Dear Comrades In Golden Arms,
What is the essence of the Dubai request for debt payment delay (a technical default)?
1. Will an implied Dubai Federal Guarantee of the debt of state owned corporations be honored in Dubai and elsewhere?
2. How many more financial problems are there out there hidden in plain view in the West as well as the Middle East?
3. Will the Middle East see to the bailouts of its own problems or is there a stampede of camel trains into the desert, devoid of cell phones and Mercedes?
4. Will this event cause other developing market country debt to default in a domino effect?
In terms of gold this event is further proof that paper and promises are NOT the stuff money is made of anymore.
Those that will come out of the woodwork to call a top in the gold price have little experience in what a top looks like in gold. Let me assure you the action of today contained zero evidence of a top.
The USA has become a giant FDIC and will have to finance in strange ways (QE) to meet its obligation prior to June of 2011.
Other than transitory technical factors there is nothing whatsoever positive in a collapse anywhere for the US dollar. When the snow falls here on the east coast of the USA the dollar will come under more pressure and fall much further.
The major immediate financial problem, hidden in plain view, is that 2009 financial entity earnings are CASHLESS. They are more than 75% due to the permission of FASB (Financial Audit Standard Board) who sold their souls to the financial sector to again mark up toxic paper to values self determine by the financial institution. The profits of their trading is toxic paper mark up accounting.
The inviting conclusion is the over the top greed in plain view by financial institutions is their own knowledge of the cashless nature of their earning and the fact that the junk is marked up now as much as one can do without either starting a riot or doing time. Therefore the earning prosperity is behind them, nothing is fixed and that makes this year the last opportunity for a long time to cash in for themselves.
Dubai has reminded us that there has been NO cure to the systemic financial problems of the West and those like Dubai that not only tried to mimic the West, but overdo them in a garish manner.
You can be sure that the US Fed and the ECB are chasing the sheiks into the desert today like Lawrence of Arabia in an attempt to get them to pay up and support their own problem. That means more international QE, as the Fed is not in the mood to tank a $12 trillion dollar bailout operation over an $80 to $110 billion dollar failure of a stupid and garish real estate project in Dubai. This concept would contain the domino effect, putting it off until later in 2011.
Conclusion:
The dollar will not reverse out of the bear market it is in, nor will gold top here and now. In fact the bear market in the US dollar and the bull market in gold is not only alive and well but in terms of price, young.
Enjoy your weekend and stop looking at the markets!
Dubai Debt May Be Higher Than $80 Billion, UBS Says
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."
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