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Al-Indunisiy
11-27-2009, 08:00 AM
Dubai's financial health has come under scrutiny after a major, government-owned investment company asked for a six-month delay on repaying its debts.

Dubai World, which has total debts of $59bn (£35bn), is asking creditors if it can postpone its forthcoming payments until May next year.

Dubai World has also appointed global accountancy group Deloitte to help with its financial restructuring.

The company has been hit hard by the global credit crunch and recession.

It was due to repay $3.5bn of its debts next month.

Put simply, everyone in the markets thought that, in the end, the federal government in Abu Dhabi would stand by all of Dubai's bad bets. Apparently, they won't.

Stephanie Flanders, BBC economics editor


Dubai: Too big to fail?
Dubai views: 'The end of the dream'
The request for a delay in repayments led to major credit ratings agencies downgrading a number of state-backed companies.

Following six years of rapid growth, the Dubai economy has slumped since the second half of 2008.

This has led to Dubai property prices falling sharply.

'Shocking'

The Dubai government said in a statement that the request to delay debt repayments also applied to property developer Nakheel, a Dubai World subsidiary.


ANALYSIS
Ben Thompson, business reporter, Dubai
Financial markets and businesses are closed here for the Eid holiday - some suggest that's why the announcement was made when it was.

It's sparked real shock that things have come to this. Just 12 months ago, few could have believed the city would find itself asking for this lifeline. It seems Dubai is now paying the price for living on borrowed money.

Of course, everyone knew the boom couldn't last forever, but no-one expected it to collapse when, or as suddenly, as it did. Property prices have more than halved over the past year and investors have fled.

The official figure for Dubai's debt is $80bn, but talk to anyone here and the feeling is the figure is much higher. Unpaid bills, abandoned cars and empty buildings are all too obvious. Some analysts put the real figure at close to $160bn.

"It's shocking because for the past few months the news coming out has given investors comfort that Dubai would most probably be able to meet its debt obligations," said analyst Shakeel Sarwar, of SICO Investment Bank.

Dubai is one of the seven self-governing emirates or states that make up the United Arab Emirates.

Analysts say the Dubai government has paid the price for a flamboyant economic model centred on foreign capital and giant construction projects.

Questions are now being raised about Dubai's ability to repay its debts, said the BBC's Middle East correspondent Jeremy Howell.

Some have speculated it is likely to turn to the more economically conservative Abu Dhabi emirate to bail it out.

Global credit rating agency Standard & Poor's, which rules on a company's or government's ability to repay its debts, said the announcement "may be considered a [debt] default".

Our correspondent said: "Standard & Poor's and Moodys immediately downgraded all six state-backed corporations in Dubai, downgrading some to junk status."

Junk is the term commonly used to describe bonds that are rated below investment grade by ratings agencies.

The Dubai World announcement was made on the eve of the Eid al-Adha Muslim festival, which will see many government agencies and companies close in Dubai until 6 December.


From BBC : http://news.bbc.co.uk/2/hi/business/8380105.stm
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Ramadhan
11-28-2009, 02:31 AM
What's surprising is not that Dubai World is asking for a lifeline from the creditors.
Having built such frivolities and monstrosities at break-neck speed on borrowed money over the past decade, it had been expected that the party would sooner or later come to an end. It is surprising that the end came with such a screeching halt.
And what is more shocking is that the Abu Dhabi government has refused to bail out Dubai World. For the past few years greedy investors keep pouring money into those projects in Dubai, confident that there is no way the oil-rich Abu Dhabi not bail out Dubai if it is in trouble.
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جوري
11-28-2009, 02:37 AM
That is what they get for investing their money on american hookers than spending it in the way of Allah..

7asbona Allah wa'ni3ma alwakeel

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Chuck
11-28-2009, 03:06 AM
This is funny, how this news is blown out of proportion as it is always with anything with the middle east. Ironically, muslims also jump the bandwagon without thinking.

Lets get real here. DW owes $59 billion debt, much of it is in Islamic sukuks. But anyhow lets focus on the numbers. First, $59 billion is nothing for multi-national corp like DW. Lehman brothers loss was $600 billion, GM loss is $90 billion, Madoff single handedly lost $59 billion and total loss in the current economic melt down is coming down to $2.7 trillion. What is this $60 billion of DW compared to those? Peanuts. Moreover, they are not defaulting in true sense, they are asking to postpone the payment deadline to 6 months until they restructure.

But it is fun to watch how markets are reacting over such a small news.
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nocturnal
11-28-2009, 03:48 AM
format_quote Originally Posted by naidamar
What's surprising is not that Dubai World is asking for a lifeline from the creditors.
Having built such frivolities and monstrosities at break-neck speed on borrowed money over the past decade, it had been expected that the party would sooner or later come to an end. It is surprising that the end came with such a screeching halt.
And what is more shocking is that the Abu Dhabi government has refused to bail out Dubai World. For the past few years greedy investors keep pouring money into those projects in Dubai, confident that there is no way the oil-rich Abu Dhabi not bail out Dubai if it is in trouble.
Indeed. I too found that rather shocking. I think Abu Dhabi seems to have come to the realisation that this is not - even by their impressive standards - a paltry some of money that they can gladly proffer to Dubai, it's quite a staggering amount. And in the midst of a global recession, they need to consolidate their own position let alone underwrite Dubai's bed debts.

Maybe Abu Dhabi will provide part of the money required, but if nothing else is forthcoming and the creditors seem unwilling to play along, then it seems like they might have to go cap-in-hand elsewhere to seek financial assistance.
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Ramadhan
11-28-2009, 04:18 AM
format_quote Originally Posted by Chuck
Lets get real here. DW owes $59 billion debt, much of it is in Islamic sukuks. But anyhow lets focus on the numbers. First, $59 billion is nothing for multi-national corp like DW. Lehman brothers loss was $600 billion, GM loss is $90 billion, Madoff single handedly lost $59 billion and total loss in the current economic melt down is coming down to $2.7 trillion. What is this $60 billion of DW compared to those? Peanuts. Moreover, they are not defaulting in true sense, they are asking to postpone the payment deadline to 6 months until they restructure.

But it is fun to watch how markets are reacting over such a small news.
What's shocking is neither the fact that DW is unable to service its debt nor the amount of its debt (still very large compared to its GDP), but the fact that Abu Dhabi is refusing to bail out DW.
Given how much Dubai has spent polishing its image as an international financial centre, asking for a delay is clearly the last option they exercised, and actually almost like suicidal.
This news holds more psychological value than economic, but it also give indication to the state of economy of other gulf countries.
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The_Prince
11-28-2009, 04:48 AM
this is a good thing for dubai, they needed something like this, its a reality check, and will only make them stronger in the future, from now on they will be more smart and realize times wont always be fruitful hence they need to be careful and not silly with their borrowing.

but its good one myth has been blown out of the water, dubai was not built on oil money at all, so all those baboons who kept saying once the oilllll runs out its all over! need to find a new line, since dubai didnt build on oil money, but used a good ole western tool of borrowing huge chunks of money from banks and nice rich people. ah now thats gotta hurt, a huge city built from sand without the oil money. :(
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The_Prince
11-28-2009, 04:54 AM
format_quote Originally Posted by nocturnal
Indeed. I too found that rather shocking. I think Abu Dhabi seems to have come to the realisation that this is not - even by their impressive standards - a paltry some of money that they can gladly proffer to Dubai, it's quite a staggering amount. And in the midst of a global recession, they need to consolidate their own position let alone underwrite Dubai's bed debts.

