Dubai Debt Crisis

What's my take?

Well.. what is yours?

I have been to Dubai and Fujairah a few years ago. Apart from that, I have seen a lot of photos on the internet. Dubai is the in "grove", whatever that means, lolz.

I have seen the buildings, the tallest building in construction, the Burj Al Arab, the reclaimed palm shape islands, the huge malls etc. They say it is for tourism, real state business, and that many investors are coming in to buy condos, to put up businesses etc.. They want to make Dubai the financial capital of the middle east which it is, IMO.

However, my impression of the construction BOOM is an EXCESS of too much of everything. And it is not, I say NOT, anchored on real economic engines like China's or India's.

I felt, a few years ago, that something was wrong about it - but I just can't pin point which and what was wrong. The PR and media blitz blinded so many. For one, the native population is too small that each native can probably own several dozens of condo units....what with the frenzy of building something and anything here or there - a few months ago. As if money spent all over was bottomless, lolz.

EXCESS.

--------

IMO, the problem would persist for years...if not decades to come... so?

I am out!

--------
Some notes from different sources:

Global financial markets were recently rattled by news that Dubai’s main investment arm, Dubai World, was seeking at least a six-month delay on repaying its $60 billion in debt.

Dubai's ruler says the emirate's economy is "strong and solid," despite a financial meltdown in the former Arab boomtown. Sheik Mohammed bin Rashid Al Maktoum says the world does not understand Dubai's announcement on restructuring the emirate's deeply indebted conglomerate, Dubai World. The debt crisis dragged down the main stock markets in the UAE for a second day on Tuesday, and caused other markets in the Gulf to plummet.

Fear of huge losses among Dubai lenders and the risk of default contagion to other countries sent global markets tumbling last week. Gulf bourses have also been hit this week, with the Dubai Financial Market sliding 5.6 per cent yesterday. Abu Dhabi’s stock exchange closed down 3.6 per cent, Qatar was off 8.3 per cent and Kuwait 2.7 per cent.

How to be rich in these times of crisis?

Just listened to today's interview with James Galbraith, and to quote some of it from Yahoo Finance:

Disappointing reports this week on housing starts and foreclosures, as well as the index of leading economic indicators, have cast a bit of a pall on the "robust recovery" story, putting a crimp in the stock market's ascent in the process.

What the optimists are missing is the impact the housing bust is having on both American's ability to borrow and banks willingness to lend. The resulting credit contraction will prevent this recovery from following the path of those following prior post-war recessions, he says.

IMO, Is there real recovery on the stock market in the US? What are my ideas?

1. Yes. Wall Street will be doing great. But they will not be translated to real jobs within the US because top US companies have mostly outsource their production to developing countries in Asia. Do not expect strong job recovery in the USA soon. Unless new policies, new technologies, new industries are set up, for newly adapted and newly skilled Americans.

2. We are now in transition to a world economy (Asean pushing it among themselves) + Japan, Korea, China, Australia with India getting in, at least in the Pacific Asia. Jobs will go to places/countries that will provide cheaper labor force etc. Capital then will follow, and a strong consumer base in these countries will eventually be developed.

3. A massive transfer of wealth and technology to developing countries in a decade or two.

So...

The price of the unskilled will level off across continents. The rich will be richer, and the poor will get poorer wherever they may be - the difference would be on the level of safety net and social security that governments will provide to its unemployed.

Money can be made if you are a savvy investor. Safe bets as always are: metals particularly gold, oil, gas, and various companies banking and investing in developing countries particularly in Asean countries.

Good luck.

Forecasts and Views on Commodities

US is out of recession. China and India would still remain as the main drivers of growth and suppliers of manufactured "things" all over the world. So demand for metals from gold to silver to copper etc. would be? Yes you right would still be up and up and away months and even years from now!

China's appetite and India's gold demand would make oil, coal, iron, copper, silver etc. expensive.

Besides, conditions why commodity prices have been rising still true:

* China and India continue their torrid growth.
* Global stimulus plans are bullish for commodity prices
* And hedge funds and other speculative investors are big commodities players.

Anything is possible in terms of price and profits, of course.

Can oil go beyond 160$ again? What do you think?
Can gold go as high as 2,500$? Well..

So? invest wisely.

