Home Thoughts from Dubai : We give you the knowledge. You decide how it is used.
Tip when visiting/moving to Dubai:
The summer months are exceptionally hot and humid. Make sure you come armed and understanding the conditions you will encounter. The locals usually exit in August.
Reflections from the week:
Well I am back from my whirlwind trip to Singapore (planned) and Bangkok (un-planned). The Bangkok trip included a trip to the local soccer stadium where a very tired Manchester City team seemed intent upon helping get rid of their under-fire manager. Given Sven’s legendary appetite for women, he was always going to have more success off the field. Not that anybody should expect a trophy for ‘scoring’ in Bangkok. Even a corpse would attract female attention. But, despite my age, I am a little quicker on my feet these days. And the 36 hours in Bangkok was more memorable for the visit to a local orphanage. Ciaran, my friend of 35 years (yes I do have a few), has a manufacturing plant just outside the city and his company provides food and electricity funding for the orphans. And what a beautiful group of children. Big smiling faces but with mischief written all over them. The most difficult part was leaving. You would want to take them all home. And so my ambition and objective to work/support an Asian orphanage has started to take some shape. And YES you will ALL have a role. Once I get my businesses here working and in the right hands, I will be off for my one year with ‘my children’. Just not sure if Vietnam or Cambodia are better alternatives. But I can reflect on that on the beach later !!!!
The temperatures in Dubai have started to move towards those uncomfortable early 40’s levels. And the humidity is making outside dining something that is best left till late September. This year Ramadan will be in September and the business repercussions of this are likely to be significant. The investor frenzy that has been so obvious over the past 8 weeks, is likely to abate. As investors move to more friendly Summer climates, the engine for much of this recent and unsustainable price increase orgy will also travel. The attendant ‘price-softening’ will be exacerbated by installment cash calls from Developers. Many Investors will be unable to meet the next 10% or 15% and will put a ‘for sale’ sign up. But in the absence of the people with the REAL money, you can expect the obvious. Which leads me nicely to something that tests my blood pressure readings.
‘Experts’, usually from Ireland, who visit Dubai and become instant authorities on property. They preach about what is value and what is not. I will have to become more clever and avoid them. I am the one living here. The guy who EVERY day breaths the business oxygen of Dubai and Abu Dhabi. A person who was brought up in a world of risk and reward. A person whose job it was to lend billions of $, Euro, Sterling etc. A person who fully understands and can assess value and incorporate appropriate/realistic investment exit strategies. So please leave me alone. I am not interested in you lecturing (or testing) me about ‘your view’. Go home. I am not here to ‘rain on your parade’. Make your own mistakes. I put you into the same category as those who ‘drink’ my knowledge and experience and then do the business with somebody else. There are so many mistakes being made in this market at the moment, that the final chapter will be something worthy of a gruesome Hollywood movie.
The electricity and water supply challenges of the Region, with the attendant impacts on delivery of projects, is something that regularly consumes space in Home Thoughts. Well this week the Dirham 30 billion Salam City project was ‘deferred’ for an unspecified period. Reason ? We can build but there will be no electricity or water. Great. Can Investors have some to the 60% installment payments back ? But expect this to be an increasing feature of projects in the Emirates. But maybe some of those ‘visitor experts’ have a solution !! Salam City was an enormous success at launch 3 years ago, but it has now fallen victim to the Regions greatest challenge. For you data-junkies Dubai expects electricity and water-needs to grow at a compounded rate of 20% per annum for the next 10 years. Pipeline power and desalination capacity contracts currently exceed $4 billion and double that figure is already before Sheikh Mohammed for signing. His good friends down the road in Abu Dhabi expect current power/water needs to double over the next four years. Despite a greater pot of available cash, Abu Dhabi will also struggle to match this demand. Its Al Showayhat project will bring 1,500 MW of electricity and 100 million gallons of water to the Emirate. The need is so great and urgent that both Emirates are now talking about opening the sector to private overseas companies, allowing them to build and own the capacity. Now that would be ground-breaking. DEWA (Dubai Electricity and Water) are however in the market with another fund raising. This time an AED 1 billion sukuk (Islamic Bond). The banks involved are Citigroup, Barclays, Dubai Islamic and Emirates/NBD. Interesting, but not surprising, that those incompetent people at HSBC have been omitted. How is this brand such an enormous name globally. I rarely hear a positive experience of them. In any country. But then I don’t speak Mandarin or Cantonese.
