Dubai is in a deep financial crisis

Dubai crisis began when the emirate announced that Dubai World would delay payment on debts for part of the USD59 billion in debt issued by Dubai world.

The causes:

i. the collapsing real estate prices
ii. Over-ambitious development plans, including artificial islands in the shape of a palm tree
iii. Spent heavily to acquire stakes in glittering properties like Barneys in New York and the MGM Mirage in Las Vegas.

Scenario:

i. The emirate economy is in a bad state
ii. Banks stopped lending
iii. Emirate stock market has plunged 70%.
iv. Luxury hotels are three-quarters empty
v. Shopkeepers in newly built malls are facing substantial drop in sales.
vi. Houses and cars are for sale everywhere
vii. property sale drop
viii. 50% of all the UAE’s construction projects, which are worth about USD582bn have either been put on hold or totally cancelled
ix. a huge trail of semi finished towers on the outskirts of the city stretching into the sandy desert.

Consequences:

i. Worry and a panic in the financial market as banks and financial firms lost in markets across the world
ii. spillover effects centered on fears that international banks could suffer big losses
iii. Economic slowdown and sales fall
iv. at least 25-percent contraction in the job market
v. commodities prices drop
vi. Gold price drops
vii. JPY, USD, and CHF are the big likely winners
viii. AUD, NZD, CAD and EUR would retreat

Can Citadel guarantee your profits or money back?

Citadel Investment Group LLC, Chicago’s biggest hedge fund, was hit hard by the fallout from Lehman Brothers’ bankruptcy and the ban on short-selling in September, 2008.

The Kensington and Wellington funds, which together manage about $10 billion, have lost 49.5 percent of their value this year through Dec. 5.


Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.

The questions remain: Should hedge funds be regulated? Can any hedge fund recover from 49.5 % drop? Can Citadel Investment Group LLC, one of the world’s largest and most sophisticated alternative investment firms possibly survive a 49.5 % catastrophic loss? Or will Citadel end up a corpse just like many other hedge funds?

Kenneth Griffin

Citadel Investment Group LLC, the Chicago-based hedge-fund firm is a multi-billion dollar hedge fund, founded by Kenneth Griffin in 1990. The company deploys its capital across a highly diversified set of proprietary investment strategies in nearly all major asset classes.

Since its founding, Citadel has grown into one of the world’s largest and most sophisticated alternative investment firms.

Citadel employs more than one thousand professionals with location in Chicago, New York, San Francisco, London, Hong Kong and Tokyo.

Since 1998, Citadel has generated over $10 billion in net profits and currently deploys approximately $15 billion of investment capital around the world.

Revitalizing the US automotive industry

The Big Three US automakers -- General Motors, Ford Motor and Chrysler LLC submitted their turnaround plans to Congress in an effort to seek approval of up to $34 billion in federal loans for the US auto industry they claim are necessary for their survival.
The poor sales caused The Big Three seeking the government bailout. General Motors, the nation's largest automaker, is asking for up to $18B, Ford wants $9B and Chrysler, $7B.

It is reported that Chrysler Chief Executive Robert Nardelli committed to working for $1 per year, GM's Rick Wagoner and Ford boss Alan Mulally both pledged Tuesday to work for one dollar a year in salary if their companies got tax-payer help.


Motor vehicles are one of the most important consumer products in terms of total household expenditures. As the largest durable consumer product in terms of expenses next to housing, the consumers demand for motor vehicles is highly correlated with the general business cycle as the automotive industry generates economic activity through backward and forward linkages.

The main competitors in the global market are Japan, South Korea and Chinese producers. Nonetheless, the efficiency of Japanese automaker Toyota has been higher and very well equipped for price competition.


The automotive industry is one of US’s key industrial sectors, whose importance is largely derived from its linkages within the domestic and international economy and its complex value chain but the international producers are well positioned to compete.

The job cuts, shuttered factories, canceled bonuses and commitments to fuel-efficient cars are not the answers to the problems.

The internationalization strategies may change over the current slump in US automotive market is to increase global competitiveness and address the challenge of mass motorization in low income, emerging economies.

The existence and the continued growth of overseas markets are encouraged. The Chinese automotive market is growing very rapidly and China will be the third largest market for automobiles by the end of the decade, thus by expending export to the emerging China, Asian and Eastern European markets relying on price and quality of cars by far one of the effective strategies to improve their financial condition.

Practically, to tide over the turbulent times, revitalizing the industry and avoid the tough international competition, the major changes to the way of doing business to achieve long-term viability is to introduce cheap but powerful hybrid electric or water vehicles.

