46 CITY Talking points Issue of the week: a local squall? The consensus view in markets is that Dubai is a containable problem. That could yet be short-sighted Say what you like about Sheikh Mohammed of Dubai, but you have to credit him with some chutzpah, said Louise Armitstead in The Daily Telegraph. As a stream of money continued to exit the emirate this week, the Sheikh lashed out against faithless international investors who “do not understand anything”. Some maintain it is too early to write Dubai’s obituary, but the Sheikh has shot himself in the foot, said Lex in the FT. Dubai’s failure “to communicate decisively and promptly with capital markets” has dented its chances of re-emerging as a credible financialservices hub. “There is no Plan B for Dubai: its cheap, credit-fuelled, City-in-the-Desert growth gambit has been shown to be a mirage.” Gulf as “containable”. But, given the “skin-deep” nature of a global market recovery “driven by short-term sentiment and massive policy action”, investors could be forgiven their jitters. Indeed so, said Larry Elliott in The Guardian. There are serious concerns about Ireland, the Baltic states and, in particular, Greece. “But it’s not just a case of looking for the usual suspects.” Many countries – Britain included – have seen budget deficits explode. “The debts that hobbled banks at the start of the credit crunch have not disappeared: they have, in effect, been nationalised.” Dubai should be a wake-up call for us all. There will be plenty more shocks to come, said Aline van Duyn in the FT, not least in the US, That’s surely too harsh, said Sultan Sooud where the exposure of banks to commercial Qassemi in the same paper. The only surprise real-estate loans tops $1,000bn. Many of these about Dubai World’s request for a debt loans have been extended in a strategy dubbed Traders in Dubai “standstill” is that “it took so long to happen”. “delay and pray”. Ultimately, it’s “a timing Perhaps “Dubai Inc’s” biggest mistake was not to have game”: eventual losses will be determined by the state of the restructured its debts a year ago, when $80bn or so “would not economy when these loans become due. The same is true globally. have raised many eyebrows” amid total bank write-downs An important factor easing Dubai “contagion fears” was the topping $500bn. But that, of course, is the key question, said news that India recorded unexpectedly strong growth of 7.9% Jeremy Warner in The Daily Telegraph. “Does Dubai amount to in the third quarter. With debt blow-ups “inevitable” in the no more than another aftershock from a banking crisis which is coming months, “the big question is whether the world can now largely behind us, or does it signal the beginnings of a new grow fast enough to limit the losses and make banks more able financial earthquake?” Most financiers view the situation in the to absorb the pain”. Making money: what the experts think size and shape of his new fund, which The gold price may will be available to be hogging the UK investors in the headlines, but silver spring, has yet to be bullion has also decided. But it will been soaring, says focus on Chinese Isabel Andrews in stocks. There are Spectator Business: doubters, noted prices are up to Jennifer Hill in £8.50 per ounce The Sunday Times. from around £3 four Experts such as years ago. So what’s Jerry Lou, Morgan the outlook for Chinese garlic: buy buy buy Stanley’s China antique English strategist, believe “an asset-price bubble silver? The recession has revived interest, is forming in China”. But Bolton is conbecause people trust silver’s intrinsic value. vinced the country is in the “sweet spot But the market is much smaller than it for growth”. used to be, and prices of some pieces have fallen dramatically. “Fifteen years ago, a Georgian coffee pot might fetch £1,500 to ● Garlic bubble £2,000,” says auctioneer Rupert Slingsby One rather surreal market bubble currently of Woolley & Wallis. The same “run-ofexpanding in China is garlic, notes Andy the mill” pot might go today for £600McSmith in The Independent. Wholesale £800. “That’s a big drop.” Where then prices have almost quadrupled from is the money heading? Pieces with March. Indeed, garlic has been “a better “particular artistic or historic significance” investment this year than gold or silver” – seem the best bets: records have recently a story which “has echoes of the great been set for nutmeg graters, Victorian Dutch tulip bubble of 1637”. The current novelty items and antique spoons. price surge is being attributed to a halving of the planting area last year and belief in ● Bolton heads east the bulb’s powers to ward off swine flu, “Anthony Bolton’s investment juices are says Lex in the FT. But unbridled trading flowing once more,” says Patrick Hosking activity suggests “the most likely cause is… in The Times. The former Fidelity “star” the abundant liquidity swilling through the manager has been enticed out of semisystem”. A bubble in garlic is relatively retirement to begin stock-picking again. harmless when it bursts. Not so the current And he’s heading east to Hong Kong. The bubble in Chinese property. ● Silver dreams? THE WEEK 5 December 2009 Bank ruling: victory or defeat? It was the rebellion that ended in a whimper. Some 1.1 million bank customers hoping for refunds were disappointed by the Supreme Court’s landmark ruling that charging fees for unauthorised overdrafts is not unfair, reported Philip Aldrick in The Daily Telegraph. “UK banks are some £2bn richer as a result.” The court decided that the Office of Fair Trading, which brought the case, did not have the authority to determine the fairness of charges, which can be as much as £39 for a bounced cheque or direct debit – pretty steep when you consider that a bank’s administrative charges are just £2.50. “So whose side were you on,” asked Ian King in The Times. “Were you with the plucky campaigners standing up for their rights against the greedy money-grabbing banks?” Or were you one of the “silent majority”, angry that the actions of a vocal minority could be about to jeopardise your free banking? “Both sides have a strong moral case.” Indeed so, said Patrick Collinson in The Guardian. But most customers will “secretly cheer” this ruling. In any case, many banks have softened their position: RBS has cut its bouncing fee to £5, and the maximum penalty charged over a month is down from the “absurd” £6,668 to £260. It would be foolhardy to take this “victory” as “a green light to return to old practices”.