“Sahab, kahan jaana hein apko?

“Sahab, kahan jaana hein apko?”

 - an obvious question every time a passenger gets into a taxi.
The obvious answer is the passenger’s destination. Imagine after boarding the taxi, the passenger says s/he does not know the destination.
 
Absurd as it may sound, many of us don’t know our financial destinations or financial goals. People ask questions on television programmes and seminars on ideal investment vehicle – best stock, safest mutual fund etc. Unfortunately they do not know the purpose for which they are making that investment. They do not have a list of their financial goals.

Most of us have a latent desire to retire early, spend on children’s education, own a home and have family vacations but it is not put in perspective – it is not clearly written in a list form. Financial goals are the destinations where you want to reach. They will help you stay focused.

Do this simple exercise. List down 5 most important goals in your life for which you are willing to save money. Also list down (at today’s cost) how much you are willing to spend for those goals. Measure the time taken to list down those goals. If you are spending more than 2 minutes to list it down, there is problem. If time taken is more than 2 minutes then it means that you are working hard everyday at office/work but you do not know for what you are working hard.

All our financial goals can be segregated into two categories –Responsibilities and Dreams.

Responsibilities: All those events in life, which begin with the statement “I have to”, are your responsibilities. For example, “I have to provide for my children’s education; I have to take care of my retired parents” etc.

Dreams: We all have dreams as well. We dream of a luxury car or a holiday home etc. Statements that start with “I wish” are the dreams. ‘I wish to go on a tour of Europe’ is your dream. Having sufficiently provided for your responsibilities, additional resources should be utilized for financing dreams.
The first step towards preparing a financial goal statement is to list all goals under each category of responsibilities and dream in the order of priority. Next to the goals write the amount you are willing to spend for each one; this is most important. Write down the cost at today’s rate of inflation. Next column calculate inflation adjusted value. If you have problem calculating the inflation adjusted value, use Microsoft Excel’s future value function. In last column put down amount of years it will take to reach the goal. Suppose daughter is currently 5 years old then there are at least 10/12 years left before money is needed for her higher education. Also, remember to review the goals list. Over a period of time, our responsibilities get modified and dreams change.

By the way, if you are married ask your spouse to prepare a list independently. After completing the list compare it. If the list which you have prepared, including amount you are willing to spend for each goal and s/he has prepared is different than it means two wheels of your chariot are moving in different direction. It is usually common to have lists with difference. We discuss everything with our spouse except the most important list of responsibilities.

In the end if you do not know your destination, the taxi driver will take you on a long ride so that he can reach his “goal” of higher earning. Those who do not work for their own goals, work for somebody else’s goals
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Source :Pratham Services

Britain's worst personal investment scandal in 20 years:

In a scandal which is the worst to hit Britain’s personal investment industry in two decades, thousands of British investors have sunk their money into a scheme based on rich, elderly Americans dying.

By the time the Financial Services Authority (FSA) closed it down, 100 million pounds had already gone missing and one of the men involved had turned up dead in Singapore.

The scandal, in fact, has sucked investors into a bitter battle involving Keydata Investment Services’ millionaire founder Stewart Ford, the FSA, Britain’s Serious Fraud Office, administrators, auditors, independent financial advisers and opportunist hedge funds sniffing around the vestiges of the remaining assets.

It throws a spotlight on the way in which attempts to regulate financial firms can compound rather than solve the problems -- and on what responsibilities regulators have to investors they are supposed to be protecting.

The scandal also exposes the potential conflicts of interest that occur when different arms of large accountancy firms act as auditors, investigators and administrators.

And it raises questions about whether -- and when - the government ought to wade in to protect investors. But how all this started?

Before knowing how all this started, we should know a little bit about this scheme, started by Keydata Investment Services, an award-winning UK company.

The Keydata product appeared tailor-made for people seeking secure and regular income. The product offered an eight percent return over a 7-year period, with no exposure to the stock market and a brochure promising an “almost guaranteed return of your original capital after seven years.”

So what the British investors bought into was a life settlement scheme, a relatively new and complex type of financial product based on purchasing the unwanted life insurance policies of wealthy Americans and then collecting the death benefits. The returns depended, in part, on when those Americans died.

Life settlement products first appeared in the mid-1990s. Typically, the market is fed by elderly individuals with life expectancies of between 3 and 12 years.

US settlement companies buy these life insurance policies at a fraction of their face value, but above their cash surrender values, picking up the tab for insurance premiums and collecting on the death benefit -- or policy maturity. The fledgling secondary market for life insurance policies -- also dubbed ‘death bonds’ -- started winning attention around 2005, especially in the United States.

As people live longer, the idea of cashing in a life insurance policy early in exchange for a lump sum appeals to some looking to supplement their longer retirement.

Industry proponents say that as long as the models used to predict the deaths of underlying policy holders are broadly correct, a suitably large portfolio should offer a healthy return, despite the industry’s often eyewatering commissions and fees -- as much as 10 percent upfront -- and the lack of generally agreed rules about how to value portfolios.

