Uncertainty Continues to Swirl Around Dubai World

OK, now the party’s over. For Macro Man, that means the pity party. OK, he’s had a bad run, and he’s moaned about more than a bit. But no one likes a whinger, and Macro Man feels like he’s close to wallowing in self-pity. So while he might still examine his performance to distill lessons for the future, the moaning stops here. Anyone who sees/hears him whingeing any more should feel free to give him a slap.

In any event, it looks like there are plenty of other pity parties being held around the world. Dubai is turning into an annoying smell that you can’t get rid of. As uncertainty continues to swirl around Dubai World, the Dubai stock market continues to collapse; there’s been a nearly uninterrupted string of limit-down days since the debt restructuring concerns first surfaced.

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These concerns over the peripherals just won’t go away. Greece has unsurprisingly come under the cosh over the last couple of weeks, with selling going through both the cash bond and CDS markets (which is pictured below.) Now, one can wonder about the utility of predatory buying of protection on Greece for speculative purposes; it’s hard to argue that such activities serve a useful purpose to anyone but the investors of the fund(s) in question. But the selling of cash bonds (if anyone can find someone to bid) is something else; it’s pretty telling that Greek 15 month bonds now yield more than 2.6%, particularly on a day when the ECB is offering 3- and 6-month fixed rate tenders at 1%. Those Greek yields are up more than 100 bps since the day before Thanksgiving; that is why you are seeing the Greek finance minister in the headlines. It’s hard to see this ending in any solution that doesn’t involve the letters “i” and “m” and “f”. How sovereign buyers of euros would view such a development remains to be seen.

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And then we come to the UK, where Alistair Darling will lower the boom at 12.30 local time today. The BBC reports that there will be punitive tax rate on all bank bonuses above £20,000; the story is unclear whether the measure would be on the tax treatment of bonus compensation on banks’ income, or whether it would be a punitive measure levied at the individual level. Intellectually, the former is far preferable to the latter; address the institutions that received the benefits of government largesse, rather than arbitrarily targeting individuals.

Anyhow, if the tax is geared towards the institutions, one could credibly wonder what the hell the FTSE is doing within a hair’s breadth of the year’s high when financials represent the highest sector weight of the index.

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Alistair and Gordon are desperate men, and look set to take desperate measures.
As noted yesterday, it’s not hard to envisage the biggest pity party in the world taking place in the City at about 12.31 today.

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