Moon Kil Woong

Dubai: Some Perspective from HBC

I respect Dubai for not throwing good money after bad if they do in fact not cover their losses with their own country's taxpayer's money. The best thing to to with lagress is let the free market burn it off. If only America could stop feeding the pork clinging to its body we would be a bit thinner but a lot healtier going into the future.

U.S. Unemployment: From Bad to Worse

Government sector job growth is not real growth or recovery at all. Like unemployment payment, it is just another economic burden placed on taxpayers except it tends to become systemic even in a recovery if we ever get a decent one after abusing capitalism the way we are. Keynsians will hate this proclamation, but it is true.

The author is right, government investment in infrastructure and cap-ex that will be accretive to the economy when it recovers is what's needed, not more bureaucrats clinging to our national debt lifeline.

Will Dubai's Standstill Spark a Reversal in the Dollar?

The government of Dubai is not Dubai world the same way Fannie Mae and Freddie Mac were not the US government. The fact that people, especially those marketing their bonds don't distinguish or acknowledge this fact and creditors overlook it is a grave mistake. The simple fact is, no government should explicitly or implicitly guarantee any private entity. Each and everytime that entity will abue it's power and stick that government with the clean-up cost.

Dubai's new government is right in saying it will not let the crony capitalism that is sinking it go on and on. The powers that be are not happy with that decision, but what should they do. Cover their eyes and play see no evil hear no evil? If you think What Dubai did was really that bad, you should look at what the US is doing? The case of Fannie Mae, Freddie Mac, AIG, and the too big to fail banks are only dissimilar die to the fact that our problem does not number in the tens of billions of dollars but trillions.

Against Liquidity

A tax on the repo market will also give better transparency to governments about what is backed by what and by whom. So far this business has flown under the radar of any sensible regulation and it is questionable whether some of the players can even cover their potential losses. Even if there is no tax we need to require better disclosure.

Yen, Gold and the Perfect Desert Storm

I have a suggestion, perhaps Dubai World should apply to be a US bank holding company. I hear that after you do that it doesn't matter how poorly you do. You can just throw away your cash flow statement.

And perhaps the BoJ should hire Hank Paulson and Greenspan. I'm sure that will put a damper on their currency values without having to lift a finger. If that fails to drop the Yen just elect George Bush Jr.

Looking at $5 Trillion in Losses and Zombie Debt in Residential Mortgages

Sadly, it's not the $5 trillion unaccounted for losses the Federal Reserve is worried about. They are probably more worries with the roughly $250 trillion in derivatives written on them to give them the look and feel of AAA mortgage backed bonds which or course is so big because those derivatives are backed by yet more derivatives.

Whoever made this beast must gave gotten the concept from the little wooden Russian dolls that hold little wooden Russian dolls that hold yet more little wooden Russian dolls.

Dubai: The Great Unravelling

The reaction is a knee jerk one making people look at an often overlooked fact, cash flow matters much more than doctored income statements. This applies equally to countries as it does to companies. Dubai has known about their problems and their creditors since they negotiated their cash flow problems with their Las Vegas development.

Undoubtedly banks and others knew very well the risk and problems in Dubai but decided to brush it off and hide it in the back corner with their derivatives. That is partially understandable maybe, since it was assumed Dubai World would always get backing by the government no matter how bad their practices were. This is much like the implicit guarantee issue to Fannie Mae and Freddie Mac.

Continuing on, it is assumed foreign government debt problems are never that bad since it is assumed that any government debt problem will get backed by the US with Ben Bernanke taking our money and exchanging it with any garbage fiat currency he sees (I assume he doesn't think our currency is worth that much). In this way there is no need for an austerity program through World Bank Financing which is also miraculously our money given away for free with no expectation for any returns.

So since it's all a free ride on the US taxpayers endless gratitude I'm sure it will all end up fine and dandy one way or another. If not, they will just sweep it under the rug with yet more intransparancy and accounting fiascos. Perhaps they will put it where the $500 trillion in derivatives junk is hiding.

