Monday, 7 December 2009

Dubai World - what was built with borrowed money

Are you wondering where 60 bn borrowed by Dubai World was spent?
Here is a video that will show you the bright ideas that have been turned into real things by Dubia World.

Friday, 4 December 2009

Dubai crisis - a person at a glance

Typical was the case of British developer Arthur Fitzwilliam, an affable 58-year-old polo fan from London. He had lived in Dubai for two decades, dabbling in real estate and other ventures. In 2004, he inked a deal to develop a 14.5 million-square-foot plot of desert acquired from a government-controlled company.

The Plantation Equestrian and Polo Club would have air-conditioned stables for 800 horses, four polo fields, facilities to host horse shows and a five-star hotel. Mr. Fitzwilliam sought partners to help finance the project. A British banker agreed to provide financing, in exchange for a 30% stake, Mr. Fitzwilliam said in an interview.

But in June 2008, authorities detained Mr. Fitzwilliam, the banker and one other. Then in September, Dubai Islamic Bank, or DIB, foreclosed on the land for the project. It also seized more than 100 polo ponies, Mr. Fitzwilliam said. For almost a year, he sat in jail before charges were filed. In March 2009, authorities charged seven men with scheming to defraud DIB, according to a bill of indictment filed by Dubai's public prosecutors. Mr. Fitzwilliam was accused of aiding the scheme.

Last month, he was transferred to a Dubai hospital to undergo tests for cancer. Four Dubai police officers stood guard outside his room.

Mr. Fitzwilliam denied any wrongdoing, as did the British banker he was working with. "I want a fair trial, and I'm prepared to go with the system," he says, shackled to his hospital bed. "Anyone who knows the case knows I'm not guilty."

A spokesman for the Dubai prosecutor's office didn't respond to requests for comment.

Amid the uncertainty surrounding the arrests, the crisis roiling the rest of the world was catching up with Dubai. When global credit markets froze up in late 2008, international investors stopped buying Dubai property. Some who had already bought stopped making installment payments. Nakheel and others shed staff and scrapped or delayed dozens of projects.

Last February, the troubles touched Ms. Chana's plan for a new home in Dubai. Nakheel halted work on the Palm Jebel Ali. Though dredging had been done, little construction had.

Ms. Chana says she has sunk about $550,000 into her still-unfinished home. Earlier this year, she flew to Dubai to try to salvage the investment. She is living in a hotel-apartment with her daughter, helping to organize other investors and petition Nakheel for rebates. "I just won't let this drop," she says. "It's become my obsession."

In October, Nakheel proposed that Jebel Ali investors transfer their contracts to property elsewhere that is already finished or close to it.

Simon Murphy bought a $240,000 ground-floor apartment in the Palm Jumeirah in 2002 and moved in five years later. He is now a "resident representative" to Nakheel, like being part of a homeowners board. He says that in recent weeks, Nakheel has cut back on maintenance, including tree trimming.

Since Dubai's debt-standstill announcement, Mr. Murphy says, many apartment residents have stopped paying management fees, typically around $700 a month. Nakheel declined to comment. "Most people fear that their money will go into the bottomless pit of Nakheel debt," Mr. Murphy says.

Thursday, 3 December 2009

Freehold definition is under scrutiny in Dubai - Jumeirah Lake Towers is the first

The Dubai Municipality's latest statement regarding the free-zone status of Jumeirah Lake Towers (JLT) has marred the hopes of several thousands of residents who were under the hope of gaining housing fee exemptions.

According to an official at the Municipality, the status of JLT needs to be clarified by a decree, and that free zone claims by a developer does not imply exemption of housing fee for its residents.

The Head of Housing Fee Section at the Dubai Municipality, Abdullah Hashim, confirmed that JLT is not officially a free zone.

The residents of towers in the 'mini-Manhattan' around the man-made lakes by Nakheel have been questioning about housing fee exemption to the developer.

"Although several areas have been claimed to be free zones, they are not free zones. Media reports had stated that the free zone areas are exempt from housing fee, and JLT has been wrongly named as a free zone. But, we never said that, and this has created lot of confusion. None of the buildings there are considered to be part of a free zone," Hashim said.

He added that municipality is however, waiting for a list which could clearly stipulate the areas designated as free zones. The concerned authorities are likely to come up with such a list shortly.

Wednesday, 2 December 2009

Dubai Shows What A Property Plunge Really Looks Like

Here's essentially what caused Dubai's debt extravaganza to finally come to an end.

Far too much easy money flowed into Dubai during previous years, fueling a massive construction boom financed with debt. For awhile this debt looked sustainable to those involved because it was ostensibly backed by valuable property.

Yet when the global financial crisis hit, property prices fell in many parts of the world. Dubai property prices were hit especially hard.

As shown below by the skiing Emirati, Dubai property rates per square foot fell 45% from Q3 2008 to Q3 2009 according to Colliers International.

Thus just as many American's went underwater on their mortgages due to the American property crisis, owing more to the bank than their house was worth, the same thing basically happened to the Nakheel property business of the Dubai state-owned conglomerate Dubai World.

Combined with near-term cash flow constraints, this finally forced Dubai World to admit to its creditors that it would not be able to meet all of its debt obligations.

Monday, 30 November 2009

Dubai's property market could plummet by up to 30 per cent from current levels - already down 50 per cent from peak - and may take more than a decade to recover

Dubai government washes its hands of $59bn debt built up by Dubai World

The Dubai government refused to guarantee the huge debts built up by its conglomerate Dubai World, dashing investor hopes that the latest episode in the global financial crisis might be swiftly resolved.

The comments were made as the region reopened for business after the Eid holiday and local stock markets fell sharply.

Creditors, including several British banks, had been eagerly awaiting some clarification from Dubai officials since the brief announcement ahead of the long weekend on Wednesday night that Dubai World was seeking to defer repayments on its $59bn (£36bn) debt pile, but there was no comfort on offer. British banks have a $50bn exposure to the United Arab Emirates and high street names including Lloyds, HSBC and Royal Bank of Scotland have formed a creditors' committee seeking urgent meetings with Dubai officials.

In an interview on local television, the director general of Dubai's department of finance, Abdulrahman al-Saleh, appeared to suggest that investors only had themselves to blame for the unfolding crisis. "Creditors need to take part of the responsibility for their decision to lend to the companies," he said.

"They think Dubai World is part of the government, which is not correct. Dubai World was established as an independent company; it is true that the government is the owner, but given that the company has various activities and is exposed to various types of risks, the decision, since its establishment, has been that the company is not guaranteed by the [Dubai] government."

Dubai World is the largest of a handful of state-controlled companies and owns assets such as a profitable ports business that includes the former P&O, the QE2 liner, and the property firm behind some of the more outlandish developments of the last decade.

Fears that it could potentially default on its debts sparked turmoil on world markets at the end of last week and concerns that other heavily indebted states could be affected as investor confidence eroded, with much of the focus on Greece, Ukraine and the Baltic states.

The central bank of the United Arab Emirates yesterday sought to restore some calm by providing an emergency facility to shore up local banks, and foreign banks operating in the Emirates.

The International Monetary Fund today welcomed the move and said it continued to monitor the situation.

Sunday, 29 November 2009

Dubai’s $59 Billion Default Sends Tremor Through Global Financial System

Dubai’s announcement on Wednesday that it would be delaying by “at least” six months the maturity date of $59 billion in bonds issued by the city-state’s largest state-owned company, Dubai World, has sent global shares tumbling. The market reaction to Dubai’s massive debt default is partly explained by the exposure of European and Asian banks to DP World and its tourism subsidiary, Nakheel.

The real reason for the falls, however, is that Dubai’s apparent insolvency confirms that default by hyper-indebted government borrowers is now a real risk right across the globe, especially in the Middle East and Eastern Europe. Such a default would not only mean an immediate worsening of the already brutal post-crash conditions suffered by millions of workers in defaulting countries, but would usher in a second, and probably worse, phase in the global financial crisis.

If countries like Dubai begin to fail, who will save them?

As one financial crisis recedes, another may be beginning. In Dubai this week, we've had a foretaste of what may be to come as governments around the globe seek to grapple with the explosive growth of fiscal deficits and public debt.

Like everyone else, my regard for the miracle of Dubai's fast-evolving skyline has always been tempered with a high degree of scepticism. As a monument to the vanity and hubris of Sheikh Mohammed bin Rashid al-Maktoum, Dubai has long looked like an accident waiting to happen. Such has been the pace of development that nobody could have been surprised by the debt default now threatened. Only the assumed support of Dubai's richer neighbour Abu Dhabi, which is now far from certain, has prevented it happening sooner.

Yet the important question for markets today is not whether Dubai and Sheikh Mohammed can survive the sandstorm; in fact, that is almost irrelevant. Dubai's debts of $80 billion (£48 billion) are a tiresome and unwelcome irritant which will cause further write-downs among western banks, but in the scale of things not of great significance: Britain is planning to raise more than three times that amount in the debt markets in this financial year alone.

Rather, the issue is whether this folie de grandeur of a desert kingdom is just an isolated, and therefore containable, incident, or a more worrying outrider for a wider sovereign debt crisis which might eventually engulf major, advanced economies. Everyone thought the financial implosion of the last two years was largely behind us – yet Dubai has reminded us that if nations start defaulting, then it may be about to enter a new and even more frightening phase.

Think of Dubai not so much as the hors d'oeuvre as the pre-dinner canapé, with the starter reserved for larger economies with distressed fiscal positions, such as Greece and Ireland, moving for the main course on to Japan and possibly even Britain and the US.

Already, there are rumblings. The cost of insuring sovereign debt against default has risen across the board, and for countries thought particularly at risk, bond yields are on a firm upward march.

Across the developed world, public debt is set on an explosive course. According to new estimates by Moody's, the credit ratings agency, the total stock of sovereign debt worldwide will have risen by more than 50 per cent between the start of the financial crisis in 2007 and the end of next year, to $15.3 trillion.

But this is just the beginning. On current projections, that total is set to rise by at least a further 50 per cent, before finally peaking in four to five years' time, and then only if governments have by then taken remedial action.

These are uncharted waters, quite without precedent in peacetime. In seeking to address the financial and economic crisis of the past few years, countries have come close to bankrupting themselves. It is as if, in treating the patient, a physician has infected himself with the same deadly disease.

Perhaps oddly, financing these fast-growing deficits has not so far been a problem, at least for the major advanced economies. Risk-averse investors have spurred high demand for sovereign debt, in the possibly misguided belief that there can be no haven safer than assets guaranteed by taxpayers and the ability of their governments to print money.

More perversely still, the crisis in Dubai has caused a renewed flight to the perceived security of G7 government debt. Money is being withdrawn from the periphery and reinvested in US Treasuries, German bunds, and even British gilts.

But if the banking crisis is anything to go by, that's not where the story ends. There, too, the implosion began with smaller, obviously flawed bit-players, who had self-evidently grown too rapidly and overstretched themselves.

Markets dashed to withdraw funding from Northern Rock, but in transferring the money to the likes of the Royal Bank of Scotland found that they had invested only in something even more unstable. The Rock, it turned out, was just an outlier in a systemically unsafe sector.

If Dubai is the sovereign debt equivalent of Northern Rock, then Greece might be its Bear Stearns and Japan its Lehman Brothers. But why stop there? For Citigroup, think the US, and for RBS and HBOS, think Britain. Only there would be no one to bail out their creditors if America or Britain showed signs of defaulting.

Of course, I am exaggerating to make a point. Nobody thinks this a likely outcome, even if it ought to be added that nobody thought the semi-nationalisation of RBS and HBOS remotely likely either. The judgment of the markets is that on present trajectories, the sovereign debt burden is just about manageable. But it's touch and go.