Jumeirah Beach Residence is about to get more ugly. Think of a cluster of high ugly towers near where you live. And if you are lucky enough not to have anything of this nature close to you, think of somewhere you have seen such nauseating ugliness, either on tv, or holiday or in pictures. Well Jumeirah Baach Residence will challenge any ‘candidate’ you put forward. And now all those smug people who say that THEIR apartment has an unobstructed sea view, are about the learn some of the reality of Dubai. I went for a run, well more a brisk walk the other evening and discovered to my horror that the vast tranche of land between those apartments with the ‘unobstructed views’ are about to lose it, and no doubt value. This land is about to become another dense ‘herd’ of residential towers. One ‘eye-sore’ will soon be able to look at another. Why is such greed necessary when it is generally accepted JBR was a mistake, and the worst example of a development in the otherwise proud landscape. The government is surely not in such financial need. Bring in tax if you need the money badly. But please don’t destroy any more of the beautiful coast-line.
And finally before I move away from what has been a real ‘bitch-fest’, a story from my good friend Andy – who has lived in Dubai for 14 years. A well known UK Estate Agency which has an office in Dubai and whose name starts and ends with the letter ‘S’, ‘illegally’ assaulted a number of mobile phones during the week with a message that they had a limited stock of Dubai Marina apartments at AED 1,200 per sq ft. For those clever enough to scratch to the truth, it became clear that the ‘true’ price was AED 1,932 per sq ft. I suppose we should not be shocked. These untrained agents, many of whom do not know the difference between meters and feet, are a rampant disease without cure. Well done Andy and shame on you Sh***o*ds. And please stop using our mobile phones to spread your terrorism.
Good old Lee P must take some satisfaction this week from a Daily Mail article stating that Britain is becoming a nation of criminals. Lee believes that anybody who is financially stressed should take advantage of the new UK legislation which permits individuals collapse into bankruptcy, thus getting rid of most/all of the financial problem, and re-surface, cleansed 12 months later. No stigma. Well the article also suggests that 40% of UK citizens see no harm in avoiding fares on public transport or entering a music or sports event without paying. There are countries in Africa with greater cultural moral conscience. But I suppose one has to look for income/cost saving alternatives when you live in a country where the Prime Minister has a tax obsession.
A quick visit to the property section of the Financial Times on the return flight from Bangkok brought the collapse in US housing pricing starkly into my head. Some REAL value. In particular a Central Park Manhattan 5 bed condo right on the river and with access to a swimming pool and 14,000 sq ft gym. Sounded like a real gem. Price ? Same as an end-tip signature villa on Palm Jumeirah. Now let me see. Which would I prefer ? Show me the way to Fifth Avenue !!!
Finally Sheikh Mo was ‘en France’ this week. Meeting Mr Sarkozy, and no doubt his beautiful new wife. His Highness looked very tired. Not surprising considering his exhausting international agenda, where he tirelessly and generously has given of his time to promote Dubai and its people. Once again leading from the front. The UAE delegation comprised 7 senior ministers – including my good friend Mohammed al Gergawi.
Finally, finally well done Willy Walsh for foregoing your Sterling 700,000 bonus. A characteristically wise and timely move by one of Irelands many overseas ambassadors. What Willy lacks in physical size is adequately compensated with Solomons wisdom. It must be very irritating for some of the pompous over-paid Eton educated senior executives of Britain Plc to have a ‘Paddy’ playing with their pay-packets. Well done Willy. Aren’t ‘pint-sized’ men just so much fun at times.
Property corner:
If anybody would be interested in buying some one and two bed apartments with a guaranteed 9% per annum (5 year) rental guarantee let me know. I have a package of such investments. I know these are far less exciting than what you usually get from Home Thoughts, but nice safe high yielding investment that might suit a pension. Otherwise have a look at Aldar product at Al Raha Beach. Some beautifully located property in what will eventually be one of the best holiday resorts in the world. And Abu Dhabi airport is only 10 minutes away.