Maybe Abu Dhabi will provide part of the money required, but if nothing else is forthcoming and the creditors seem unwilling to play along, then it seems like they might have to go cap-in-hand elsewhere to seek financial assistance.
or perhaps AD doesnt want to bail dubai out because they dont really need to, and dubai have it under control as they have said. there are two sides to a story, and what you mention is the western side, the very same western side who would love nothing more than to see Dubai collapse because it is a Muslim and Arab country, they have been out to get Dubai since day one.

whats more funny is that when you compare Dubai's debt to the debt of the USA then WOWWWWWWW i dont know what the hell everyone is so worried about!

has anyone forgotten about the ticking time bomb of the U.S. debt which they cant pay back? geeeee whats gonna happen when its time to pay up, and when the U.S. can no longer sustain itself because of the debt, heck the same applies to UK and many other countries. heckkkkkk whats gonna happen when people decide to dump the dollar (which is fast becomming a reality).

but nahhhhhhhhhhhh we will ignore all of this and concentrate on Dubai, lol.
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Beardo
11-28-2009, 04:59 AM
format_quote Originally Posted by The_Prince
this is a good thing for dubai, they needed something like this, its a reality check, and will only make them stronger in the future, from now on they will be more smart and realize times wont always be fruitful hence they need to be careful and not silly with their borrowing.
That was a bold and courageous statement to make there, Bro.

But I suppose you are right. It is a reality check. They've been expanding like no OTHER, quite extravagantly.

I spent a whole summer in Dubai in the initial years of it's growth, which was (I believe) before the bars started opening etc in the early 2000s. I can't say I didn't enjoy it! You'd be amazed. So secure Masha'Allah. We used to leave our car unlocked, the GOLD SOUKS used to keep their stores open unattended during Salaah time. SubhanAllah!

...But things have changed.
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nocturnal
11-28-2009, 05:12 AM
Prince, I hardly think it is in the interest of the West to see Dubai implode in the manner in which you are describing. They have invested billions of dollars in Dubai and have a huge stake in it. Besides, this transcends religious and political issues, it is an economic issue and if they could have the affrontery to utilise billions of taxypayers dollars to bail out banks, then i don't think they'll shy away from assisting Dubai, even if it means pressurizing the IMF to take action. Afterall, the IMF after the London summit, did receive billions of dollars in additional funds for precisely this sort of crisis, not just to direct economic structuring programmes in third world countries.
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nocturnal
11-28-2009, 05:14 AM
And no one is in doubt as to the gravity of the situation rgarding US debt repayment, but even some of the most sceptical analysts believe the US and other EU nations have the wherewithal to deal with it unlike many of the nascent Gulf countries, especially Dubai which relied on fianance and construction to compensate for a lack of oil resources and unfortunately for it, proved to be two of the most devastatingly hit industires by the global recession.
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Chuck
11-28-2009, 05:31 AM
format_quote Originally Posted by naidamar
What's shocking is neither the fact that DW is unable to service its debt nor the amount of its debt (still very large compared to its GDP), but the fact that Abu Dhabi is refusing to bail out DW.
Given how much Dubai has spent polishing its image as an international financial centre, asking for a delay is clearly the last option they exercised, and actually almost like suicidal.
This news holds more psychological value than economic, but it also give indication to the state of economy of other gulf countries.
Asking delay is normal, world is going through a very difficult economic recession. But there is always so much hoohaa in western media for anything that is about middle east. At least one person is being realistic.

People are clearly overreacting, and that’s creating a good opportunity to
buy. Here’s why:

1. Dubai World’s debt of $60 billion compares to Lehman’s exposure of more
than $1 trillion when it collapsed. When Fannie Mae (FNM) and Freddie Mac (FRE)
were rescued, they were guaranteeing over $5 trillion in mortgages. When
American International Group Inc. (AIG) was rescued, it had over $200 billion in
credit default swap exposure. Similarly, Citigroup Inc. (C) and Bank of America
Corp. (BAC) had hundreds of billions in potential exposure.

Now, the U.S. stock market is higher than when all of those entities were
rescued. A $60 billion debt turning sour doesn’t (or shouldn’t) shock us
anymore, and the exposure of U.S. banks to this mess is minimal at best.

2. What in fact is the banking world’s exposure to Dubai? From a Goldman Sachs
report on Dubai issued Thursday: “We estimate the potential credit losses to
HSBC and STAN at US$611 million and US$177 million – or 4.6% and 3.9% of
2010E NPAT, 0.5% and 0.6% of 2010E equity.” In other words, nothing.

3. Plenty can happen between now and Monday. Dubai could come to agreements
with its creditors on the $10 billion, give or take, that is due in the next
month. Abu Dhabi, which has already agreed to lend Dubai $5 billion, has over
$650 billion in assets. Abu Dhabi will certainly negotiate agreements with the
creditors and buy debt for 60 to 70 cents on the dollar, avoiding the default of
its strategically placed neighbor. In return, Abu Dhabi will get massive
political concessions from Dubai.

This morning many stocks are falling. But this is not a repeat of last year’s
financial crisis. Many opportunities for snapbacks will appear. I’m going to be
keeping an eye, for the long side, on volatile stocks such as Citigroup; Apple
Inc. (AAPL); Dendreon Corp. (DNDN); Google Inc. (GOOG); STEC Inc. (STEC), which
I own; and heavily shorted stocks like Nutrisystem Inc. (NTRI), which should
benefit from post-Thanksgiving dieters, and priceline.com Inc. (PCLN).

http://blogs.wsj.com/financial-advis...-is-overblown/
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Sampharo
11-28-2009, 06:58 AM
Brother Chuck, I spent 20 years of my life in Dubai, 5 of which doing financial analysis and running my own financial brokerage firm.

I have to say this article you're quoting is infuriatingly devoid of economic principal or sense and I don't understand who would write something like that. What analysis in the World can EVER justify the failure of a company in one country based on how much it took for another company in another country with a different size to fail?!?! What financial data did the article rely on in order to equate a property master developer like Dubai World with car manufacturer GM or financial institution Lehman Brothers?

The analogy the article is using is like being in a cruising car on the highway that starts spitting, spatting and the dashboard indicator shows an empty gas tank, and one of the passengers saying: "It's impossible we are running out of fuel, my dad's 18 wheeler can go 1000 miles before running out of gas and we only drove 300." What a company with the history and size of GM did to fail, and the fact that the American administration succumbed to the lobby and decided to use taxpayer money to bail them out, has nothing to do with a ciompany with the different size and history and industry of Dubai World did, and there is neither going to be lobbying on their behalf nor American taxpayer money to bail them out.

Look, here is the actual situation: Asking for a delay in payment means they're running out of fuel AND the management team was incompetent enough not to be able to have sorted it out. It is a huge alarm in any terms and is called a default.

Additionally, the whole dubai market had alarm bells going on regarding its sustainability for more than three years, and more importantly the Dubai government has been doing a bad job of dismissing the solid data and breaches, which means that they were not facing the facts and had a problem with transparency. Having a problem with transparency means that new proper investors will not plug any serious money in there. Add to that the new rating of "Junk" which is really not that hard to understand for non-savvies. The situation is very much like a rich boy gambling in a casino that's bitten off more than they can chew, so much that the casino just cut off further credit and asked him to pay up, and instead of confidently taking out his chequebook and paying, he says: "Gee well... I am not liquid right now... but I am expecting some money real soon and.. and.." and then looking onto his heart-broken big brother "I promise you I am due for some money, I am just in a rut, I'll take care of everything I promise but if you just please liquidate the family trust-fund and let me keep playing to win the money back. Please I'll make it all back I swear!"

Dubai World in short is in deep &^*% whether they face the music or not. So much so that Dubai ruling family failed to come up with the money in time and Big Brother Abu Dhabi decided to cut them off. Nobody cares if they come up with the money later on because the default is already made and no one will extend any further much needed credit in the future, so there is no possibility of growth under the current ownership/management, and their greatest commodity (potential property profits based on Dubai's reputation) is already busted.
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Chuck
11-28-2009, 07:34 AM
Comparison was correct in terms of assessing financial fallout in the international market. To international banks it doesn't matter if $60 billion are lost by DW or GM, to them it is same.

format_quote Originally Posted by Sampharo
Brother Chuck, I spent 20 years of my life in Dubai, 5 of which doing financial analysis and running my own financial brokerage firm.

I have to say this article you're quoting is infuriatingly devoid of economic principal or sense and I don't understand who would write something like that. What analysis in the World can EVER justify the failure of a company in one country based on how much it took for another company in another country with a different size to fail?!?! What financial data did the article rely on in order to equate a property master developer like Dubai World with car manufacturer GM or financial institution Lehman Brothers?

