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Abu Dhabi [Unlikely to Pay All Dubai's Debts/Graciously Assisting Sovereign Brother] (Select One)
Interestingly, though implicit and Fanniesque guarantees by Abu Dhabi have always colored the pricing of Dubai's debt (along with the image, apparently exaggerated both in will and ability, of the virtually unlimited backing of Abu Dhabi's "$600 billion" sovereign wealth fund) most stories covering the Reuters disclosure this morning focus on the (so far ethereal) assistance Abu Dhabi will be giving Dubai, and not that which it will not.
"We will look at Dubai's commitments and approach them on a case-by-case basis. It does not mean that Abu Dhabi will underwrite all of their debts," the official told Reuters by telephone.
The government official declined to be identified because he is not authorised to speak to the media.
"Some of Dubai's entities are commercial, semi-government ones. Abu Dhabi will pick and choose when and where to assist," he said.1
Are we the only ones beginning to wonder if the illusion of boundless prosperity so successfully marketed by Dubai to the likes of Tiger Woods, Roger Federer, and the balance of DeBeer's top quartile client list extends to debt-laden Abu Dhabi as well? Is there anything about this region that is not muddled by the miasma of official opacity and the always underestimated power of investor self-denial?
Let us wonder aloud:
Question: If you are Abu Dhabi, why permit a newsbreaking stand-still request and pop your own cost of capital along with the rest of the region? Surely, you saw this coming long ago?
Question: If you are Abu Dhabi, how might you have hedged your exposure to Dubai? (And who is your counterparty exactly)?
Question: If you are Abu Dhabi, and Dubai had already done all the dirty work of recruiting and deploying slave labor to build the modern version of the Hanging Gardens of Semiramis, mightn't you be quietly buying up distressed Dubai debt just now?
The information asymmetries are huge in this case. Particularly in the Middle East that's usually a hint that foreign investors are going to get their lunch money lifted, find themselves framed for the crime by local authorities when they complain, imprisoned by the uncle-of-the-thief (who also happens to be a judge) immediately before being repeatedly raped while in custody, caned and then deported "accidentally" to Azerbaijan.
It occurs to us that, in this respect, and in an admittedly perverse (but deliciously ironic) interpretation, Abu Dhabi is the Anti-Fed/Anti-Treasury that some Americans have been lusting for in the wake of AIG funnel payments to the likes of SocGen: Crushing moral hazard (and bond prices), a dozen foreign investors at a time (and perhaps making money for taxpayers on the bailout in the very short term via careful use of quiet acquisitions of distressed debt and the aggressive use of default protection).
Or maybe the message is simply that sovereigns of all stripes should just stay the fuck out of finance.
- 1. Stanley Carvalho, "Abu Dhabi to Aid Dubai "Case by Case'," Reuters, November 28, 2009.
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The Fed will find a way to help bail them out--note that C already has at least $2 Billion (referencing old data) on the hook so Uncle Stupid is already in the game.
I heard on a talking head show yesterday that the US will be at the table for talks negotiating this debt. My first thought was TARPX to the rescue, the Benny and Timmy tag team will buy anything.
They just print more dollars to bail out more bankstas. While everyone is focused on a few bad real estate deals in dubai, there's real problems over here:
http://www.google.com/hostednews/ap/article/ALeqM5iRqjZV1Meppj40hTs8IBOv4DdsQwD9C8KJV81
If they try to do TARP X on this deal, they better have the ultimate in secrecy because the American taxpayer will NOT go along with this at all. In my view, this would be the tipping point, if we are not there already.
I feel from the American taxpayer a collective "go ahead, make my day" if that lying sack of crap Tim "Mr. Strong Dollar" Geithner and Ben "the world will incinerate and vaporize immediately if the Fed is audited" Bernanke so much as offer up one lousy devalued near worthless Federal Reserve Note.
