UAE federal structure handles crisis well

images16

UAE stocks picked up yesterday on news that the UAE Central Bank is about to lower interest rates as a part of its strategy for handling the global financial crisis.

On the same day it was reported that Abu Dhabi Commercial Bank is to convert $1.8 billion of federal government deposits into Tier II capital and that the Commercial Bank of Dubai is also converting $500 million of federal deposits in the same fashion.

Calm response

The calm and measured response of the UAE Central Bank to the global financial crisis shows federal institutions responding well to the slump in the world economy. The contrast with fellow GCC member Kuwait, with its current political chaos and bank defaults is notable.

UAE bankers say an even more comprehensive response is coming, in particular to address the imbalance between loans and deposits, a matter already highlighted by the Governor of the Central Bank in a recent speech.

This complicated is the world as far as the economic forefront is considered. Investments in such platforms also becomes difficult especially in the cryptocurrency arena. Auto trading robots such as the Bitcoin Loophole have been considered the best in terms of assisting in such tough market fluctuations.

If the UAE is serious about realizing the objective of becoming the region’s banking centre then this is exactly the right way to go about it, and bankers in London and New York will be taking note. It is only in a crisis that systemic strength is tested.

They will be watching the next steps with interest. It seems that far from disengaging from heavily indebted Dubai, Abu Dhabi is seeking a harmonious federal solution to the benefit of all citizens, and residents with employment.

Dream ticket

Harnessing the financial strength of Abu Dhabi to the commercial and entrepreneurial dynamism of Dubai sounds like a winning formula. This is the dream ticket that larger and more systemically challenged countries could only hope to emulate.

That said the UAE is hardly out of the woods entirely with oil revenues set to tumble by half in 2009 and the six-year real estate boom obviously over. Banks will need recapitalizing to meet the strain on their balance sheets and to assist customers through a very tough time.

But looking forward this could still prove to be a seminal moment in the emergence of the UAE federation into an admired, respected and again highly profitable business model.
Order online from this link

Allocated gold only for Dubai ETF

Filed under: Banking, Gold & Silver, UAE Stocks, US Bonds, US Dollar — peterjcooper @ 3:36 pm

images9The Nasdaq Dubai and World Gold Council launched its long awaited gold exchange traded fund today, which is both Shariah compliant for Islamic investors and 100 per cent backed by physical gold.

‘This is not a derivative product because it is 100 per cent backed by allocated gold held in London vaults by HSBC, and audited both by traditional and shariah auditors,’ CEO of the WGC Aram Shishmanian told ArabianMoney.Net.

Allocated gold

He said it was important to understand the difference between unallocated and allocated gold. ‘The Dubai ETF has allocated gold, so there is no third party between the metal and its owner. The ETF certificate is an entitlement to one-tenth of an ounce of gold.’

It is just similar to the cryptocurrencies being traded economically the world over. There are no intermediaries involved and the security is well ensured through cryptocurrencies. As it is a new concept to invest and earn in such platform, we have entrusted trading robots as the Crypto Code.

Trading under the ticker symbol GOLD, the new ETF is the first new launch on the Nasdaq Dubai this year, and the one-time 60 basis point charge is exactly the same as other existing ETFs.

Will this make the Dubai ETF sufficiently different to attract regional investors who already have the exchanges of the world at their finger tips?

‘We have launched a series of ETFs around the world and have always found that a regional product stimulates new demand,’ said Simon Village, executive director of Dubai Commodities Asset Management.

Dubai is a logical choice for the ETF as the financial hub of the Middle East and the regional ‘City of Gold’, handling around 20 per cent of the world’s trade in physical metal.

Good timing

‘It is an opportune time to launch in Dubai,’ said Mr. Shishmanian. ‘There is substantial latent demand from investors. Gold is a safe haven and protection against inflation and a weaker US dollar as well as a risk mitigator for investment portfolios.

‘Gold and bonds are the only asset classes to show a positive performance in the past 12 months. We are seeing a structural shift in gold as an investment immune from third party failures at a time of systemic risk in the financial sector.’

