Don_Kenobi
/ 83.5.209.* / 2009-12-03 13:49
By Andrew Mickey
“U.S financial institutions could take direct hits,” warned a CNN headline after last week’s market rattling announcement from Dubai.
Like an eerie reminder of last November, when the only reasonable expectation you could have as the markets closed was that you would wake up to something unexpected, the markets opened up with a renewed sense of fear.
For investors who are willing to look past the day-to-day drama and look at the bigger picture, the Dubai debt issue is just another step on the current path. Because once you take a step back and look at what’s really going on, and the implications of a Dubai World meltdown, and how it’s all likely play out, you can see where this scare ends up. And from there you can see the big opportunity resulting from it all.
Ever-growing List of Too Big to Fail
Dubai World has real estate investments all over the world. As the investment arm of the Dubai government, it owns and operates shipping ports, dry docks, hotels, and built the man-made palm shaped island which epitomizes the debt-fueled opulence.
To fund the lavish and aggressive growth, Dubai World was a big borrower. Over the years it has accumulated $59 billion in debt (that used to be a lot, in an era before Fannie, Freddie, GM and most of the major banks were handed trillions of dollars).
Despite its relative size, Dubai World is too big to fail. Here’s why.
Dubai World owns a lot of commercial properties in the United States. One of its crown jewel properties, the Las Vegas CityCenter, an $8.5 billion joint venture with MGM Mirage (NYSE:MGM), just opened today.