I have been asking the first question since the news broke. It also seems that the 90 or so billion being discussed is too low. How much does a indoor ski mountain cost?
Yahoo maps shows Dubai before the development and Google maps shows it after the Palm islands are there.
http://maps.yahoo.com/#mvt=s&lat=24.919042&lon=54.950908&zoom=13&gp=1&q1...
http://maps.google.com/maps?q=dubai&oe=utf-8&rls=org.mozilla:en-US:offic...
Shit looks like it cost one hell of a lot of dough.
Damage Control team are hard at work... Just like after Lehman/Bear collapses.
I find this interesting:
NY times saying Citi Bank only has $1.9B under loan.
http://www.nytimes.com/2009/11/28/business/global/28dubai.html?hp
Dennis Kucinich says otherwise.
http://www.7days.ae/storydetails.php?id=75035&title=US+outrage+over+Citi+loan
that 'money for gold' ad on zerohedge is soooo irritating!!
Fo real, dawg! It should read "worthless fiat paper for money"!
I am Chumbawamba.
Fo real, dawg! It should read "worthless fiat paper for money"!
I am Chumbawamba.
Agreed, i'll send you a TRILLION in Zim for a few ounces of gold. After all, you do not need gold and that paper FIAT money is worth its weight in.... paper.
the latest from Jesse's Cafe - (if you have a couple of hours to spare)
http://jessescrossroadscafe.blogspot.com/2009/11/weekend-viewing-fall-of...
Question: If you are Abu Dhabi, how might you have hedged your exposure to Dubai? (And who is your counterparty exactly)?
Exactly. "How to make huge profits in a recession". I wonder if UBS and BOA saw this and followed through with a coat tale trade.
Yes many Americans do dream of an Anti-Fed,
an Anti-Treasury, and we wish we had one
of them "hanging gardens" too!
What about American Ports & our Supply Chain??
No worries.
http://en.wikipedia.org/wiki/Dubai_Ports_World_controversy
letter I wrote to the ft:
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Flag this messagean editorial staff on fantasy IslandSaturday, November 28, 2009 9:35 AM
From: This sender is DomainKeys verified"David Blumenthal" Add sender to ContactsTo: letters.editor@ft.comCc: letters@nytimes.com, "Sharon Gazley" , "Ramesh Nuti" , "Ishtmeet Sahni" , "Jerry Salerno" , "Sanjay Sukhrani" , "Randall Thomas" , "lisa weintraub"
, chrispalikuca@mac.com, "onestein@fnguide.com" , eileensc@optonline.net, aberock@optonline.net, dblumenthal@yahoo.com... moreSir,
Over the course of this crisis I have sent your paper many articles detailing the deceptive practices of the financial services industry. These include, but are not limited to, auction rate securities, credit card fees, municipalities paying more to issue bonds than corporations, hidden fees for municipalities, interest rates swaps, and the list goes on. By your own admission the industry engages in regulatory arbitrage. Information asymmetry is the rule of the game (avoid complete disclosure. Teams of lawyers to figure out how to skirt the law, and what is defensible Vs. what isn't. When regulators and politicians attempt to force the industry to offer simple easy to understand mortgage products they cry foul and do everything they can to keep up the deceptive practices. They fight with all their might to make the consumer protection agency toothless, and keep derivatives opaque.
with of of this in mind you call for Abu Dhabi to pay of Dubai's obligations because of an implied idea that they would do so. Why do you keep having to be reminded that nobody forced these bakers to make stupid loans to a hole in the desert building "palm" Islands, the worlds tallest buildings, and indoor ski slopes in the desert. The god damn country has no resources except for sun and sand.
The entire financial services industry functions around hidden fees and traps, always looking for way to skirt the law and make off with a bit of excess alpha. when threatened with any regulation that would decrease their bonuses but make society better off they do everything in their power to prevent it. Now you are effectively calling once more for the state, without legal obligations, to come to the rescue for their poor choices.
sometimes I wonder if your editorial staff lives on the same planet I do. Clearly they choose to filter reality in a manner consistent with their world view.