The credit ratings agencies are just itching to downgrade some of the big hitters, alongside the obviously more vulnerable, with Britain and America the first in line. If the markets start to demand a premium for their money, that's going to make the task of economic recovery and fiscal consolidation that much tougher. At the risk of sounding like a scratched record, this crisis is not over yet – not by a long chalk.

Friday, 27 November 2009

Dubai Default - collection of links

No one saw this coming ...

From Bloomberg: Dubai Debt Delay Rattles Confidence in Gulf Borrowers

Dubai is shaking investor confidence across the Persian Gulf after its proposal to delay debt payments risked triggering the biggest sovereign default since Argentina in 2001.
Moody’s Investors Service and Standard & Poor’s cut the ratings on state companies yesterday, saying they may consider state-controlled Dubai World’s plan to delay debt payments a default. The sheikhdom, ruled by Sheikh Mohammed Bin Rashid Al Maktoum, borrowed $80 billion in a four-year construction boom ...
And a few articles from the WSJ: Dubai Starts to Untangle Dubai World Fallout

And European Banks Seen Exposed To Dubai World
Most banks on Thursday said their exposure to Dubai and Dubai World is small or declined to comment, but Credit Suisse analysts estimate European banks have about $40 billion in exposure to debt issued by various Dubai city-state entities, including Dubai World.
And from December 2008: Citi Voices Upbeat View on Dubai (ht jb)
With questions about Dubai's looming debt obligations swirling, Citigroup Inc. said it had raised $8 billion for the Persian Gulf city-state over the course of the past year and still had a positive outlook on its economy.

Citigroup Chairman Win Bischoff was quoted in the bank's statement Monday as saying Citigroup continues to see Dubai as among its "most significant markets."
When there are bad loans to be made, apparently Citi never sleeps.

UPDATES: Brad DeLong suggests it might be Time to Reread the History of Austria's Creditanstalt in 1931...
Interesting time. In Europe, the Creditanstalt's bankruptcy and what followed was what turned the recession into the European Great Depression...
And DeLong excerpts from a Financial Times article by Roula Khalaf: The emirate has a lot of explaining to do

And from Izabella Kaminska at the FT Alphaville: Barclays Capital ‘change their view’ on Dubai
My, my, what a difference a few weeks make.

Earlier this month — when all still seemed relatively well in the UAE emirate of Dubai — Barclays Capital was among those touting Dubai-related debt as a decent investment for clients. The bank even confidently predicted the repayment of the now infamous Nakheel sukuk.

In fact on November 4 — the day Moody’s slashed its ratings on five Dubai government related entities — BarCap analysts wrote:
We expect several developments to act as positive catalysts for Dubai’s sovereign spreads. First, the likely repayment of the Nakheel sukuk in December. Second, Dubai’s ability to raise the second USD10bn tranche with the support of Abu Dhabi. Third, a successful conclusion of the merger between Emaar and Dubai Holding, as well as a solution allowing mortgage providers Amlak and Tamweel to resume lending.

On that basis, we recommend a long position in Dubai sovereign credit and see today’s negative price actions as an opportunity to buy.
There is much more at the link.

Dubai default is about to be announced

Dubai Holding credit-default swaps rose to 1,175 basis points from 1,085 basis points, CMA Datavision prices show. CMA started to track Dubai credit swap at the beginning of this year.

Lending and investment banking in the Gulf are declining as oil prices and stock markets in Dubai and Abu Dhabi are hit by the worst global economic slump since the 1930s. Dubai is also bracing for a real-estate slowdown after a five-year boom as banks cut back on mortgage loans and speculators exit the market.

The largest state-owned companies in the United Arab Emirates -- of which Dubai is one of seven sheikhdoms -- have $20 billion of debt due this year, according to a Merrill Lynch & Co. report published in October.

“Will Abu Dhabi’s government, or even the federal government, follow this step by supporting banks in other emirates?” analysts led by Sofia El Boury at Shuaa Capital PSC, the U.A.E.’s biggest investment bank, wrote in a note released today. “At this point, we do not have a clear direction of how things will proceed.”

Thursday, 26 November 2009

A view - Lisa Strotts

IT was a bubble waiting to burst. For all the glitz and glamour, something about Dubai made me feel distinctly uncomfortable.

When I first visited four years ago Dubai was already a good few years into its frenzy of construction.

The city seemed to me no more than a dusty building site - it screamed environmental disaster.

Everywhere luxury hotels, apartment complexes and more were being thrown up with gay abandon.

As we toured one concrete and glass monstrosity after another I questioned who would fill the thousands of hotel beds.

The scale of the construction came crashing home to me, literally, as I took a breather from a late party at the luxury One & Only Royal Mirage Hotel.

It was 3am and as I strolled down to the beach the sound of the sea was drowned out by hammering.

Guests paying thousands of pounds were trying to sleep as workers toiled away building a hotel next door.

Millions of Brits WERE enjoying holidays in Dubai - drawn by the attainable luxury promoted by hotels including the iconic sail-shaped seven-star Burj Al Arab hotel.

Scorching weather was a given, hotel standards blew traditional Med resorts out of the water - if you didn't fancy any culture or natural wonder it was a great bet.

But as time went on and tourist numbers increased the nagging feeling kept returning. Why, four years after I first saw man-made archipelago The World, was it unfinished and unsold?

Deals to hotels previously thousands of pounds a night began arriving in my inbox.Dubai was on sale.

With the credit crunch, visitor numbers plummeted.

Officially, Brit visitors are down four per cent this year - unofficially, travel experts say it is nearer 15 per cent.

The famous QE2 ocean liner retired last year by Cunard, supposed to become a floating luxury hotel, may end up on the scrap heap.

Plans for Dubai versions of four American theme parks are now on ice.

The practice of pumping salt back into the sea from desalination plants has allegedly all but destroyed aquatic life close to shore.

Apart from sunshine and expensive shops, I can't see a reason to visit Dubai and many other destinations offer that - and more.

Until Dubai offers more than just ostentatious hotels with views of cranes its troubles could get a LOT worse.

What Dubai World owns?

What Dubai World owns

DUBAI PORTS WORLD: World's fourth largest port operator whose investments include Port Of Tilbury in Essex, Southampton Container Terminals, Churchill Dock in Belgium and Port Of Djibouti in Africa.

NAKHEEL PROPERTIES: Developer of The Palm Jumeirah (including Atlantis, The Palm hotel), World Islands, Universe Islands and owns retired ocean liner QE II.

LEISURE CORP: Owns PGA European Tour venues such as Jumeirah Golf Estates and South Africa's Pearl Valley Golf Estates.

ISTITHMAR WORLD: Dubai World investment arm that owns American department store Barneys.

Dubai World spent the boom years hoovering up trophy assets around the world, including golf courses and hotels.

Their subsidiaries own everything from Barneys department store in the US to the QEII liner. These could now be sold off as Dubai's sheikhs scramble to raise cash.

The financial problems stem from a massive bubble in Dubai's housing market - and the Ј36billion debt taken on by Dubai World during their buying spree.

Dubai is unable to repay $70 bn of debt... Another crisis?

Debt problems in Dubai struck financial markets hard on Thursday, sinking global stocks, lifting safe-haven bonds and driving the dollar higher.

Gold climbed to a new record high but fell back as the dollar rose. European shares had their worst daily loss in seven months.

Banking stocks came under particular pressure because of potential exposure to any bad debt in the Gulf, as did shares in European car companies, some of which are part-owned by sovereign wealth funds from the region.

Markets were trading without much input from the United States, where it was the Thanksgiving holiday.

Dubai said on Wednesday it wanted creditors of Dubai World and property group Nakheel to agree a debt standstill as it restructures Dubai World, the conglomerate that spearheaded the emirate's breakneck growth.

The announcement triggered widespread concern about the once-booming Gulf region's financial health, although some investors differentiated between leveraged Dubai and other more solidly wealthy emirates and countries in the region.

But the worries fed directly into a general nervousness in financial markets about the real state of the world economy at a time when investors are also seeking to lock in 2009 profits.

"The Dubai worries have played a major role in rattling market sentiment at a time when the U.S. is closed and we are not getting anything from anywhere else," said Peter Dixon, economist at Commerzbank.

"It is a day in which market uncertainty has been provoked again."

Others, such as Royal Bank of Scotland, said Dubai's bombshell meant investors would now have to "re-appraise the quality of sovereign support for state-owned entities in the region."

Dubai sought to ease some concerns about international port operator DP World DPW.DI, saying its debt was not included in the restructuring.

But markets stayed nervous and the cost of insuring debt through credit default swaps around the Gulf rose.

Tuesday, 17 November 2009

Dubai Property Prices Rise 7%

Dubai property prices rose in the third quarter for the first time since the emirate's property market crashed late last year, but are still almost 50% lower than a year earlier, U.K.-based real estate consultancy Colliers International said Tuesday.

Prices increased 7% between July and September from the second quarter -- the first price jump since the market fell from its peak in the third quarter of 2008, Colliers said in its quarterly price index, which collates mortgage transactions on properties open to foreign ownership since the start of 2007.
Here is a post from Emirates City Forum:

I was advised to contact my developer - and request that all PDC's be returned, which I would replace with cheques issued to the new Escrow account. Have been trying to contact the developer, and they say they need more time to set up the Escrow Account. My developer is Sweethomes.

Also, there was a post on Skyscraper City by Ajman_Lover - as follows - about the newly set up AJMAN RERA .... I am reposting below;

A good news for eveybody. From one of my real estate friend, I got some information about AJMAN RERA. The fulflashed office is started in OLD MUNICIPALITY BUILDING & full flash customer supprt office for AJMAN RERA started. Anybody affected peron can visit beween 8 AM to 2.00 PM at their office to lodge your compalint. The staff is very supportive to listen.

Still the office telephone number is not publised officially, so i am not liable for any change/authorised or not. But in interest of my beloved Ajman reputation among investors, anybody can try 009716-7444144 ( Telephone) & 06-7444145 ( Fax ).

One customer support executive communicate me that no need to pay any rest amount direct to developer. Lodge your complaint with the name of developer, who still not register for AJMAN ESCROW account,& this AJMAN RERA seems connected with Ajman rulars Court( Division of property Regulation).

So, give a big hand to AJMAN GOVT. for great initative & don't write bad for AJMAN.

The rest matters better you speak to AJMAN RERA suppott executive regarding PDC cheques return, CONSTRUCTION BASED PAYMENT etc. as I am not a investor.

Dynasty Zarooni is involved in the fraud

Dubai’s Public Prosecution is detaining Kabir Mulchandani, chairman of Dynasty Zarooni Real Estate, amid allegations he defrauded investors of up to 450 million U.A.E. dirhams ($123 million), according to lawyers for the investors, government officials and one of his business partners.

The first case relates to allegations that he conned a small group of wealthy investors into pledging large sums of money with the promise of a hefty monthly return.

The second case involves the selling of property at the AED2 billion Ebony and Ivory development in Dubai’s Jumeirah Lake Towers district. According to Salem Al Shaali, the lawyer handling the case at Dubai-based Al Shaali & Co., Mulchandani took deposits for 20% of the property but failed to deliver the project.

What is happening in Dubai Property Sector?

With Dubai property sector undergoing a transitional phase, companies are reviewing their project strategies, and developers are more cautious with their future investments on projects, as several mega-developments are now being reviewed.

For instance, Nakheel has announced that parts of the Dh.350bn Jumeirah Garden City, the Trump International Hotel, the Tower on Palm Jumeirah, and the kilometer-high tower will be put on hold.

Even work on 'The Universe' will be restricted to preliminary studies, Nakheel said. Decrease in liquidity and financing has led to delay in progress of such projects, resulting in these projects bearing the brunt of financial turmoil. The mega-projects that had earlier brought about a property boom in Dubai, have now been put on hold.

