As my most devoted readers will note, I have a certain "soft spot" for the country known as the "United Arab Emirates", which is why I don't buy any products whose bar code number starts with 629. This point of view was encouraged when I saw this scrawled on my family's residence in the UAE:
Many investors who did buy the islands proved unwilling or unable to finance further work when Dubai's property prices halved in the space of a year. Some were hit by troubles elsewhere – the owner of the company which bought [the island shaped like] Ireland for £24 million, John O'Dolan, committed suicide, while the man who bought [the island shaped like] Britain for £43 million, Safi Qurashi, is serving seven years in jail in Dubai after being accused of bouncing cheques.
Which makes this as good a time as any to remind my loyal readers that being in debt in the UAE is a crime punishable by imprisonment, which doesn't make any sense. How are you supposed to earn the money you owe, if you're in prison? But anyway, back to the Amazing Eroding Islands:
The dispute being heard by the property tribunal involves Penguin Marine, the company which bought the rights to provide boat travel to the islands. With little business, it is trying to exit the contract, which involves paying an annual fee of just under £1 million to Nakheel. Nahkeel say they will cash an advanced payment guarantee worth just over £1 million if that happens. Penguin claim that work on the islands has "effectively stopped". Mr Wilmot-Smith described the project as "dead". Graham Lovett, for Nakheel, said the project was not dead but admitted it was "in a coma". ... The tribunal found for Nakheel on Thursday, saying it would give full reasoning later. A spokesman for Nakheel insisted the islands were not sinking. "Our periodical monitoring survey over the past three years didn't observe any substantial erosion that requires sand nourishment," a statement said.
I think it's a pretty funny demonstration of the property value literally "eroding away". It seems like a total economic collapse is right around the corner. All we have to do is sit back and wait for that terrible, terrible country to fall apart. But for those of us who don't feel like waiting, perhaps you can help me with my plan.
I know you can invest in a company by buying shares of its stock, or you can invest against a company by "short-selling" its shares (selling shares you don't own yet, and promising to buy some in the future to make up for it; it's pretty existential). This hurts the company by lowering the value of its shares. You can also invest in a country, by buying its currency. But I don't know of a way to "short" a country's currency. Anyone have any ideas? If we can pull together and short-sell the currency of the UAE, we can accelerate their collapse, make a nice profit, and help end this awful regime. It should be noted that the UAE's currency is pegged to the US dollar, meaning that until the country goes bankrupt, your investment is risk-free! But the minute the UAE treasury runs out of money with which to buy their currency back (with dollars), we can buy out of our short positions with a large profit.
All of my ideas keep coming back to buying up all of the UAE's currency. Depleting that much supply should naturally lead to an increase in demand, but if it's pegged to the USD, then the UAE currency can't raise its prices as drastically as the free-marked price would suggest. As the UAE keeps printing currency to sell to us (at a constant price, assuming the USD doesn't fluctuate too much), we can do one of two things. We can declare victory when we have more of the UAE's currency than the UAE itself does. Or, we can unleash a flood of UAE money onto the market, creating a "parallel market" in which there's so much of it floating it around that the free market values it at far less than the country does, and eroding worldwide consumer confidence in the UAE economy.
ReplyDeleteThe only problem is that I haven't figured out the profit angle for either approach.
My plan is a little different from either of those. Instead of buying up their currency (which would help them in the short term), we simply sell it (short-sell it), forcing them to buy it back, using their gold reserves or dollar reserves. Once they run out and their country goes broke, we buy it back at the new, lower price (exiting our short position). That way we (1) destroy their government's worth and (2) make at least some profit. The only risk is that it doesn't work, and our money earns nothing for a while. That's why we need to coordinate our efforts and do all this simultaneously.
ReplyDeleteProblem with a shorting or hoarding a pegged currency is if it tanks they could end up saying, "keep your useless oily-lumps-of-sand (I assume that's what dirham translates to) we're gonna start directly circulating our reserves of US cash like Panama and Ecuador do". With the massive amount of non-value in the UAE economy that mightn't work out too well for us here in the U.S.
ReplyDelete