BANKERS HAVE BECOME THE SPOILED CHILDREN OF OUR PLANET. THEY EXPECT GROWN UPS (THE STATE) TO COME TO THEIR RESCUE WHEN THEY MAKE MISTAKES, AND STILL KEEP SAYING "IWANT THIS, i WANT THAT, LET ME DO THIS, LET ME DO THAT" . THEY HAVE IN FACT BECOME TWO YEAR OLDS IN BUSINESS SUITS.
I do not know if writing to the editors of anything helps. I do not know if writing to your representatives helps either. I do both of those and expect to only get a good nights sleep.
'Money doesn't grow on trees...'
'Money doesn't grow on trees...'
'Money doesn't grow on trees...'
Shut up!
I was talking with a friend of mine last night who knows people in the Emirates. Apparently there is no love lost between Abu Dhabi and Dubai so it makes one wonder what Abu Dhabi will be expecting, or getting, from any help that is given, if it's given.
He also said that they're intending a remake of The Flintstones in the Middel East - Dubai don't want to do it but Abu Dhabi do (Ouch!)!
DavidC
'Money doesn't grow on trees...'
'Money doesn't grow on trees...'
'Money doesn't grow on trees...'
No, it's printed by banks via fractional reserve banking. The greatest and longest lasting fraud of all times the banking system. Get this if the bank's print money through debt creation they tell us it isn't inflationary. Huh? It is chasing goods and services and it carries the extra cost of interest. Sounds inflationary to me. The banks have taken over the printing press saying we can't trust politicians with that power. While they are right about that the alternative of a debt driven money system is that over time it is guarenteed to blow up.
No.. you have it all wrong. The statement which you must REALLY examine is......
"Money does not beget money."
And please......... IT DOES NOT PRINT MONEY UNLESS CONGRESS AUTHORIZES IT. IT CREATES CREDIT THROUGH FRACTIONAL FUCKING RESERVES, QUIT BEING AN IDIOT FUCKING PROPOGANDA PARROT.
Thank you! :)
My observations.....
One... Abu Dhabi may have its own financial problems hence its reluctance to help out Dubai.
Two....More bad news means Uncle Benny is going to have to keep the printing presses going for a little while longer. All positive for the price of gold.
Deflation is inevitable. Forget about Gold.
All the main stream media is reporting either Party Crashers at the White House or Tiger Woods getting hit by golf clubs/car crash.
Man... everything to prevent Black Friday from collapsing and people keep buying big screen TVs.
Gold does better in deflation than it does in ordinary inflation. Why would I want to forget about it?
my thought as well...with the world becoming a lil' more unbuttoned everyday why NOT gold?
I disagree. Bernanke was absolutely right when he said that sufficiently determined monetary policy-makers could always engender inflation. He is quite wrong, however, to think that such inflation through mass printing will necessarily create growth in output or employment, or that it will be straightforward to so judge the cessation of printing as to avoid hyperinflation. Gold of any description would perform well in an acute stagflationary envrionment, and physical is one of the better and more liquid forms of insurance against a hyperinflationary one.
Wise up - they're not mutually exclusive events. One will ultimately beget the other...........
Also true. Hyperinflation is typically preceded by deflation. Argentina earlier this decade is a good example.
11/27, GCF0, Gold Jan 2010 Future close ~1180.
12/08, GCF0, Gold Jan 2010 Future trading around 1145.
Gold has its value, but deflation is still inevitable.
Put it simply, as one of my friend did, If the Arab Oilmen can't pay their bills, what shots does the grandmas in Iowa have? (And who do you think has more Oil and Gold to sell in order to pay said bills?)
If Abu Dhabi hedged its exposure to Dubai... I hope Goldman Sachs is a counterparty with significant exposure...
