 6:03 pm
Who didn’t see this one coming? Dubai’s been building islands in the desert and driving gold plated cars. Now the banks are going to have to repossess all of these orphaned cars and homes (see: http://www.repofinder.com). Good luck to the banks who have to sell the gold plated cars.
Reply