Limitless too, revealed that it is reviewing construction schedule of Arabian Canal. The Head of Dubai's RERA, Marwan bin Galita, said that developers need to review their projects which are yet to be launched for sale. Recession is a very crucial phase, and RERA had been urging developers to do this about a year back, Galita said.

The Chairman of Crisis Management Committee, Mohammad al Abbar, last week said that it would pull back on its building spree due to the current financial crisis. Apart from backing out of its projects, Nakheel has also laid off 500 employees, constituting 15 percent of the company's work-force. All the 500 employees were offered redundancy package, including outplacement support services to assist them during this transitional phase.

Better Homes, Damac and Omniyat too, have followed suit, with Better Homes axing 50 jobs, Omniyat with 69 jobs, and Damac laid off 200 jobs, with the drop in demand for properties.
Meeras however, said that it does not have plans for lay-offs at the moment.

According to analysts, about 819 employees have lost their jobs in the Dubai real estate sector till date, with more to follow. However, the Head of Research and Consultancy at Cluttons, Matthew Green, said that these happenings are not restricted to the realty sector alone, and few other major corporate too, have announced staff reductions.

In the meanwhile, the time is now appropriate for small developers to join hands to bring confidence back into the market, say analysts.

A member of Financial Crisis Committee said that Dubai has been witnessing plenty of defaults on high-end properties with worsening financial conditions, and there are possibilities of merger among smaller developers. Even Head of RERA, Marwan bin Galita, agrees that merger between small companies would bring in more confidence, as good mergers in any sector adds more value to the sector.

The developers, Union Properties and Deyaar, although denied talks about any plans of merger, they were unable to comment on whether the government would order their merger.

Secondary prices in Dubai and Abu Dhabi fell 4 to 5 percent in October from the previous month, while the villa prices of Dubai dropped by 19 percent, under strict lending conditions, according to a recent HSBC statement.

The "off-plan" market is not doing too well, due to market speculations. Few of the banks have stopped financing, while few developers are said to be demanding exorbitant prices. However, the prices of "affordable" off-plan properties may pick-up during second quarter of 2009, if the banks improve on their lending, Bin Galita said.

RERA is likely to implement a new law on registration of off-plan properties next week.

On the whole, Dubai real estate sector has met with stringent mortgage lending measures, liquidity crunch, and real estate slowdown during recent months. The indications of property boom in Dubai, have atleast, temporarily halted, and developers are seen scaling back on their projects, while jobs are cut and property prices have plummeted.

Monday, 16 November 2009

Luxury Villa in Dubai

If you are looking for a luxury villa in Dubai, then I recommend visiting the following Luxury Real Estate Companies:

How Dubai has lost its sparkle for one UK jeweller

For successful London jeweller Nadeem Osman, Dubai had all the bling in the world. Like thousands of others, he loved the city's fast life, with its sports cars, glitzy shopping malls and super-luxury hotels. And, of course, its sun and fabulous beaches.

The 37-year-old businessman from Balham, South London, holidayed there at least twice a year with his wife and even thought of moving there eventually, away from the rain and cold of England.

So 14 months ago, as an investment on the side, Mr Osman decided to buy four apartments in the city, which he planned to rent and also use as his holiday homes.
Losing its sparkle: Jeweller Nadeem Osman bought four flats in Dubai last year, just before the property market there crashed

Losing its sparkle: Jeweller Nadeem Osman bought four flats in Dubai last year, just before the property market there crashed

He paid £580,000 for two off-plan apartments in Villa Caria, a residential block in Jumeirah South, and two more in a proposed hotel on the Dubai Waterfront, known as Hotel K. But his timing could not have been worse, with the Dubai property market then going into free fall: down 32 per cent in the first quarter of this year and 47 per cent in the second, according to Knight Frank.

Assetz, a property investment company, estimates that the fall may reach 70 per cent this year. Mr Osman bought the apartments through Dynasty Zarooni (DZ) - one of the city's biggest real estate companies, with a portfolio of properties worth £219million.

He paid the full sum upfront, assured that the money would be put into an escrow account which protects a buyer's money until the work is complete.

In January, one of the directors of DZ was arrested on a £60million fraud allegation - and since released without charge - but work on Hotel K has not even started. It is scheduled to finish by 2011. The company does not even own the land on which it was to be built.

Villa Caria was supposed to be completed by the end of this year, but DZ has told him it may take a further two years. Mr Osman has also been told that his money was not put into an escrow account, and he is unable to get any back.

'I don't know what to do,' he said. 'If it was in this country I could do something about it, but in Dubai it's so difficult as there is a huge backlog in the courts.' Dynasty Zarooni has declined to comment after repeated attempts to contact it. Mr Osman has now formed a group with ten other investors to decide whether to take legal action or file a criminal case.

Dubai's courts are struggling with a mountain of property cases totalling £3billion - as much as £500million may involve British investors.

Stuart Law, of Assetz, says Britons, who were the largest Western investors, were partly responsible for the crash as they inflated prices through their highly geared buy-to-let schemes.

'We've known of properties that were sold again and again about ten times one after another - it was good as each person made a profit, but the person who was left with the contract at the last was in trouble,' said Mr Law.

Tuesday, 3 November 2009

Welcome to Debt City

Default on a loan or bounce a check in Dubai and you could end up in debtors’ prison.

That was the very Dickensian prospect facing Simon Ford, a boyish British entrepreneur whose “alternative gift” business sold rides in hot air balloons and Formula 1 racing cars to the party crowd in this Disneyesque city-state. But the recession has hit Dubai hard and Ford’s business foundered.

When his loans came due last June, he did what thousands of other expats have done. He packed up his family and fled — a few hours ahead of the law.

Ford also left behind an anguished “open letter” to friends and creditors that neatly encapsulates the predicament of many expats in Dubai who took out loans during the flush times and now find themselves out of work and unable to keep up with the payments on their seaside villas and luxury cars.

“I am not running away from debt, I am purely protecting those dearest to me and getting out of a country which, due to the lack of structured bankruptcy laws and a banking system which has zero flexibility on loan repayments, drives people to make horrible decisions,” he wrote in an open letter to local media.

He promised to repay all of his creditors.

Dubai authorities won’t say precisely how many people have been jailed for their debts, but local news accounts put the number at about 1,200 — more than 40 percent of the total prison population.

Even trickier to gauge is how many others took Ford’s route and simply fled. Judging by the number of apparently abandoned BMW’s and Mercedes gathering dust on city streets and the ensuing chatter on expats’ discussion boards, the number is not insignificant.

One recent escapee has written a book about his flight. Herve Jaubert, a former French intelligence agent who used to cruise around Dubai in a red Lamborghini, found the law breathing down his neck after his plans to manufacture “luxury submarines” became submerged in debt.

Jaubert explains that he bolted last year after government interrogators threatened to stick needles up his nose. With 007 panache and a woman’s all-encompassing burqa concealing his frogman gear, Jaubert slipped into the sea, swam out to a police patrol boat and disabled its fuel line so that it could not give chase. He then used a rubber dingy to get safely beyond the UAE’s territorial waters where he was met by a confederate in a sailboat. Eight days later they landed in India.

The book, “Escape from Dubai” comes out next month. But Jaubert’s website has been blocked in Dubai and sale of his book will no doubt be banned here. The Frenchman, now living in Florida, was tried in absentia and sentenced to five years imprisonment for fraud.

A number of U.S. citizens have been imprisoned for bounced checks, but the American Embassy — apparently in keeping with the local custom of casting a veil of silence over disturbing news — declined to provide specific figures.

Reprinted from Global Post

The Dark Side of Dubai

Karen Andrews can't speak. Every time she starts to tell her story, she puts her head down and crumples. She is slim and angular and has the faded radiance of the once-rich, even though her clothes are as creased as her forehead. I find her in the car park of one of Dubai's finest international hotels, where she is living, in her Range Rover. She has been sleeping here for months, thanks to the kindness of the Bangladeshi car park attendants who don't have the heart to move her on. This is not where she thought her Dubai dream would end.

Her story comes out in stutters, over four hours. At times, her old voice – witty and warm – breaks through. Karen came here from Canada when her husband was offered a job in the senior division of a famous multinational. "When he said Dubai, I said – if you want me to wear black and quit booze, baby, you've got the wrong girl. But he asked me to give it a chance. And I loved him."

All her worries melted when she touched down in Dubai in 2005. "It was an adult Disneyland, where Sheikh Mohammed is the mouse," she says. "Life was fantastic. You had these amazing big apartments, you had a whole army of your own staff, you pay no taxes at all. It seemed like everyone was a CEO. We were partying the whole time."

Her husband, Daniel, bought two properties. "We were drunk on Dubai," she says. But for the first time in his life, he was beginning to mismanage their finances. "We're not talking huge sums, but he was getting confused. It was so unlike Daniel, I was surprised. We got into a little bit of debt." After a year, she found out why: Daniel was diagnosed with a brain tumour.

One doctor told him he had a year to live; another said it was benign and he'd be okay. But the debts were growing. "Before I came here, I didn't know anything about Dubai law. I assumed if all these big companies come here, it must be pretty like Canada's or any other liberal democracy's," she says. Nobody told her there is no concept of bankruptcy. If you get into debt and you can't pay, you go to prison.

"When we realised that, I sat Daniel down and told him: listen, we need to get out of here. He knew he was guaranteed a pay-off when he resigned, so we said – right, let's take the pay-off, clear the debt, and go." So Daniel resigned – but he was given a lower pay-off than his contract suggested. The debt remained. As soon as you quit your job in Dubai, your employer has to inform your bank. If you have any outstanding debts that aren't covered by your savings, then all your accounts are frozen, and you are forbidden to leave the country.

"Suddenly our cards stopped working. We had nothing. We were thrown out of our apartment." Karen can't speak about what happened next for a long time; she is shaking.

Daniel was arrested and taken away on the day of their eviction. It was six days before she could talk to him. "He told me he was put in a cell with another debtor, a Sri Lankan guy who was only 27, who said he couldn't face the shame to his family. Daniel woke up and the boy had swallowed razor-blades. He banged for help, but nobody came, and the boy died in front of him."

Karen managed to beg from her friends for a few weeks, "but it was so humiliating. I've never lived like this. I worked in the fashion industry. I had my own shops. I've never..." She peters out.

Daniel was sentenced to six months' imprisonment at a trial he couldn't understand. It was in Arabic, and there was no translation. "Now I'm here illegally, too," Karen says I've got no money, nothing. I have to last nine months until he's out, somehow." Looking away, almost paralysed with embarrassment, she asks if I could buy her a meal.

She is not alone. All over the city, there are maxed-out expats sleeping secretly in the sand-dunes or the airport or in their cars.

"The thing you have to understand about Dubai is – nothing is what it seems," Karen says at last. "Nothing. This isn't a city, it's a con-job. They lure you in telling you it's one thing – a modern kind of place – but beneath the surface it's a medieval dictatorship."

II. Tumbleweed

Thirty years ago, almost all of contemporary Dubai was desert, inhabited only by cactuses and tumbleweed and scorpions. But downtown there are traces of the town that once was, buried amidst the metal and glass. In the dusty fort of the Dubai Museum, a sanitised version of this story is told.

In the mid-18th century, a small village was built here, in the lower Persian Gulf, where people would dive for pearls off the coast. It soon began to accumulate a cosmopolitan population washing up from Persia, the Indian subcontinent, and other Arab countries, all hoping to make their fortune. They named it after a local locust, the daba, who consumed everything before it. The town was soon seized by the gunships of the British Empire, who held it by the throat as late as 1971. As they scuttled away, Dubai decided to ally with the six surrounding states and make up the United Arab Emirates (UAE).