"We will look at Dubai's commitments and approach them on a case-by-case basis. It does not mean that Abu Dhabi will underwrite all of their debts," the official told Reuters by telephone.
This is absolutely the right way to go. A huge part of the damage done to the global economy comes from the toxic crap the banks have forced down the throats of counterparties who did not understand them. An theory all senior unsecured claims should rank pari passu, but if we are ever going to purge the system, the banks need to be taught a lesson.
The smart way for them to go is to declare a default and then restructure in a way that pays back ordinary creditors (esp bondholders) at par, maybe via an exchange of obligation and leave the derivatives trades hanging out to dry. This way, the CDS hedges the banks have will not be any good - they can't deliver derivatives into a CDS.
I think the bonds may be a good buy at 40 cents in the Dollar and then we will see the banks trying to get the billions of other claims...
Hmmm...... Kind of makes one wonder if maybe Tiger Woods had some exposure here as well?
He did seem to be having a rather rough evening did he not?
+1
I was wondering what would make him so upset at 2 AM to go and get in a wreck.
Fight with the wife. She did have a driver in her hand to 'conveniently' help him out. LOL.
he smoked the last rock, without offering to share
I am starting to see how the 23.7 trillion in government guarantee's may play out. Emerging markets may find that they no longer get any of the excess global liquidity sloshing around as a result of this and all of the taxpayers money may be coming back home.
Way off topic but I see no evidence of a fire hydrant near Tiger's driveway in Windermere, FL (Orlando), nor is this the lush tropical enclave that one might have expected where one could have miscalculated where the road was:
http://i49.tinypic.com/243ol5f.jpg
http://i45.tinypic.com/2zhno91.jpg
http://www.bing.com/maps/?FORM=Z9LH3#JndoZXJlMT02MzQ4K0RlYWNvbitDaXIlMmM...
Dubai is basically all about Emirates Airline, its their absolute crown jewel along with the new airport which just happens to be ideally placed between east and west. The last time AD bailed out Dubai, the rumour (i got this from a stewie on emirates) was that they ended up with 20% of Emirates and the racecourse quietly changing hands.
Bet they are going back for the rest.
Sand in the desert to bring the financial system to its knees...the oilmen must be smiling
As I understand it, Dubai has virtually nothing by way of oil or natural gas reserves. It is a literal mirage built on sand and debt, a potemkin village with no substance. It has no real value, except for the net worth of the various emirs and sheiks who run the place...
Sorta like a minimum-wage landscaper who buys a million-dollar house in Arizona with a no-down, interest-only ARM... There's no "there" there!
Here's hoping that AIG and GS are up to their eyeballs in swaps on this place... Fresh calimari for dinner!
So, they will takeover the best projects. The wise move.
the best projects?
Now what part of the mirage might that be?
New, very short, reality TV show:
"Flip my Mirage"
Oh wait... that show's been on the air for years now...
+1
Flip my mirage. I am going to have to repeat that one, thanks.
Somewhere at a remote location(Princeton, NJ) The Squid has assembled a special team of operatives headed by a little squid Seb. The special team, using quantitative analysis has been able to predict net losses due to sovereign default on the top 10 sick countries.
Dubai was their yardstick.
The Squid plans to topple them all one by one.
$350 Billion is the bet. Lithuania the first target.
Happy New Year. Long live the Squid.
These out fits need to be busted up. Nothing should get that big that this post would have credibility. Fuck auditing the Fed. Small potatoes.
Invoke the existing Anti-Trust laws against the TBTF entities.
RICO Act!
G. Robert Blakey should be contacted maybe?
We do not have our eye on the ball, at all.
It is certainly a serious matter and I wanted to write something intelligent but your tongue in cheek style of writing had me laughing too much.