Is Dubai's Default a Black Swan Event?

Knowing Ben Bernanke he is liable to backstop Dubai on taxpayers money. There hasn't been a country in danger he hasn't currency swapped with.

Gold May Gain on Dubai Crisis

The market responded correctly selling off commodities and gold. When a default crisis hits like Dubai the scarcity is $ and credit not commodities. If Dubai has assets they will be liquidating them if they can to pay debt. It is not a bullish sign.

Take for instance if Inda experienced an economic meltdown, they would be forced to dump their sizable gold hoard. Now exchange that with Dubai and oil since no one wants their 120 degree sweltering apartments and you can see why oil is lower. Undoubtedly, they hold gold as well.

It is true US dollar depreciation is leading gold higher , but this scenario isn't going to help gold. If anything it will help the dollar if the rush to liquidity spreads.

Mini Thanksgiving Meltdown

If Japan depended on a weak Yen to finance their exports no wonder they have multi decade long recessions. Japanese have long surpassed the cheap production phase of exports. Their employees are paid higher than Americans (aside from their executives who are paid much lower and more reasonably than the US), their cars and products sell for more on average, and their quality is better.

The real problem is Chinese RMB which forces China to buy loads of garbage US Treasuries and gets Americans to keep buying cheap Chinese goods they can't afford (but can afford more than buying expensive domestic goods as their dollar drops into the cellar). It is a raw deal for both of them. The Chinese get deflated garbage paper for labor and the US is driven into economic collapse.

I guess at least with Dubai we will get cheaper oil although oil would be cheaper already on weak demand and oversupply except the Federal Reserve's dollar depreciation is driving everyone into hoarding anything just to get away from holding dollars that drop over 10% in value annually. Happy Thanksgiving, the turkey is Ben Bernanke and the stuffing is US Treasury notes.

Dubai: Gauging the Impact

Everytime I think of Dubai I think of the foolish man who built his house upon the sand. If there was ever a sign of the massive real estate speculation that plauged the world this decade it would have been Dubai. It's not like no one could have seen it coming. It's fall was about a 2 year lagging indicator.

$59 Billion Dubai Debt Default Could Have Much Wider Implications

Dubai is just another case of complete government intervention in real estate creating a massive real estate bubble. It's not like no one could have seen it coming.

We’ve Survived Worse Markets (and Economies) Before – the 1970s

Yes but in the past we weren't at 0% so monetary policy is useless and didn't engage in funny accounting via QE etc. The author is right, things were worse then economically, but morally we are in the crapper.

That means getting confidence, credibility, and accounting standards up will be that much harder. What we need is transparency and barring those responsible from being in financial, insurance, and the brokerage industry indefinately. It irks us that Countrywide's management is now doing loans again. Never have we been so ethically bankrupt.

We Have Nothing to Fear but Uncle Sam Himself

The author points out what many of us already know, the companyies that cut and cut some more and the companies that sell overseas are recovering. All other businesses save financials (which need not be mentioned) that don't have these factors going for them are not seeing a recovery even if their stocks rise merely on the dollar depreciation rally. That means large cap multinationals easily outperform the rest of the market. The growth and value businesses see is no longer in America.

The Death of the U.S. Consumer

The US consumer is rapidly being replaced by the US government. Should we all jump for joy or go cry in a corner? Some economists think that replacing lost workers with more buraucracy paid for by deficits is good for you. What do you think?

For one thing government doesn't buy from mom and pop stores, so you can forget the small and medium sized businesses getting any of the windfall. And as for everyone else, they are too busy stuffing their own pockets to help you out. You will be lucky if they buy a crossant sandwitch from you on their way from one meeting to the next.

While the government gets fatter your purchasing power gets smaller. I doubt if any of you got a 14% raise to make up for the 14% drop in the value of the dollar. Inevitably you are the one that will pay, and pay, and pay, and pay...