Ten-Tola's Anyone?

"The recent violent volatility in gold prices is disrupting traditional buying patterns in Dubai, with customers moving from jewelry to bullion as they renew a focus on the yellow metal's investment potential, a trend that is prompting more city jewelers to stock gold in the form of coins and bars.  Dubai, known as the city of gold, is a long-established market for bullion and wholesale and retail jewelry. Its trade is fueled by demand from India, the world's number one gold consumer, and domestic consumption which, at 19 tons in the second quarter of 2011, makes the United Arab Emirates the second-largest consumer of gold jewelry and bullion in the Middle East after Saudi Arabia. Whereas traditional retail demand was for jewelry, there has been a change in buying patterns, said Pradeep Unni, senior relationship manager at Richcomm Global Services, a Dubai-based commodity services company and a broker of the Dubai Gold and Commodity Exchange, or DGCX, which trades a gold futures contract.  Earlier while women would buy gold in the form of jewelry, now one can see men, finding themselves with a bit of spare cash, go into a jewelry shop and buying ten-tola bars," he says. A ten-tola bar, called TT bar in the trade, is a traditional Indian measure of weight that equals 3.75 ounces."
Source: Wall Street Journal

The Psychological Commodity

“To me gold is a psychological commodity. It’s not really an industrial commodity. There’s plenty of gold producible, especially at these prices. So it’s really a momentum trade on a global scale rather than anything that has intrinsic value. Part of the reason that you’ve seen the kind of increases in the price of gold is the fact that if you really step back from the world, almost universally and in tandem, the paper currencies of the world have been devalued”

Wilbur Ross, CEO, WL Ross & Co. on CNBC

2nd Bout of Hubris

The Burj Dubai might serve as a monument to the Supersize Me Era.

DUBAI, Jan 4 (Reuters) - "Dubai opened the world's tallest structure in a glitzy ceremony meant to put a brave face on crushing debt woes, leading some to wonder whether the Burj Dubai is the emirate's crowning glory or its last hurrah. The $1.5-billion tower will reach 200 storeys into the sky, and although officials have not yet revealed the exact height, it will exceed the next highest structure by some 300 metres (1,000 ft). But concerns about the emirate's $100-billion debt pile, which have made Dubai's stock exchange one of the world's worst performing, overshadow both the ceremony and boasts by the builder, Emaar Properties EMAR.DU, that the Burj heralds a new dawn. 'The worry for Dubai is that the event will be remembered as a second bout of hubris,' said David Butter, regional director for Middle East and North Africa at Economist Intelligence Unit. The first bout was in November, 2008, two months after the collapse of Lehman Bros., when Dubai spent $24 million on the opening ceremony of the Atlantis hotel, an event that did more to highlight a taste for extravagance than assuage fears that the economic crisis was not being taken seriously."


"Robert Prechter's research illustrates that during major credit expansion periods, the tallest buildings "of their time" have been constructed. The Burj Dubai might be a great example of this phenomenom. Euphoria rules at the crest of the tidal wave."
Random Roving - 12/11/08


"It looks like that credit card might have run dry. This one will be one to watch"
Random Roving - 3/11/09

"Wow.....sounds like the used car business might have a surplus in Dubai!"
Random Roving - 6/16/09

Wasn't This Obvious?

It is my humble position that what's transpiring across the world does not take a rocket scientist to understand. It's amazing reading all of the articles about Dubai's pending default. Why are we always so surprised? Arrogance? Ignorance? Overly optimistic? Linear thinkers?

Dubai definitely is the outer layer of the Middle Eastern onion.

"Robert Prechter's research illustrates that during major credit expansion periods, the tallest buildings "of their time" have been constructed. The Burj Dubai might be a great example of this phenomenom. Euphoria rules at the crest of the tidal wave."
Random Roving 12/11/08
http://randomroving.blogspot.com/2008/12/night-in-atlantis.html


"It looks like that credit card might have run dry. It sounds like they've been dining on a few Plastic Eggrolls! This will be one to watch. Lets consider Dubai to be the world's leader in credit spending!"
Random Roving 3/11/09
http://randomroving.blogspot.com/2009/03/is-atlantis-underwater.html


"He responded 'the parking lot at the airport is filled with abandoned cars'."
Random Roving 6/16/09
http://randomroving.blogspot.com/2009/06/filling-parking-lot.html

The Dubai Standstill

In December ,2008 I made a post about Dubai. In March, 2009 I provided an update. Then in June of this year we talked about the parking lots. The Wall Street Journal reports this:
LONDON (MarketWatch) -- "Fears of a potential sovereign default by Dubai roiled financial markets Thursday, sinking stocks in Asia and Europe and pushing up government-bond prices as investors sought safe havens. Dubai late Wednesday said it would restructure Dubai World and announced a six-month "standstill" on repayments of the state-run wide-ranging conglomerate's debt. Analysts said Dubai's woes were a blow to sentiment, serving as a reminder that potential trouble spots remain. 'I don't see this as a massive issue but it's another warning to where the world got itself last year with loose monetary conditions [and] loose lending,' said Naeem Wahid, market strategist at Lloyds TSB. 'And, in a few cases, the problems are still out there and we could continue to see these kinds of nasty surprises' in the future."