Only time will tell how GOLD on the Nasdaq Dubai is received but this regionally tailored product is likely to be considered as a low cost method of diversifying local portfolios at a time when very few asset classes offer much upside potential.

Bonds and dollar will crash after the Dow low!

Filed under: Banking, Oil Prices, US Bonds, US Dollar, US Stocks — peterjcooper @ 10:33 am

04_28_50-us-dollar-bills_webHow low can the Dow go in this bear market? Yesterday the index dropped to 7,114, a 12-year low, and there is no sign of a market bottom in sight. It was notable that almost all stocks tumbled without exception, so there was again no place to hide like last November.

Bank nationalization is the new fear on the street. Taking over bankrupt banks, stripping out the toxic assets and them returning them to public ownership is increasingly seen as a logical solution.

But it will annihilate shareholder capital, and the worry is that a legion of risk-averse state banks will not provide the entrepreneurial support to revive American business. Or more cynically, state banks will not offer loans that can be used to buy stocks and fire up prices again.

Oil and gold

At some point commodities and basic resources stocks are going to be a major buy. Gold and black gold look obvious beneficiaries from the near-panic global creation of paper money and inflation to come.

This has created a lot of commotion among the commodity traders after the recent fall in the price of crude oil.

The crude oil price on Qprofit System fall occurred because of an increase in the supply of crude oil. However this was without any extra demand created for this commodity.

If these stock prices continue to fall with everything else – due to automatic panic disposals of entire portfolios – then they will be the obvious buys at the bottom. But how long until we get there?

Wall Street is not known for its patience, but it does have a considerable capacity for self-delusion and hot air to support prices. There is also plenty of hot air coming from the new Obama administration and Americans love to talk.

However, there is nothing else to sustain price levels. Profit forecasts for the year ahead are still too optimistic, and the outlook is increasingly for big losses from major companies and low or no dividends.

Cash up

There is no reason to risk capital in equities at this point. Money is better taken out of the market and kept in cash or precious metals. Bonds have an increasingly toxic feel, for reasons of supply if nothing else, and will surely crash once stocks hit rock bottom.

The dollar is probably safe as long as the markets are selling down. But the moment markets hit bottom any investor with brains ought to be out of the US dollar whose crash, along with bonds, is inevitable, and actually the next part of the economic recovery cycle.

Bond holders need to be driven out of bonds and into stocks, and dollar devaluation will make US exports competitive again.
Order my book online from this link

Can Dubai get quickly back to growth again?

Filed under: Dubai Property, Marc Faber, UAE Stocks, US Bonds, US Dollar, US Stocks — peterjcooper @ 10:36 am

Order my book online from this link
Yesterday this blog explored the emerging market business cycles as suggested by Dr Marc Faber in his book ‘Tomorrow’s Gold’ and saw Dubai situated in phase five and entering phase six.

The real dilemma is looking forward to the next phase: phase zero. The last time Dubai came anywhere close to this phase was in 1999 with oil prices at $10 and local stock prices on the floor, at the tail-end of the Asian Financial Crisis.

The fear at that time contrasted with the much more modest business slowdown of 2000, and a quick resumption of growth back through the business cycle to our present position. Will it be the same again this time?

Phase zero

Certainly a long phase zero is a nasty business. Dr Faber identifies its characteristics as: flat per capita income; high unemployment; low capital spending; domestic instability; falling profits; capital flight; no foreign investment; hotels empty; stock market at a bottom base; stocks very undervalued; press very negative; credit tight; Swiss bankers give up.

Oil economies are perhaps a little different to this general model for all emerging markets. Capital spending is generally sustainable, and an exit of foreign guest workers leaves less scope for internal unrest.

Indeed, what is needed to quickly exit phase zero is also available. Dr Faber says it needs a ’spark’ or ‘catalyst’ to start the recovery cycle. For oil economies an upturn in oil prices is the usual catalyst, although the long stretches of low oil prices in the 80s and 90s should not be forgotten.

However, if you believe in a commodities super-cycle that began around 2000 then today’s oil price crash should not last long. The supply and demand economics of oil favor a higher price to encourage more oil exploration to replace dwindling reserves, which must sooner or later impact price levels.

