So what exactly happened on Thanksgiving Eve? To understand, I for one needed a primer. Dubai World is Dubai’s benchmark for its investments throughout the world. It is a government-owned entity at the epicenter as Dubai’s conduit to diversify its economy in various investments. Dubai has the highest population of the seven United Arab Emirates. Dubai World commenced in 2006 with the ruler of Dubai holding a majority stake in the company. Its assets include a marine terminal operator, investments in drydock firms, urban development interests, and a host of investments in financial services. Its best known holding is Nakheel- the property developer in charge of projects such as the artificial Palm Islands. In January 2009, the first sign of trouble emerged when Nakheel said that work would be halted for the Nakheel Tower project; the Nakheel Tower was supposed to be a 200-story skyscraper. As the worldwide recession has failed to loosen dramatically, the real estate market in Dubai fell about 50%. On Wednesday night, the company (Dubai World) noted that it “intends to ask all providers of financing to Dubai World and Nakheel to standstill and extend maturities until at least May 30, 2010” on its debt. Dubai World will immediately restructure its $59 billion debt. This has led to a dramatic financial impact throughout the rest of the world. The major focus is on a host of European banks which underwrote ore loans than anyone else to Dubai World with a focus on Royal Bank of Scotland and HSBC. Furthermore, there is a wide variety of off-balance sheet financing and instruments based on the project which raises questions marks as to exactly how high the true wealth destruction is. The worry now centers upon the ramifications for the balance of the world. If European banks sustain a major blow here, how will that affect the economic recovery in Europe? In Asia, nations such as Vietnam were forced to adjust the peg rate on its currency. As the dollar has become the relative safe-haven, the carry trade has reversed a bit with gold down along with oil and other relatively risky assets. So, what happens here is anybody’s guess based on whether Abu Dhabi will bail out the entirety of Dubai World and exactly how much the true amount of liabilities are. But the fallout from this will be with us for awhile as everything settles itself out.
Watch list:
11302009Eriklist.zip
Reiterating-Please understand that if the ideas do not get to the hoped for set-ups cited below, more often than not, one should not blindly trade the symbol next to said idea. If the whole story is not there -If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified.If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified- Good- The following stocks have good news and/or a strong technical pattern
SEED- closed near a high
CSIQ- among other solars which recouped major early morning losses and closed near a high
KNDI- closed near a high
QLTI- closed near a high
X- closed near a high; Goldman Sachs upgraded steel sector as well this morning
APWR- closed near a high
TRIT- closed near a high
MON- featured positively in “Barron’s” over the weekend
Bad-The following stocks have bad news and/or a weak technical patter
LVS- Sands China fell sharply in its debut
AIG- trading down notably in the pre-hours; there is no apparent news on the wires except for rumors of ties to Abu Dhabi and the sale of its aviation unit
Earnings:
MON NOV 30 BEFORE
None
MON NOV 30 AFTER
OVTI
Good luck today.
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner
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