The entire article: http://www.marketwatch.com/story/dubai-woes-roil-financial-markets-2009-11-26

Filling The Parking Lot

I was having a beer with my new neighbor this weekend and he was elaborating about developments in his business sector. His company is involved in major infrastructure projects around the world. He mentioned their office in Dubai and I asked him how the city was handling the contraction. He responded "the parking lot at the airport is filled with abandoned cars". I didn't quite understand his statement so I asked for clarification. He then stated that the country allows for expatriates to invest in local real estate. Over the past few years, speculation went crazy and many folks were holding property that was under water. He then stated "this part of the world handles defaults a little differently." So basically, many have fled the country to escape prosecution. They drive to the airport and leave their car in the parking lot. He said that his company has lost three employees in the last month due to these reasons. He said that they don't resign until they've successfully fled the region. Wow.....sounds like the used car business might have a surplus in Dubai!

http://randomroving.blogspot.com/2009/03/is-atlantis-underwater.html

http://randomroving.blogspot.com/2008/12/night-in-atlantis.html

Is Atlantis Underwater?

Last December I made a post regarding the extreme construction going on in Dubai.
http://randomroving.blogspot.com/2008/12/night-in-atlantis.html

It looks like that credit card might have run dry.

Source: The Wall Street Journal
DUBAI -- "This city-state said the federal government of the United Arab Emirates would provide $10 billion in funding, allowing Dubai to service its heavy debt load as it copes with a tanking real-estate market and tepid appetite among international lenders to extend further credit. The effective bailout will be structured as a long-term bond, the governments of Dubai and the UAE said in separate statements late Sunday. Dubai is one of seven, semi-autonomous emirates that make up the UAE. Unlike its neighbor and UAE capital Abu Dhabi, Dubai doesn't have much oil. It financed much of its recent, explosive growth with international borrowing. State owned and controlled companies tapped local and overseas markets to help finance some of the emirate's most ambitious property, tourism and infrastructure projects.

In less than a decade, Dubai transformed itself from a sleepy backwater to a booming regional business, tourism and transportation hub. As it blossomed, civic leaders grew more ambitious. In 2001, a government-owned developer launched a palm-tree-shaped island development of luxury villas and hotels. Two years later, another government-controlled developer started selling floor space in the then-unbuilt Burj Dubai tower. Both projects are now mostly finished, and the Burj Dubai stands as the world's tallest skyscraper. But as the U.S. housing market soured and the first hints of the extent of today's global financial crisis started to emerge in late 2007, analysts and investors began raising concerns about the lack of transparency surrounding all the borrowing.

Dubai officials said at the time they would seek a sovereign debt rating, like next-door neighbor Abu Dhabi. But they never appeared to be actively pursuing one. Still, credit agencies tended to give near-top-notch ratings to corporations owned or controlled by either the Dubai government or Dubai's charismatic ruler, Sheikh Mohammed bin Rashid al Maktoum. If Sheikh Mohammed overextended, many analysts assumed, oil-rich Abu Dhabi would offer a lifeline. This year turned out to be crunch time. Regional bank EFG-Hermes estimated that Dubai's principal and interest payments due in 2009 would equal some $14 billion. Late last year, the city's once red-hot property market soured. After soaring for years since Dubai opened the market to foreigners in 2002, prices have now fallen back down to earth more recently."

The country holds the following records:
-world's tallest building
-world's largest gold ring (135 lbs)
-world's tallest hotel
-world's largest mall
-world's largest indoor ski resort
-world's largest man-made marina
-world's largest man-made island
-world's first underwater hotel
-world's largest amusement park
-world's largest passenger and cargo hub
-world's first rotating skyscraper
-world's longest and tallest arch bridge
-world's longest fully automated rail system
-world's largest horse racing purse

It sounds like they've been dining on a few Plastic Eggrolls!

This will be one to watch. Lets consider Dubai to be the world's leader in credit spending!

A Night In Atlantis

A few weeks ago in Dubai, Atlantis opened and a $20 million party was thrown to commemorate the grand opening of this $1 billion hotel. Massive fireworks and celebrities abound culminated the event. Suites in the hotel go for $35,000 per night. The project is part of a decade-long trillion dollar building boom in Dubai. 67% of Dubai's revenue is from tourism.
The Burj Dubai, the soon-to-be tallest building in the world, is under construction in Dubai. The Dubai financial markets, like many others, have lost 70% of their value since the summer. Robert Prechter's research illustrates that during major credit expansion periods, the tallest buildings "of their time" have been constructed. The Burj Dubai might be a great example of this phenomenom. Euphoria rules at the crest of the tidal wave.

http://www.youtube.com/watch?v=h_zbLajAnqc