It would also have an impact on all the markets in the financial sector, especially in foreign exchange and cryptocurrency market.  To save your situation, it is best you should take the help of automated software.  Our site will guide you through the entire process and benefits of choosing the trading software.

Oil is king

It should be no surprise to realize that recovery prospects in the region depend on oil prices. Dubai, as the regional logistics, commercial and financial capital takes about six months to feel an upturn in oil prices as it feeds through the orders pipeline.

But will the world’s economy get quickly back on its feet? That is a far more difficult question to answer. Clearly if that took several years, and not just until Q3 as some hope, then it would be bad news all round.

However, the global stimulus packages look hugely reflationary, and oil prices would surely be one of the first signs it was working. That would make buying assets associated with oil economies at this time a wise move, especially for those who can afford to wait a while.

January 27, 2009

Dubai in phase five of the business cycle

Filed under: Dubai Property, Hotels, Marc Faber, Media, Oil Prices, Travel, US Bonds, US Dollar, US Stocks — peterjcooper @ 10:34 am

Order my book online from this link
Reading Dr Marc Faber’s investment classic ‘Tomorrow’s Gold’ it is interesting to note how Dubai has moved into phase five of his seven phases of the emerging market business cycle.

The symptoms of phase five are: tight credit; falling consumption; profits collapse; stocks crash; real estate prices fall sharply; big players go bankrupt; companies issue bonds or shares to raise cash; hotel vacancies rise; unemployment up; brokers lay off staff; tourism declines.

Of this list Dubai has yet to see any big players going bankrupt, and emergency fund raising is in its early stages. But all the rest of the list apply. For what lies ahead then we need to turn to the description of phase six of the cycle.

Phase six

This comprises: investors give up on stocks; capital spending falls; interest rates fall; foreigners exit; currency weakens; press very negative; equity funds down 90%; hotels, flights empty; taxi drivers discuss how much they have lost; men go out for work in suits but sit in parks.

Dubai is not quite in phase six. But lower interest rates could be on the cards soon, and a weakening of the US dollar due to money supply growth is very likely. Job losses are clearly mounting but UAE labor law will not allow people to sit on park benches, they will go back to their countries of origin.

However, Marc Faber notes that the down cycle in emerging markets does not have to be very long, and he points to the Asian Financial Crisis of the late 90s which took a year to bottom out and a couple of years to start a recovery: phase zero.

Oil prices

In the oil-rich Middle East there ought to be considerable room for optimism about a similar early recovery on the back of higher oil prices. But that would still not seem to mean that phase six can be avoided. It just means that anybody buying assets in that period will not have long to wait to be rewarded.

No doubt many would argue ‘it is different this time’ in Dubai. However, as the great investor Sir John Templeton explained these are often the most expensive words in the English language for investors who believe them. It might be different this time but if you bet against history the odds are stacked against you.

New GCC single currency agreed, will it include gold?

Filed under: Gold & Silver, Inflation, Oil Prices, UAE Revaluation, UAE Stocks, US Bonds, US Dollar — peterjcooper @ 8:56 am

08-12-12-goldashxGulf Cooperation Council leaders yesterday concluded their 29th annual summit meeting in Muscat, Oman with a final approval for the creation of a single currency for the six-nation economic bloc, still targeted for 2010.

Saudi Arabia is the largest economy in the GCC and boasts substantial gold reserves. But whether gold will be included in the currency basket has not yet been decided.

Golden opportunity

GCC assistant secretary-general Mohammad Al Mazroui told Gulf News: ‘We first have to decide on the location of the Central Bank, then the Central Bank and Monetary Council will have to decide on the gold reserves for the Central Bank’.

The creation of the GCC single currency – likely to be known as the Khaleeji which means Gulf in Arabic – is a major gold event for two reasons.

First, the breaking of their dollar pegs by the Gulf Arab nations is clearly dollar negative. Secondly, any inclusion of gold either as a part of the monetary basket, or in the reserves of the new GCC Central Bank will create additional demand for the precious metal.

