Saturday, November 28, 2009

Dubai Crisis - All you need to know

What is Dubai Crisis


UAE's largest corporation, Dubai World Conglomerate has asked for agreement for 6 months delay


in repayment on it's close to sixty million dollars of debt. Default by Dubai on payment of the debt could trigger


off the next set of bankruptcies, and since Dubai is well connected to other financial centers of the world it


could easily boil over into something huge. As it is the festival of Id , no information is forthcoming which is making the


whole financial world fidgety.


What is the reason of this crisis


Dubai real estate, fuelled by cheap loans and inflow of foerign invesments created a bubble over


the last five years. Now home prices in Dubai have plummetted to 60% their peak value in 2008.


On this note, yesterday on a TV channel one analyst was seen remarking that Dubai crisis will fuel


Indian real estate market. Well is the existing bubble in Indian real estate market not sufficient ???


Why it affects India and other parts of the world


Do you remember what was the starting point of 2008 crisis ? Iceland debt crisis.


Dubai firms have huge real estate investments in major cities around the world. There is huge


Indian population in Dubai. Any trouble will start off a huge unwinding in real estate, which will


drive the asset values even lower across the globe thus signalling the end of any recovery from


the recent recession.


What next ?


There are talks that Abu Dhabhi, which is rich in oil, and which continues to enjoy


a real estate boom and is financially strong, will bail out Dubai. However due to holy festival


of Id, no information is forthcoming .


What should we do ?


As investors, we should watch for information coming out of ther region.


Avoid making decisions based on TV analysts. Always make your own decisions to buy and sell.


If a crash happens, look for value stocks which have strong fundamentals.


If crash doesnt happen, look for growth stocks and new oppurtinites stocks.


Always remember, every stock has an intrinisic value, which will be visted repeatedly ,


as the market makes its waves.

2 comments:

Preethi said...

This is very interesting. It reflects the impact of the global conditions on our stock market. Helped me understand my options better. Thanks Jerry!

Technicals said...

Sir can i knw abt tht Red lind its is Ema line or sma..and also which Ema or Sma. Just we also learn technicals From You. so Teach here Mr Nifty Rocking King Jerry

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