Commodities Trading in the Philippines

Probably indicates that the Philippines market is improving. On the news today, the Philippine Stock Exchange plans to introduce a platform for the spot trading of commodities like rice, corn, sugar and coconut to help boost transparency in the pricing of the country’s key farm produce while offering an alternative outlet to investors.

Many people are looking forward to this changes. Many hopes that transparency on prices of commodities would benefit the public, but a few are worried that it could also be used to speculate on commodities prices. Remember - we have the so-called "rice cartel" controlled by Chinese businessmen.

But, let us wait and see.

Here is more about that news;

The PSE signed a partnership with the Department of Agriculture Friday night to lay the foundation for such a commodities trading platform. Under the agreement, the DA will support the enactment of laws, rules and regulations and circulars necessary to create an enabling environment for an organized commodity market for agricultural products.

The ultimate goal is to come up with a trading system that will link Filipino agriculture farmers to profitable markets for their products.

The PSE wants to set up the platform the soonest time possible.

“We believe that an organized commodities exchange in the Philippines can help relieve the pressure on commodity prices. If we can establish more transparency in pricing, the players in the food supply chain will face fairer prices,” PSE president Francis Lim said during the signing with Agriculture Secretary Arthur Yap.

“Price transparency allows our farmers to get better prices for their produce as intermediation costs are reduced. Traders, end-users and consumers will also benefit as prices shall now be determined at the national level, unlike in the present scenario where price discovery can be limited to local geographic areas,” Lim added.

But unlike most commodities exchanges across the globe, Lim said the Philippines may start with trading based on spot or real-time prices rather than futures, whereby investors buy contracts at a specified price with delivery set at a specified future date.

--------

On another news. Indeed, the Clinton times in the White House were among those times remembered by most - including the Monica L affair, lolz. Several years later - people in Albania remembered him - not just for a moment but for a much longer time - with a statue.

Thousands of ethnic Albanians braved low temperatures and a cold wind in Kosovo's capital Pristina to welcome former President Bill Clinton on Sunday as he attended the unveiling of an 11-foot (3.5-meter) statue of himself on a key boulevard that also bears his name.

Clinton is celebrated as a hero by Kosovo's ethnic Albanian majority for launching NATO's bombing campaign against Yugoslavia in 1999 that stopped the brutal Serb forces' crackdown on independence-seeking ethnic Albanians.

This is his first visit to Kosovo since it declared independence from Serbia last year.

Upbeat corporate news lifts Dow to 12-month high

Upbeat news from the corporate sector helped Wall Street extend its rally Friday, capping a solid week of gains fueled by growing hopes for a profit recovery.

The Dow Jones Industrial Average climbed 78.07 points (0.80 percent) to 9,864.94, propelling the blue-chip index to a fresh 2009 high and its best since October 6, 2008.

The Nasdaq composite advanced 15.35 points (0.72 percent) to 2,139.28. The broad-market Standard & Poor's 500 index added 6.01 points (0.56 percent) to end at 1,071.49, a fraction shy of its 12-month high hit last month.

The market shook off early weakness, and kept moderate gains throughout the day, with sentiment helped by an improved profit outlook from oil giant Chevron and news of more corporate dealmaking.

The Dow surged nearly four percent for the week and the broad S&P index nearly 4.5 percent.

Andrea Kramer at Schaeffer's Investment Research said the market was helped by "residual earnings-related optimism" following Alcoa's surprise profit report earlier this week, raising expectations for an improving corporate profit picture.

Fred Dickson at DA Davidson & Co. said investors sitting with cash on the sidelines have been using the modest dips to buy more stocks.

"We continue to see small pullbacks followed by rallies on expanding volume, signaling equity buyers are still waiting on the sidelines to get on board the train," he said.

"Some of the recent rally can be attributed to global investors seeking to unload dollars for stocks and commodities."

The market was digesting comments from Bernanke late Thursday that rates may be lifted from the level of near zero when the US economic outlook has "improved sufficiently."

Although some analysts fear talk of a rate hike might spook the market, Robert Kavcic at BMO Capital Markets said it also meant the economy is on the mend.

"It's actually normal behavior for stocks to cheer rate hikes coming out of a recession," he said.

"For equity investors, the benefit of strengthening economic and earnings growth outweighs the cost of higher interest rates this early in the cycle."