Unhappy American watch more TV

Is the US financial crisis affected the economic performance and demonstrated the era of American global leadership is over?

The devastating economic crisis seems worry the American and caused unhappiness and it is proven by the research.

US researchers found unhappy people spend time in front of the television 30 percent more than happy people, according to media reports Sunday.

The finding, made by researchers at University of Maryland, comes from a survey of nearly 30,000 American adults conducted from 1975 to 2006.

While unhappy people spent more time in front of the TV, happy people were more socially active, voted more, read more newspapers and attend more religious services.

The study found 51 percent of unhappy people were more likely to have unwanted extra time.

RM7b stimulus to bolster economy of Malaysia

It was the recent overlapping effects of the Japanese and Russian crises that have been a major cause of the recent worsening in the global economic situation. The current economy scenario calls for urgent and exceptional action. Countries afflicted by the financial crisis have been forced to take their own measures to protect their economy.

In response to the global financial crisis, the government of Malaysia has also taken an active and positive role to address the problem by pumping RM7 billion into the economy. The RM7bil come mainly from the reduction of fuel subsidies.

Najib Abdul Razak

Deputy Prime Minister and Finance Minister Datuk Seri Najib Abdul Razak tabled the RM7 billion stimulus package to reinforce the economy, strengthen national resilience and to maintain economic growth momentum to face the increasingly challenging global economic climate.

"This is to ensure Malaysia's economy continues to grow and the rakyat do not come under too much pressure.”

He said the Gross Domestic Product (GDP) would be revised downwards to 3.5 percent for 2009 from five percent this year.

Najib said the government will give workers the option to reduce their contribution to the Employees Provident Fund (EPF) by three percent for two years beginning next January.

Iceland's interest rate increase from 12% to 18%

Iceland's central bank raised interest rates by 6% to 18% today as a part of a loan agreement imposed by the IMF to battles against financial collapse.


The central bank governor said the increase was part of its agreement with the International Monetary Fund, from which it borrowed $2bn (£1.3bn).


The move was designed to restore trust in Iceland's battered currency. After the announcement, the Icelandic krona traded internationally for the first time in a week.

The rate rise means that investors get a much higher return for putting money back into the Iceland's crippled financial system.

China immunes to the toxicity of global financial crisis

Although global financial crisis has devastating effects on vast numbers of people, but many expatriates in China are finding they are largely immune to its toxicity and stabilizing an unstable global economy.


The fundamentals of the Chinese economy remain sound and can cope with the challenges caused by the worsening global financial crisis, nevertheless it should not underestimate the impact (of the crisis) on China's economy, Central Bank governor Zhou Xiaochuan told legislators Sunday.

He Said, despite the impact of the global financial crisis, China should recognize overall economic condition is good and financial institutions are generally strong, with increased profit-making and risk-fending abilities. Market liquidity on the whole is ample and the financial system is sound and safe.


Continuing urbanization and industrialization, which generate huge investment demand, as well as the large domestic market and low-cost labor, the basic economic growth track, will not deviate much, he said.

Lin Yifu, senior vice-president and chief economist of the World Bank said, the impact of the global financial crisis on China would be "limited". In the era of globalization, no place is safe but China's economic condition is one of the best compared with others, he said.

Economists said, China's GDP growth slipped to 9 percent in the third quarter from 10.1 percent. As the global economy is expected to slowdown, China's growth may weaken further, although it may avoid a hard landing.

Citigroup Posts Fourth Consecutive Loss

The financial crisis has amplified economic ailments that are now intensifying, vanishing paychecks, falling house prices and diminished spending. The bailout would not lift the economy and continued weakness was certain.


Citigroup Inc. suffered its fourth straight quarterly loss and cut another 11,000 jobs, drubbed again by the relentless downturn in housing and turmoil in the financial markets.

With $2.05 trillion in total assets now, Citigroup has officially forfeited the title of largest bank by assets, falling behind JPMorgan Chase's $2.25 trillion in total assets.

The New York-based bank announced lost $2.8 billion, or 60 cents per share, in the third quarter, compared with a profit of $2.2 billion, or 44 cents per share, a year ago. The deficit for the June-to-September period brings Citi's total losses over the past 12 months to $20.2 billion.

The shortfall for the quarter was narrower than anticipated. Analysts polled by Thomson Reuters expected a loss of 70 cents per share.

Citigroup wrote down $4.4 billion in investments, plus another $612 million from a settlement related to auction-rate securities; recorded $4.9 billion in credit losses; and took a $3.9 billion charge to boost reserves. The bank has written down the value of its investments tied to souring mortgages and other bad debt by some $51 billion since this time last year.