Is Dubai a Financial China Syndrome?

Black Friday happened, and the results, in the context of reduced expectations among retailers and analysts, were encouraging. The busiest shopping day of the year, reported the New York Times, found consumers willing to buy but sticking to budgets they had laid out in advance. Yet “[a]cross many categories of merchandise, retailers noticed that consumers seemed more willing to spend money on themselves than they had been a year ago.” It will take several days for receipts to come in, but the National Retail Federation predicted an overall decline of 1 percent for the day’s take, which would make it $437.6 billion. One analyst noted many shoppers were buying gifts for themselves, having decided to “wait for better discounts around Christmastime to buy gifts for others.”

Dubai, that member of the United Arab Emirates that racked up $59 billion in debt only to find itself facing bankruptcy, is not finished scaring investors or the markets. Its troubles call into question the assumption that fellow emirate Abu Dhabi would always be there to bail out its extravagant real estate ventures. The Times notes that the news, though, is not just about Dubai but about the topic of sovereign debt. A useful summation: “The anxiety reached Wall Street on Friday, sending the Dow Jones industrial average down more than 150 points, as investors worried about hidden debt bombs in other countries and institutions—heavily indebted nations like Greece and even Britain, high-flying emerging markets and even European and American banks that had lent Dubai money.” Indeed, analysts are quoted as worried that that the problem could spread quite easily.

In more foreign news, a bank in Kazakhstan has lost billions of dollars, forcing banks who loaned it money to consider writing off up to 80 percent of its outstanding debt. The episode calls into question whether the losses were part of a scheme or theft, something the bank’s former chairman has denied. Mukhtar Ablyazov, the Times writes, used $10 billion in loans to finance ill-fated projects in Ireland, Iceland, and the United States. In the sober light of 2009, the deals look like bad ideas at best, but one banker who works in the country said, “Kazakhstan was very sexy at the time, and foreign banks were just shoveling in money, so much so that that banks here had more money than they knew what to do with.”

Science and business leaders of Indian origin are being invited to return to India to help the country regain a prominent footing in the world, reports the Times. However, they are finding it hard to navigate India’s Byzantine and sometimes corrupt bureaucracy once they get there. One scientist from MIT found his job offer withdrawn as he battled to get Indian scientists and even the person who hired him to respond to the planning documents he had begun circulating. A journalist who helped build Mint, India’s most-read financial newspaper, returned early to the United States to work at the Washington Post, saying that working in India was “draining on body and soul.”

Greece is finding itself drawn into the global recession “on Greek time,” says the Times. Remember the sovereign-credit issue exposed by Dubai two paragraphs ago? “As the country’s budget deficit swells, its sovereign credit rating has come under renewed threat. That has encouraged speculation that Greek government bonds might soon no longer be accepted as collateral by the European Central Bank, or might only be eligible at a higher cost,” says the paper. The problem is rippling through the economy, and all eyes are on a newly elected government to fix the problem somehow, though, the paper notes, investors currently don’t fear a sovereign default.

The Wall Street Journal says GM’s (GMGMQ) Saab unit may still be sold. Koenigsegg Group backed away from a deal earlier this week, but two U.S. investment banks may be interested in helping the company survive indepdently or even partnering it with the same Chinese manufacturer Koenigsegg had planned to use to build its Saab cars. Saab now has to convince GM to let it explore the other options and still hopes the Swedish government will help guarantee loans related to a spinoff of the unit.