The fresh developments over last couple of days are pointing to the fact that the credit crisis (note the shift in my approach of not terming it as “financial crisis”) that started last year is not over yet. Dubai World has requested a re-structuring of its debt payable to its creditors.
Over the years until 2 days back, I have been made to believe that middle-east is the where the richest of the world resides. I recall discussion with school friends (around the time of Iraqi crisis) that how a desert where nothing grows can be so rich. Drawing learnings from geography taught in class VIII and IX we knew that India compared to Middle-east (that only produces oil) is rich in natural resources, abundant water, has 4 seasons in a year and is a leading agricultural producer of the world. Most of us believed India will be a superpower due to its engineers and its agriculture produce.
Iraqi crisis (the Kuwait incident) saw fuel prices rise and I came to believe that middle-east countries will continue to be rich and India will have no chance, except when I recalled the concept of “renewable” and “non-renewable’ sources of energy. I believed- one day middle-east countries will have their oil wells running dry and then they will have to purchase everything from outside world with the wealth accumulated over a century or so.
The realty boom in Dubai was totally missed out by me except getting to know about Indian celebrities buying the property in Dubai- the Zoom channel was one such source. What I understand is that development of Dubai as a shopping hub over the last decade or so was an attempt to develop other sources of income and what better idea that getting into retail business which is directly linked to realty business.
So what’s in store from a common man- recall what I wrote on June 26, 2009. Please visit archives on my blog (http://thinkin-blog.blogspot.com).
I reiterate that as an individual with limited understanding of the finance world- debt is more of a disciplining measure…refer to the capital structure theories…..but what has happened is, debt has predominantly funded the growth of economies around the world. Equity investors, the key product of the capitalism have always worked towards one goal of wealth maximization while the risk is limited to the amount invested as an equity shareholder.
As a common man always remember the concept of “Leverage”- be careful. Go slow.
SLOW and STEADY ALWAYS WINS THE RACE..Cheers and be happy if you have no debt in life…
I will always like to be known as conservative. But not risk averse. Conservatives take risks at tactical levels only..