You are looking at the world’s tallest building at 2684′, over one half mile high. It is the Burj Dubai and the lightning strike of the world credit implosion hit home in the improbably bizarre desert nation state of Dubai this thanksgiving when Dubai World, a giant real estate development conglomerate told the world banks that it was going to be missing payments on its $60 Billion loan for the next 6 months or so. Dubai is famous for its extravagant Mall of the Emirates with a 5 run ski area with real snow and islands in the shape of a palm trees and the world for sale to uber wealthy nutcases. The company has dredged up vast quantities of silt from the Arabian Gulf using computer modeling to make home site islands in the shape of countries and palm fronds. Sales haven’t taken off as hoped and real estate prices have gone off a cliff mirroring the collapse in Las Vegas real estate, our home grown equivalent to Dubai. Dubai is the poster child of environmental unsustainability. Dubai has little in the way of oil and gas resources, at least as compared to it’s wealthy neighbors in the Persian Gulf but it somehow managed to promote itself as a financial services and destination resort to the Gulf Region but that business model is obviously at risk as are a lot of misbegotten commercial real estate projects elsewhere. The sums to bail out poor Dubai are chump change compared to what Tim Geithner and Helicopter Ben and Nasty Larry have parcelled out to Goldman Sachs and AIG but it will be a wake up call to the nincompoops who run the world’s investment banks. But not to worry, maybe Tim or Lord whatshisface of the Bank of England will step up again and provide taxpayer funded help to keep this Tower of Babel on schedule along with all the other nonsensical projects in the pipeline. The announcement from Dubai was scheduled to coincide with a big Islamic holiday so it will be a few days for the financial sandstorm to clear up. Speculation has it that the big money in UAE, namely Abu Dhabi with it’s giant sovereign wealth fund will step up with a bridge loan but other financial bloggers think that Abu Dhabi is fed up with Dubai and may instead come in and pick up distressed assets for pennies on the dollar. Regardless of what happens, it bodes poorly for US Commercial RE which is already in deep feces. The CDS market has been humming with risk spreads widening as the smart money seeks financial protection from high risk countries like Dubai. Some of the countries where risk premiums are rising besides Dubai are Greece, Spain, Italy and the good old USA. Premiums are dropping in former financial basket cases like Russia and Brazil. It’s a curious world we live in. Happy Thanksgiving.
Meltdown in Dubai
Published by Rendezvous Mountain Farm
I was born in Cascade county Montana and raised in a dozen Air Force SAC bases. I attended Holy Cross,West Point and UNC in Chapel Hill(MD"71). Army doc in the last years of the Viet Nam fiasco. My wife and I live in a log cabin I built from standing dead lodgepole trees we cut from Shadow Mountain and regional local timber in 1976 . I've done a dozen different jobs including construction, boat building,magazine writing and commercial fishing and retired from the Emergency and Operating Room in 2004. We manage a small diversified organic farm including leased land which totals about 40 acres in the Jackson Hole valley. We raise a variety of livestock which includes some heritage breeds of animals and poultry. We grow most of our food and forage. Our land is irrigated from Granite Creek and the Snake River and we raise and bale our own organic hay. We supplement with food collected from Jackson Hole Food rescue which is mostly dairy, bread and past date vegetables and food from the grocery stores and restaurants. View more posts