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Dubai: Weird story of correlation

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All these headlines seemed to batter the global stock markets over the preceding 30-45 days, and rightly so. I mean, really, when was the last time that the stock market swung upwards or downwards on anything other than sentiment, news, and skin deep factors? Besides the fact that for the last two years we have not seen investments in asset classes based on fundamentals, the reality is there are opportunities out there for dirt cheap.

But that is something I will touch upon in a later article, hopefully not so far away from this post. The idea i wanted to share with you is that global markets seem to have synchronized quite well. US up, then Asia is up, US down, then Europe down, Europe down, then Asia down. So we see a lot of correlation nowadays between the capital markets; or more so than in the past.

My dilemma, you see, is that the GCC (where most of my funds are) seems to be bucking the trend and raising a finger to the global investor. "Nay!" says the GCC stock market after seeing an incredible upswing in the US and Europe on the close of trading. It is terrible to see this when my funds are invested here, but I find it to be a blessing. I get to buy better goods (good companies) for cheaper prices. Power to the nay sayers, says I.

My focus point in this region is Dubai. More so than its lovely oil-rich neighbors the Dubai Financial Market is a very volatile stock market that has moved downwards when the rest of the world has, and moved down some more or stabilized if global markets move up. A fine indicator of how bad things really are. Is Dubai just thick? Are its investors so self-destructive that they throw good money after bad in their chase to the bottom of the market? Is it market manipulation... ?

These questions have an evident answer (except for the third, which I still am not sure of) and that is No. Dubai is an indicator to the state of the economy in a country that has lived in excesses for too long. Sound like a country you know? US? UK? Europe perhaps?

As the Dubai Finanacial Market index hovers around the key 1500-point level, I believe that if it does break this level while the rest of the world sings songs of freedom and salvation (from the crisis' claws), it will be a loud cry of pain when the world wakes up to its dire condition and deteriorating health.

I might be a bit too cynical. That is true, and I agree. But the numbers tell a different story. Unemployment: high. Defaults: high. Provisions: high. These are all eating at the financial system and closing down the credit tap. I hope for a good year for all, but my wish won't come true; of that, I am sure.

Investor, o investor, if you are still out there and still have the kahunas to put your money in that jungle we call a capital market, find good companies, with good prospects, strong products, and better margins and you won't need to worry about all this hub-bub on the news everyday.

I agree that the structure of this article is terrible. This more a rant than anything else, as I was simmering for the last few months on the condition of the global economy and the consequent underperformance of the global markets.