The British quit, exhausted, just as oil was being discovered, and the sheikhs who suddenly found themselves in charge faced a remarkable dilemma. They were largely illiterate nomads who spent their lives driving camels through the desert – yet now they had a vast pot of gold. What should they do with it?

Dubai only had a dribble of oil compared to neighbouring Abu Dhabi – so Sheikh Maktoum decided to use the revenues to build something that would last. Israel used to boast it made the desert bloom; Sheikh Maktoum resolved to make the desert boom. He would build a city to be a centre of tourism and financial services, sucking up cash and talent from across the globe. He invited the world to come tax-free – and they came in their millions, swamping the local population, who now make up just 5 per cent of Dubai. A city seemed to fall from the sky in just three decades, whole and complete and swelling. They fast-forwarded from the 18th century to the 21st in a single generation.

If you take the Big Bus Tour of Dubai – the passport to a pre-processed experience of every major city on earth – you are fed the propaganda-vision of how this happened. "Dubai's motto is 'Open doors, open minds'," the tour guide tells you in clipped tones, before depositing you at the souks to buy camel tea-cosies. "Here you are free. To purchase fabrics," he adds. As you pass each new monumental building, he tells you: "The World Trade Centre was built by His Highness..."

But this is a lie. The sheikh did not build this city. It was built by slaves. They are building it now.

Reprinted from

Monday, 2 November 2009

Recovering your Dubai Investments from Fraud and Scam

How to avoid Fraud and Scam when investing in the Dubai and Ajman?
You shall avoid this companies and it owners by any means

3D Ventures - h
Mr. Ali Anwar

Fraudulent projects in Dubai - Crown Avenue, R&R Tower
Fraudulent projects in Ajman - Emirates Pearls

Rockland Real Estate -
Fraudulent projects in Dubai - Cordoba Palace, SP Oasis, Rockland Residence

Remember, investing in these projects is a high-risk and shall be avoided.
They have collected million dollars from investors and are hiding from investors.

If you have invested with those companies - you should join a discussion group to unite with other investors:

Empty properties in Dubai - but no sign of reducing rents

I don't understand why a landlord would keep his property empty with no hope of recovery in the near future. Just take a trip around the new developments - you can see so many completed...

IT seems like Dubai landlords are still hoping for quick recovery. As we can see from the reviews and advices from international real-estate companies, the future of Dubai Real Estate is still very shaky and further price decreases are waiting to come.

Dubai Real Estate Could Fall Another 30 Percent

There will be no recovery in the Dubai property market in 2010 with prices falling up to 30% in 2010, according to an economist who accurately predicted the credit crunch.

Eckart Woerts, a senior economist at think tank the Gulf Research Center who is currently lecturing at Princeton University in the US, said the global economy is in for a big surprise and as a result the already depressed real estate sector in Dubai faces more misery.

‘Are we out of the woods in Dubai? I don’t think so.

There are so many projects coming on stream. I don’t see a recovery.

My initial take was a decline of 60 to 80%.

We have had 50% so maybe we have another 10 to 30% to go measured against the old high,’ he says in an interview to be published in Arabian Business magazine on Sunday. (Nov 1)

‘A lot of the crash has already happened, but don’t think about the old highs, because that is a price you will not see for a very, very long time,’ he adds.

Unlike many economists predicting a recovery from the global economic downturn in 2010, Woertz said that a time lag between state stimulus packages ending and real demand picking up will cause further problems in 2010.

‘We have some stabilization going on, but the problem is this is mainly attributable to government spending and stimulus.

But what happens when the stimulus peters out? Because the job market looks awful.

So the spending cannot come from private households under such conditions,’ he explains.

‘For the real economy, we are in for a nasty surprise in 2010.

We could see several consecutive bottoms rather than a miraculous recovery,’ he adds.

But even when the global economy does recover it will not necessarily mean the start of an upturn for Dubai’s property prices, Woertz says.

‘Dubai has high inventories.

Just based on end user demand, without the speculative hype, you can probably have quite a few people moving back to the city without the market moving at all.

The point is, you shouldn’t calculate the price of real estate based on your opinion of the market and the hope that you will sell to a bigger fool than you for a higher price,’ he adds.

But he believes that the property market downturn could prove to be good news for Dubai in the long run.

‘It is good for Dubai that the real estate is going down in the sense that it was pricing itself out of the market.

It is a model trading hub. Dubai does things much more efficiently and better than neighboring countries.

There is a need and demand for business services made in Dubai.

But not at the price of yesterday which needed to be high because of ridiculous real estate prices,’ he concludes.

This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.

Friday, 11 September 2009

In spite reports of recent growth, the real estate sector in UAE remains "uncertain"

In spite reports of recent growth, the real estate sector in UAE remains "uncertain", according to a consensus of real estate brokers.

Simon Kylie, head of research at emerging market specialist Real East Watch, advised investors to take a cautious approach as there are no "solid fundamentals" underpinning the industry.

His comments follow news the emirates have seen the highest level of sales activity since 2008, according to new data from real estate consultancy Landmark Advisory.

Mr Chadd noted these figures may indicate the market is "stabilising", but said: "It would be a brave person to suggest that now is the time to invest in Dubai."

Those still keen to buy should opt for one or two-bedroom properties as these offer the best chance of receiving a high return on investment, he added.

In Abu Dhabi, meanwhile, Landmark Advisory's figures suggest prices of villas remained stable, while lower-priced properties declined by up to five per cent.

Thursday, 20 August 2009


I see that ARRA (Ajman Real Estate Authrotiy) made a facelift to its site - it is available at
Does this mean they will review the fraudster developers and make real interventions?

Any comments on that?

30,000+ surplus residential units in Dubai

According to a JP Morgan report, a surplus of 31,000 residential units could be recorded in Dubai, mainly due to the decline in expatriate population, while the shortage of units in Abu Dhabi is hoped to rise to 28,000 by the year-end.

In the short-term, the non-residential sector in the UAE will continue to be under pressure, owing to global financial crisis. However, historical shortage of both retail and commercial space in Abu Dhabi has kept tab against fall in leasing rates well below Dubai, reveals an investment bank report on MENA (Middle East North Africa) real estate.

Ever-since its peak during mid-2008, the average transaction volumes are down by 60 percent during the first half of 2009, compared to that during same period in 2008. Despite the slight pickup in transaction volumes recently, the supply overhand in Dubai property sector will touch 28,500 by end of the year, because of the modest economic forecast and negative population growth estimates, JP Morgan said.

Furthermore, after 2009, the JP Morgan says that the forecast of 3.5 percent population growth for Dubai is unlikely to absorb the surplus residential units, which according to Colliers International, will total to 25,000 per annum in the next three years.

However, given Dubai's large infrastructure investment, the city's positioning which makes it accessible to neighbouring economies out of which few are facing economic challenges, and Dubai being a liberal tax-free business-friendly destination, a surprise demand recovery from regional investors, exposed to less stable geo-political environments, cannot be ruled out, the Bank concludes.

Contrastingly, the short-term supply of homes in Abu Dhabi is fairly limited. The high occupancy levels are unlikely to ease from near 100 percent any time soon, the Bank said.

Sunday, 2 August 2009

Dubai’s real estate sector will continue to see price drops until the second quarter of 2010.

A recent report by credit-rating agency Moody’s claims that Dubai’s real estate sector will continue to see price drops until the second quarter of 2010. “The Dubai property market remains subdued following the fall-out from the credit crunch and the global recession,” it says.

Dust sweeps across the UAE

August 02, 2009 - Abu Dhabi

The slow-moving dust cloud that settled on the Emirates before the weekend is expected to dissipate by Tuesday.

However, there may be only a brief respite, as more winds are expected to blow towards the UAE from northern Iraq, where the dust originates.

“The problem now is dust is starting again in that area,” said Ahmed Habib, a meteorologist with the National Centre for Meteorology and Seismology.

“There is another one coming from Iraq, but we will wait to determine when exactly it will come here.”

Visibility in most parts of the country yesterday was around 1,000m, although it was reduced to 300m in the west. Mr Habib said the lack of wind meant that the dust was suspended in the air and that visibility would improve only by a few hundred metres a day.

“Wind is light and moving to the south-east, so it’s dissipating gradually,” he said.

“When wind is light to moderate, it means very gradual movement.”

The light winds mean that fishermen at least will still be able to take small boats to sea despite the poor visibility, he said.

In the meantime, asthma sufferers were warned to avoid exposure to the dust. “It’s better to keep in the house today,” he said.

Mr Habib also cautioned motorists to be vigilant on the roads.

From Iraq, the haze moved towards Kuwait and over the Arabian Sea and eastern Saudi Arabia, then over Bahrain and Qatar before blowing to the UAE, Mr Habib said.

In Saudi Arabia, hospital emergency rooms were “packed” over the weekend with people complaining about breathing problems, according to Arab News.

The newspaper quoted a nurse at Dammam hospital saying the facility “received children and elderly men and women with choked throats and breathlessness ... many of them with a history of asthma”.

The patients were put on nebulisers to clear their choked lungs.

It followed six fatalities on Thursday in road accidents caused by the poor visibility in the kingdom’s Eastern Region, the paper added.

In Baghdad, the Iraqi capital, a heavy sandstorm flooded hospitals with people suffering from respiratory problems. Health officials said patients complained about shortness of breath and other problems.

Work restarted on Dubailand's mid income homes

Construction work has started again on Queue Point in Dubailand after delays forced the developer to put the project on hold earlier this year. Al Mazaya said on Sunday that work had resumed on all buildings in the project, which is aimed at middle income earners, and that delivery was set for 2010.

Sunday, 26 July 2009

The Seven Immutable Laws of Bubbles: Example, Housing in USA, UK & Dubai

The cycle of bubble and bust in housing is drawing to a close. For many the ferocity of the bust and the collateral damage that followed was a shock, but bubbles and busts are not new; chances are there will be more.

I got interested in bubbles in early 2008 trying to figure out why my model of real estate prices that had worked perfectly for ten years was saying that prices in Dubai which is where I was at the time, "should" have been 30% less than where they were.

This is what I found out:

Law #1: All bubbles need a catalyst, like a stone to throw into a still pond.

Bubbles start in "good times", typically GDP is going up and people have money to spend and invest, so money starts chasing assets and if it takes time for the supply of those assets to increase, prices go up.

For example, the fundamental price of housing long-term is exactly equal to nominal GDP per house divided by a function of long-term interest rates ( When nominal GDP goes up a lot faster than the supply of housing does, then the price of housing goes up; that's supply and demand, there is nothing wrong with that but it's the pebble in your hand; just you didn't throw it yet.


Dubai rental prices decrease as some sale prices stabilise

Property units in areas seen as prestige developments and those that offer completed amenities and ease of commuting access to business zones have begun to see an increase in pricing, as buyers in the Dubai market continue to increasingly highlight differentiation between communities, according to a market report.

Properties on the Palm Jumeirah, which suffered some of the largest falls in price during Q4 2008 and Q1 2009, may be showing signs of stabilisation, driven by the slowdown in 'distressed' units coming onto the market, Dubai-based property services group Asteco has said.

Emirates Financial Tower - July 26 Construction Update

Emirates Financial Towers, Dubai International Financial Centre (DIFC)
The proposed development on Dubai International Financial Centre (DIFC Plot CP-06)

will be a mixed development with 61,300 sqm of Gross Floor Area, and over a million square feet of gross building area.

The massing of the project will consist of two towers linked by a tubular glass sky bridge. Both almost identical towers will sit on a four-storey podium and a four-storey basement. The podium will comply with the master plan for DIFC in that it will be physically attached to the neighboring plot as well as the retail mall. Below ground, the basements are intended to allow links to the central services, parking and services along the central spine of DIFC.