The analogy the article is using is like being in a cruising car on the highway that starts spitting, spatting and the dashboard indicator shows an empty gas tank, and one of the passengers saying: "It's impossible we are running out of fuel, my dad's 18 wheeler can go 1000 miles before running out of gas and we only drove 300." What a company with the history and size of GM did to fail, and the fact that the American administration succumbed to the lobby and decided to use taxpayer money to bail them out, has nothing to do with a ciompany with the different size and history and industry of Dubai World did, and there is neither going to be lobbying on their behalf nor American taxpayer money to bail them out.

Look, here is the actual situation: Asking for a delay in payment means they're running out of fuel AND the management team was incompetent enough not to be able to have sorted it out. It is a huge alarm in any terms and is called a default.

Additionally, the whole dubai market had alarm bells going on regarding its sustainability for more than three years, and more importantly the Dubai government has been doing a bad job of dismissing the solid data and breaches, which means that they were not facing the facts and had a problem with transparency. Having a problem with transparency means that new proper investors will not plug any serious money in there. Add to that the new rating of "Junk" which is really not that hard to understand for non-savvies. The situation is very much like a rich boy gambling in a casino that's bitten off more than they can chew, so much that the casino just cut off further credit and asked him to pay up, and instead of confidently taking out his chequebook and paying, he says: "Gee well... I am not liquid right now... but I am expecting some money real soon and.. and.." and then looking onto his heart-broken big brother "I promise you I am due for some money, I am just in a rut, I'll take care of everything I promise but if you just please liquidate the family trust-fund and let me keep playing to win the money back. Please I'll make it all back I swear!"

Dubai World in short is in deep &^*% whether they face the music or not. So much so that Dubai ruling family failed to come up with the money in time and Big Brother Abu Dhabi decided to cut them off. Nobody cares if they come up with the money later on because the default is already made and no one will extend any further much needed credit in the future, so there is no possibility of growth under the current ownership/management, and their greatest commodity (potential property profits based on Dubai's reputation) is already busted.
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Sampharo
11-28-2009, 07:47 AM
^ Brother Chuck, I don't think anyone here nor the opening post was suggesting in any way that the banking system will fail again because one corporation is not paying 3.5 billion in time. :D Glad to have cleared up the confusion though.

However, it does stand true that Dubai's economy has been over-inflated and that the master developer's failure along with loss of credibility and credit-worthiness, it is more than a detrimental blow to the city's financial health, if that is what you might have been referring to.
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Chuck
11-28-2009, 08:06 AM
format_quote Originally Posted by Sampharo
^ Brother Chuch, I don't think anyone here nor the opening post was suggesting in any way that the banking system will fail again because one corporation is not paying 3.5 billion in time. :D Glad to have cleared up the confusion though.

However, it does stand true that Dubai's economy has been over-inflated and that the master developer's failure along with loss of credibility and credit-worthiness, it is more than a detrimental blow to the city's financial health, if that is what you might have been referring to.
The article was talking about reaction of the financial markets and media, mainly media, because financial markets reacted based on media. As far as Dubai is concerned, it is not contractually liable to pay the debts of DW, it could affect the face of Dubai but that is another issue. But DW is in trouble but still it is not in as bad situation as compared to other multinationals that went bust in current recession globally. DW has assets about $100 billion vs total debt of $59billion, thus has high level of solvency. Recently it raised $2billion in Islamic bonds and govt has injected $5billion in cash, so it has enough liquidity to deal with its short-term debt. However, they don't want to finance debt with debt, so they are restructuring their debt, which will help them in the long-term.
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Sampharo
11-28-2009, 09:06 AM
This is where I usually start going into an in-depth debate, but as I said: I ran a financial brokerage for 5 years and I did this for a living, and what you are quoting from these sources is not only wrong, but outright non-sense trust me.

Dubai World is a sheikhdom company and when it goes into this it shows that one of the pillars has fallen as predicted yet dismissed all along. Financial markets is a panicy market because it runs according to crowd psychology and the situation here is that finally even the stupid ones in the market have realized Dubai Inc is not as solid as touted. If the same family runs four businesses that carry the weight of a city's economy running out of oil, and every decent analysis source was saying they over-extended themselves, and then one of the companies fail and get restructured, you don't exactly get billions pumped into the rest. The kind of "don't worry it's normal" articles you're reading now is just apologetic garbage similar to the ones that swore financial banking system was doing great and there's no need to panic. It's delay tactics to milk the cow as much as possible and get the important money out before the sell-off of the regular people dips the prices into the ground.

It is because of such effect that EVEN if there was merit for the company to survive in the long-run, the well-known dive the prices will take dictates that anyone with ability should exit the company and wait for the rock-bottom to be reached, (planning to buy again the shares at fraction of their costs). This in itself is a possibility to force the company into final liquidation despite its assets.

Dubai World right now is in the crapper, and while you are speaking about how they are fine and adopting strategies that is better for them in the long run, Rothschild has been appointed to sell their assets, another sign that the company is failing.
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Chuck
11-28-2009, 09:44 AM
format_quote Originally Posted by Sampharo
This is where I usually start going into an in-depth debate, but as I said: I ran a financial brokerage for 5 years and I did this for a living, and what you are quoting from these sources is not only wrong, but outright non-sense trust me.

Dubai World is a sheikhdom company and when it goes into this it shows that one of the pillars has fallen as predicted yet dismissed all along. Financial markets is a panicy market because it runs according to crowd psychology and the situation here is that finally even the stupid ones in the market have realized Dubai Inc is not as solid as touted. If the same family runs four businesses that carry the weight of a city's economy running out of oil, and every decent analysis source was saying they over-extended themselves, and then one of the companies fail and get restructured, you don't exactly get billions pumped into the rest. The kind of "don't worry it's normal" articles you're reading now is just apologetic garbage similar to the ones that swore financial banking system was doing great and there's no need to panic. It's delay tactics to milk the cow as much as possible and get the important money out before the sell-off of the regular people dips the prices into the ground.

It is because of such effect that EVEN if there was merit for the company to survive in the long-run, the well-known dive the prices will take dictates that anyone with ability should exit the company and wait for the rock-bottom to be reached, (planning to buy again the shares at fraction of their costs). This in itself is a possibility to force the company into final liquidation despite its assets.

Dubai World right now is in the crapper, and while you are speaking about how they are fine and adopting strategies that is better for them in the long run, Rothschild has been appointed to sell their assets, another sign that the company is failing.
Let me break it down:
(1) Dubai govt is not liable to pay for DW debts, what does that means? That means Dubai govt can let it go bust. It would affect the reputation of Dubai govt., but that doesn't really matter after so much Dubai bashing in the media that has taken since the financial crises. The fallout would be on investors and creditors.

(2) Fallout on the international financial system is nothing compared to what we have seen in the current crises. $59 billion is nothing compared to $2.7 trillion. This whole panic is nothing more than a sensationalism with middle east of western media.

(3) DW has $100billion estimated asset at the end of 2008. Estimate was after the nov 2008 market crash so that estimate is fairly valid still. DW is in very good position still, nothing compared to Lehman bros. whose debt was nearly 1 trillion and 600 billion was never recovered. If DW is forced into liquidation all the debt will be recovered.

You might be in finance, but you saying some general thing which doesn't mean much like the western media. I suppose you don't like Dubai.

Second, I can tell you I'm UCLA graduate economist and consultant for big financial firms. I'm currently working in Middle east. I'm quoting, because I want present something with backing.
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Sampharo
11-28-2009, 10:08 AM
format_quote Originally Posted by Chuck
Let me break it down:
(1) Dubai govt is not liable to pay for DW debts, what does that means? That means Dubai govt can let it go bust. It would affect the reputation of Dubai govt., but that doesn't really matter after so much Dubai bashing in the media that has taken since the financial crises. The fallout would be on investors and creditors.
No one cared if they were liable or not. Their entire construction economy was dependent on reputation and with its failure the economy is badly hurt.

(2) Fallout on the international financial system is nothing compared to what we have seen in the current crises. $59 billion is nothing compared to $2.7 trillion. This whole panic is nothing more than a sensationalism with middle east of western media.
Again no one cared or addressed that.

