By Anthony DiPaola and Chris Bourke
Nov. 27 (Bloomberg) -- Dubai, the Persian Gulf emirate whose state-run companies are seeking to defer debt payments, may owe more than the $80 billion to $90 billion in liabilities assumed by investors, UBS AG analysts said.
“Perhaps Dubai’s debt includes sizeable off-balance sheet liabilities that imply a total debt burden well above the $80 billion to $90 billion markets have estimated so far,” Dubai- based real estate analyst Saud Masud wrote in a note. “This could imply that the debt issued by Dubai in recent weeks is insufficient to meet upcoming redemptions.”
Dubai, which has said it will raise as much as $20 billion selling bonds to repay borrowings, said on Nov. 25 that state- run Dubai World, with $59 billion of liabilities, would ask creditors for a “standstill” agreement as it negotiates to extend debt maturities.
The request to delay debt repayment “came as a major shock” to investors, Masud and fellow UBS London-based analyst Reinhard Cluse told clients on a conference call today. Dubai World property unit Nakheel PJSC has $3.52 billion of Islamic bonds due Dec. 14. Dubai World may seek to negotiate all its liabilities as it reorganizes the business, Masud said.
“The Nakheel sukuk is the largest that has ever been issued,” Cluse said on the conference call. “Markets will take some time to digest this blow.”
‘Significant Sweetener’
Dubai accumulated $80 billion of debt by expanding in banking, real estate and transportation before credit markets seized up last year. The second biggest of seven sheikhdoms that make up the United Arab Emirates formed a fund to help reorganize state firms and sold $10 billion in bonds to the national central bank in February.
It borrowed an additional $5 billion from Abu Dhabi government-controlled banks Nov. 25, half the $10 billion in bonds that Dubai ruler Sheikh Mohammed Bin Rashid Al-Maktoum said he planned to raise by yearend.
Nakheel bondholders could demand a “significant sweetener” to renegotiate the debt and look to determine which of the real estate unit’s assets they may be able to claim, according to Masud.
There is growing interest from Persian Gulf investment funds in acquiring properties owned by Dubai entities, including Nakheel, which may be forced to sell assets to reduce debt, said Michael Atwell, head of Middle East operations at real estate broker Cushman & Wakefield.
‘Still Buzzing’
“We can sense it, and we’re hoping to have some transactions from several funds with buying requirements, some over $100 million,” he said. Potential buyers may be seeking stable cash flow from buildings with long leases.
“The city is still buzzing. Dubai won’t turn into a ghost town, but there’ll be some big restructuring and reorganization, without a doubt.”
Seeking a repayment delay may indicate that Abu Dhabi, the U.A.E.’s largest sheikhdom, may not want to support Dubai further financially until the smaller emirate addresses internal problems at government-run companies, Masud said.
“This could be the realization that you cannot simply buy your way out of this crisis,” Masud said.
The request could also suggest that Abu Dhabi and Dubai have decided to seek to bolster long-term confidence in the market by forcing weaker parts of government businesses to take responsibility for bad decisions and could involve defaults at some Dubai firms, Masud said.
Mortgage Defaults
Dubai property developers may be liable for an estimated $11 billion required to build 40,000 homes that they have started, said Masud in an interview yesterday. That amount represents the off-balance sheet cost, or “funding gap” required to complete and hand over the properties, on which investors are now defaulting, by the end of 2010.
Nakheel’s share of that funding gap is about $2 billion, estimated Masud. Around half of the investors in the 40,000 unfinished homes may default by the end of next year, he said.
Mortgage defaults, which stand at about 3 percent of the total in the U.A.E., may increase fivefold to “the teens,” Masud said on the call today.
Friday, November 27, 2009
U.S., Emerging Market Stocks Slide as Bonds Advance on Dubai
By Mark Gilbert and Paul Sillitoe
Nov. 27 (Bloomberg) -- U.S. and emerging-market stocks slumped and commodities dropped the most since July as Dubai’s attempt to delay debt repayments unnerved investors. Treasuries and the dollar rose while credit-default swaps surged.