There was little reaction to a report showing the US trade deficit narrowed for the first time in four months.

Although a lower trade gap would ordinarily be seen as positive news, analysts said it showed higher exports driven by a weak dollar and lower imports amid lackluster domestic demand.

"This month's trade report is bad news for anyone expecting to see signs of recovery in trade," said Christopher Cornell at Moody's Economy.com.

"Trade volume has flattened, both in nominal and real terms."

Among stocks in focus, Chevron rose 1.83 percent to $72.76 after it revealed interim results indicating third-quarter profits would increase on better results from exploration and production.

Kimberly Clark added 0.34 percent to $59.26 after the maker of Kleenex and other personal care products said it would buy medical equipment maker I-Flow for 276 million dollars. I-Flow rose 6.97 percent to $12.58.

Analyst upgrades helped the tech sector as IBM jumped 2.98 percent to $125.93 and Google increased 0.4 percent to 516.25.

Citigroup fell 0.43 percent to $4.63 after announcing the sale for $250 million of its oil trading unit Phibro to Occidental Petroleum, down 0.69 percent at $79.54.

Bonds fell sharply on the prospect of higher rates. The yield on the 10-year US Treasury bond rose to 3.384 percent from 3.255 percent Thursday and that on the 30-year bond climbed to 4.227 percent from 4.094 percent. Bond yields and prices move in opposite directions.

Agence France-Presse

How much will it cost insurance companies?

Now it is time to file claims....from Ondoy and Pepeng damages. How much it will cost our insurance companies?

Insurance companies face at least P11 billion in property claims alone from the devastation brought about by Tropical Storm “Ondoy,” according to the Philippine Insurers and Reinsurers Association (Pira).

The amount, which does not include life insurance claims, was an “ultraconservative” estimate, said Michael F. Rellosa, vice chair of Pira, the country’s non-life insurance industry association.

The estimate is enormous because the areas most affected by the devastating floods were industrial and commercial rather than agricultural or residential, he said.

“Marikina, Pasig and Cainta [host] many factories that have millions of pesos worth of machinery and equipment. The warehouses were full of stock for the Christmas season,” he said.

The commercial establishments sustained heavy losses in lost inventories, he added.

Claims from water-logged vehicles with “acts of God” coverage could reach P1 billion, said Rellosa, who is also president of Fortune General Insurance Corp.

“Three Pira members that offer motor vehicle insurance with [acts of God coverage] said claims from their clients could reach roughly P300 million,” he said.

There you have it.

Are you properly covered?

Can we still take this: another global crisis to watch out for?

2008 until today, the world hasn't fully recovered yet from the subprime crisis - and yet another warning was given out today in Manila:

VISITING INVESTMENT GURU Mark Mobius warned that the rapid growth of money supply and lax regulation on derivatives could lead to another global financial crisis in the future.

Mobius, executive chair of Templeton Asset Management Ltd. and considered to be one of the world’s most influential asset managers, said liquidity growth that could induce inflation and unbridled growth of derivatives were the two “big elephants” in the global investment area.

“As you know, elephants can be very gentle and they can also be very wild and destructive,” the Singapore-based Mobius said in a briefing before addressing delegates to the 9th Annual Pacific Region Investment Conference in Manila.

on the other hand, concerns are growing over another mortgage giant in the US, from New York Times:

First it was Fannie Mae and Freddie Mac. Now concern is growing that another government mortgage giant might teeter, just as the nation’s housing market is stabilizing. A year after Fannie and Freddie were effectively nationalized, problems at the Federal Housing Administration are raising worries among industry executives and Washington policy makers.

Some 20 percent of F.H.A. loans insured last year — and as many as 24 percent of those from 2007 — faced serious problems including foreclosure, offering a preview of a forthcoming audit of the agency’s finances. Mr. Stevens said that the F.H.A., which insures mortgages with low down payments, holds more than $30 billion of cash in reserve to cushion against potential losses, and the average credit score of borrowers is about 9 percent higher now than two years ago.

“It appears destined for a taxpayer bailout in the next 24 to 36 months,” the former Fannie Mae executive, Edward Pinto, said in testimony prepared for the hearing. Mr. Pinto, who was the chief credit officer from 1987 to 1989 for Fannie Mae, predicted losses on its mortgage insurance would more than wipe out the agency’s reserves.