(3) DW has $100billion estimated asset at the end of 2008. Estimate was after the nov 2008 market crash so that estimate is fairly valid still. DW is in very good position still, nothing compared to Lehman bros. whose debt was nearly 1 trillion and 600 billion was never recovered. If DW is forced into liquidation all the debt will be recovered.
You seem to be still speaking about the effect on international financial institutions which nobody questioned nor cared about. You're creating your own argument to validate quoting something irrelevent.

You might be in finance, but you saying some general thing which doesn't mean much like the western media. I suppose you don't like Dubai.

Second, I can tell you I'm UCLA graduate economist and consultant for big financial firms.
If you then call yourself an economics major and a financial consultant and then think that love and hate of a place has anything to do with it, and are going to mash sensationalism and religion into a financial analysis of a firm, then you are consulting on office stationary cost savings no more, or flat out lying to save face.:skeleton:

There is nothing general about calling a failing company "a failing company". This whole thread is about the company itself and its default, and your posts along with the quoted article is saying that the company is in good shape, which is a load of garbage in anyone's dictionary. No generalities there. Everytime that is pointed out you seem to run to "it has little effect on international market", which is an irrelevent fact that no one even mentioned.

If you subscribe to wrong information, it is your perogative to stay ignorant, but don't say stupid things like that and then claim to be a professional "consultant" to big financial firms. Otherwise of course you are working for a "Dubai government" financial firm that is ordered to release and spread articles about how great Dubai financial situation and economy is.
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Chuck
11-28-2009, 10:34 AM
format_quote Originally Posted by Sampharo
No one cared if they were liable or not. Their entire construction economy was dependent on reputation and with its failure the economy is badly hurt.

Again no one cared or addressed that.

You seem to be still speaking about the effect on international financial institutions which nobody questioned nor cared about. You're creating your own argument to validate quoting something irrelevent.

If you then call yourself an economics major and a financial consultant and then think that love and hate of a place has anything to do with it, and are going to mash sensationalism and religion into a financial analysis of a firm, then you are consulting on office stationary cost savings no more, or flat out lying to save face.:skeleton:

There is nothing general about calling a failing company "a failing company". This whole thread is about the company itself and its default, and your posts along with the quoted article is saying that the company is in good shape, which is a load of garbage in anyone's dictionary. No generalities there. Everytime that is pointed out you seem to run to "it has little effect on international market", which is an irrelevent fact that no one even mentioned.

If you subscribe to wrong information, it is your perogative to stay ignorant, but don't say stupid things like that and then claim to be a professional "consultant" to big financial firms. Otherwise of course you are working for a "Dubai government" financial firm that is ordered to release and spread articles about how great Dubai financial situation and economy is.
You are getting emotional. I don't know exactly why. But simple question, tell me this. A company has $100 billion in assets and $59 billion in liabilities, is this a good or bad debt to equity ratio?
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Chuck
11-28-2009, 10:40 AM
Anyhow this a buying opportunity, I'm buying DW sukuks and stocks of DW companies. I bought some already yesterday and I'll buy more if price goes down further.
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Chuck
11-28-2009, 11:38 AM
format_quote Originally Posted by Sampharo
There is nothing general about calling a failing company "a failing company". This whole thread is about the company itself and its default, and your posts along with the quoted article is saying that the company is in good shape, which is a load of garbage in anyone's dictionary.
The article I quoted doesn't say it is in good shape, neither I said it is in good shape. What it is said is the reaction is out of proportion, and rest of the large companies around world are not doing any b
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Chuck
11-28-2009, 11:51 AM
format_quote Originally Posted by Gossamer skye
That is what they get for investing their money on american hookers than spending it in the way of Allah..
Well, I wouldn't call spending on tourism as spending on hookers, and it has its advantages. Thousands of people convert to Islam each year in Dubai. The reason is coming here opens them to Islam and muslims more than their home countries. System is good here and it is easier to live here than other states after conversion, which also makes it easier for them to convert.

http://www.khaleejtimes.com/DisplayA...ae_June615.xml
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Supreme
11-28-2009, 12:40 PM
I've been to Dubai.

It's nice.
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cat eyes
11-28-2009, 02:54 PM
:sl:my friend spent a week in dubai before flying off to pakistan for a month... This girl is a revert and she said that they drink more alcohol and sell more alcohol then the west! She never seen anything like it.....They were even selling alcohol in the airport and drinking it during the day. Europeans are not as bad as that and her family lives in the biggest holiday destination in Europe
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The_Prince
11-28-2009, 03:33 PM
format_quote Originally Posted by nocturnal
Prince, I hardly think it is in the interest of the West to see Dubai implode in the manner in which you are describing. They have invested billions of dollars in Dubai and have a huge stake in it. Besides, this transcends religious and political issues, it is an economic issue and if they could have the affrontery to utilise billions of taxypayers dollars to bail out banks, then i don't think they'll shy away from assisting Dubai, even if it means pressurizing the IMF to take action. Afterall, the IMF after the London summit, did receive billions of dollars in additional funds for precisely this sort of crisis, not just to direct economic structuring programmes in third world countries.
when i say west, im not talking about the guys in charge, but the media, and your certain average joe's etc. you make very good points, which show how the west will have some bad problems if dubai falls, which is what the western media and average joe dont get!
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The_Prince
11-28-2009, 03:39 PM
format_quote Originally Posted by Chuck
Anyhow this a buying opportunity, I'm buying DW sukuks and stocks of DW companies. I bought some already yesterday and I'll buy more if price goes down further.
i 100% agree with you, this is a very good time for buying, i was thinking that to myself when i heard about this story, good job!
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Justufy
11-28-2009, 03:39 PM
I heard if this story where they can no longner pay their debts :hmm:
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Justufy
11-28-2009, 03:40 PM
Mabey their is no more oil.
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The_Prince
11-28-2009, 03:43 PM
format_quote Originally Posted by cat eyes
:sl:my friend spent a week in dubai before flying off to pakistan for a month... This girl is a revert and she said that they drink more alcohol and sell more alcohol then the west! She never seen anything like it.....They were even selling alcohol in the airport and drinking it during the day. Europeans are not as bad as that and her family lives in the biggest holiday destination in Europe
i think your friend was talking rubbish and obviously hasnt been around Europe that properly, or she wore blinkers when she was in Europe. how about you come to England and see the amount of their alcohol consumption which is getting so bad that the youth health is going down the drain.

they were selling alcohol in the airport? lol was that the first time your friend visited an airport? or again, did she wear blinkers when she visited european airpots? virtually every airport in europe and america sell alcohol.

so plz if you wanna say something, dont say something so blatantly false, and something people who have been around know is complete and utter BS.

i mean your comment about how they sell alcohol in the airport shows how little you and your ignorant friend really know, and when you say something as silly as that, thats when everyone knows you dont even know what your talking about.
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The_Prince
11-28-2009, 03:44 PM
format_quote Originally Posted by Justufy
Mabey their is no more oil.
dubai have no oil, and dubai never used oil money in the first place, dubai wasnt built on oil but investments.
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The_Prince
11-28-2009, 03:46 PM
format_quote Originally Posted by Gossamer skye
That is what they get for investing their money on american hookers than spending it in the way of Allah..

7asbona Allah wa'ni3ma alwakeel

by any chance, could you give me the sources or evidence that the official government and people in charge of dubai have invested in American hookers? i would love to have such a source.
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Sampharo
11-28-2009, 04:09 PM
format_quote Originally Posted by Chuck
You are getting emotional. I don't know exactly why. But simple question, tell me this.
It's called indignant reaction to misinformation. Something those of virtue and honesty naturally do not accept, not to mention that it is of legal consequence that implausible share recommendations are made. If you presented a plausible yet disagreeable opinion it would have been normal and respected by any of us. But instead you were insisting on a strange non-argument that seems to be fundamentally faulty, yet you were backing it up with claims of being an expert and a financial consultant.

A company has $100 billion in assets and $59 billion in liabilities, is this a good or bad debt to equity ratio?