The Standard & Poor’s 500 Index slid 1.3 percent at 10:57 a.m. in New York and the MSCI Emerging Markets Index slipped 2.1 percent. The Chicago Board Options Exchange Volatility Index, the equity-derivatives benchmark known as the VIX, surged 18 percent to 24.07. Two-year Treasury yields fell to the lowest level since December. Oil and gold tumbled as the Dollar Index advanced. Credit-default swaps tied to debt sold by Dubai rose 134 basis points to 675, according to CMA DataVision.
“The world’s going to test now how much this means to people’s risk-taking attitude,” said Donald Ross, the Cleveland- based global strategist for Titanium Asset Management Corp., which manages $9 billion. “This is a big enough deal for people to question how far and how fast we’ve come.”
Dubai World, the government investment company burdened by $59 billion of liabilities, sought this week to delay repayment on much of its debt. The yen pared its advance after Japan’s Finance Minister Hirohisa Fujii said he may contact the U.S. and Europe to act on currencies, signaling concern that the yen’s ascent will hurt the economy by crimping exports.
U.S. stock exchanges close at 1 p.m. in New York, three hours early.
Asia, Europe Stocks
The MSCI Asia Pacific Index slid 3.2 percent, the biggest drop since March, extending a rout in Europe yesterday that sent the Dow Jones Stoxx 600 Index to its steepest one-day slump since April. The MSCI World Index fell 0.6 percent, bringing its two-day drop to 2 percent. The Dow Jones Industrial Average slid 1.2 percent, after U.S. markets were closed yesterday for Thanksgiving.
South Korea’s Kospi index slid 4.7 percent and Taiwan’s Taiex lost 3.2 percent. Samsung Engineering Co. tumbled 9.8 percent, leading declines among construction stocks in Seoul on concern orders may slow in the United Arab Emirates, the biggest overseas market for South Korean builders.
Dubai’s attempt to delay debt payments prompted investors to buy assets deemed safe and sell riskier ones. Treasury two- year notes rallied, driving their yields down 0.05 percentage point to 0.70 percent, the lowest payout in 11 months. The VIX, which tends to rise when investors are less willing to take risks, jumped as much as 27 percent in the biggest intraday gain since Oct. 30.
‘Risk Aversion’
“We’re bound to see a rise in risk aversion,” Arnab Das, the head of market research and strategy at Roubini Global Economics, said in an interview from London “The Dubai situation signifies that although the major central banks around the world have stabilized the financial system, they can’t make all the excesses simply disappear. We still have to work out those balance sheet stresses.”
The MSCI World has rallied 68 percent since March 9, and the S&P 500 has climbed 62 percent in the steepest rally since the Great Depression. The rebound came as the Federal Reserve spent, lent or guaranteed $11.6 trillion and held interest rates near zero to unlock credit markets and end the first simultaneous recessions in the U.S., Europe and Japan since World War II.
Europe’s Stoxx 600 reversed a decline of as much as 1.8 percent and gained 1.3 percent, paring its two-day decline to 1.9 percent. Royal Bank of Scotland Group Plc, which was Dubai World’s biggest loan arranger since January 2007 according to JPMorgan Chase & Co., gained 5.9 percent in London after plunging 7.8 percent yesterday.
Oil, Gold Drop
Oil fell 3.3 percent to $75.36 a barrel in New York. Gold lost 0.9 percent to $1,177.80 an ounce, falling for the first time in 10 days.
Dubai, which borrowed $80 billion in a four-year construction boom to transform its economy into a regional tourism and financial hub, suffered the world’s steepest property slump in the worst global recession since World War II. Home prices fell 50 percent from their 2008 peak, according to Deutsche Bank AG.
“If Dubai has to default, that could start a wave of defaults in other areas,” Mark Mobius, the chairman of Templeton Asset Management Ltd. who oversees $25 billion in emerging-market assets, said in an interview on Bloomberg Television from Hanoi. “This may be the trigger to allow for the market to take a rest and pull back.”
Debt Swaps
Credit-default swaps on emerging-market government and corporate bonds jumped, with contracts on Qatar adding 15 basis points to 129 and Abu Dhabi rising 24 to 184, according to CMA DataVision prices. Default swaps on DP World Ltd., the Middle East’s biggest port operator, rose 201 basis points to 810, according to CMA. Sellers also are requiring a 12 percent payment in advance. Swaps on Malaysian government bonds rose 16 basis points to 120 and those on Thailand climbed 14 to 124.
