Friday, November 27, 2009
My flashback was to August 1998, when I boarded a plane from Cairo back to the States, and as I took the International Herald Tribune from the flight attendant I saw the news of Russia's default on its bonds. That took a little time to sweep through markets; it was three weeks later that Russia floated the ruble. So while we may not want to believe the doom and gloom crowd, I think we should pay more attention to this than one might on a holiday weekend.
Gillian Tett puts it in some perspective, including the Greek story with it (I wrote about Greece earlier this week) as "a welcome wake-up call":
After all, [investors] have known for months that Dubai World was dangerously over-leveraged. They assumed that this would not be too dangerous, because they thought that foreign investors would always be protected."Seabee" at Dubai World expands:
For nearly a year the Dubai World companies have been going through a 'restructuring'. But it's always a nonsense for the management responsible for a company's troubles to be allowed to create and preside over a restructuring made necessary because of their own policies. A Chief Restructuring Officer, an outside expert with a proven track record, was needed from the beginning of the crisis to sort the mess out. But it wasn't treated with the urgency the situation demanded.Does this sound familiar to you?
They became bloated companies with unnecessarily huge numbers of people being paid huge amounts of money, huge duplication of job functions between the companies in the group, unnecessary competition to build the biggest, tallest.
That led to too many mega-projects all going ahead at the same time. Worse, many were pushing engineering into uncharted waters but second and third versions were being pushed ahead before the engineers had worked out how to make the first one.
...We're a year into the crisis before the real moves are made that needed to be made there and then.
Mohammed El-Erian of Pimco: "There will be contagion to many markets, especially in the emerging world where we are witnessing broad-based sell-offs among names with very different financial characteristics."