Gary Rumor’s Anti-Entropic Continuum

Dubai has decided to let all those investors swing. Too bad for people who went long. The people making money are the ones who went short there. I wonder how Halliburton is doing, they skipped town for the tax free shores of Dubai. Now with the real estate bubble collapsed we are getting the commercial real estate shoe dropping that people were predicting last spring.
This is from the Toronto Globe & Mail National Edition.

“In Dubai, a blunt refusal amid a market sell off

Investors had been confident Abu Dhabi and Dubai itself would back Dubai World’s debts. Not so fast, says a senior Dubai official
An eerie calm engulfed Dubai’s financial centre, even as the city-state’s two stock exchanges and another down the road in Abu Dhabi took a hammering.

Investors rushed to unload shares of several corporations expected to bear the brunt of a sharp downturn in Dubai’s economy, the result of the announcement last week that the powerful holding company Dubai World needs a break from making payments on its $59-billion (U.S.) in debts.

Abu Dhabi’s market was down a record 8.3 per cent Monday, and the Dubai Financial Market fell 7.3 per cent, with several banks, transportation and construction firms at or near the daily allowable loss of 10 per cent. Over at the more modern NASDAQ Dubai, DP World, a major subsidiary of Dubai World and one of the few subsidiaries listed on an exchange, lost 14.88 per cent of its value, hovering all day just above the exchange’s 15-per-cent loss limit per day.

Global markets have been gyrating wildly since Dubai World first announced plans for a debt standstill last Wednesday, just before holidays began. Emerging markets and Asia were hard hit last week, but largely bounced back Monday as investors hoped Dubai’s problems would remain largely contained.

In Dubai, government and private offices had almost all been given a 10-day holiday with the religious festival of Eid al Adha, ending later this week with the celebration of the United Arab Emirates independence day.

Eid al Adha commemorates the sacrifice the patriarch Abraham was about to make of his son Ishmael. This year, however, the holiday might also be said to mark the sacrifice of those holding stocks in vulnerable Dubai companies.

Together, the Dubai and Abu Dhabi markets shed about $10-billion in capitalization yesterday. They would have shed more, but for the exchanges’ strict limits. In both cities, there were many orders to sell; almost none to buy.

But people here also have been confident that Dubai itself would back Dubai World’s debts – after all, they reasoned, the government owns the giant holding company.

Not so fast, said a senior government official Monday. There’s a difference between ownership and being a government entity.

“It is correct that the government owns Dubai World,” Abdulrahman Al Saleh, director general of Dubai’s Department of Finance, said in an interview with Dubai TV. “But the decision when it was set up was that it should receive financing based on the viability of its projects, not on government guarantees,” he said. “The lenders should bear part of the responsibility.”

Those holding bonds of Nakheel PJSC, Dubai World’s lavish property development subsidiary that has run up the most debt, have “almost no legal leg to stand on” to recover assets from the Dubai government in the event of non-payment of debt, says RBC Dominion Securities Inc.

“The prospectus makes it clear that there is no recourse back to the sovereign’s assets,” wrote analysts led by Nick Chamie at RBC in Toronto in a research note Monday. Dubai World yesterday unveiled a restructuring plan that would include its property firms and $26-billion of debt, including $6-billion relating to the Nakheel bonds.

Why are these governments that have enjoyed the success of Dubai, and the prestige it has offered the UAE as a whole, now so reluctant to pony up?

In Dubai’s case, analysts here are blunt: Dubai doesn’t have the money. Its wealth has been based on borrowing and it would only have to borrow more money to pay Dubai World’s loan payments.

When that became painfully clear a few months ago, the Emir, Sheik Mohammed bin Rashid al Maktoum, took action, though he didn’t tell the people. The ruler sacked the chief of the finance department (bringing in Mr. Al Saleh), brought in a chief restructuring officer and, soon after, started to lay off large numbers of staff.

The government statement last Wednesday, announcing its intervention and suggesting a standstill on payments by Dubai World’s loans, was just the latest step in distancing itself from the corporation. In effect, it has chosen to blame company management for company extravagance.

It doesn’t seem to matter that it was the al Maktoum family that had the dream of taking a small fishing port and turning it into a world class financial centre and trading hub.

It’s a harsh reminder, say some, that Dubai is not a democracy, but a monarchy. The ruler of the 1.6 million people is never to blame when things go wrong.

However, the consequences of this situation will be felt by all – as they will be paid by the city-state’s reputation. “This is a big blow to Dubai’s status,” said Charlie Parker, chief analyst for Citywire in London, “and to its goal of becoming a major financial centre.”

It also “can have a big effect on emerging markets’ bond issues,” Mr. Parker said.

Abu Dhabi has strong incentives not to let Dubai collapse, said a note issued yesterday by Eurasia Group. But any support it gave would come with a price. “Longer term, Abu Dhabi will use this opportunity to establish greater influence over political and economic decision-making in Dubai, and Dubai will consequently adopt a more conservative financial model,” the consultancy wrote.”