Default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
The cost to protect U.S. corporate bonds from default rose to the highest in almost a month as Dubai attempts to delay debt repayments, trading in a benchmark credit derivatives index shows.
U.S. Swaps
Contracts on the Markit CDX North America Investment-Grade Index, used to speculate on the creditworthiness of 125 companies in the U.S. and Canada or to protect against losses on their debt, rose five basis points to a midprice of about 107.5 basis points as of 10:22 a.m. in New York, according to Phoenix Partners Group. The index rose to the highest since Nov. 2, according to CMA DataVision.
Dubai’s debt woes may worsen to become a “major sovereign default” that roils developing nations and cuts off capital flows to emerging markets, Bank of America Corp. said.
“One cannot rule out -- as a tail risk -- a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s,” Bank of America strategists Benoit Anne and Daniel Tenengauzer wrote in a report.
Writedowns and losses at banks around the world have risen to more than $1.7 trillion since 2007 as the credit crisis undermined the value of assets owned by financial institutions, according to data compiled by Bloomberg.
Dollar Gains
The dollar rose against most major counterparts as Dubai’s attempt to delay debt spurred investors to sell higher-yielding assets funded with the currency.
The yen declined against the dollar after touching a 14- year high on speculation Japan will intervene after Finance Minister Hirohisa Fujii said he will contact U.S. and European officials about exchange rates if needed. The Bank of Japan checked rates at commercial banks in Tokyo, seen as a type of verbal intervention, Kyodo News Service reported. The dollar’s gain was reduced as global equity markets pared losses.
“People are scared and concerned about possible intervention,” said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC Co. in Tokyo. The Bank of Japan may sell the yen “and buy Treasuries, which will be a plus for Treasuries,” he said. Central banks intervene by buying or selling their currencies after sudden movements.
Nov. 27 (Bloomberg) -- U.S. and emerging-market stocks slumped and commodities dropped the most since July as Dubai’s attempt to delay debt repayments unnerved investors. Treasuries and the dollar rose while credit-default swaps surged.
The Standard & Poor’s 500 Index slid 1.3 percent at 10:57 a.m. in New York and the MSCI Emerging Markets Index slipped 2.1 percent. The Chicago Board Options Exchange Volatility Index, the equity-derivatives benchmark known as the VIX, surged 18 percent to 24.07. Two-year Treasury yields fell to the lowest level since December. Oil and gold tumbled as the Dollar Index advanced. Credit-default swaps tied to debt sold by Dubai rose 134 basis points to 675, according to CMA DataVision.
“The world’s going to test now how much this means to people’s risk-taking attitude,” said Donald Ross, the Cleveland- based global strategist for Titanium Asset Management Corp., which manages $9 billion. “This is a big enough deal for people to question how far and how fast we’ve come.”
Dubai World, the government investment company burdened by $59 billion of liabilities, sought this week to delay repayment on much of its debt. The yen pared its advance after Japan’s Finance Minister Hirohisa Fujii said he may contact the U.S. and Europe to act on currencies, signaling concern that the yen’s ascent will hurt the economy by crimping exports.
U.S. stock exchanges close at 1 p.m. in New York, three hours early.
Asia, Europe Stocks
The MSCI Asia Pacific Index slid 3.2 percent, the biggest drop since March, extending a rout in Europe yesterday that sent the Dow Jones Stoxx 600 Index to its steepest one-day slump since April. The MSCI World Index fell 0.6 percent, bringing its two-day drop to 2 percent. The Dow Jones Industrial Average slid 1.2 percent, after U.S. markets were closed yesterday for Thanksgiving.
South Korea’s Kospi index slid 4.7 percent and Taiwan’s Taiex lost 3.2 percent. Samsung Engineering Co. tumbled 9.8 percent, leading declines among construction stocks in Seoul on concern orders may slow in the United Arab Emirates, the biggest overseas market for South Korean builders.
Dubai’s attempt to delay debt payments prompted investors to buy assets deemed safe and sell riskier ones. Treasury two- year notes rallied, driving their yields down 0.05 percentage point to 0.70 percent, the lowest payout in 11 months. The VIX, which tends to rise when investors are less willing to take risks, jumped as much as 27 percent in the biggest intraday gain since Oct. 30.
