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For some reason, spending billions on skyscrapers and man-made palm-shaped island leads to...debt! So far, the Dow Jones, S&P 500 and Nasdaq have fallen at least 1% (even up to 2% as soon as the markets opened today), due to, as the Wall Street Journal puts it, "fears...about the potential fallout of debt prolems at Dubai World, the city-state's largest corporate entity, which asked creditors for a six-month stay on repayment of its $60 billion in debts." UBS actually estimates that Dubai's overall debt may be over $80 billion.
Yesterday, world markets fell on the Dubai news, while U.S. markets, which close earlier today, were off yesterday, due to the Thanksgiving holiday. One strategist tells the NY Times, "I don’t think it’s devastating at all. Nobody knows the collateral damage, but it is clear that our banks have exposure to European banks," while another economist said, "Dubai is really a symptom, a legacy, from the previous boom, rather than symptomatic of a start of a whole new set of issues that are going to crate a systemic crisis in emerging markets. Markets assume the worst-case scenario."
Still, the Financial Times' James Mackintosh writes that a problem "should have been glaringly obvious to everyone: building a ski resort in a desert where temperatures often top 45 degrees centigrade, reclaiming islands from the sea to build super-luxury apartments and installing chilled swimming pools just made no sense..."
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Sorry, no sympathy. They brought it on themselves. The problems were glaringly obvious to even the most simpleminded. These were all uber-expensive vanity projects with no real diversification of their economy. That's a recipe for financial disaster. At least China has a real economy backing their superskyscrapers, not this house of cards like the Burj Dubai. And that's even with them paying slave wages to their construction workers.
They tell workers in Pakistan and the Phillipines that they will be paid $300 or $400 per week, confiscate their passports at the airport when they arrive, and then force them to work 14 hour days at $4 or $5 per day and bunk them in un-airconditioned worker's camps with little or no contact with the outside world. Debtors also lose their passports and can be imprisoned for not paying. There are foreign expats literally sleeping in their cars for fear of being arrested. Meanwhile, half the shiny new buildings and lux condos sit empty. Paradise, or hell on earth? You be the judge.
Society Fail.
Not for nothing, but anyone with an ounce of sense understood Dubai imploding was only a matter of time. It hasn't fully happened yet, but it most probably will.
I'm really surprised the market didn't see this coming.
The fact is that the market does it coming but the geniuses involved in it believe they can make their money and get out before the collapse happens.
Arrogance has its price...
Brasilia!
Xanadu!
Secaucus!
go burn in hell dubai.
The irony here is that Dubai sends common people to debtors prison if they can't pay their debts - hence all those who fled last year and abandoned cars and all personal belongings. Do you suppose the gov't officials will put themselves into prison because of this? Doubtful. Hypocrites. Good riddance to arrogance.
If this is not the most stupid thing achieved by man, it's the second most stupid thing.
Got to love the lack of government regulations that allowed the invisible hand to do the stupidest investments!!
Bonus to the invisible hand sons and daughters!
...comments all by people living in a country in even more of a dire financial situation.
exactly. just happy someone ELSE is feeling their pain, and trying to pull the 'i told you so' when it should be 'i told myself so.'
Some of us in this country actually have lived within their means; buying only what they've needed, completely without the idea of credit, making their homes in small apartments in buildings that were built long before they were born. And still feeling that their lives are pretty good. The mass behavior of the people in my own country is alien to me.
It's glaringly obvious AFTER it happens. All the commenters above claim it's SO OBVIOUS. But did any of them take a short position on Dubai debt? Please. It's obvious after the shit hits the fan. Get off ur high horse.
lol- wut? short Dubai debt?
obviously you don't know shit.
There's a difference between shorting something and taking a short position on something. Read more carefully. Thanks.
Oh, come on. It wasn't obvious to you before? It was only a matter of time before it caught up with them. I didn't know exactly when, but I knew there was nothing ahead of them except debt. Didn't you know that not many people were leasing space in their new buildings? It's been common knowledge for quite some time now. If you actually believed their "If we build it, they will come!" sales pitch, there's a corn field in Iowa I'd like to sell you.
so the right thing to do is never ever ever, change directions EVEN when proven wrong!? This whole thing of not taking action to correct what is wrong because it did not needed correction before it went to hell makes sense to Faux News type of mentality...
I do hope some of those poor day laborers, mostly southern Indians, get out while the getting is still good.
go to hell dubai, I hope it's hot there
and your towels and beards goes up in flames.
yeah you, you filthy dubais.
this country is in financial dire straits for the middle class. if you're poor, you'll be OK by poor standards.
AUD/NZD market was wonderful at the night after reporting of Dubai fund situation.
I read an article last year that stated that fully 25% of the construction cranes in the world were in Dubai. I didn't believe it then and I don't believe it now. It was all part of their hype.
They generally borrow through SPVs and other offerings. It's not something anyone can short even if you were talking about REIT related stuff -its not directly involved.
Understood. But to take a short position on Dubai debt, one can also short the equity of banks that arranged the loans of Dubai World (ING, Woori, Shihan, HSBC), short public equity held by Dubai World (Sony, DB), etc. My point was that these keyboard Buffetts say things are so obvious, but they don't surface until the "thing" happens.
So we should come to Gothamist and inject comments about Dubai into any old story rather than wait until a post about it? Some of us like to stay on topic, thank you very much.
Congrats on making your millions on Dubai's over leverage.
You're an imbecile, but we knew that. So we couldn't possibly have known this was going to fail unless we have tons of money to play the market, eh? Do you really think people with six or seven figures in the bank (necessary to make decent money off short-selling) frequent Gothamist? I'd have to agree with dkim. Obviously, you don't know shit except how to fling around a few financial terms. In your way of thinking, the struggling middle class of the city can't possibly know anything, otherwise we'd be millionaires instead.
cry me a river
Hopefully all the poor immigrant workers will take over the vacancies and the country. The poor are super adaptable. Maybe they'll make the rich Dubai super plutocrats' life Hell.... YAY!
building indoor skiing facilities in the desert is a bad idea? who would have thought.
http://ow.ly/GtXr
Even better: they put cooling pipes under the beach sand at fancy-schmancy "6 star" resorts to keep the well-heeled from becoming cooked-heeled guests. Meanwhile, the sewage treatment system often overloads sending raw sewage into the sea and washing up on their lovely beaches. Residents and visitors alike are advised to avoid the water.
Serves them right, an anti-Israel sheikhdom catering to wealthy Europeans. They deserve each other.