Interesting nothing about the nasty treatment of Amy Goodman who was harassed at the Canadian border when she was going the Vancouver on Thanksgiving day to speak about her new book. The Canadians were so paranoid that she was going to join the groups opposed to the Olympics being held there next year that they gave her a control visa with only a 48 hour stay in the country.

Obama announced today that he had made his choice about the surge in Afghanistan. He has decided to add 30,000 to 35,000 more troops as his exit strategy. Pretty ass backwards if you ask me. This is from the ANSWER coalition.

“Join anti-war protests tomorrow & Wednesday
to oppose the widening war in Afghanistan

When President Obama tells the nation that he is expanding the war in Afghanistan, the anti-war movement will be taking to the streets in protests staged in cities and towns throughout the United States. Demonstrations will take place on Tuesday, Dec. 1 and Wednesday, Dec. 2.

Today, representatives of 34 antiwar organizations, including the ANSWER Coalition, delivered an open letter to President Obama strongly opposing his anticipated decision to expand the war in Afghanistan.

The letter pledges to “to build the kind of massive movement –which today represents the sentiments of a majority of the American people–that will play a key role in ending U.S. war in Afghanistan.”

The U.S./NATO military intervention in Afghanistan is not a so-called war of necessity. It is a colonial-type war. The people of Afghanistan will resist until the foreign occupation ends. The U.S. war effort is doomed. Tens of thousands more troops will be sent into the country because the Pentagon cannot figure out what else to do. The continued war and its escalation threaten the lives of untold thousands of Afghan people and U.S. soldiers.

The ANSWER Coalition is demanding the immediate and unconditional withdrawal of all U.S. and NATO forces from Afghanistan as well as Iraq.”

According to Rachel Maddow the escalation will take a year and a half. That means we will reach approximately 100,000 US troops in Afghanistan in 2011. That will make this the longest war.

Reports by the US Senate Armed Services Committee says that Rumsfeld and General Tommy Franks decided to not send troops in the get Osama Ben Laden and let him slip across the border into Pakistan.
Dan Rather says on Rachel Maddow’s show that the war has been realigned with the retreat from rural areas and a concentration on protecting urban areas. Corruption, cronyism, mismanagement and the vast amount of opium along with the desire to get rid of the foreign infidels. That is what Dan Rather is saying. But he says we might be spending our selves into oblivion. He says it is tribal, predominantly rural and illiterate. There is only a 10% literacy rate according to Rather. The change of strategy might give them time. The Russians tried it and we tried it in Vietnam.
This is patently an absurd attempt. They will have to buy every tribal leader in Afghanistan and the easiest way to win the hearts and minds is to pay off each village leader and let him police his followers. Putting every tribal leader on the payroll is what worked in Iraq but there it was relatively simple because the tribes were fairly large. In Afghanistan you have a much more decentralized network.
The problem is that there is no way of knowing if they will play both sides and simply work for whomever sticks around longest. That is why we should turn this over to the Pakistanis. They are the ones with the interest. They are there. Also to be more effective we should be doing business with them. That means we should be buying the Opium wholesale. Simply cut out the middle man, buy direct. Pay the villagers more than the Taliban or anyone else could and then sell it to the domestic market by making opium smoking a fashionable activity again as it was a couple centuries ago when people like Coleridge made it popular with his poems about Kublai Kan etc. Now that will get this whole thing over with. Better marketing. That is using the capitalist system the way it was meant to be used. And we can regulate it and tax it it could fund the entire military operation there and since everyone would be making money off of it the groups like the Taliban would be cut out of the operation. We could even cut out Karzai’s brother. The NATO should be escorting Opium convoys not wasting their time going after rebels in the hills. Business. That is what I mean… Lets cut to the chase and forget all this BS about creating a safety zone for the Afghani military to take over.
They don’t have the infrastructure to support a 300,000 man army. It would bust the economy. We can set them up to support the convoys. We can provide a few bases with air support to blast any competition out of the sky. Pakistan can run things on the ground with the local tribals and we can make sure the supply makes it to the international market. What could be simpler. This could be done with a NATO force on the ground of maybe 20,000 troops max. Divided up between each nation it would mean only a brigade from each country, a helicopter strike force, some drones and lots of transports to move the crop.
A local military of 100,000 should be adequate with tribal militias on the ground protecting each crop. So it would work like this Pakistani ad visors with Afghani troops escort convoys of opium to pickup points. NATO forces protect the pick up points and airlift the product to distributors around the world. This could be self sustaining and profitable. Addicts get their drugs safe and legal. Opium inspires languid poetry and a more laid back culture around the world. Terrorism is out of business and everybody is happy.

That is how the British funded their empire selling Indian Opium to China, so why not sell Afghani Opium to the hard working masses around the world? You deserve a break today with a puff from the magic dragon. Sound good? Sure it does. It happens anyway all the time, just not up front and legal.