The elliptical plan profile will allow the shape of the towers to appear different depending on the angle at which the development is viewed from. The sky bridge will also be a distinct feature both from within and beyond the development.

The Towers and Sky Bridge
The two towers are elliptical in plan profile and identical in height. Both towers, each twenty seven-storeys high, will be commercial offices. Piercing the two towers at the 18th floor is the glass tubular sky bridge, which will house a commercial club.

The Podium
The podium and basement will contain the retail component and parking for the entire development. This parking will be able to accommodate four hundred cars.

Part of the podium abutting the retail spine is designed as terraces that will allow light, air and greenery into the retail elements. This will allow opportunities to enliven the retail experience with waterfalls, landscaped features, natural light and outdoor activities such as al fresco dining.

The sensuous and aerodynamic curves of the tower will complement yet distinguish itself from the hard edge buildings increasingly common in the competitive Dubai Skyline. The sculptural profile of the elliptical towers, the sky bridge, and the distinct angles of tower tops will allow the development to define its presence and identity while adding and complementing Dubai's already impressive skyline and cityscape

Sunday, 19 July 2009

Ajman and Dubai to be linked by Water Taxi service

The Ajman Municipality, together with Dubai RTA, plans to launch the water taxi service to link the two emirates. The Ajman Municipality had submitted a proposal regarding this to the RTA, which promptly accepted the joint project.

Ajman-Dubai Water Taxi service will get operational by the beginning of next year, with one million commuters expected to be transported annually.

About 30 percent of water taxi project has been completed at present. The first phase of the project will cost Dh.30million, and the RTA has so far approved 17 stops from Ajman. The first phase will include 10 stops, while the second will include 17, apart from the stops in Ajman.

In Ajman, the Municipality has chosen two locations to construct taxi stops – the Ajman Corniche and the Fish Market. The stops will be easily accessible to commuters from several pasts of the emirate and will be equipped with all necessities such as air-conditioning and vender machines, seats for snacks and soft drinks.

The project aims to develop the areas around the taxi stops, in which restaurants, cafeterias and other outlets will be constructed to attract investors. Booking services will also be available through phones. Commuters can hire taxis from the stops, or they could be rented for tourism purposes between the two emirates.

The project will also help ease traffic congestion between the emirates and is hoped to boost tourism.

Problems with Dubai Property sector

Dubai´s property market which already saw a plunge of more than 40 percent in the first quarter of 2009 suffered another blow after a respected ratings agency forecasted that the country is in debts that it may have trouble repaying.

According to a report by Property Frontiers, Standard & Poor´s Ratings Service (S&P) downgraded ratings for three government backed entities, namely, port operator DP World, the Jebel Ali Free Zone and Dubai Multi Commodities Centre Authority, putting the trio on credit watch since April.

“The rating actions reflect Standard & Poor’s reappraisal of the likelihood of extraordinary financial support by the Government of Dubai to ensure the timely repayment of their financial obligations,” the agency told Property Frontiers.

S&P said the reappraisal also was the result of “increased uncertainty in regards to the government’s willingness to provide such support” to Nakheel, the property developer who built Dubai’s manmade islands.
On a separate report by Property Wire, the downturn in the property market in Dubai has resulted in about 400 people losing their jobs at major developer, Nakheel.

Property Wire reported that Nakheel, whose ambitious projects include the Palm Islands, has made the latest redundancies on top of 500 that were carried out in December.

´Nakheel continues to re-adjust its current business objectives to match supply and demand in the most effective way,´ a company spokesman told Property Wire.

Developers, who were mostly reliant on off-plan sales to finance the construction of their projects, have struggled to collect payments, leading to rising defaults, while payments to suppliers have been delayed.

High profile development projects have also been delayed and it is estimated that currently over £335 billion of projects have been halted or are on hold.

Dubai´s real estate market is the second worst performing housing market according to a global housing price research, coming in 44th in ranking – second only to Latvia.

S&P said the downgrades “reflect our view of the stand-alone credit profiles of the entities, which in certain instances, we consider to have deteriorated.”

New procedure for UAE visit visas from 1st August 2009

Beginning next Tuesday, applications will be filed for new visit visas which were revamped under a Federal ruling last June, revealed an official at senior residency department.

The new fee schedule for visas ranging from visit visas to medical treatment visas, which should have been effective from 1st August, has been postponed due to the weekend holidays (30th July is an official government holiday). The rules are applicable to nationalites, requiring sponsorship for arriving in the country.

The DNRD (Dubai Naturalization and Residency Department) and the Economic Department will meet with representatives of tourist agencies, hotels, educational institutions and hospitals on Wednesday to brief them regarding the implementation of changes.

The Director-General of DNRD, Maj. Gen. Mohammad Ahmad Al Merri, has reiterated the fact that visitors should hold health insurance coverage, while the sponsors will have to pay a refundable deposit of Dh.1000.

The Visit visa holder will be permitted to enter UAE once in two months from the date of issuance of visa. As per the amendments, there will be 16 new types of visas.

Residents can seek visas for their spouse or blood relative. Expatriates will not be permitted to sponsor friends, while sponsoring blood relative will need prior permission of a senior officer.

As per the new regulations expatriates will not be eligible to apply for relatives seeking to enter UAE for any medical treatment. Only hospitals are allowed to do this.

New Visa Fees are as follows (in Dirrhams)
Short Entry (visit) Visa - 500 (1 month)
Long Entry (visit) Visa - 1,000 (3 months)
Multiple Entry Visa - 2,000
Entry Visa for Study - 1,000
Renewal of Study Visa - 500
Entry Visa for Medical Treatment - 1,000
Renewal of Medical Treatment Visa - 500
Entry Visa for Expos and Conferences - 100
Tourism Entry Visa - 100
Renewal of Tourism Visa - 500
Entry Visa for GCC State Residents - 100
Renewal of GCC State Resident's Visa - 500
Entry Visa for GCC State Resident's Companions - 100
Renewal of GCC State Residents Companions' Visa - 200
Mission Entry Visa - 200
Transit Entry Visa - 100

Thursday, 16 July 2009

Burj Dubai - July 02 2009

The most beatiful bulding in Dubai - filmed on July 02, 2009

Friday, 10 July 2009

Donald Trump - Dubai Tower

Donald Trump is one of the world’s most successful businessmen, with an impressive international property portfolio. Speaking from the Trump Tower boardroom in New York, he tells us about his latest venture in Dubai

Why have you bought in Dubai?

Dubai is a splendid place, which I’ve been to many times. Trump Tower Dubai is a project I’m involved with along with the property developers, Nakheel. It is unbelievable, it will be the best in the world.

Do you actually own there yourself, or are you just putting your name to the venture?

No, I’m keeping one of the apartments there for myself. I love the city, it’s a hot place, it’s a great place, and there will not be any other buildings or locations like it. People from around the world tend to buy wherever I build, so it represents a great investment.

Surely you must have one of the luxury penthouses?

No, it’s just an apartment. The penthouses are already in great demand and are setting property rice records at £3,000 per square foot which, for what they are getting, is an incredible bargain.

We’ve heard all about your plans for a golf development in Aberdeen, Scotland, being on hold because of various environmental issues. Has your experience there put you off developing?

Certainly not! We have 97 per cent agreement and are confident that it will go ahead – we’re swaying them! That course will be one of the world’s finest. I now even have the great 007, Sean Connery, on my side, which I’m very happy about. I certainly wouldn’t want him against me!

How does developing in Dubai compare with, say, developing in New York?

In Dubai they are building in the ocean, which has never been seen before – it’s really spectacular, a real engineering feat. I love building and I love engineering. I come from a country that likes to get things done but it’s now very hard to get things done in the US. With planning constraints, you couldn’t do what we’re doing in Dubai here in New York so I’ve great respect for what they’re achieving out there Your current portfolio includes the Grenadines, Seoul, São Paulo, Istanbul, Punta Bandera in Mexico, Cap Cana in the Dominican Republic, Tel Aviv, Toronto and Puerto Rico.

Wherever next?

We are looking at other things but I don’t want to say where until the contracts are signed. We want to make sure that Trump Tower Dubai is the great success which we know it will be, then we will be looking at other things, ideally with Nakheel.

Are there any destinations which you wouldn’t touch?

There are but I wouldn’t like to insult anyone by naming them.

With much of the world suffering an economic downturn, do you think your timing on this project is good?

I think the timing on this is great as Dubai is doing so well. Most of the USA’s not doing so well, although places like Manhattan are unique. I just sold a house in Palm Beach, Florida for over $100 million – that’s another unique area.

You front the original, American version of The Apprentice. Who is meaner, you or Sir Alan Sugar?

We’re different but I think he’s terrific and does a good job. We had plenty of choice for the UK show, lots of people wanted to do it but I think we made the right decision when we hired him.

You are involved in so many diverse products, from clothes to casinos even water and vodka. Which of your business interests gives you the most pleasure?

I take great pleasure in all of them, but I really hope the golf development works out in Scotland. The Apprentice has been great for the Trump brand – we’re all about quality and the show highlights that, all over the world.

You have numerous holiday homes around the world, and have just added to them with this latest Dubai property. Do you plan on taking many holidays there?

I’ll be visiting for business and to play golf, which I love – but no, I don’t take too many holidays. What do you like doing in your rare moments off? I love all sports, golf, tennis and soccer – or football as you call it in Europe.

Ajman - new building regulation

A new Law issued by H H Shaikh Saud bin Saqr Al Qasmi, the Crown Prince and Deputy Ruler of Ras Al Khaimah, will bring in better regulation to the building sector in the emirate.

According to Law No.1 of 2009 for regulation of buildings in the emirate, it will be applicable to all buildings, except those that come under special decree or resolution.

The Law does not permit anybody to construct a building or make additions, or expansion, or partly or wholly demolish it, or make any modifications, whether on the facet or internal divisions, without prior permission from the authorized section of emirate’s municipality.

The law is applicable to a range of topics dealing with buildings, such as designs, construction, architectural standards, specifications, license, additions, expansions, maintenance, safety, and penalties for breaching provisions of the law.

As per the law, the construction permit will remain valid for a period of one year from the date of issuance and will be considered void, if no construction happens on the site within the said period or if the work is stopped for more than six months, without valid reasons. The permit can be renewed within 30 days following expiry.

The Architect is responsible for the safety of the building for ten years after delivery. The Municipality Chairman has the right to instruct the concerned authorities to remove unlicensed caravans, pounds, and makeshift houses when their owners fail to do so after expiry of the grace period given to them.

Based on the Technical Committee recommendations, the Municipality Chairman can also order demolition of any worn-out buildings or facilities that may pose danger to inhabitants and passers-by or harm the environment and public health.

The law will be implemented within a month after its issuance and will be published in the gazette.

Monday, 6 July 2009


From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again


The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled-dry American empire, reads like a Who's Who of Goldman Sachs graduates.

By now, most of us know the major players. As George Bush's last Treasury secretary, former Goldman CEO Henry Paulson was the architect of the bailout, a suspiciously self-serving plan to funnel trillions of Your Dollars to a handful of his old friends on Wall Street. Robert Rubin, Bill Clinton's former Treasury secretary, spent 26 years at Goldman before becoming chairman of Citigroup - which in turn got a $300 billion taxpayer bailout from Paulson. There's John Thain, the rear end in a top hat chief of Merrill Lynch who bought an $87,000 area rug for his office as his company was imploding; a former Goldman banker, Thain enjoyed a multibillion-dollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain's sorry company. And Robert Steel, the former Goldmanite head of Wachovia, scored himself and his fellow executives $225 million in golden parachute payments as his bank was self-destructing. There's Joshua Bolten, Bush's chief of staff during the bailout, and Mark Patterson, the current Treasury chief of staff, who was a Goldman lobbyist just a year ago, and Ed Liddy, the former Goldman director whom Paulson put in charge of bailed-out insurance giant AIG, which forked over $13 billion to Goldman after Liddy came on board. The heads of the Canadian and Italian national banks are Goldman alums, as is the head of the World Bank, the head of the New York Stock Exchange, the last two heads of the Federal Reserve Bank of New York - which, incidentally, is now in charge of overseeing Goldman - not to mention ...

