Monthly Archives: November 2009

Let Dubai Serve as a Reminder

Last week, prior to the Thanksgiving holiday, the Dubai government announced that it will look to restructure Dubai World; a government owned conglomerate, and asked creditors for a six-month delay on outstanding debt payments. The total liabilities of Dubai World are estimated to exceed $60 billion with existing creditors spread across much of the developed and emerging world markets. The announcement took much of the world by surprise and caused the U.S. stock market to open over 200 points lower although the drop was essentially cut in half by the close of the shortened trading day last Friday as traders and investors put the announcement into perspective. Additionally, as I write this post, the United Arab Emirates has indicated that it would step in, as needed, to support local banks through a special liquidity facility. This should help to stem fears of a potential run on the local banks that could have negative ramifications throughout the region.Read more

What is driving the price of Gold?

We have all heard the age-old wisdom that gold can provide for a hedge against inflation. The Federal Reserve has recently contended that inflation is not an immediate threat or concern to them. In fact, Ben Bernanke, Chairman of the Federal Reserve, said in a speech earlier this week that "the U.S. economy still faces considerable challenges but the most likely outcome is moderate growth with subdued inflation." Despite this, Gold has rallied significantly in 2009 - noticeably in recent weeks. What then is accounting for rising Gold prices?Read more

Are U.S. Treasuries Still a Safe Haven?

I couldn't help but find it amusing yesterday when one of my fellow panelists during a discussion at The Art of Indexing Summit in New York City suggested that U.S. Treasury Bills, while once considered as a proxy for "risk-free return" perhaps are now a better proxy for "return-free risk." All kidding aside, many well-respected economists throughout the world are now calling into question the perceived safe haven status of U.S. Treasuries and, in a similar vein, if the U.S. Dollar will remain as the world's reserve currency. Regarding the latter, some have suggested that the U.S. Dollar could eventually be replaced by the Euro, the Japanese Yen or even the Chinese Yuan.Read more