If AIG happens to be party to Dubai debt swaps it will be Katie bar the door. Not saying it would be with Abu Dhabi who if they did some probably did them long ago. Exactly how stupid you would have to be to do such a deal because of some of these questions I am unable to fathom. Head protecter drool cup range I believe. Guys the smarter fellas can and are now planning to rape as select companies will be taken out and shot to collect on the CDS's. Hedge my ass.
http://www.telegraph.co.uk/finance/businesslatestnews/6673264/Rothschild-appointed-to-help-sell-Dubai-World-assets.html
Makes sense, as the Rothschilds are one of the major players behind the entire central bank scam that has plagued the human race for generations. Obviously the situation is extremely bad when they need to call in the Rothschilds, so in my mind this means it is a very large problem needing massive intervention far above that being reported upon to the public.
Lizzy you're just awesome!!
"Buy when there's blood in the streets and sell to the sound of trumpets." -Nathan Rothschild
So, there will be blood in the streets then
$60B is not a huge some of money for the oil rich UAE. There must be more to this story than is out there. Maybe this is just a distraction from the real problems in some other countries in Eastern Europe?
admin
http://invetrics.com
"Or maybe the message is simply that sovereigns of all stripes should just stay the fuck out of finance."
LOL. You don't get that on CNBC.
If I was Abu Dhabi I would have bought cds then sprung the trap and made out big!!!
aside from taking more control over dubai, why would abu dhabi squander their SWF on this crap. hang dubai out to dry, let them stiff their western creditors... the governments of those western states will bail out their banks and paper the problem over. there is the simple way to abu dhabi to treat this.
Marla...this is a brilliantly written piece and certainly opened my eyes to numerous possibilities in this smelly little litter box.....where, oh where, are all the cat turds hidden....
Thank you for the piece.
I do think things will be okay as I expect Timothy Geithner to declare the U.S. policy is a "...strong dollar..." and that will probably make everything okay, like cuddling up with a nice fuzzy blanket and a cup of hot cocoa.
after which, the dollar will drop .5% immediately
Why worry? Monday morning everything will be back to "normal"; shoppers reported out in force over the Thanksgiving weekend "better than expected", Abu Dhabi bailed out and solid as a rock, markets and gold recapture their unwarranted Wednesday losses and resume their baseless skyward climb.
Let's not be naive, the fraud, manipulation and propaganda full court press is working overtime as we speak.
Totally right, some BS report is gonna feed CNBS with something about better than expected black friday shopping numbers.
Why should Abu Dhabi pay so that more horses can be brought
http://www.mirror.co.uk/sport/racing-betting/racing-news/2009/11/28/shei...
Here is Anon's link live:
http://www.mirror.co.uk/sport/racing-betting/racing-news/2009/11/28/shei...
It is Sheikh to be a banker, or is it Banker to be a Sheikh? I can't tell a pol from a bankster any more...I suggest you look at what Russia did in 1998. In this instance we are looking at two countries within a federation but I should think the principle is the same: AD is going to buy back that debt at 50c on the dollar; saving: $40bn not counting the billions of debt not reported.
W
I like the post, but how can you use "recruit" and "slave labor" in the same sentence? The workers recruited to Dubai went there willingly because the offer was better than they got at home.
Your interpretation is too black and white. Different example, the human trafficking that goes on in the US. Folks are recruited to come here and work, and then, once over here, the terms of their agreements are not honored and they become slaves (prostitutes, maids, day laborers). There are many means to coerce them (threaten their families, isolation, threaten to turn them over to authorities, make big promises).
This is an extreme example, there are something like 300,000 cases a year they track in the US. Washington DC makes use of a lot of these folks for domestic labor. Very scandalous.
Do you really think the Dubai laborers get the same considerations a US laborer would? Shades of grey, recruit, then bait and switch.
Some folks say our soldiers are "recruited." They are. But they look a lot like a junior college student population, lots of minorities trying to make something of themselves. When you don't have a lot of resources, you make "choices" that may not be as informed if you and I were in the saddle looking at it.
She can use both words in the same sentence just fine.