But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain - an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.

The bank's unprecedented reach and power have enabled it to turn all of America into a giant pump-and-dump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere - high gas prices, rising consumer-credit rates, half-eaten pension funds, mass layoffs, future taxes to pay off bailouts. All that money that you're losing, it's going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it's going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth - pure profit for rich individuals.

They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They've been pulling this same stunt over and over since the 1920s - and now they're preparing to do it again, creating what may be the biggest and most audacious bubble yet. ...


Goldman wasn't always a too-big-to-fail Wall Street behemoth, the ruthless face of kill-or-be-killed capitalism on steroids - just almost always. The bank was actually founded in 1869 by a German immigrant named Marcus Goldman, who built it up with his son-in-law Samuel Sachs. They were pioneers in the use of commercial paper, which is just a fancy way of saying they made money lending out short-term IOUs to small-time vendors in downtown Manhattan.

You can probably guess the basic plotline of Goldman's first 100 years in business: plucky, immigrant-led investment bank beats the odds, pulls itself up by its bootstraps, makes shitloads of money. In that ancient history there's really only one episode that bears scrutiny now, in light of more recent events: Goldman's disastrous foray into the speculative mania of pre-crash Wall Street in the late 1920s.

This great Hindenburg of financial history has a few features that might sound familiar. Back then, the main financial tool used to bilk investors was called an "investment trust." Similar to modern mutual funds, the trusts took the cash of investors large and small and (theoretically, at least) invested it in a smorgasbord of Wall Street securities, though the securities and amounts were often kept hidden from the public. So a regular guy could invest $10 or $100 in a trust and feel like he was a big player. Much as in the 1990s, when new vehicles like day trading and e-trading attracted reams of new suckers from the sticks who wanted to feel like big shots, investment trusts roped a new generation of regular-guy investors into the speculation game.

Beginning a pattern that would repeat itself over and over again, Goldman got into the investment-trust game late, then jumped in with both feet and went hog-wild. The first effort was the Goldman Sachs Trading Corporation; the bank issued a million shares at $100 apiece, bought all those shares with its own money and then sold 90 percent of them to the hungry public at $104. The trading corporation then relentlessly bought shares in itself, bidding the price up further and further. Eventually it dumped part of its holdings and sponsored a new trust, the Shenandoah Corporation, issuing millions more in shares in that fund - which in turn sponsored yet another trust called the Blue Ridge Corporation. In this way, each investment trust served as a front for an endless investment pyramid: Goldman hiding behind Goldman hiding behind Goldman. Of the 7,250,000 initial shares of Blue Ridge, 6,250,000 were actually owned by Shenandoah - which, of course, was in large part owned by Goldman Trading.

The end result (ask yourself if this sounds familiar) was a daisy chain of borrowed money, one exquisitely vulnerable to a decline in performance anywhere along the line ....

Fast-Forward about 65 years. Goldman not only survived the crash that wiped out so many of the investors it duped, it went on to become the chief underwriter to the country's wealthiest and most powerful corporations. Thanks to Sidney Weinberg, who rose from the rank of janitor's assistant to head the firm, Goldman became the pioneer of the initial public offering, one of the principal and most lucrative means by which companies raise money. During the 1970s and 1980s, Goldman may not have been the planet-eating Death Star of political influence it is today, but it was a top-drawer firm that had a reputation for attracting the very smartest talent on the Street.

It also, oddly enough, had a reputation for relatively solid ethics and a patient approach to investment that shunned the fast buck; its executives were trained to adopt the firm's mantra, "long-term greedy." One former Goldman banker who left the firm in the early Nineties recalls seeing his superiors give up a very profitable deal on the grounds that it was a long-term loser. "We gave back money to 'grownup' corporate clients who had made bad deals with us," he says. "Everything we did was legal and fair - but 'long-term greedy' said we didn't want to make such a profit at the clients' collective expense that we spoiled the marketplace." ...

But then, something happened. It's hard to say what it was exactly; it might have been the fact that Goldman's co-chairman in the early Nineties, Robert Rubin, followed Bill Clinton to the White House, where he directed the National Economic Council and eventually became Treasury secretary. ...

Rubin was the prototypical Goldman banker. He was probably born in a $4,000 suit, he had a face that seemed permanently frozen just short of an apology for being so much smarter than you, and he exuded a Spock-like, emotion-neutral exterior; the only human feeling you could imagine him experiencing was a nightmare about being forced to fly coach. It became almost a national cliche that whatever Rubin thought was best for the economy - a phenomenon that reached its apex in 1999, when Rubin appeared on the cover of Time with his Treasury deputy, Larry Summers, and Fed chief Alan Greenspan under the headline THE COMMITTEE TO SAVE THE WORLD. And "what Rubin thought," mostly, was that the American economy, and in particular the financial markets, were over-regulated and needed to be set free. ...

The basic scam in the Internet Age is pretty easy even for the financially illiterate to grasp. Companies that weren't much more than pot-fueled ideas scrawled on napkins by up-too-late bong-smokers were taken public via IPOs, hyped in the media and sold to the public for megamillions. It was as if banks like Goldman were wrapping ribbons around watermelons, tossing them out 50-story windows and opening the phones for bids. In this game you were a winner only if you took your money out before the melon hit the pavement.

It sounds obvious now, but what the average investor didn't know at the time was that the banks had changed the rules of the game, making the deals look better than they actually were. They did this by setting up what was, in reality, a two-tiered investment system - one for the insiders who knew the real numbers, and another for the lay investor who was invited to chase soaring prices the banks themselves knew were irrational. While Goldman's later pattern would be to capitalize on changes in the regulatory environment, its key innovation in the Internet years was to abandon its own industry's standards of quality control.

"Since the Depression, there were strict underwriting guidelines that Wall Street adhered to when taking a company public," says one prominent hedge-fund manager. "The company had to be in business for a minimum of five years, and it had to show profitability for three consecutive years. But Wall Street took these guidelines and threw them in the trash." Goldman completed the snow job by pumping up the sham stocks: "Their analysts were out there saying is worth $100 a share."

The problem was, nobody told investors that the rules had changed. "Everyone on the inside knew," the manager says. "Bob Rubin sure as hell knew what the underwriting standards were. They'd been intact since the 1930s." ...

Goldman has denied that it changed its underwriting standards during the Internet years, but its own statistics belie the claim. Just as it did with the investment trust in the 1920s, Goldman started slow and finished crazy in the Internet years. After it took a little-known company with weak financials called Yahoo! public in 1996, once the tech boom had already begun, Goldman quickly became the IPO king of the Internet era. Of the 24 companies it took public in 1997, a third were losing money at the time of the IPO. In 1999, at the height of the boom, it took 47 companies public, including stillborns like Webvan and eToys, investment offerings that were in many ways the modern equivalents of Blue Ridge and Shenandoah. The following year, it underwrote 18 companies in the first four months, 14 of which were money losers at the time. As a leading underwriter of Internet stocks during the boom, Goldman provided profits far more volatile than those of its competitors: In 1999, the average Goldman IPO leapt 281 percent above its offering price, compared to the Wall Street average of 181 percent.

How did Goldman achieve such extraordinary results? One answer is that they used a practice called "laddering," which is just a fancy way of saying they manipulated the share price of new offerings. Here's how it works: Say you're Goldman Sachs, and comes to you and asks you to take their company public. You agree on the usual terms: You'll price the stock, determine how many shares should be released and take the CEO on a "road show" to schmooze investors, all in exchange for a substantial fee (typically six to seven percent of the amount raised). You then promise your best clients the right to buy big chunks of the IPO at the low offering price - let's say's starting share price is $15 - in exchange for a promise that they will buy more shares later on the open market. That seemingly simple demand gives you inside knowledge of the IPO's future, knowledge that wasn't disclosed to the day-trader schmucks who only had the prospectus to go by: You know that certain of your clients who bought X amount of shares at $15 are also going to buy Y more shares at $20 or $25, virtually guaranteeing that the price is going to go to $25 and beyond. In this way, Goldman could artificially jack up the new company's price, which of course was to the bank's benefit - a six percent fee of a $500 million IPO is serious money.

Goldman was repeatedly sued by shareholders for engaging in laddering in a variety of Internet IPOs, including Webvan and NetZero. The deceptive practices also caught the attention of Nichol as Maier, the syndicate manager of Cramer & Co., the hedge fund run at the time by the now-famous chattering television rear end in a top hat Jim Cramer, himself a Goldman alum. ...

"Goldman, from what I witnessed, they were the worst perpetrator," Maier said. "They totally fueled the bubble. And it's specifically that kind of behavior that has caused the market crash. They built these stocks upon an illegal foundation - manipulated up - and ultimately, it really was the small person who ended up buying in." In 2005, Goldman agreed to pay $40 million for its laddering violations - a puny penalty relative to the enormous profits it made. (Goldman, which has denied wrongdoing in all of the cases it has settled, refused to respond to questions for this story.)

Another practice Goldman engaged in during the Internet boom was "spinning," better known as bribery. Here the investment bank would offer the executives of the newly public company shares at extra-low prices, in exchange for future underwriting business. Banks that engaged in spinning would then undervalue the initial offering price - ensuring that those "hot" opening price shares it had handed out to insiders would be more likely to rise quickly, supplying bigger first-day rewards for the chosen few. So instead of opening at $20, the bank would approach the CEO and offer him a million shares of his own company at $18 in exchange for future business - effectively robbing all of Bullshit's new shareholders by diverting cash that should have gone to the company's bottom line into the private bank account of the company's CEO. ...

Such practices conspired to turn the Internet bubble into one of the greatest financial disasters in world history: Some $5 trillion of wealth was wiped out on the NASDAQ alone. But the real problem wasn't the money that was lost by shareholders, it was the money gained by investment bankers, who received hefty bonuses for tampering with the market. Instead of teaching Wall Street a lesson that bubbles always deflate, the Internet years demonstrated to bankers that in the age of freely flowing capital and publicly owned financial companies, bubbles are incredibly easy to inflate, and individual bonuses are actually bigger when the mania and the irrationality are greater.


Nowhere was this truer than at Goldman. Between 1999 and 2002, the firm paid out $28.5 billion in compensation and benefits - an average of roughly $350,000 a year per employee. Those numbers are important because the key legacy of the Internet boom is that the economy is now driven in large part by the pursuit of the enormous salaries and bonuses that such bubbles make possible. Goldman's mantra of "long-term greedy" vanished into thin air as the game became about getting your check before the melon hit the pavement.

The market was no longer a rationally managed place to grow real, profitable businesses: It was a huge ocean of Someone Else's Money where bankers hauled in vast sums through whatever means necessary and tried to convert that money into bonuses and payouts as quickly as possible. If you laddered and spun 50 Internet IPOs that went bust within a year, so what? By the time the Securities and Exchange Commission got around to fining your firm $110 million, the yacht you bought with your IPO bonuses was already six years old. Besides, you were probably out of Goldman by then, running the U.S. Treasury or maybe the state of New Jersey. (One of the truly comic moments in the history of America's recent financial collapse came when Gov. Jon Corzine of New Jersey, who ran Goldman from 1994 to 1999 and left with $320 million in IPO-fattened stock, insisted in 2002 that "I've never even heard the term 'laddering' before.")

