Dubai fallout: Shares extending losses, Dow futures off over 250pts

Harry_Powell

HammerSmashedFace wrote: »

This kind of thing really isn't a shock is it ? I've been saying for the last 9 months that the recovery is fake, here in this country and around the world. The fallout will likely be worse now over the next 2 years as the truth is slowly exposed.

Joe Public, here and around the world need to get a grip of reality, issues like what happened last year do not go away overnight and certainly not because the media/government says so. Speaking of this country, nothing has changed since last year apart from we have borrowed and printed to make things appear better, that is all. Both policies are unsustainable.

The reality will make itself known, when QE is reversed and the borrowed money is to be paid back.

Where have you been saying it? Certainly not here as you've only been a member for a month!

I agree with you though, I think that QE has skewed the figures, plus the various VAT, stamp duty and interest rate reductions, plus scrappage schemes and that we'll see a more realistic figure once all these schemes end.

If you look at the lead up to the Great depression, they had similar developments, an asset slide followed by a small rally, followed by a disasterous collapse.

inspector_monkfish

Harry_Powell wrote: »

Where have you been saying it? Certainly not here as you've only been a member for a month!

I agree with you though, I think that QE has skewed the figures, plus the various VAT, stamp duty and interest rate reductions, plus scrappage schemes and that we'll see a more realistic figure once all these schemes end.

If you look at the lead up to the Great depression, they had similar developments, an asset slide followed by a small rally, followed by a disasterous collapse.

starting to feel like they blocked the leaking dam with tissue paper....:eek::eek:

Generali

avantra wrote: »

What other potential houses of cards are out there?

The obvious things for me are private equity funds which bought lots of assets expensively on credit. There was a particularly interesting form of debt used by some funds known as a PIK bond or Payment in Kind bond.

How it works is that instead of making a regular interest payment, the interest is rolled up into the capital value of the bond and paid at some point in the future. They are very high risk and so pay a very high rate of interest - the Glazers used one to partly finance their takeover of Man Utd and from memory it has a rate of interest of 14.675% and the first payment comes due in 2011.

Now in many cases there will have been no payment to make so far so no default on the bond even if the company concerned isn't doing so well. If that is the case, it would be reasonable for the value of the bond on the books of the holder (often but not always a bank) to be higher than the original amount of the debt because of the subsequently accrued interest and because interest rates have fallen making a high yielding bond even more valuable.

I suspect the rate of default on PIKs is likely to be high. It remains to be seen whether the high rates of interest no them are high enough to recompense the holders for the default rate.

Harry_Powell wrote: »

Where have you been saying it? Certainly not here as you've only been a member for a month!

I agree with you though, I think that QE has skewed the figures, plus the various VAT, stamp duty and interest rate reductions, plus scrappage schemes and that we'll see a more realistic figure once all these schemes end.

If you look at the lead up to the Great depression, they had similar developments, an asset slide followed by a small rally, followed by a disasterous collapse.

There is a double whammy with the stimuli (stimulouseses?) - the cost of servicing Government debt goes up and the withdrawal of them cuts GDP at the same time.

HammerSmashedFace

Harry_Powell wrote: »

Where have you been saying it? Certainly not here as you've only been a member for a month!

I agree with you though, I think that QE has skewed the figures, plus the various VAT, stamp duty and interest rate reductions, plus scrappage schemes and that we'll see a more realistic figure once all these schemes end.

If you look at the lead up to the Great depression, they had similar developments, an asset slide followed by a small rally, followed by a disasterous collapse.

There are knowns, known knowns, known unknowns and unknown unknowns.

ses6jwg

Here we go chaps, get some funds at the ready.... lots of money to be made soon on the bounce.

lemonjelly

inspector_monkfish wrote: »

starting to feel like they blocked the leaking dam with tissue paper....:eek::eek:

Great analogy!

I'm starting to wonder how quickly this will play itself out, as that could be a factor highly relevant to how the world economy goes from here, as well as reacts to this news.

It's kinda funny. The banks, when they took a hitting yesterday tended to say "our exposure is minimal", or nothing at all. Dubai appear to be saying "there's no problem really, but can we pay you 6 months later than we originally agreed?"

It appears no-one is being completely open about what the actual situation is. Looking at IM's posts, fears are rife, rumours, concerns about potential exposure etc.

Where are the bloomin facts. What is really going on? Give us the details & lets fix it!

(Bob the builder.....)

fedupfreda

HammerSmashedFace wrote: »

This kind of thing really isn't a shock is it ? I've been saying for the last 9 months that the recovery is fake, here in this country and around the world. The fallout will likely be worse now over the next 2 years as the truth is slowly exposed.

Joe Public, here and around the world need to get a grip of reality, issues like what happened last year do not go away overnight and certainly not because the media/government says so. Speaking of this country, nothing has changed since last year apart from we have borrowed and printed to make things appear better, that is all. Both policies are unsustainable.

The reality will make itself known, when QE is reversed and the borrowed money is to be paid back.

Hit the nail bang on. Trouble is our illustrious leaders have been spouting the same hype for so long, they are starting to believe it. I think most of us out in the real world are looking at things rather more practically - we've not been insulated from the cold blasts of economic reality like they have. Anyone else think its time for a regime change?????

abaxas

Why worry, the UK government will just print £100 billion and send it over with some virgin eastern european prostitutes.

Jonbvn

I'm surprised that the FTSE is only down less than 0.5% as I type. I guess they are waiting to see the reaction on the NYSE, although it is only a half-day trading over there.

ukmike

There are knowns, known knowns, known unknowns and unknown unknowns.

What about the unknown knowns then?