Dubai: was it Smiley?

Cheers! Abu Dhabi has ridden to the rescue at the last minute (visualize elegant Arabian thoroughbreds galloping on the air-conditioned beaches of Dubai).
Enough billions have been made available to redeem at full value the Nakheel bond expiring as we speak.
Was it, after all, a clever Smiley-like operation, as we suspected it might be?
We will never know, as we will never know how much of those bonds changed hands at the distressed levels, nor who bought them.
All eyes now on Greece. No, it will not default. Nor leave the EUR. But all kind of poop might hit the ventilators before another cavalry charge resolve the day.

Clearly the Greece situation would warrant dedicated expectorations. But there again, so would High Frequency Trading, which is becoming the next bugbear. No time though.

Bash the bankers? OK, but don't forget splitting them!

Judging from the excited cackling pervading every media, from the blogs to the tabloids, it certainly appears that Mr. Darling, the UK Chancellor, has set some kind of aggressive feline loose among the pigeons.

Pointless as it might be, here are the haruspex summary of the situation, and humble views, having read the opinions of more illustrious commentators, discussed with learned friends.

UK Plc and its subsidiary RBS

ERRATA: it turns out that DJ got the below wrong. the revision was not to -1.5%, but to 1.5%.
Infuriating. So a minor slowdown, within noise, which is actually quite encouraging for the good old UK manufacturing sector. Still, the market was spooked. But maybe it was something else. RBS ended down nearly 8%.
Now need to check the German number... was that wrong too?

Fear and trembling

Terror and tremor. Yes, I am aware I am calling the name of Søren in vain.
But I am amazed at how the US stock market managed NOT to rally strongly on what were, at least by my humble measure, some bloody surprisingly good payrolls numbers, especially  given that previous 2 months were revised as well. 
In fact, they look good enough to make me seriously want to reconsider the view, now longly held, that the economy is rolling over (e.g. second derivative negative), leading to problems early next year.
It is just one number, among several others which point in the opposite direction, but an important one, so it has to be taken seriously.
I can't say that I have turned bullish (yet): but I do want to re assess and re evaluate... when the facts change... 


In the meantime, all thanks go to my historian friend who plugged my memory hole, and corrected my ignorance of philosophy. Ciao!

let's face it: it's quiet

It's good time to catch with all those books on the "to read" pile.
It's quiet. It's dead. In the markets at least. You hear it from the trading floors, from the brokerages, from the financial journos... everybody wants to shut up shop and call it a year.

So we use this time to tidy up, enter a few more trades (see views and positions), to think, to read, to do more worthy work.

It's quiet... it's dead. Till something happens, at least.

Enough with Dubai

The global concerns in the markets for the Dubai are now abating. A statement (in full here) has been released which clarifies that Dubai World
is trying to restructure just 26 GUSD of debt, and that "constructive" talks are starting.
This is probably the end of the story, as far as markets are concerned.

Probably, quite rightly too. The chances of unexpected bad news coming out before XMas (the Dad's army scenario) are now very slim. Was it Smiley's? We'll never know.

Apart from the localized hit in the Gulf, equity markets are back where they were, more or less. Bonds though are still near the highs, but they were on an uptrend anyway.
Recent pieces of economic news have been tinged of a rosy hue, cancelling the mood effect of the darker ones from previous weeks.
The views then revert to what they were. Use the time to prepare for next year.

Why the picture? Well, why not?

Dubai. Dad's army or Smiley's people?

The Financial Times mantains the line that there was amateurishness and incompetence in the way Dubai handled the recent events and it follows by recommending  Abu Dhabi to clean up the mess.
This reading of the events is plausible. Let's call it the Dad's army hypothesis.

Under this view, Dubai's autocratic rulers would not have access to professional, market savvy bankers and consultants, or if they do they would have overridden their advice. That is not impossible: the FT itself reminds us that Deutsche Bank has fled, leaving only Rothschild to advise Dubai World, one of the main entities of Dubai Inc.

This scenario though raises fears and doubts, if you are prepared to entertain the feelings of deja vu: normally when incompetence is on this scale, the worst follows soon after.
Remember Parmalat? You could tell the writing was definitely on the wall from the moment that the famous letter appeared, written in terrible English. Incompetence and amateurishness were a clear signal of the scale of the fraud to be soon revealed.
If this turns out to be the case, we should expect worse news to come out of Dubai over the next few days.
It is most  likely that a REAL panic would ensue, not the test run we saw on Thursday. All bets would be off, especially with liquidity so dire.

The other scenario, for which we have a sentimental preference (see our previous blog below or to the side) paints the Dubai operators as canny and uber-professional,  not unworthy of Smiley's best.
In this narrative, the announcement was indeed meant to feel botched, and intentionally released at the worst possible time, on the eve of Thanksgiving, during Eid, with the aim of provoking the foreign investors to rush and sell the Nakheel bond at very low levels (the excellent macroman writes they are trading below 50), in order to scoop them up on the cheap, saving a billion or so. Domestic investors would be less prone to panic, would accept the deferral till May, and be made good then.