‘Risk Aversion’
“We’re bound to see a rise in risk aversion,” Arnab Das, the head of market research and strategy at Roubini Global Economics, said in an interview from London “The Dubai situation signifies that although the major central banks around the world have stabilized the financial system, they can’t make all the excesses simply disappear. We still have to work out those balance sheet stresses.”
The MSCI World has rallied 68 percent since March 9, and the S&P 500 has climbed 62 percent in the steepest rally since the Great Depression. The rebound came as the Federal Reserve spent, lent or guaranteed $11.6 trillion and held interest rates near zero to unlock credit markets and end the first simultaneous recessions in the U.S., Europe and Japan since World War II.
Europe’s Stoxx 600 reversed a decline of as much as 1.8 percent and gained 1.3 percent, paring its two-day decline to 1.9 percent. Royal Bank of Scotland Group Plc, which was Dubai World’s biggest loan arranger since January 2007 according to JPMorgan Chase & Co., gained 5.9 percent in London after plunging 7.8 percent yesterday.
Oil, Gold Drop
Oil fell 3.3 percent to $75.36 a barrel in New York. Gold lost 0.9 percent to $1,177.80 an ounce, falling for the first time in 10 days.
Dubai, which borrowed $80 billion in a four-year construction boom to transform its economy into a regional tourism and financial hub, suffered the world’s steepest property slump in the worst global recession since World War II. Home prices fell 50 percent from their 2008 peak, according to Deutsche Bank AG.
“If Dubai has to default, that could start a wave of defaults in other areas,” Mark Mobius, the chairman of Templeton Asset Management Ltd. who oversees $25 billion in emerging-market assets, said in an interview on Bloomberg Television from Hanoi. “This may be the trigger to allow for the market to take a rest and pull back.”
Debt Swaps
Credit-default swaps on emerging-market government and corporate bonds jumped, with contracts on Qatar adding 15 basis points to 129 and Abu Dhabi rising 24 to 184, according to CMA DataVision prices. Default swaps on DP World Ltd., the Middle East’s biggest port operator, rose 201 basis points to 810, according to CMA. Sellers also are requiring a 12 percent payment in advance. Swaps on Malaysian government bonds rose 16 basis points to 120 and those on Thailand climbed 14 to 124.
Default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
The cost to protect U.S. corporate bonds from default rose to the highest in almost a month as Dubai attempts to delay debt repayments, trading in a benchmark credit derivatives index shows.
U.S. Swaps
Contracts on the Markit CDX North America Investment-Grade Index, used to speculate on the creditworthiness of 125 companies in the U.S. and Canada or to protect against losses on their debt, rose five basis points to a midprice of about 107.5 basis points as of 10:22 a.m. in New York, according to Phoenix Partners Group. The index rose to the highest since Nov. 2, according to CMA DataVision.
Dubai’s debt woes may worsen to become a “major sovereign default” that roils developing nations and cuts off capital flows to emerging markets, Bank of America Corp. said.
“One cannot rule out -- as a tail risk -- a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s,” Bank of America strategists Benoit Anne and Daniel Tenengauzer wrote in a report.
Writedowns and losses at banks around the world have risen to more than $1.7 trillion since 2007 as the credit crisis undermined the value of assets owned by financial institutions, according to data compiled by Bloomberg.
Dollar Gains
The dollar rose against most major counterparts as Dubai’s attempt to delay debt spurred investors to sell higher-yielding assets funded with the currency.
The yen declined against the dollar after touching a 14- year high on speculation Japan will intervene after Finance Minister Hirohisa Fujii said he will contact U.S. and European officials about exchange rates if needed. The Bank of Japan checked rates at commercial banks in Tokyo, seen as a type of verbal intervention, Kyodo News Service reported. The dollar’s gain was reduced as global equity markets pared losses.
“People are scared and concerned about possible intervention,” said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC Co. in Tokyo. The Bank of Japan may sell the yen “and buy Treasuries, which will be a plus for Treasuries,” he said. Central banks intervene by buying or selling their currencies after sudden movements.
Thursday, November 26, 2009
The Warmers would rather change the facts than their theories.
