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MONDAY’S MUST READS – THE DUBAI HANGOVER

30 November 2009 by Cullen Roche 1 Comment
Cullen Roche

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Comments
  • LongShort

    So, every bank has put out a report, most of which outline the exposures various banks, construction firms and countries have to Dubai and UAE.

    Is that it then? Is that the real exposure?

    Does this not remind you of the various reports in 07 indicating bank exposure to Las Vegas. i.e., the problem was contained. Then came Florida, Arizona, CA, Michigan, Mid West etc. etc. Then the leverage exacerbated the problem

    The questions to ask are:

    1. Who is next and in what time frame? HongKong property? Chinese property? Indian property market? Eastern Europe, Mexico, Greece, Ukraine? Its only a matter of time before some of these markets crack

    2. What and where is the leverage? Is the exposure the $30B of debt that may need a haircut of 50% say, so $15B. What if there is 5-10x leverage involved. The losses would be 75-150b.

    3. What are the secondary effects? From the CDS moves, currency moves, property value decline in other mid east markets, equity market declines. Who then has to sell to raise capital?

    Time will tell

    11/30/2009 at 3:31 PM