Anyhow this a buying opportunity, I'm buying DW sukuks and stocks of DW companies. I bought some already yesterday and I'll buy more if price goes down further.
This would be a plausible yet disagreeable proposal. If that is how you decide to invest in companies, that is fine. If that is what you presented earlier it would have been a different discussion.

Earlier however you were not on that. However, I'll go along for a second with the proposal with a neutral mindset about Dubai World and you, please elaborate though:

You're saying that a company with $100 billion in assets and $59 billion in liabilities would be a good investment:
a- based on what income levels? How much does it earn annually?
b- what was the last share dividend payout?
c- What are the future projections of profit that you made to account for the company's growth over the next ten years?
d- Have you analyzed the management team in place to account for expected performance?
e- Most importantly: What is the share price above which people should no longer buy DW shares and sukuks now that the restructure is announced?

:sl:my friend spent a week in dubai before flying off to pakistan for a month... This girl is a revert and she said that they drink more alcohol and sell more alcohol then the west! She never seen anything like it.....They were even selling alcohol in the airport and drinking it during the day. Europeans are not as bad as that and her family lives in the biggest holiday destination in Europe
Dubai is a strange city. You gotta love it but then can't help hating some stuff in it. Alcoholics are a problem in dubai, but it's mostly because it's always giving a feeling of being a 5 star hotel not home, which drives expats into great indulgence. Feeling of ownership is a weakness for Dubaians. 20 years and I still felt that it was one big glassy airport with wannabe insecurities, best and fastest place to do business, yet the spirit of it is as deep as a starbucks.
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aamirsaab
11-28-2009, 04:41 PM
We'll have to wait and see how this unfolds. All we have to go on is a postponed payment - that's not as problematic as say going completely bankrupt.
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Sampharo
11-28-2009, 07:19 PM
format_quote Originally Posted by The_Prince
i think your friend was talking rubbish and obviously hasnt been around Europe that properly, or she wore blinkers when she was in Europe. how about you come to England and see the amount of their alcohol consumption which is getting so bad that the youth health is going down the drain.

....and when you say something as silly as that, thats when everyone knows you dont even know what your talking about.
Easy there buddy, I happened to have lived there for a very long time and it's the Europeans themselves that say it very bluntly that they drink a lot more in Dubai than they do back home.

Executives have loads of alcohol with practically every other meal and walking out of nightclubs "pissed to passing out level" is an absolute normality of regular western society there in Dubai. That is no way for regular society in the west to live, maybe just delinquents and losers. Alcohol is much cheaper in Dubai because of the low duties and the local police do not bother them as long as they are western expats and are not driving in such states.
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Beardo
11-28-2009, 07:31 PM
format_quote Originally Posted by aamirsaab
We'll have to wait and see how this unfolds. All we have to go on is a postponed payment - that's not as problematic as say going completely bankrupt.
True that. Just sell one of those hotels or palaces and you're done. ;D

Shoot, just ask the King to donate his toilet!
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cat eyes
11-28-2009, 07:35 PM
format_quote Originally Posted by The_Prince
i think your friend was talking rubbish and obviously hasnt been around Europe that properly, or she wore blinkers when she was in Europe. how about you come to England and see the amount of their alcohol consumption which is getting so bad that the youth health is going down the drain.

they were selling alcohol in the airport? lol was that the first time your friend visited an airport? or again, did she wear blinkers when she visited european airpots? virtually every airport in europe and america sell alcohol.

so plz if you wanna say something, dont say something so blatantly false, and something people who have been around know is complete and utter BS.

i mean your comment about how they sell alcohol in the airport shows how little you and your ignorant friend really know, and when you say something as silly as that, thats when everyone knows you dont even know what your talking about.
;D they are muslims for pity sake they don't feel any shame?? ive been to u.k many times as i have loads of family there and at least they are bloody private and decent enough to not flash there cash and there fancy clothes and they drink in there homes away from the public to see
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aamirsaab
11-28-2009, 07:49 PM
format_quote Originally Posted by Rashad
True that. Just sell one of those hotels or palaces and you're done. ;D

Shoot, just ask the King to donate his toilet!
On the proviso, he flushes first ;)

Just a point in general, let's try and keep the posts on topic and not turn this into a dubai bashing thread. My potential career in a dubai-based bank, with earnings of up-to-lots-of-thousands-of-dollars, has absolutely nothing to do with this. Honest!
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nocturnal
11-28-2009, 07:56 PM
format_quote Originally Posted by The_Prince
i think your friend was talking rubbish and obviously hasnt been around Europe that properly, or she wore blinkers when she was in Europe. how about you come to England and see the amount of their alcohol consumption which is getting so bad that the youth health is going down the drain.

they were selling alcohol in the airport? lol was that the first time your friend visited an airport? or again, did she wear blinkers when she visited european airpots? virtually every airport in europe and america sell alcohol.

so plz if you wanna say something, dont say something so blatantly false, and something people who have been around know is complete and utter BS.

i mean your comment about how they sell alcohol in the airport shows how little you and your ignorant friend really know, and when you say something as silly as that, thats when everyone knows you dont even know what your talking about.
Dude, cut her some slack ok. She's not talking about the derelict rundown towns of northern England and similar types of places where you have rampant alcoholism as a result of no development or economic regeneration. She's talking about Dubai in the context of the Middle East and relative to some major European capitals and holiday hotspots where alcohol consumption is on a par with Dubai, especially given its huge expatriate population. She has a valid point, so don't denigrate her for it.
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جوري
11-29-2009, 01:16 AM
:sl:

akhi uthman, I can appreciate why you removed the pictures, but it is only fair that if Br. prince asks for validation that we provide it to him in pictures? You can't get any more incriminating than that and you don't really need to stretch the imagination. I don't think it is particularly fair to bury our head in the sand and pretend that frank di3arra isn't going on, in allegedly Islamic countries!

:wa:
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Enderby
11-29-2009, 05:16 AM
[QUOTE=Gossamer skye;1252520]That is what they get for investing their money on american hookers than spending it in the way of Allah..

7asbona Allah wa'ni3ma alwakeel



you have proof that they were amercan hookers or none is needed in this particular case
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جوري
11-29-2009, 07:07 AM
format_quote Originally Posted by Enderby



you have proof that they were amercan hookers or none is needed in this particular case

you should work on your reading and writing skills, on top of your mannerism you make it incredibly easy for folks to ignore your posts..

Other than that if genuinely interested, you may google the guest list for the hotel on fire in the pic above.. I won't post any more links to have them removed..

large vacancy between the ears? don't know how to compensate? google shall be your vindicator!

all the best of course!
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Chuck
11-29-2009, 12:33 PM
format_quote Originally Posted by cat eyes
;D they are muslims for pity sake they don't feel any shame?? ive been to u.k many times as i have loads of family there and at least they are bloody private and decent enough to not flash there cash and there fancy clothes and they drink in there homes away from the public to see
I don't know where your friend is getting information from? Personally, I've not seem them drinking on the places I go, which is lot places here. Parks, shopping malls, streets, etc... and I've been living here for 9 years. Airport is duty free, and I've seen Europeans by lot of beer since it is cheaper. But they are not allowed to get drunk or there is a big fine and may be jail. Same with drunken on street, thats probably the reason I've seen drunk driving or somebody drunk on the street. People are allowed to drink in designated areas like night clubs, but I don't go there so I don't know how much they drink there.
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Chuck
11-29-2009, 12:42 PM
What pictures, american hookers who? You mean american celebrities?
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Chuck
11-30-2009, 05:19 AM
format_quote Originally Posted by Sampharo
It's called indignant reaction to misinformation.
What misinformation I've given? You are the one talking hearsay and saying these things:
format_quote Originally Posted by Sampharo
Big Brother Abu Dhabi decided to cut them off... Nobody cares if they come up with the money later on because the default is already made... no one will extend any further much needed credit in the future, so there is no possibility of growth under the current ownership/management, and their greatest commodity (potential property profits based on Dubai's reputation) is already busted...
.................................................. ...................

format_quote Originally Posted by Sampharo
It's called indignant reaction to misinformation. Something those of virtue and honesty naturally do not accept, not to mention that it is of legal consequence that implausible share recommendations are made. If you presented a plausible yet disagreeable opinion it would have been normal and respected by any of us. But instead you were insisting on a strange non-argument that seems to be fundamentally faulty, yet you were backing it up with claims of being an expert and a financial consultant.