2009 deadline

The project is gathering pace, and no lesser figure than Saudi Arabia’s King Abdullah has directed that GCC economic integration committees speed up their work and complete the whole exercise by September 2009.

It is only a couple of months since a group of Saudi businessmen allegedly bought $3.5 billion worth of gold, believed to be the largest ever single transaction for the precious metal. Perhaps in 2009 it will be gold rather than local currencies which become of interest to speculators about monetary reform in the GCC.

Gulf countries are keen to break away from the link with the US dollar because it ties them to inappropriate monetary policies that exaggerate the boom-to-bust cycle in their economies.
Order my book online from this link

Peter Schiff says move to Dubai!

Filed under: Dubai Property, GCC Currency Union, Peter Schiff, US Bonds, US Dollar, US Stocks — peterjcooper @ 4:03 pm

047038378xReading Peter D. Schiff’s ‘Little Book of Bull Moves in Bear Markets’ it was intriguing to see him become so frustrated with the US economy that he advocated emigration, at least for a few years.

‘If you are more adventurous, you might consider the nations of the Persian Gulf, such as Dubai, Qatar, Kuwait, or the United Arab Emirates,’ he opined. ‘Flushed with petro-dollars and unburdened by taxes or regulation, the Arab world seems destined to reclaim a more prominent role in the years ahead.’

How prescient! Of course, clearly neither Mr Schiff or his proof readers have much knowledge of the region or they would know that Dubai is a city in the United Arab Emirates and not a separate nation.

The ADX is not used to know what the trend is but instead it is used to indicate whether the current trend is strong or is turning weak on Crypto CFD Trader. The indicator is used in the market when the market is trending since it lets you understand whether you should still hold on to your positions or sell them off.

That much any American reader ought to establish before jumping on one of the excellent new Emirates Airlines’ flights from the States and rushing into business in Dubai, and that is what he suggests, ‘if you’ve ever had any inclination towards entrepreneurial life.’ Well, at least buy a copy of my book ‘Opportunity Dubai’ before taking that advice!

Changing times

The problem is that Mr. Schiff’s world view – only completed this summer – already looks a bit out-of-date. His world then was one of high oil prices, a falling dollar and a US economic collapse isolated from the rest of the world.

What we now know is that high commodity prices insulated commodity producing countries from the sub-prime crisis until the summer. But once commodity prices collapsed – oil from $147 to $34 a barrel – so did these supposedly immune economies.

The city of Dubai’s financial market is 75 per cent down this year, among the worst performers and well ahead of the US decline of 40 per cent for the S&P. House prices in Dubai are down 40-50 per cent this autumn, far ahead of Main Street USA.

Dollar appreciation

The dollar’s devaluation also swung into reverse as capital markets imploded this autumn with a flight to quality and a recovery for the greenback. So much for the US devaluation trumpeted by Mr. Schiff. It is clear that other global economies are also in trouble, and Europe’s debt problem could be bigger than America’s.

However, Mr. Schiff’s free market prescription for US recovery: allowing lame ducks to die, bankrupting major corporations and banks and removing social security, has no chance of being adopted by President Obama.

On the other hand, a very vigorous shake-out is underway in the UAE with expatriate labor summarily dismissed with modest compensation, downsizing of major real estate projects, continued investment in major infrastructure schemes and a rapid reorganization of national debts.

In truth the UAE (and that includes Dubai) can manage something far closer to a free market solution to the economic crisis than the USA can ever hope to achieve. Perhaps Mr. Schiff is right Americans ought to move to the Persian Gulf countries.
Order my book online from this link

What does backwardisation mean for silver?

Filed under: Gold & Silver, US Dollar — peterjcooper @ 10:06 am

silveralertprofilelogoAntal E. Fekete, a professor at Intermountain Institute of Science and Applied Mathematics, and frequent writer on precious metals, answers a timely question:

Q: People from around the world keep asking me what advance warning for the collapse of our international monetary system, based as it is on irredeemable promises to pay, they should be looking for.

A: My answer invariably is: ‘watch for the last contango in silver’.