Dog Corner:
I got another ‘hot deal’ this week. A Burj View apartment from Emaar. The better located ones were ‘just’ AED 4,000 per sq ft. What has happened AED 1,200 to AED 1,500 per sq ft ? Its almost as though we woke up one morning and 5 years of property price increases had been passed into the system. And now investors are believing AED 2,000 per sq ft to be great value. In all this bubble-hype, reality has got drowned. There were physical fights in last week’s Abu Dhabi City Scape. Human men fighting with each other to try and buy some, possibly, overpriced apartments and villa’s. Please just avoid anything that is in the AED 2,000 + per sq ft category. You will not want the scale of nose-bleed that is less than 24 months away. If you must invest, buy something that is already completed. Second-hand accommodation prices have not matched the increases seen in the ‘new launch’ space. Some real analysis is needed as to what percentage of end-users purchases are happening. The put-down 10% and sell at 5% or 10% premium (giving the investor a 50% to 100% return on their invested capital) market is a very dangerous space. For everybody.
Restuarant Watch:
Try the Fusion restaurant at the Royal Meridien. Great value food, albeit that the service is a little slow. Full of the legendary Dubai smiling and helpful service. Telephone number is +9714 3995555 (hotel number). Wine list a bit limited. Not gourmet but worth a visit.
Fun corner:
A woman got on a bus holding a baby. The bus driver said: “That’s the ugliest baby I’ve ever seen.” In a huff, the woman slammed her fare into the fare box and took an aisle seat near the rear of the bus. The man seated next to her sensed that she was agitated and asked her what was wrong. “The bus driver insulted me,” she fumed. The man sympathized and said “Why, he’s a public servant and shouldn’t say things to insult passengers.” “You’re right,” she said. “I think I’ll go back up there and give him a piece of my mind.” “That’s a good idea,” the man said. “Here, let me hold your monkey”.
And another…..
A man meets a genie. The genie tells him he can have whatever he wants, provided that his mother-in-law gets double. The man thinks for a moment and then says, “OK, give me a million dollars and beat me half to death.”
A man and a woman were having a romantic hand-holding dinner in a posh restaurant. Their waitress, taking another order at a table a few paces away noticed that the man was slowly sliding down his chair and under the table, with the woman acting unconcerned. The waitress watched as the man slid all the way down his chair and out of sight under the table. Still, the woman dining across from him appeared calm and unruffled, apparently unaware that her dining companion had disappeared. After the waitress finished taking the order, she came over to the table and said to the woman, “Pardon me, ma’am, but I think your husband just slid under the table and I am ready to take your order.” The woman calmly looked up at her and replied firmly, “No he didn’t. He just walked in the door.”
This is dedicated to everyone who ever attempted to get into a regular work-out routine…
Dear Diary,
For my birthday this year, my daughter (the dear) purchased a week of personal training at the local health club for me. Although I am still in great shape since being a high school cheerleader 43 years ago, I decided it would be a good idea to go ahead and give it a try. I called the club and made my reservations with a personal trainer named Brad, who identified himself as a 26-year-old aerobics instructor and model for athletic clothing and swim wear. My daughter seemed pleased with my enthusiasm to get started! The club encouraged me to keep a diary to chart my progress.
MONDAY: Started my day at 6:00 a.m. Tough to get out of bed, but found it was well worth it when I arrived at the health club to find Brad waiting for me. He is something of a Greek god - with blond hair, dancing eyes and a dazzling white smile. Woo Hoo!! Brad gave me a tour and showed me the machines. I enjoyed watching the skilful way in which he conducted his aerobics class after my work-out today. Very inspiring! Brad was encouraging as I did my sit-ups, although my gut was already aching from holding it in the whole time he was around. This is going to be a FANTASTIC week!!
TUESDAY: I drank a whole pot of coffee, but I finally made it out the door. Brad made me lie on my back and push a heavy iron bar into the air then he put weights on it! My legs were a little wobbly on the treadmill, but I made the full mile. Brad’s rewarding smile made it all worthwhile. I feel GREAT-!! It’s a whole new life for me.