For a bank that paid out $7 billion a year in salaries, $110 million fines issued half a decade late were something far less than a deterrent - they were a joke. Once the Internet bubble burst, Goldman had no incentive to reassess its new, profit-driven strategy; it just searched around for another bubble to inflate. As it turns out, it had one ready, thanks in large part to Rubin.

Goldman's role in the sweeping disaster that was the housing bubble is not hard to trace. Here again, the basic trick was a decline in underwriting standards, although in this case the standards weren't in IPOs but in mortgages. ...

None of that would have been possible without investment bankers like Goldman, who created vehicles to package those lovely mortgages and sell them en masse to unsuspecting insurance companies and pension funds. This created a mass market for toxic debt that would never have existed before; in the old days, no bank would have wanted to keep some addict ex-con's mortgage on its books, knowing how likely it was to fail. You can't write these mortgages, in other words, unless you can sell them to someone who doesn't know what they are.

Goldman used two methods to hide the mess they were selling. First, they bundled hundreds of different mortgages into instruments called Collateralized Debt Obligations. Then they sold investors on the idea that, because a bunch of those mortgages would turn out to be OK, there was no reason to worry so much about the lovely ones: The CDO, as a whole, was sound. Thus, junk-rated mortgages were turned into AAA-rated investments. Second, to hedge its own bets, Goldman got companies like AIG to provide insurance - known as credit-default swaps - on the CDOs. The swaps were essentially a racetrack bet between AIG and Goldman: Goldman is betting the ex-cons will default, AIG is betting they won't.

There was only one problem with the deals: All of the wheeling and dealing represented exactly the kind of dangerous speculation that federal regulators are supposed to rein in. Derivatives like CDOs and credit swaps had already caused a series of serious financial calamities: Procter & Gamble and Gibson Greetings both lost fortunes, and Orange County, California, was forced to default in 1994. A report that year by the Government Accountability Office recommended that such financial instruments be tightly regulated - and in 1998, the head of the Commodity Futures Trading Commission, a woman named Brooksley Born, agreed. That May, she circulated a letter to business leaders and the Clinton administration suggesting that banks be required to provide greater disclosure in derivatives trades, and maintain reserves to cushion against losses. ...

Clinton's reigning economic foursome - "especially Rubin," according to Greenberger - called Born in for a meeting and pleaded their case. She refused to back down, however, and continued to push for more regulation of the derivatives. Then, in June 1998, Rubin went public to denounce her move, eventually recommending that Congress strip the CFTC of its regulatory authority. In 2000, on its last day in session, Congress passed the now-notorious Commodity Futures Modernization Act, which had been inserted into an 1l,000-page spending bill at the last minute, with almost no debate on the floor of the Senate. Banks were now free to trade default swaps with impunity.

But the story didn't end there. AIG, a major purveyor of default swaps, approached the New York State Insurance Department in 2000 and asked whether default swaps would be regulated as insurance. At the time, the office was run by one Neil Levin, a former Goldman vice president, who decided against regulating the swaps. Now freed to underwrite as many housing-based securities and buy as much credit-default protection as it wanted, Goldman went berserk with lending lust. By the peak of the housing boom in 2006, Goldman was underwriting $76.5 billion worth of mortgage-backed securities - a third of which were subprime - much of it to institutional investors like pensions and insurance companies. And in these massive issues of real estate were vast swamps of crap.

Take one $494 million issue that year, GSAMP Trust 2006-S3. Many of the mortgages belonged to second-mortgage borrowers, and the average equity they had in their homes was 0.71 percent. Moreover, 58 percent of the loans included little or no documentation - no names of the borrowers, no addresses of the homes, just zip codes. Yet both of the major ratings agencies, Moody's and Standard & Poor's, rated 93 percent of the issue as investment grade. Moody's projected that less than 10 percent of the loans would default. In reality, 18 percent of the mortgages were in default within 18 months.

Not that Goldman was personally at any risk. The bank might be taking all these hideous, completely irresponsible mortgages from beneath-gangster-status firms like Countrywide and selling them off to municipalities and pensioners - old people, for God's sake - pretending the whole time that it wasn't grade-D horseshit. But even as it was doing so, it was taking short positions in the same market, in essence betting against the same crap it was selling. Even worse, Goldman bragged about it in public. "The mortgage sector continues to be challenged," David Viniar, the bank's chief financial officer, boasted in 2007. "As a result, we took significant markdowns on our long inventory positions .... However, our risk bias in that market was to be short, and that net short position was profitable." In other words, the mortgages it was selling were for chumps. The real money was in betting against those same mortgages.

"That's how audacious these assholes are," says one hedge-fund manager. "At least with other banks, you could say that they were just dumb - they believed what they were selling, and it blew them up. Goldman knew what it was doing." I ask the manager how it could be that selling something to customers that you're actually betting against - particularly when you know more about the weaknesses of those products than the customer - doesn't amount to securities fraud.

"It's exactly securities fraud," he says. "It's the heart of securities fraud."

Eventually, lots of aggrieved investors agreed. In a virtual repeat of the Internet IPO craze, Goldman was hit with a wave of lawsuits after the collapse of the housing bubble, many of which accused the bank of withholding pertinent information about the quality of the mortgages it issued. .... But once again, Goldman got off virtually scot-free, staving off prosecution by agreeing to pay a paltry $60 million - about what the bank's CDO division made in a day and a half during the real estate boom.

The effects of the housing bubble are well known - it led more or less directly to the collapse of Bear Stearns, Lehman Brothers and AIG, whose toxic portfolio of credit swaps was in significant part composed of the insurance that banks like Goldman bought against their own housing portfolios. In fact, at least $13 billion of the taxpayer money given to AIG in the bailout ultimately went to Goldman, meaning that the bank made out on the housing bubble twice: It hosed the investors who bought their horseshit CDOs by betting against its own crappy product, then it turned around and hosed the taxpayer by making him payoff those same bets.

And once again, while the world was crashing down all around the bank, Goldman made sure it was doing just fine in the compensation department. In 2006, the firm's payroll jumped to $16.5 billion - an average of $622,000 per employee. As a Goldman spokesman explained, "We work very hard here."

But the best was yet to come. While the collapse of the housing bubble sent most of the financial world fleeing for the exits, or to jail, Goldman boldly doubled down - and almost single-handedly created yet another bubble, one the world still barely knows the firm had anything to do with.

By the beginning of 2008, the financial world was in turmoil. Wall Street had spent the past two and a half decades producing one scandal after another, which didn't leave much to sell that wasn't tainted. The terms junk bond, IPO, subprime mortgage and other once-hot financial fare were now firmly associated in the public's mind with scams; the terms credit swaps and CDOs were about to join them. The credit markets were in crisis, and the mantra that had sustained the fantasy economy throughout the Bush years - the notion that housing prices never go down - was now a fully exploded myth, leaving the Street clamoring for a new bullshit paradigm to sling.

Where to go? With the public reluctant to put money in anything that felt like a paper investment, the Street quietly moved the casino to the physical-commodities market - stuff you could touch: corn, coffee, cocoa, wheat and, above all, energy commodities, especially oil. In conjunction with a decline in the dollar, the credit crunch and the housing crash caused a "flight to commodities." Oil futures in particular skyrocketed, as the price of a single barrel went from around $60 in the middle of 2007 to a high of $147 in the summer of 2008.

That summer, as the presidential campaign heated up, the accepted explanation for why gasoline had hit $4.11 a gallon was that there was a problem with the world oil supply. In a classic example of how Republicans and Democrats respond to crises by engaging in fierce exchanges of moronic irrelevancies, John McCain insisted that ending the moratorium on offshore drilling would be "very helpful in the short term," while Barack Obama in typical liberal-arts yuppie style argued that federal investment in hybrid cars was the way out.


But it was all a lie. While the global supply of oil will eventually dry up, the short-term flow has actually been increasing. In the six months before prices spiked, according to the U.S. Energy Information Administration, the world oil supply rose from 85.24 million barrels a day to 85.72 million. Over the same period, world oil demand dropped from 86.82 million barrels a day to 86.07 million. Not only was the short-term supply of oil rising, the demand for it was falling - which, in classic economic terms, should have brought prices at the pump down.

So what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help - there were other players in the physical-commodities market - but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the once-solid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures - agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.

As is so often the case, there had been a Depression-era law in place designed specifically to prevent this sort of thing. ... In 1936, Congress recognized that there should never be more speculators in the market than real producers and consumers. If that happened, prices would be affected by something other than supply and demand, and price manipulations would ensue. A new law empowered the Commodity Futures Trading Commission - the very same body that would later try and fail to regulate credit swaps - to place limits on speculative trades in commodities. As a result of the CFTC's oversight, peace and harmony reigned in the commodities markets for more than 50 years.

All that changed in 1991 when, unbeknownst to almost everyone in the world, a Goldman-owned commodities-trading subsidiary called J. Aron wrote to the CFTC and made an unusual argument. Farmers with big stores of corn, Goldman argued, weren't the only ones who needed to hedge their risk against future price drops - Wall Street dealers who made big bets on oil prices also needed to hedge their risk, because, well, they stood to lose a lot too.

This was complete and utter crap - the 1936 law, remember, was specifically designed to maintain distinctions between people who were buying and selling real tangible stuff and people who were trading in paper alone. But the CFTC, amazingly, bought Goldman's argument. It issued the bank a free pass, called the "Bona Fide Hedging" exemption, allowing Goldman's subsidiary to call itself a physical hedger and escape virtually all limits placed on speculators. In the years that followed, the commission would quietly issue 14 similar exemptions to other companies.

Now Goldman and other banks were free to drive more investors into the commodities markets, enabling speculators to place increasingly big bets. That 1991 letter from Goldman more or less directly led to the oil bubble in 2008, when the number of speculators in the market - driven there by fear of the falling dollar and the housing crash - finally overwhelmed the real physical suppliers and consumers. By 2008, at least three quarters of the activity on the commodity exchanges was speculative, according to a congressional staffer who studied the numbers - and that's likely a conservative estimate. By the middle of last summer, despite rising supply and a drop in demand, we were paying $4 a gallon every time we pulled up to the pump.

What is even more amazing is that the letter to Goldman, along with most of the other trading exemptions, was handed out more or less in secret. "I was the head of the division of trading and markets, and Brooksley Born was the chair of the CFTC," says Greenberger, "and neither of us knew this letter was out there." In fact, the letters only came to light by accident. Last year, a staffer for the House Energy and Commerce Committee just happened to be at a briefing when officials from the CFTC made an offhand reference to the exemptions.

"1 had been invited to a briefing the commission was holding on energy," the staffer recounts. "And suddenly in the middle of it, they start saying, 'Yeah, we've been issuing these letters for years now.' I raised my hand and said, 'Really? You issued a letter? Can I see it?' And they were like, 'Duh, duh.' So we went back and forth, and finally they said, 'We have to clear it with Goldman Sachs.' I'm like, 'What do you mean, you have to clear it with Goldman Sachs?'" ... [I]n a classic example of how complete Goldman's capture of government is, the CFTC waited until it got clearance from the bank before it turned the letter over.

Armed with the semi-secret government exemption, Goldman had become the chief designer of a giant commodities betting parlor. Its Goldman Sachs Commodities Index - which tracks the prices of 24 major commodities but is overwhelmingly weighted toward oil - became the place where pension funds and insurance companies and other institutional investors could make massive long-term bets on commodity prices. Which was all well and good, except for a couple of things. One was that index speculators are mostly "long only" bettors, who seldom if ever take short positions - meaning they only bet on prices to rise. While this kind of behavior is good for a stock market, it's terrible for commodities, because it continually forces prices upward. "If index speculators took short positions as well as long ones, you'd see them pushing prices both up and down," says Michael Masters, a hedge-fund manager who has helped expose the role of investment banks in the manipulation of oil prices. "But they only push prices in one direction: up."