There is NO global warming, just global climate changes. It changes everywhere based on time of year, sun activity and other exogenous factors. Human activity is NOT the cause of global climate change. The most ridiculous effort made so far to promote Global Warming is the notion that the sun plays no part in global warming. Such a notion is so provably false that it is criminal fraud to propose it. The sun IS the main contributor to global climate changes and the changes cycle according to sun activity which is also assisted by other natural fators like volcanic activity.
Wednesday, November 25, 2009
The Warmer's hoax a global Ponzi scheme
The supporters included Goldman Sachs, JP Morgan Chase Bank, and others who are financing this fraud. Enron in association with Al Gore in the mid 90's came up with a plan to create a whole new Ponzi scheme which includes a whole new type of derivatives that will enable them to buy and sell carbon credits.
The UN will employ a whole new arm of enforcement that will police the entire world. Your own State and County has an arm of enforcement "Carbon Cops" within their local government. The stick that made this possible is the REAL threat that if the local government did not create this enforcement arm the environazis would start legal actions against any local government that did not comply.
Our own local government has created a "Carbon Cop" agency that has the power to TAX any and all new residential and commercial/industrial development to pay into this agency. Most dangerously, this agency can make any "mistake" they want and the local government must support and encourage them, at tax payers expense.
The UN will employ a whole new arm of enforcement that will police the entire world. Your own State and County has an arm of enforcement "Carbon Cops" within their local government. The stick that made this possible is the REAL threat that if the local government did not create this enforcement arm the environazis would start legal actions against any local government that did not comply.
Our own local government has created a "Carbon Cop" agency that has the power to TAX any and all new residential and commercial/industrial development to pay into this agency. Most dangerously, this agency can make any "mistake" they want and the local government must support and encourage them, at tax payers expense.
Saturday, November 21, 2009
Thursday, November 19, 2009
Congressman Kevin Brady asks Treasury Secretary Timothy Geithner to step down
We heed to ask that of the entire government.
(Actually, I view this effort to find a scapegoat as a sign the collapse is getting near!)
(Actually, I view this effort to find a scapegoat as a sign the collapse is getting near!)
Bank of America, UBS, JPMorgan Sued Over Derivatives
Joel Rosenblatt
Bloomberg News
Wednesday, November 18, 2009
Bank of America Corp., UBS AG and JPMorgan Chase & Co. were sued by a California public utility over claims they rigged sales of municipal derivatives and shared illegal profits through kickbacks.
The lawsuit, filed by the Sacramento Municipal Utility District, is based on federal and state antitrust claims. It alleges Charlotte, North Carolina-based Bank of America and more than a dozen other banks conspired to pre-select winners of municipal derivative auctions, coordinated their pricing, and accepted kickbacks disguised as fees from co-conspirators.
The allegations resemble those made by a U.S. grand jury in New York last month, according to the lawsuit filed Nov. 12 in federal court in Sacramento. CDR Financial Products Inc. founder David Rubin and two employees of the Beverly Hills, California- based company were indicted for allegedly accepting kickbacks on investments sold to local governments. CDR is also named as a defendant in the Sacramento case.
The banks engaged in “allocating customers and markets for municipal derivatives, rigging the bidding process by which municipal bond issuers acquire municipal derivatives, and conspiring to manipulate the terms that issuers received,” according to the lawsuit.
Bloomberg News
Wednesday, November 18, 2009
Bank of America Corp., UBS AG and JPMorgan Chase & Co. were sued by a California public utility over claims they rigged sales of municipal derivatives and shared illegal profits through kickbacks.
The lawsuit, filed by the Sacramento Municipal Utility District, is based on federal and state antitrust claims. It alleges Charlotte, North Carolina-based Bank of America and more than a dozen other banks conspired to pre-select winners of municipal derivative auctions, coordinated their pricing, and accepted kickbacks disguised as fees from co-conspirators.
The allegations resemble those made by a U.S. grand jury in New York last month, according to the lawsuit filed Nov. 12 in federal court in Sacramento. CDR Financial Products Inc. founder David Rubin and two employees of the Beverly Hills, California- based company were indicted for allegedly accepting kickbacks on investments sold to local governments. CDR is also named as a defendant in the Sacramento case.
The banks engaged in “allocating customers and markets for municipal derivatives, rigging the bidding process by which municipal bond issuers acquire municipal derivatives, and conspiring to manipulate the terms that issuers received,” according to the lawsuit.
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