This would be a plausible yet disagreeable proposal. If that is how you decide to invest in companies, that is fine. If that is what you presented earlier it would have been a different discussion.

Earlier however you were not on that. However, I'll go along for a second with the proposal with a neutral mindset about Dubai World and you, please elaborate though:

You're saying that a company with $100 billion in assets and $59 billion in liabilities would be a good investment:
a- based on what income levels? How much does it earn annually?
b- what was the last share dividend payout?
c- What are the future projections of profit that you made to account for the company's growth over the next ten years?
d- Have you analyzed the management team in place to account for expected performance?
e- Most importantly: What is the share price above which people should no longer buy DW shares and sukuks now that the restructure is announced?
You are mixing two different things. I just asked you if their debt-to-equity ratio is good or bad. 0.59 ratio is considered good and doom-gloom sentiments are out of proportion. I don't know why you mixed it with my other comment, perhaps because that gives you better chance to dodge my question.

And one another thing, restructuring debt is meant to improve a,c, and d.
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Sampharo
11-30-2009, 08:49 AM
format_quote Originally Posted by Chuck
What misinformation I've given? You are the one talking hearsay and saying these things:
That's called financial news and fundamental analysis, and it is based on best practices of the industry. Not even beginners consider such things as hearsay, because even a false rumor produces real market decisions.

format_quote Originally Posted by Chuck
You are mixing two different things. I just asked you if their debt-to-equity ratio is good or bad. 0.59 ratio is considered good and doom-gloom sentiments are out of proportion. I don't know why you mixed it with my other comment, perhaps because that gives you better chance to dodge my question.

And one another thing, restructuring debt is meant to improve a,c, and d.
Chuck, I asked you these questions because you said you were a consultant to financial institutions and are right now buying DW stocks and bonds. It is not possible that you do that without connecting all the lines together and having already calculated AND combined these fundamental numbers together. Sorry but I believe then what you said was only said to support your opinion and is simply not true.

Saying that debt-to-equity is what matters, is like saying a car will win because it has good power-to-weight ratio, regardless of the fact that it has a broken chassis and shot suspension and the has less fuel than the race requires. No consultant worth his salt will ever be tolerated with such a statement. If you don't know how much is it making now and what is the share buying cutoff price, it is impossible and unacceptable to make a share and bond buying decision. If funds were managed that way it would have been lost in a flash and the person managing would have been held negligent.

The reason for the market reaction is the problem that this company has right now is a disease with its liquidity. Liquidity is fuel and lack of liquidity that is so severe a major company announces one whole month in advance that they are unable to make a payment this small in comparison to its size, it means the market will experience a domino effect of failures to pay, and everybody knows this is detrimental for a highly leveraged market. Additionally the prices were all trading on such levels because there was a sentiment of liquidity being back and abundunt in the market, with that gone they HAVE To recalculate and therefore exit before the prices crash to reflect reality. The market is running fine and financial institutions know what they were doing, it's obvious however you're missing the point.

As for your general opinion that DW is doing good, that is your opinion then and it's yours to keep, however to answer your question a debt-to-ASSETS (not equity !?!) ratio of 0.59 is less than 0.75, therefore it is healthy, but is considered good investment and sustainable ONLY if the management team is strong and is generating steady good income. Failure to pay also means the management team is unable to steer the company and manage its finances properly, which means the company's income is a lot less than expected or at least not possible to be collected properly. Since they decided to sell Assets and companies to fund the debt, it means in the future they will get even less income while the same less than competent management is staying in control and the company suffers even lower credit limits, which means forget growth potential.
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Chuck
11-30-2009, 09:08 AM
format_quote Originally Posted by Sampharo
That's called financial news and fundamental analysis, and it is based on best practices of the industry. Not even beginners consider such things as hearsay, because even a false rumor produces real market decisions.
Lets see:
format_quote Originally Posted by Sampharo
Big Brother Abu Dhabi decided to cut them off... Nobody cares if they come up with the money later on because the default is already made... no one will extend any further much needed credit in the future, so there is no possibility of growth under the current ownership/management, and their greatest commodity (potential property profits based on Dubai's reputation) is already busted...
Above is financial news, fundamental analysis based on best practices of the industry? I rest my case.

Btw, Abu Dhabi gave them $15 billion. That is cutting them off? :hmm:

Your info is hearsay, which is basically based on western media.
format_quote Originally Posted by Sampharo
ratio of 0.59 is less than 0.75, therefore it is healthy
Thank you!
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Sampharo
12-01-2009, 04:15 PM
format_quote Originally Posted by Chuck
Lets see:

Above is financial news, fundamental analysis based on best practices of the industry? I rest my case.
Actually:

The statement did not rattle Wall Street Monday night. The Dow Jones Industrial Average was down 0.3 per cent in early trade, partly on expectations that Abu Dhabi will still bail out Dubai. [The Straits Times/Asia News Network]
I rest mine, unless you think wall-street traders are a group of idiots who trade on hearsay, which is non-consequential because it will STILL affect the price. I am completely convinced now that this is not your area at ALL.


"ratio of 0.59 is less than 0.75, therefore it is healthy"

Thank you!
Seriously?!?!? Are we going to play the "And don't come near prayers..." lecturing tricks without adding the "while you are intoxicated"? I said:

"ratio of 0.59 is less than 0.75, therefore it is healthy, but is considered good investment and sustainable ONLY if the management team is strong and is generating steady good income."

Which DW is NOT. Clearly you are trying hard to save a point which is not even there.

---

As for DW future, still looks murky, especially after THIS:

"Dubai govt walks away from Dubai World debacle

The Dubai government effectively washed its hands of crisis-hit Dubai World Monday (November 30) when it announced that it does not guarantee the conglomerate's debts.

A senior finance department official said that while the government was the firm's owner, its many activities and interests meant it had to stand alone.

"The decision was, from the day of its establishment, that the company would not be guaranteed by the government," said Abdulrahman al-Saleh, head of Dubai's Finance Department in an interview with state-owned Dubai Television, AFP reported.
"

We'll still have wait and see if the companies are not merged and thousands are not laid off to boost the profits as they usually do, which otherwise along with the stricken small sub-contractors not getting paid, means again more exodus without settling credit cards and car loans in the local market. If not merged, still no point in re-entering until the assets are sold off and the new balance sheet can give an indication of what the company is worth (by at that time the share prices would have continued dropping to a seriously low level), where it can become a decent buy.

Impact on the global market should be close to non-existent now that the illiquidity was digested and reflected.
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Chuck
12-01-2009, 06:03 PM
format_quote Originally Posted by Sampharo
I rest mine, unless you think wall-street traders are a group of idiots who trade on hearsay, which is non-consequential because it will STILL affect the price. I am completely convinced now that this is not your area at ALL.
All most all of the stocks that were going down, were not even exposed to Dubai debts. Traders were panic selling, and did not base their judgement on fundamentals. This is not an example of financial news and fundamental analysis based on best practices of the industry.

Markets doesn't always move with fundamentals, anybody with experience of financial markets would know that.

With all the doom and gloom about Dubai and its debts in the media, traders started panic selling. There was a big gap down the day market opened after news, which any smart trader would have seen the sign of panic selling and buying opportunity along with studying the real fundamentals.

It gave me opportunity to buy Nakheel bonds at 40 and some other nice stocks at a good price. Whoever sold it at 40 must be feeling stupid now since price has gone back up to 50-65 range.

Your Abu Dhabi comments was pure hearsay and rubbish, which you conveniently avoided to respond. But the fact is Abu Dhabi gave Dubai $15 billion in last 6 months. As a muslim brother, I expect you to be more truthful, and not just base your opinion on what the western media says.