Complicating matters even further was the fact that Goldman itself was cheerleading with all its might for an increase in oil prices. In the beginning of 2008, Arjun Murti, a Goldman analyst, hailed as an "oracle of oil" by The New York Times, predicted a "super spike" in oil prices, forecasting a rise to $200 a barrel. At the time Goldman was heavily invested in oil through its commodities-trading subsidiary, J. Aron; it also owned a stake in a major oil refinery in Kansas, where it warehoused the crude it bought and sold. Even though the supply of oil was keeping pace with demand, Murti continually warned of disruptions to the world oil supply, going so far as to broadcast the fact that he owned two hybrid cars. High prices, the bank insisted, were somehow the fault of the piggish American consumer; in 2005, Goldman analysts insisted that we wouldn't know when oil prices would fall until we knew "when American consumers will stop buying gas-guzzling sport utility vehicles and instead seek fuel-efficient alternatives."

But it wasn't the consumption of real oil that was driving up prices - it was the trade in paper oil. By the summer of2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country's commercial storage tanks and the Strategic Petroleum Reserve combined. It was a repeat of both the Internet craze and the housing bubble, when Wall Street jacked up present-day profits by selling suckers shares of a fictional fantasy future of endlessly rising prices.

In what was by now a painfully familiar pattern, the oil-commodities melon hit the pavement hard in the summer of 2008, causing a massive loss of wealth; crude prices plunged from $147 to $33. Once again the big losers were ordinary people. The pensioners whose funds invested in this crap got massacred: CalPERS, the California Public Employees' Retirement System, had $1.1 billion in commodities when the crash came. And the damage didn't just come from oil. Soaring food prices driven by the commodities bubble led to catastrophes across the planet, forcing an estimated 100 million people into hunger and sparking food riots throughout the Third World. ...

After the oil bubble collapsed last fall, there was no new bubble to keep things humming - this time, the money seems to be really gone, like worldwide-depression gone. So the financial safari has moved elsewhere, and the big game in the hunt has become the only remaining pool of dumb, unguarded capital left to feed upon: taxpayer money. Here, in the biggest bailout in history, is where Goldman Sachs really started to flex its muscle.

It began in September of last year, when then-Treasury secretary Paulson made a momentous series of decisions. Although he had already engineered a rescue of Bear Stearns a few months before and helped bail out quasi-private lenders Fannie Mae and Freddie Mac, Paulson elected to let Lehman Brothers - one of Goldman's last real competitors - collapse without intervention. ("Goldman's superhero status was left intact," says market analyst Eric Salzman, "and an investment-banking competitor, Lehman, goes away.") The very next day, Paulson greenlighted a massive, $85 billion bailout of AIG, which promptly turned around and repaid $13 billion it owed to Goldman. Thanks to the rescue effort, the bank ended up getting paid in full for its bad bets: By contrast, retired auto workers awaiting the Chrysler bailout will be lucky to receive 50 cents for every dollar they are owed.

Immediately after the AIG bailout, Paulson announced his federal bailout for the financial industry, a $700 billion plan called the Troubled Asset Relief Program, and put a heretofore unknown 35-year-old Goldman banker named Neel Kashkari in charge of administering the funds. In order to qualify for bailout monies, Goldman announced that it would convert from an investment bank to a bankholding company, a move that allows it access not only to $10 billion in TARP funds, but to a whole galaxy of less conspicuous, publicly backed funding - most notably, lending from the discount window of the Federal Reserve. By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs - and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret.

Converting to a bank-holding company has other benefits as well: Goldman's primary supervisor is now the New York Fed, whose chairman at the time of its announcement was Stephen Friedman, a former co-chairman of Goldman Sachs. Friedman was technically in violation of Federal Reserve policy by remaining on the board of Goldman even as he was supposedly regulating the bank; in order to rectify the problem, he applied for, and got, a conflict-of-interest waiver from the government. Friedman was also supposed to divest himself of his Goldman stock after Goldman became a bank-holding company, but thanks to the waiver, he was allowed to go out and buy 52,000 additional shares in his old bank, leaving him $3 million richer. Friedman stepped down in May, but the man now in charge of supervising Goldman - New York Fed president William Dudley - is yet another former Goldmanite.

The collective message of all this - the AIG bailout, the swift approval for its bank-holding conversion, the TARP funds - is that when it comes to Goldman Sachs, there isn't a free market at all. The government might let other players on the market die, but it simply will not allow Goldman to fail under any circumstances. Its edge in the market has suddenly become an open declaration of supreme privilege. "In the past it was an implicit advantage," says Simon Johnson, an economics professor at MIT and former official at the International Monetary Fund, who compares the bailout to the crony capitalism he has seen in Third World countries. "Now it's more of an explicit advantage." ...

And here's the real punch line. After playing an intimate role in four historic bubble catastrophes, after helping $5 trillion in wealth disappear from the NASDAQ, after pawning off thousands of toxic mortgages on pensioners and cities, after helping to drive the price of gas up to $4 a gallon and to push 100 million people around the world into hunger, after securing tens of billions of taxpayer dollars through a series of bailouts overseen by its former CEO, what did Goldman Sachs give back to the people of the United States in 2008?

Fourteen million dollars.

That is what the firm paid in taxes in 2008, an effective tax rate of exactly one, read it, one percent. The bank paid out $10 billion in compensation and benefits that same year and made a profit of more than $2 billion - yet it paid the Treasury less than a third of what it forked over to CEO Lloyd Blankfein, who made $42.9 million last year.

How is this possible? According to Goldman's annual report, the low taxes are due in large part to changes in the bank's "geographic earnings mix." In other words, the bank moved its money around so that most of its earnings took place in foreign countries with low tax rates. Thanks to our completely hosed corporate tax system, companies like Goldman can ship their revenues offshore and defer taxes on those revenues indefinitely, even while they claim deductions upfront on that same untaxed income. This is why any corporation with an at least occasionally sober accountant can usually find a way to zero out its taxes. A GAO report, in fact, found that between 1998 and 2005, roughly two-thirds of all corporations operating in the U.S. paid no taxes at all.

This should be a pitchfork-level outrage - but somehow, when Goldman released its post-bailout tax profile, hardly anyone said a word. One of the few to remark on the obscenity was Rep. Lloyd Doggett, a Democrat from Texas who serves on the House Ways and Means Committee. "With the right hand out begging for bailout money," he said, "the left is hiding it offshore."

Fast-Forward to today. It's early June in Washington, D.C. Barack Obama, a popular young politician whose leading private campaign donor was an investment bank called Goldman Sachs - its employees paid some $981,000 to his campaign - sits in the White House. Having seamlessly navigated the political minefield of the bailout era, Goldman is once again back to its old business, scouting out loopholes in a new government-created market with the aid of a new set of alumni occupying key government jobs.


Gone are Hank Paulson and Neel Kashkari; in their place are Treasury chief of staff Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites. (Gensler was the firm's co-head of finance) And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits - a booming trillion-dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an "environmental plan," called cap-and-trade.

The new carbon-credit market is a virtual repeat of the commodities-market casino that's been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won't even have to rig the game. It will be rigged in advance.

Here's how it works: If the bill passes; there will be limits for coal plants, utilities, natural-gas distributors and numerous other industries on the amount of carbon emissions (a.k.a. greenhouse gases) they can produce per year. If the companies go over their allotment, they will be able to buy "allocations" or credits from other companies that have managed to produce fewer emissions. President Obama conservatively estimates that about $646 billions worth of carbon credits will be auctioned in the first seven years; one of his top economic aides speculates that the real number might be twice or even three times that amount.

The feature of this plan that has special appeal to speculators is that the "cap" on carbon will be continually lowered by the government, which means that carbon credits will become more and more scarce with each passing year. Which means that this is a brand-new commodities market where the main commodity to be traded is guaranteed to rise in price over time. The volume of this new market will be upwards of a trillion dollars annually; for comparison's sake, the annual combined revenues of an electricity suppliers in the U.S. total $320 billion.

Goldman wants this bill. The plan is (1) to get in on the ground floor of paradigm-shifting legislation, (2) make sure that they're the profit-making slice of that paradigm and (3) make sure the slice is a big slice. Goldman started pushing hard for cap-and-trade long ago, but things really ramped up last year when the firm spent $3.5 million to lobby climate issues. (One of their lobbyists at the time was none other than Patterson, now Treasury chief of staff.) Back in 2005, when Hank Paulson was chief of Goldman, he personally helped author the bank's environmental policy, a document that contains some surprising elements for a firm that in all other areas has been consistently opposed to any sort of government regulation. Paulson's report argued that "voluntary action alone cannot solve the climate-change problem." A few years later, the bank's carbon chief, Ken Newcombe, insisted that cap-and-trade alone won't be enough to fix the climate problem and called for further public investments in research and development. Which is convenient, considering that 'Goldman made early investments in wind power (it bought a subsidiary called Horizon Wind Energy), renewable diesel (it is an investor in a firm called Changing World Technologies) and solar power (it partnered with BP Solar), exactly the kind of deals that will prosper if the government forces energy producers to use cleaner energy. As Paulson said at the time, "We're not making those investments to lose money."

The bank owns a 10 percent stake in the Chicago Climate Exchange, where the carbon credits will be traded. Moreover, Goldman owns a minority stake in Blue Source LLC, a Utah-based firm that sells carbon credits of the type that will be in great demand if the bill passes. Nobel Prize winner Al Gore, who is intimately involved with the planning of cap-and-trade, started up a company called Generation Investment Management with three former bigwigs from Goldman Sachs Asset Management, David Blood, Mark Ferguson and Peter Harris. Their business? Investing in carbon offsets. There's also a $500 million Green Growth Fund set up by a Goldmanite to invest in green-tech ... the list goes on and on. Goldman is ahead of the headlines again, just waiting for someone to make it rain in the right spot. Will this market be bigger than the energy-futures market?

"Oh, it'll dwarf it," says a former staffer on the House energy committee. ....

"If it's going to be a tax, I would prefer that Washington set the tax and collect it," says Michael Masters, the hedge fund director who spoke out against oil-futures speculation. "But we're saying that Wall Street can set the tax, and Wall Street can collect the tax. That's the last thing in the world I want. It's just asinine."

Cap-and-trade is going to happen. Or, if it doesn't, something like it will. The moral is the same as for all the other bubbles that Goldman helped create, from 1929 to 2009. In almost every case, the very same bank that behaved recklessly for years, weighing down the system with toxic loans and predatory debt, and accomplishing nothing but massive bonuses for a few bosses, has been rewarded with mountains of virtually free money and government guarantees - while the actual victims in this mess, ordinary taxpayers, are the ones paying for it.

It's not always easy to accept the reality of what we now routinely allow these people to get away with; there's a kind of collective denial that kicks in when a country goes through what America has gone through lately, when a people lose as much prestige and status as we have in the past few years. You can't really register the fact that you're no longer a citizen of a thriving first-world democracy, that you're no longer above getting robbed in broad daylight, because like an amputee, you can still sort of feel things that are no longer there.

But this is it. This is the world we live in now. And in this world, some of us have to play by the rules, while others get a note from the principal excusing them from homework till the end of time, plus 10 billion free dollars in a paper bag to buy lunch. It's a gangster state, running on gangster economics, and even prices can't be trusted anymore; there are hidden taxes in every buck you pay. And maybe we can't stop it, but we should at least know where it's all going.

The bubbles don't come 'til the end of the program... Turn off the bubbles... Turn off the bubble machine!