Dubai: WSJ

In today's panic-stricken debt markets, the uncertainty means higher costs for big and prudent borrowers. The cost of insuring $10 million worth of Dubai debt for five years has risen to $247,500 a year, up more than fivefold from the beginning of the year, according to CMA DataVision, a price-discovery service.

CMA, which calculates a "cumulative probability of default" for sovereign borrowers, estimates the likelihood of Dubai defaulting over the next five years is just shy of 20%. That's up from 4.3% at the beginning of the year.

So... Someone besides Iceland might default on their Sovereign debt. Now, a 20% risk of default really isn't that bad. One has to look at it in order of magnitude (Factors of 3). That could be as low as a ~6% risk or it could be as high as a 60% risk.

Either way, it looks like a huge fraction of the world's cranes might suddenly become available... just as no one else wants them. :(



WSJ on Dubai

But wait... Dubai is among the most heavily indebted governments in the wealthy Persian Gulf. Standard & Poor's estimated at the end of last year that Dubai government debt represented 41.8% of gross domestic product, compared with 22% in Bahrain and 2.9% in Abu Dhabi.

Ok, this isn't Iceland's 1200% of GNP debt by any means. But one of the things that awoke me to the global nature of the bubble was a reader by the handle of SMF alerting me to look into the bubble in Dubai. Heck, I argued with him that Dubai wasn't really a bubble at the time. (Oops... Point SMF.) This credit crunch is brutal. To have have a nation with a large wealth fund in a cash crunch... is interesting...


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Neil