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Investors can tell a bubble when they see it, but we must consider that hindsight is 20/20 in these situations. And perhaps investing in a bubble is okay, just
by omarish 17y ago
Investors can tell a bubble when they see it, but we must consider that hindsight is 20/20 in these situations. And perhaps investing in a bubble is okay, just as long as you get out at the right time?
A lot of the press makes this look like the end of the world. I don't want to make a hasty comparison, but let's contrast it to the $700bn dollar bailout that we saw earlier in the States .. $60bn exposure isn't quite as bad as it seems.
The question is in underlying value. Aside from the world's speculation and the good word of the ruling family, there isn't so much backing Dubai. AFAIK, nobody owns a huge share of the markets, just the royal family.
At the same time, it doesn't take much to apply some startup thinking to Dubai -- put a couple people together with some good ideas on how to shape the markets there, and Dubai could look drastically different 24-36 months from now. Islamic Finance could be an interesting starting point.
Dubai will be very interesting as soon as all of this smoke clears up.
- adatta02 17y agoIt seems like the real shock to the world markets was that Abu Dhabi stood quiet instead of immediately stepping in to guarantee at least some of the money. It happened before http://online.wsj.com/article/SB123532630416442781.html http://online.wsj.com/article/SB123532630416442781.html so why not again?
- omarish 17y agoDubai and Abu Dhabi haven't always had the best relations - they're both Emirates but that doesn't mean that they agree on everything. Fiscal policy could very well be in this set of things. http://news.bbc.co.uk/2/hi/middle_east/8382275.stm http://news.bbc.co.uk/2/hi/middle_east/8382275.stm - have a look through the section titled "Competition". Also, oil is relatively inexpensive right now. Abu Dhabi exports a lot of oil. I don't want to risk making a false correlation, but that could have something to do with it.
- evgen 17y agoThere is definitely the fiscal policy aspects (Abu Dhabi has good reason to let Dubai and its backers know that it will not necessarily bail them out) and there are also socio-cultural aspects as well. Abu Dhabi is much more conservative than Dubai and there is some friction there that is getting magnified by the financial aspects.
- rbanffy 17y agoKnowingly investing in a bubble is almost as bad as propagating a Ponzi scheme. It may be legal, but it's quite unethical.
- darien 17y agoIslamic finance prohibits interest rate lending because of the Koran's condemnation of usury. What bank can achieve a profit under those circumstances? Especially in 24-36 months!?
- dagw 17y agoIslamic banks and finance institutes (like most finance institutes) are really good at coming up with various creative ways of working around annoying legislation. Basically they use various financial engineering tricks to create products that look they pay interest, while technically not paying interest. Google for 'sukuk' if you want a simple example.