It takes a little bit of explaining what this cryptic message means. Contango is that condition whereby more distant futures prices are at a premium over the nearby. The opposite is called backwardation which obtains when the nearby futures sell at a premium and the more distant futures are at a discount.

When contango gives way to backwardation in all contract spreads, never again to return, it is a foolproof indication that no deliverable monetary silver exists.

Silver price hike

Thank you professor! This is really an extension of the argument on this website dating back to before the summer rout of precious metal prices.

This means that the bullish trend is in most probability dying out. Similarly if the commodity chart is making a lower low but the CCI indicator is making a higher low than this means that the bearish trend is ending.

These are some ways in which the commodity technical indicators are used but they are not fool proof. You need to use them on Bitcoin Code along with the support and resistance levels to use as a confirmatory tool.

Trading the equity market is also a game of probabilities and the equity indicators make it possible to increase the probability of the trade working out. The equity market traders use the technical indicators to increase the trade probability.  There are a number of buying and selling opportunities

Physical stocks are low and the futures price has been distorted by big hedge fund forced-sales – now we are coming to the day of reckoning when the physical shortage starts to determine the spot price, and not the futures market.

The upside – which should have been there all along – will now come back with a vengeance and smash the few remaining shorts. This is likely to be spectacular – but after the culling of bulls recently not all precious metal fans will be there to benefit.
Order my book online from this link

What does the $3.5bn Saudi gold rush in two weeks mean?

Filed under: Gold & Silver, Oil Prices, UAE Stocks, US Stocks — peterjcooper @ 8:22 am

saudi1_200revThe revelation on this blog, actually sourced from what appears to be a reliable story in the Gulf News, the leading regional newspaper, that Saudi Arabia has spent a total of $3.5 billion on gold over the past two weeks has naturally attracted huge worldwide interest.

I can not verify the source but all I can say is that this has the hallmarks of a genuine story, based on my 25 years in financial journalism. First, it was buried on an inside page and the amount was given in UAE currency later in the story – hardly the action of somebody looking to manipulate the gold price, more an indication that the sub-editors did not understand the importance of this story.

Second, this is how the best stories emerge from Saudi Arabia – the market is not very transparent but insiders do notice big changes and pass this information on, and it surfaces as well sourced rumor. I am afraid this is about as good as it gets in the Middle East.

Truth in rumors?

After 9/11 we had rumors about chartered 747s flying full of gold and dollars back to the Kingdom to avoid the increased scrutiny of US regulators. Was it true? Real estate here is said to have boomed on the back of this new money – that certainly happened, did the transfer? We do not know for sure.

So what is going on? By whom and why are these gold purchased being made? Again we can only indulge in informed speculation – nobody is ever going to give an on the record comment on this.

However, we do know that the Saudi stock market has crashed over the past two weeks. There has been an enormous amount of money cashed out. The obvious source of the money for gold purchases has to be that money.

The problem for Saudis is that by cashing out of local stocks they get their own riyals in exchange, and riyals are effectively US dollars due to the currency fixed link. The US dollar is presently high, so diversifying into another asset class makes sense.

But what do you buy? What is safe these days? Dubai villas, perhaps but the rest of regional real estate is crashing? US stocks – you must be joking?

Conspiracy nonsense

I think some of the conspiracy theorists are wide of the mark. People love to come up with elaborate rationales for actions. It is laughable to see Saudi Arabians rushing to buy gold as a conspiracy to bring down the West. The West has brought that on itself, and the Saudis are just trying to find an effective shelter for their wealth from that collapse.

Gold and silver are precious metals with a limited supply that retain their value over time. Also if we are in a repeat of the late 1970s, as this author believes, then cash and gold are the safe havens, with silver probably the best of all, if very volatile.

Therefore, my lesson to draw from the Saudi gold rush is that very much higher gold prices are coming and investors in the Kingdom are making a logical choice ahead of the global pack. If you can not beat them I would join them and preserve your capital.

Incidentally, what I would like to know is who is buying? The report in Gulf News makes it sound like the broad mass of local investors, not the government, and that would explain why such a report has surfaced. If it was the government we would not have heard about it.