"ratio of 0.59 is less than 0.75, therefore it is healthy [emphasis mine], but is considered good investment and sustainable ONLY if the management team is strong and is generating steady good income."
Now you are again changing the goal post. It is not gloom and doom some people here are making it out to be. As for the future, we'll see what happens with DW.

format_quote Originally Posted by Sampharo
"Dubai govt walks away from Dubai World debacle

The Dubai government effectively washed its hands of crisis-hit Dubai World Monday (November 30) when it announced that it does not guarantee the conglomerate's debts.
And your point is? As I said before Dubai govt is not liable of for debts of DW. DW is commercial company, and Dubai govt is just a shareholder of the company. And DW is limited liability company. Contractually, they are not liable for the debts of DW in anyway, and they are just making that clear.
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Proud of Islam
12-01-2009, 06:49 PM
format_quote Originally Posted by cat eyes
:sl:my friend spent a week in dubai before flying off to pakistan for a month... This girl is a revert and she said that they drink more alcohol and sell more alcohol then the west! She never seen anything like it.....They were even selling alcohol in the airport and drinking it during the day. Europeans are not as bad as that and her family lives in the biggest holiday destination in Europe
:wa:
Although your point is out of the economical topic discussed here, I have to comment that when you say a fact, say it COMPLETELY please. I’m Emirati, and I don’t see these things in Dubai because simply I communicate with the locals there. So, you must say (if your point is valid) that those drinkers are NOT locals, most of them are western. So the bad attitudes which you are talking about have been brought by foreign people. People who drink in their countries, are the same ones who your friend saw!

You might know this point, sis.. and it might be trivial for many people who know Dubai, but if a person hasn’t been here and doesn’t know that there is a mixture of nationalities residing in Dubai, s/he might understand from your post that Emirati people in Dubai drink alcohol! So, you have to clarify that you mean the non-locals in your post!


----------------------------------------------------------------

Longing for the Paradise (Al-Jannah) where the endless happiness…
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rpwelton
12-01-2009, 07:15 PM
If Dubai didn't deal in riba and actually adhered to true shari'ah finance principles without playing a usury shell game this wouldn't have happened (of course, the city would never have been built in the manner it was if it refused to resort to debt financing).

It's stuff like this that actually inspires me to continue in finance and help develop true, shari'ah compliant financial products that both operate within the strict confines of Islamic law and Islamic ethics.

I encourage everyone to go read the article Uthman just posted in the "Islamic Finance News" thread, which details how modern "Islamic" banks are really not too much different from their conventional riba-based counterparts. Very interesting stuff.

EDIT: I'll just post it here for easy reference: http://news.bbc.co.uk/2/hi/business/8388644.stm
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Chuck
12-01-2009, 08:18 PM
format_quote Originally Posted by rpwelton
If Dubai didn't deal in riba and actually adhered to true shari'ah finance principles without playing a usury shell game this wouldn't have happened (of course, the city would never have been built in the manner it was if it refused to resort to debt financing).

It's stuff like this that actually inspires me to continue in finance and help develop true, shari'ah compliant financial products that both operate within the strict confines of Islamic law and Islamic ethics.

I encourage everyone to go read the article Uthman just posted in the "Islamic Finance News" thread, which details how modern "Islamic" banks are really not too much different from their conventional riba-based counterparts. Very interesting stuff.

EDIT: I'll just post it here for easy reference: http://news.bbc.co.uk/2/hi/business/8388644.stm
Nakheel bonds are Islamic bonds. And they are not over leveraged as all are below the value of DW assets.
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rpwelton
12-01-2009, 08:27 PM
format_quote Originally Posted by Chuck
Nakheel bonds are Islamic bonds. And they are not over leveraged as all are below the value of DW assets.
I have a hard time believing bonds can even be Islamic. The very nature of shari'ah denotes that one cannot finance with debt, but rather dealings should be structured like an equity partnership. Thus, using equity, there is nobody to repay should things go sour (ie, both parties share in the gain as well as the loss).
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Chuck
12-01-2009, 08:36 PM
format_quote Originally Posted by rpwelton
I have a hard time believing bonds can even be Islamic. The very nature of shari'ah denotes that one cannot finance with debt, but rather dealings should be structured like an equity partnership. Thus, using equity, there is nobody to repay should things go sour (ie, both parties share in the gain as well as the loss).
Sukuks are Islamic bonds, you can read in detail about it here: http://en.wikipedia.org/wiki/Sukuk
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rpwelton
12-01-2009, 08:43 PM
format_quote Originally Posted by Chuck
Sukuks are Islamic bonds, you can read in detail about it here: http://en.wikipedia.org/wiki/Sukuk
The trouble with sukuks is: how Islamic are they?

The problem is with debt financing. If we stick to the shari'ah, then we can deduce that only equity partnerships are viable Islamic solutions. Both parties share in the gain and both share in the loss. There is also no such thing as a fixed rate of return in Islam, and many sukuks often fix a rate of return for investors.
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Chuck
12-01-2009, 08:43 PM
Q & A on sukuks: http://www.reuters.com/article/bankr...28939220091105
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Chuck
12-01-2009, 09:00 PM
format_quote Originally Posted by rpwelton
I know full well what sukuks are; the trouble is: how Islamic are they?

The problem is with debt financing. If we stick to the shari'ah, then we can deduce that only equity partnerships are viable Islamic solutions. Both parties share in the gain and both share in the loss. There is also no such thing as a fixed rate of return in Islam, and many sukuks often fix a rate of return for investors.

These types of "Islamic" instruments seek to circumvent the laws of shari'ah and do nothing to reduce the type of havoc riba causes in society. Western banks are all too eager to buy into these instruments because they know they can make the same profits as with conventional products and the risks are not much different.
Risk sharing is not proportional in all Islamic financial instruments. Nakheel sukuks were based on ijara structure which is lease-to-own model. Difference with conventional bond is that it is backed by asset. It is not like what happened on wall street in which debt was repacked again and again in the form of derivatives and you end up with 1 trillion of sales with only assets of $100 billion. Islamic finance principles will not do away with economic cycles of expansion and recession, neither they are meant to do away these cycles. However, they do give good practice to better coup with them. DW is not in the same situation as what happened to the companies in US and UK -- it is not over-leveraged and it has assets more than its debts.
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rpwelton
12-01-2009, 09:30 PM
What I'm wondering is: is the debt of this company tied to the market value of its assets? If a creditor owns a portion of the company, that ownership stake should be tied to the market value of what they own, so this way there can never be a "negative-equity" position (like so many homebuyers in the US are facing right now). I understand that the company has more assets than liabilities, but this doesn't mean the liabilities can't become more than the assets should the market drop significantly lower.
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brotherubaid
12-01-2009, 10:38 PM
Tuesdays Gulf news headline

http://gulfnews.com/business/economy...ndent-1.542520
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Sampharo
12-02-2009, 06:44 AM
format_quote Originally Posted by Chuck
Traders were panic selling, and did not base their judgement on fundamentals. This is not an example of financial news and fundamental analysis based on best practices of the industry.
.............

Nakheel bonds are Islamic bonds. And they are not over leveraged as all are below the value of DW assets.
Brother Chuck, it is getting tiring the way you are disrespecting people's professional knowledge and underestimating your ignorance on the matter. You are NOT a financial expert by any standard, you're just blabbing laymen deductions, and it is getting annoying when you start claiming buying at 40. I am no longer willing to discuss finance with you considering you couldn't even address the most basics correctly or answer the questions set that ANY floor sweeper in a financial institution could have answered specifically.

But if you're going to claim that sukuk are proper Islamic then you are seriously blabbing out of place. Sukuk are fundamentally unislamic and all they did was avoid direct outright set interest-rate, did not avoid the forbiddence of "loan that brought benefits is still usury", nor the fact that guaranteed capital is not Islamically compliant. If you're going to count on wikipedia then you might as well subscribe to whatever nonsense is being written there.

Additionally, DW financial department approached us a couple of years ago asking if we can arrange a money market account for them, which is a strictly interest-based market for banks to utilize excess corporate cash to increase their account size in front of the central banks on certain dates and times, allowing them to leverage more loans. DW gets paid daily interest for the money utilized. We told them we don't have such accounts and they went shopping for it elsewhere.
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Chuck
12-02-2009, 08:06 AM
format_quote Originally Posted by Sampharo
Brother Chuck, it is getting tiring the way you are disrespecting people's professional knowledge and underestimating your ignorance on the matter. You are NOT a financial expert by any standard, you're just blabbing laymen deductions, and it is getting annoying when you start claiming buying at 40. I am no longer willing to discuss finance with you considering you couldn't even address the most basics correctly or answer the questions set that ANY floor sweeper in a financial institution could have answered specifically.

