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Back to Basics - Dubai

Dubai palm island realestate development
Dubai palm island realestate development

News Items

Dubai crisis: MENA manager braced for Monday sell-off

11:38 Fri 27 November 2009  Citywire

Pictet's emerging markets head Oliver Bell thinks the Dubai World debt crisis is a 'disaster' for the MENA region's equity markets, and is braced for a big sell-off when markets reopen on Monday.


The VIX (volatility Index) jumped 11% to 24.75.  The DOW fell 154 points on Friday and the futures are not strong for Monday.  

Interestingly - European stocks posted gains (FTSE up 51 and Dax 71 points) 


The market is considering a Dubai default from its $88BN debt ($59BN of which is with Dubai World) - used to transform Dubai into a trading and tourist destination  - Will they default?  Will Abu Dhabi ride to the rescue?

(Post Road Advisors prediction: yes AD will rescue - after a trip to the woodshed - maybe today - the UAE can't afford the market backlash if they don't intervene)


Market Reality Check Regarding Trading

As per Seth Mayers in the SNL Update skits, - Do you REALLY think traders are waiting for Monday to make a deal? REALLY? - they don't check their Blackberries between turkey bites? 

Back to Basics

Credit fundamentals -  we never bought into the EBITDA / Enterprise Value multiple calcs.  We use pure accounting B/S and Income Statement/Cashflow basics with debt service coverage multiples and stress test for each investment.  

All the quant guys are looking around wondering "what happened? my models never predicted this!"

You need proof - not algorithms.  As my Oma in Germany used to say before dinnertime when I always said I had washed my hands, "Uh Huh, let me see."  

Learn to read the signs and take action

Last year, we were concerned at the GE Trade Execution Desk (TED) that there were counterparty risk issues developing at certain trade partners.  We moved all settlement to electronic services that were faster and more accurate and then ultimately suspended any sell-side trading with them and then we accelerated settlement 3 months before their demise.  We read the signs.

Dubai is not an anomaly in the EM - but it can be an opportunity.  I believe there will be more opportunities in this region.


Maurice Johnson

203 450 2498