Wall St. Concerned About Dubai Panic Setting In

When Dubai sought a moratorium on its $59 billion in debt, it triggered a mild financial crisis. However, that only began at the end of a holiday shortened week. Wall Street experts are not optimistic over future events as a result of the Dubai effect. There's a warning for America buried in the news, as well.

The Middle Eastern city state announced late Wednesday that its state flagship conglomerate, Dubai World, wanted a six-month standstill on 59 billion dollars in debt, sending markets into a panic over fears of a debt default.

The news wiped out the Wall Street gains made earlier in the week.

"It's not a default yet, it's a small financial crisis, but what we've learned from history is that small financial crises can become bigger financial crises," said Hugh Johnson of Johnson Illington Advisors.

"I wouldn't be surprised to see this situation take more time to be resolved than you might expect -- it does create so many questions," he said, adding that the crisis comes "at a time when some would argue that the market is overvalued."

David Kotok at Cumberland Advisors warned that the Dubai World debt crisis carries "contagion risk."

"Insolvency cannot be permanently papered over by excess liquidity, not in the Middle East nor, for that matter, in America," he said.

Comments

[PA]

Meh. Madoff made that much disappear with nothing to show for it. These creditors at least have some hard assets.

[unseen]

This is how the subprime crisis started. the dow lost 8,000 pts before that crisis ran its course. and only was stopped by taken the risk form the banks to the governments. Now the governments are defaulting. We see Dow 6,000 again before this runs its course. The double dip recession is coming.

during the last credit default recession the DOW lost 90% before it was all said and done. If the same thing happens the DOw will about 1400.

[Elmo]

Self perpetuating memes .... the surprise has been, how robust. How really unflappable the global economy has been. In light of Buraq the Magic Pony/Soldier of Allah's attempts at destroying it.

But running the intaglio's 24/7 ... cranking out all that funny money. Is indeed now having a noticable effect. As well the obviousness of the derangement, present in the Oval Office.

I don't necessarily feel comfortable, suggesting things may in fact get worse. I don't know. But the uncertainty can set the mood. Affect the river's course. The uncertainty is real. It is palpable.

Didn't gear up for a full round of combat shopping, at the mall yesterday. But I did indeed make a couple of stops. No sellout for some tempting leaders (modest weight, adult winter jackets/$7), at the Walliemart (I walked right by). And NO line/wait at checkout.

Some lines at the Kmart (the leader $3 dvds gone ... but only a minimal stock was put in). At the Home Depot, no problem on stock for the leaders, and ... right at the front of store/entrance (just like Walmart, very respectful). And also .... NO lines.

No major battles raging at the 99c store [Picked up a rather well crafted Giuliani, bobblehead doll (passed on the Hillary, and Mac)].

So, I ain't saying things are bleak. But I didn't feel the tiniest wisp of Christmas spirit in the air. Nor hint thereof.

[Elmo]

Update:

Went to Tar-sjay Sunday morn, to pickup an item (from/in the Sunday paper circular). Arrived around fifteen minutes after eight a.m. open. Parking lot ... empty. Store deserted. Downright creepy.

Then moseyed over to the weekly flea market. Attendance looked to be up a notch (but not near pre Buraq/Magic Pony levels).

Then over to Sears, for a looksy at an advertised item. You would have never known it was Christmas. By a glance around the malls' parking lot.

Scary.