So this is just a local flight to a safe haven asset class by people panicking about plunging local and global stocks. But $3.5 billion in two weeks is a big shift in demand for gold in a short period.
Order my book online from this link

Saudi Arabia buys $3.5bn of gold in two weeks

Posted on 13 November 2008 with no comments from readers

There has been an unprecedented surge in Saudi gold purchases in the past two weeks with over $3.5 billion being spent on the yellow metal, reported Gulf News citing local industry sources.

Gold market expert Sami Al Mohna told the leading regional newspaper that this buying had substantially increased the gold reserves of the country: ‘Many Saudi investors see this as the right time for making investments in gold as the price is the most reasonable one at present’.

He said gold was seen as a traditional safe haven at a time of global financial turmoil. Gulf regional stock markets have fallen very sharply since early October, leading to an exodus of cash which needs to find a safe haven.

Gold is currently trading at prices similar to a year ago, and 30 per cent off its March peak. Saudi investors clearly think this is the right time to buy and are piling into gold.

News about the Saudi gold rush is bound to fuel speculation about the alleged large physical gold transactions that have been taking place at prices will above the spot price set in the futures market. It is very unlikely that such a large hoard of physical gold could have been bought for the depressed current price.

Market analysts such as the legendary gold bug Jim Sinclair have pointed out that if less than two thousand millionaires insisted on delivery of physical gold at the end of their futures contracts, as is their legal right, then the spot gold market would jump to new highs.

Saudi Arabian investors have spotted a bargain, and it may be a much better one than they think.

Jewellery sector is ranked among the fastest growing one and is also regarded as the leading segment for foreign exchange generation. Gold, silver and diamond are the major opted pieces of jewellery and account for around 87 percent of the global jewellery market. The golden exchange is considered as the potential signs for revival and growth.

In addition, these jewellery items have

  • A remarkedly high level of manufacturing along with an increased domestic consumption
  • Moreover, these zones are well supported by the financial firms and other government policies

The jewellery items can be further subdivided into plain gold, studded, costume and so on. Always the traditional designs are in demand and for more info click on the above-given site.

Order my book online from this link

Saudi Arabia buys $3.5bn of gold in two weeks

Filed under: Gold & Silver — peterjcooper @ 8:55 am

welcome21There has been an unprecedented surge in Saudi gold purchases in the past two weeks with over $3.5 billion being spent on the yellow metal, reported Gulf News citing local industry sources.

Gold market expert Sami Al Mohna told the leading regional newspaper that this buying had substantially increased the gold reserves of the country: ‘Many Saudi investors see this as the right time for making investments in gold as the price is the most reasonable one at present’.

He said gold was seen as a traditional safe haven at a time of global financial turmoil. Gulf regional stock markets have fallen very sharply since early October, leading to an exodus of cash which needs to find a safe haven.

To narrow down on the commodity trading indicators on Crypto Code one needs to understand that the indicators cannot be used independently to give buy and sell trade signals. These indicators have to be used with the support and the resistance levels and can be used only as a confirmation to the trades. This will help to increase the probability of the trades working out.

One of the indicators used popularly to trade in the commodity markets are the moving average indicator. This is a simple indicator and also one that is very commonly used in order to tarde the commodities. Two moving averages are placed on the commodity chart and you need to look out for a crossover of the moving average.

Gold is currently trading at prices similar to a year ago, and 30 per cent off its March peak. Saudi investors clearly think this is the right time to buy and are piling into gold.

News about the Saudi gold rush is bound to fuel speculation about the alleged large physical gold transactions that have been taking place at prices will above the spot price set in the futures market. It is very unlikely that such a large hoard of physical gold could have been bought for the depressed current price.

Market analysts such as the legendary gold bug Jim Sinclair have pointed out that if less than two thousand millionaires insisted on delivery of physical gold at the end of their futures contracts, as is their legal right, then the spot gold market would jump to new highs.

Saudi Arabian investors have spotted a bargain, and it may be a much better one than they think.
Order my book online from this link