But if you're going to claim that sukuk are proper Islamic then you are seriously blabbing out of place. Sukuk are fundamentally unislamic and all they did was avoid direct outright set interest-rate, did not avoid the forbiddence of "loan that brought benefits is still usury", nor the fact that guaranteed capital is not Islamically compliant. If you're going to count on wikipedia then you might as well subscribe to whatever nonsense is being written there.
Now you have moved to another topic. And I'm getting tired of you twisting and spinning. Wikipedia I gave for explanation, I don't have to write anything that is already written. Sukuks are Islamic or not they is debatable but they are based on lease-to-own model. Any argument against sukuk will make lease-to-own unislamic too.

As for disrespecting people's professional knowledge and underestimating, where did I do that? I only explained why your example was poor and stated empirical reasons for it. Anyhow, many of your statements were hearsay about Dubai, I can quote you again if you want. You can dodge it all you want but anyone with experience in financial market (or perhaps even with common sense) and not tainted by the media can see your mistakes. Example of one of your hearsay (my polite way of saying baloney): "Abu Dhabi has cut off Dubai."
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Chuck
12-02-2009, 08:54 AM
format_quote Originally Posted by rpwelton
What I'm wondering is: is the debt of this company tied to the market value of its assets? If a creditor owns a portion of the company, that ownership stake should be tied to the market value of what they own, so this way there can never be a "negative-equity" position (like so many homebuyers in the US are facing right now). I understand that the company has more assets than liabilities, but this doesn't mean the liabilities can't become more than the assets should the market drop significantly lower.
It is not possible to guarantee against negative equity, because nobody knows what can happen in the future and how much a price of asset can fall, for example, drought, war, etc... However, in Islamic finance a transaction must be backed by an identifiable asset with fair valuation. Nahkeel sukuks were based on Ijara, which is lease to own. Sukuks were backed by assets, and Nakheel was the leaser and investors in sukuks were the owners of those assets. Nakheel is suppose to follow lease-to-own model and pay amount to the owners while gaining ownership of the assets. So it is true what you are saying about the ownership stake, which is there in DW's case for the sukuks, but that doesn't guarantee against negative equity. Because contract is based on the market price when the contract was signed, and if later market price falls significantly then there will be difference between the contract price and market price, hence, negative equity.

Islamic finance is going through learning experience since it is new industry in modern times, so Islamic scholar are studying cases as they emerge, working out and improving Islamic financial instruments. But certainly for now, leasing is halal and manuals of Islamic law are filled with the subject of leasing.

Nakheel is the real estate subsidiary of DW. DW has 2 big real estate subsidiaries Limitless and Nakheel which may not be profitable for the next 5 years due to real estate market crash. For this reason, DW wants to restructure debts so it can sale assets and off load the debt of these two companies and one investment company, and focus on companies that are healthy and profitable for DW.

Sukuks in the news were issued by Nakheel.
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rpwelton
12-02-2009, 01:13 PM
format_quote Originally Posted by Chuck
It is not possible to guarantee against negative equity, because nobody knows what can happen in the future and how much a price of asset can fall, for example, drought, war, etc... However, in Islamic finance a transaction must be backed by an identifiable asset with fair valuation. Nahkeel sukuks were based on Ijara, which is lease to own. Sukuks were backed by assets, and Nakheel was the leaser and investors in sukuks were the owners of those assets. Nakheel is suppose to follow lease-to-own model and pay amount to the owners while gaining ownership of the assets. So it is true what you are saying about the ownership stake, which is there in DW's case for the sukuks, but that doesn't guarantee against negative equity. Because contract is based on the market price when the contract was signed, and if later market price falls significantly then there will be difference between the contract price and market price, hence, negative equity.

Islamic finance is going through learning experience since it is new industry in modern times, so Islamic scholar are studying cases as they emerge, working out and improving Islamic financial instruments. But certainly for now, leasing is halal and manuals of Islamic law are filled with the subject of leasing.

Nakheel is the real estate subsidiary of DW. DW has 2 big real estate subsidiaries Limitless and Nakheel which may not be profitable for the next 5 years due to real estate market crash. For this reason, DW wants to restructure debts so it can sale assets and off load the debt of these two companies and one investment company, and focus on companies that are healthy and profitable for DW.

Sukuks in the news were issued by Nakheel.
A bond is a type of loan (or "investment" if you want to call it that) from one person to another with the intention of being paid back, and in the Western conventional finance it is paid back with interest. In Islam, the only way to be in debt is to borrow money from someone at 0% interest.

If these sukuk deals are made by fixing the amount of ownership to the market value based at a particular point in time, then this is essentially a loan. The parties are agreeing up front that they each own a portion of the company valued at X. So regardless of whether the companies wins or loses they still get X back, plus any profits. Is this not exactly what a interest-bearing loan is, albeit with different wording?

The only way Islamically this can work is if their ownership stake is tied to the market value as a percentage, not a fixed amount. This way they win when the company wins, and they lose when the company loses.
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Chuck
12-02-2009, 03:13 PM
format_quote Originally Posted by rpwelton
A bond is a type of loan (or "investment" if you want to call it that) from one person to another with the intention of being paid back, and in the Western conventional finance it is paid back with interest. In Islam, the only way to be in debt is to borrow money from someone at 0% interest.

If these sukuk deals are made by fixing the amount of ownership to the market value based at a particular point in time, then this is essentially a loan. The parties are agreeing up front that they each own a portion of the company valued at X. So regardless of whether the companies wins or loses they still get X back, plus any profits. Is this not exactly what a interest-bearing loan is, albeit with different wording?

The only way Islamically this can work is if their ownership stake is tied to the market value as a percentage, not a fixed amount. This way they win when the company wins, and they lose when the company loses.
You know how contract of Al-Ijarah works or that is not Islamic in your opinion?
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rpwelton
12-02-2009, 09:21 PM
format_quote Originally Posted by Chuck
You know how contract of Al-Ijarah works or that is not Islamic in your opinion?
I am aware of ijara, in that it involves a business transaction whereby the lessee agrees to rent an item of productive use for a specified period of time, which is halal. However, a lease to own deal seems to be different (although I am aware that it is considered a type of ijara). As far as I am aware, the price of the asset to be sold at the end of the leasing term cannot be fixed before the contract is signed. One can, however, enter into a new agreement at the end of the leasing term where the lessee takes ownership of the item.

Perhaps you can explain the mechanics of this sukuk deal for me.
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Chuck
12-03-2009, 10:17 AM
(1) Nakheel sold properties against the issue of these sukuks.
(2) Nakheel leased these properties and giving a return on these sukuks. Half the returns were periodical and half were supposed to be given on maturity.
(3) Nakheel is suppose to buy back these properties at the maturity. However, contract doesn't guarantee that Nakheel will buy back these properties. I don't know the exact circumstances but DW parent company of Nakheel put some guaranteed behind these sukuks.

Issue is detailed here: http://blogs.thenational.ae/economy_...rospectus.html

Assets belonging to these sukuks expected to have lost 20% of their value, that means market value of these sukuks should worth 2.8 billion currently. What happens is between DW and investors of these sukuks. Obviouly, there is a pressure from investors that DW buy back these assets at the original price of the contract. I don't know the exact details of the guarantee made by DW, if guarantee stipulates that DW buy back these properties at original price than DW has to buy them back at original price. However, as far as I know sukuks agreement doesn't obligate Nakheel to buy back these properties according to shariah compliancy rules.

Here is fatwa on lease-to-own transaction: http://www.islamweb.net/ver2/fatwa/S...ang=E&Id=92515
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Chuck
12-14-2009, 03:29 PM
Nakheel paid its sukuk debt today with the help of Abu Dhabi *cough* *cough*

sukuks I purchased for 40, sold them for 115 today. *ahem* *ahem* that is 75% profit in less than a month.
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