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The Dubai Situation:Coming at a shit time or just perfect timing?

I really should be quite piss with myself for the outstanding timing i can get myself into. I have publicly stated how i thinkthe 5 year trend is getting quite toppish for that time scale and i am playing more cautiously.

The Dubai situation send a small shock wave through the market causing the biggest lost in 7 months. I have 4 trades out for my biggest position yet and it would seem that sometimes human psychology is linked to the over general market psychology. Mind you, I wouldn’t get into such a big position (40% of my trading capital) without some good signals I see in Ezra,Olam and Capitaland.

I am still testing this but i think my tighter stops suit me much better than letter the situation slide further and further to oblivion. Capitaland was closed out at a loss but it was a small one compare to if i let it run after Sitex.

Speaking of which i never enjoy Sitex that much (this year’s Sitex was crap) when i don’t know if my position will get executed. I got my bbom data plan and it looks like i better make better use of it.

There is still Ezra and Olam, will play it cautious on monday and tuesday. I have a feeling this ain’t a big shock and i might want to let it work its way higher then see. But thats abit going against what i said earlier.

Meanwhile, this is a good article on the Dubai Debacle, specifically, the writer warns that another big state (probably California) that is dangerously close to Dubai’s situation.

You’ve seen the before-and-after pictures, like a Vegas slug of glass rising in the desert. And, you’ve read the stories about indebted foreign workers leaving their Range Rovers behind, as they flee. Perhaps you’ve seen video of the indoor ski arcade? Or, caught the gaze of the photographer’s eye on the poor, underpaid migrant workers constructing the Burj Dubai. Welcome to today’s obligatory Dubai blog post. Brought to you courtesy of some very hot, sovereign default action as the UAE’s most glittery city announced overnight a request for a stay on debt payments from Dubai World. How could a country so rich in energy resources have gotten itself into such a mess?

It’s generally assumed that just about every Mid-East oil producer is a big, net exporter of oil and while that’s also true for the United Arab Emirates what’s worth noting, or retelling today, is the means by which the UAE, principally because of Dubai (an Emirate within the UAE), started to become a net importer of natural gas. Let’s start with a chart of electricity demand.

UAE electricity demandAs in the rest of the world, though primarily in Asia,  the Mid-East is now finally in the process of transitioning away from using industrial diesel for its power generation–though in many cases starting from very high levels. You can understand why that practice lingered in places like Saudi Arabia for so long, when the cost of oil extraction was effectively near zero. However, Saudi Arabia has now elected to build more NG fired power generation (and even adding Solar) and in places like the UAE, natural gas power generation has now become well established. But in a nice portrait of demand outstripping geology, the UAE now must import LNG to fund its parabolic growth in electricity demand. (part of that demand is also for water desalination). And this is despite the UAE’s very sizeable reserves of natural gas. Worse, at times the UAE has even had to switch back to oil-fired power generation, owing to infrastructural limits to the NG-fired portions of the power grid.  This too offers an insight: it’s easier and faster to put up buildings and build roads than it is to develop oil and gas for production.

Now, let me just pause here and say one of the implications of this story that I really like is that human beings, universally, are overshooters. And the people of the UAE have now shown themselves to be overshooters in classic fashion. The UAE obviously looked at its considerable resource inheritance of oil and gas and then got about the business of attaching as much possible debt to this wealth and future growth as the world could stomach. This is yet another example of an infinite debt philosophy on both the part of the borrowers, and the lenders. And by the way, if you think humanity is going to collectively decide to build sustainable, low-growth economies on a voluntary basis then I say dream on. We’re all overshooters now. (this post continues below the theoretical street level limits of the Al Burj, the not-yet-built rival to the now completing Burj Dubai).

[Read the rest of this article here >>]


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