Friday, November 27, 2009

Best Article on Dubai Debt Problem and Related Issues I Have Seen Yet

I think the best way to look at crises (both big and small) is to think of them as learning opportunities. In the last year or so, many investors whose investing universe was narrowly bound by stocks have now become conversant in credit default swaps, the TED spread, the dollar, the carry trade, bank capital ratios and a whole host of concepts and statistics that they didn’t know existed in 2007.

So should the Dubai situation also be a learning trigger. Not familiar with the political structure of the United Arab Emirates? the history of sovereign default? the principles of Islamic banking? Now is an excellent time to learn – and perhaps profit – from becoming better informed about these issues.

I also see the events in Dubai as an opportunity to identify some sharp thinkers who are on top of the situation and whose work I was not previously aware of. One such instance is Bill Mitchell’s Billy Blog, where I encountered Dubai Is Not a Case of Sovereign Debt Default, one of the best articles I have yet read on the Dubai situation. As for the author, how can you not like someone who provides a handy (Political Compass) plot of his ideology, an email address and a cell phone number on his blog? Mitchell describes himself as a professional musician who also just happens to be a Research Professor in Economics and Director of the Centre of Full Employment and Equity at the University of Newcastle, NSW Australia.

One of my mantras is that where there is panic, there is opportunity. Whether you made directional bets on prices or volatility today, I hope at the very least you expanded you knowledge base and sources of information in order to give you a better perspective on events as they unfold next week and going forward.

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