WEDNESDAY: The only way I can brush my teeth is by laying the toothbrush on the counter and moving my mouth back and forth over it. I believe I have a hernia in both pectorals. Driving was OK as long as I didn’t try to steer or stop. Brad was impatient with me, insisting that my screams bothered other club members. His voice is a little too perky for early in the morning and when he scolds, he gets this nasally whine that is VERY annoying. My chest hurt when I got on the treadmill, so Brad put me on the stair monster. Why the hell would anyone invent a machine to simulate an activity rendered obsolete by elevators? Brad told me it would help me get in shape and enjoy life. He said some other shit too.
THURSDAY : Brad was waiting for me with his vampire-like teeth exposed as his thin, cruel lips were pulled back in a full snarl. I couldn’t help being a half an hour late, it took me that long to tie my shoes. Brad took me to work out with dumbbells. When he was not looking, I ran and hid in the rest-room. He sent some skinny bitch to find me. Then, as punishment, he put me on the rowing machine — which I sank.
FRIDAY : I hate that Brad more than any human being has ever hated any other human being in the history of the world. Brad wanted me to work on my triceps. I don’t have any triceps! And if you don’t want dents in the floor, don’t hand me the dam barbells or anything that weighs more than a sandwich. The treadmill flung me off and I landed on a health and nutrition teacher. Why couldn’t it have been someone softer, like the drama coach or the choir director?
SATURDAY : Brad left a message on my answering machine in his grating, shrilly voice wondering why I did not show up today. Just hearing him made me want to smash the machine with my planner. However, I lacked the strength to even use the TV remote and ended up catching eleven straight hours of the Weather Channel.
SUNDAY : I’m having the Church van pick me up for services today so I can go and thank GOD that this week is over. I will also pray that next year my daughter (the little shit) will choose a gift for me that is fun — like a root canal or a hysterectomy. I still say if God had wanted me to bend over, he would have sprinkled the floor with diamonds!!!
And one final one….
A woman goes to her doctor who verifies that she is pregnant. This is her first pregnancy. The doctor asks her if she has any questions. She replies, “Well, I’m a little worried about the pain. How much will childbirth hurt?” The doctor answered, “Well, that varies from woman to woman and pregnancy to pregnancy and besides, it’s difficult to describe pain.” “I know, but can’t you give me some idea?” she asks. “Grab your upper lip and pull it out a little…” “Like this?” “A little more…” “Like this?” “No. A little more…” “Like this?” “Yes. Does that hurt?” “A little bit.” “Now stretch it over your head!”
Currency corner:
With the Brown government now is collapse, the GREAT Britain currency seems equally doomed for the short term. He has been an embarrassing disaster for a country in need of a Leadership rather than this arrogant bully. It is only now the UK electorate will appreciate just how capable and clever Tony Blair was. Flair Blair vs Clown Brown. The beneficiary from this circus is the Conservative Party. David Cameron could become a granny-assaulting rapist and still win the next election. So unfortunately the currency has to go the same path as its ‘leader’. This man just cannot make the right decisions on anything. I don’t expect him to resign, so expect the currency to remain weak. The US$ had a bad week but still remains comfortably below the 1.60 (vs Euro) level. I think the country is in a recession where recovery will be tortuous. But I remain of the view that the true health of the European economy has not been fully exposed. When this happens, the $ will recover against its European counterpart. The Aussie ? Is it possible it will go though the 1 for 1 level ? Don’t bet against it.
Equity corner:
Apologies to everybody for the RBS tip. But please stick with it and if you have some extra cash buy some of the nil-paid rights at 45 pence. A very nice geared play against the stock. The rights-issue is likely to be a success and the underwriters will not have any trouble in absorbing any ‘surplus’. We will then be back to business as usual for RBS – albeit that future earnings will have to be recalibrated to recognize the ‘new world’ of financial services. But the bank will have surplus capital which will enable it benefit from loans/investments in low risk but high margin categories. It was also the first out of the traps with its fund raising. Buy some rights and hope to sell over the next week at a 10% to 20% profit on your investment (or greater if you put a cfd around the investment).