There are two men at the center of this story. Stewart Ford, founder and CEO of Keydata, cut his teeth in business selling sandwiches, worked as a camera operator and spent three years at a printing company in Edinburgh.

In 1997, he set up Keydata, an online and digital publishing company that provided fund research and performance ratings -- some of it from Reuters, now Thomson Reuters Corp -- to the investment fund industry. In 2001, Keydata branched out into investment products. At its height, the company had 2.8 billion pounds of assets under management.

David Elias sprung from altogether more privileged roots. Born in Singapore, he studied at Pembroke College, Oxford, and trained as a barrister before taking a financial job in the City of London. Elias proved adept at building fortunes and losing them. Ford and Elias met in the summer of 2005. Elias was on a mission to find a UK distribution channel for SLS Capital, a Luxembourg-based life settlement company he part-owned.

He was full of enthusiasm for the nascent life settlement market, which he said looked under-priced and offered a safe haven for investors seeking shelter from stock market volatility. He handed around an independent report by Wall Street firm Bernstein Research, which forecast that the secondary market for US life insurance would grow more than ten-fold to $160 billion over the next few years.
~
Source: ET

Short-term traders log 95% returns against 45% by long term in past 5 years:

MUMBAI: Short-term trading versus ‘buy and hold’ strategy in stocks has been a debate that has raged in the market for a while, with advocates of long-term investing mostly holding the edge. But now short-term traders have something to cheer about, if a recent study by brokerage IDBI Capital Markets is any evidence of their capability to generate superior returns vis-a-vis long-term investors.

In the past five years, short-term traders have churned returns of around 95%, while investors, who buy shares and hold them long, have got 45% returns, according to IDBI Capital’s Utpal Choudhury, who authored the report.

Mr Choudhury defines an investor as one who invests in Nifty over a period and a short-term trader as one who trades Nifty, as per the ‘buy’ or ‘sell’ signal given by the five-day moving average (DMA), a popular technical indicator to determine index or stock trends. The returns from trading includes transaction costs of 5 paise for every Rs 100 worth of trading.

“In a shorter investment horizon (less than one year), a trader, a hedger and a plain-vanilla investor generates almost similar return. Over a longer period of time, trading generates the highest return,” Mr Choudhury said in
the report.

However, other market participants — many of them were unwilling to come on record — were divided about which strategy is superior.

A fund manager with a private mutual fund agreed with Mr Choudhury over the increasing relevance of trading to churn better returns, but differs on the use of five-DMA as the key technical indicator.

“Every fund manager realises the importance of trading, while holding a portion of his portfolio in long-term assets, but using such short-term indicators (five-DMA) for trading is not recommended,” the fund manager said. “It can be very tiring and costly,” he said.

Analysts said the number of times that short-term traders need to churn the Nifty for five years, based on actions driven by the five-day moving average, will be ‘significant’, thereby driving up expenses.

Alex Mathews, head-technical and derivatives research, Geojit BNP Paribas Financial Services, feels the income from ‘very short-term trading’ will not be sufficient to cover the costs on an average.

“Moving averages like 200, 100, 50 or even 10 will give you lesser opportunities to buy or sell, but they are less risky and can even return handsome profits,” he said.

In recent years, many fund managers, especially of mutual funds, have started to book profits within days of buying in case of a sharp rise, as competition in the industry has forced them to be nimble-footed for better returns. Nifty’s sharp movements in a tight range of 4800-5300 for most of 2010 have also prompted investors to trade more often.

The use of Nifty as the benchmark for long-term investments, as in the IDBI Capital study, does not capture the real picture, said the chief investment officer (CIO) of a private mutual fund.

“Most multi-baggers (stocks that rise multi-fold) are outside the index... Looking at the Nifty alone does not require any particular expertise,” the CIO said.
~ET

Eight-year cycle: Sensex may hit 21,000 jackpot in 2011

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If you are a retail investor looking to make money on Dalal Street, you may have a little over 12 months left to get your portfolio right. The Indian stock market is in the midst of a consolidation phase that will set the tone for the next bull run which, according to chartists, is set to begin in the first half of 2011.

The technical analysis, based on a classical eight-year time cycle that the market has followed since 1984, projects the Bombay Stock Exchange (BSE) benchmark Sensex to break the 21,000 barrier by early 2011 and embark on a bigger bull run. “The current rally is an upward leg of the larger consolidation pattern,” said Anup Bagchi of ICICI Securities. “In 2010, the Sensex will fluctuate in the range of 12,500 and 21,000. The next major peak is expected in 2016.”

The analysis shows that the equity market tends to be range bound after doubling from the bottom. For instance, after the 13-month bear phase witnessed during 1992-93, the Sensex jumped more than 100% from 1,980 to 4,643 before going into a consolidation phase for almost four years. The larger bull run, which started in 1998, then took the Sensex beyond the 6,000-mark in Feb 2000 before markets were spooked by the bursting of the tech bubble.

The next cycle from 2000 to 2008 also witnessed a similar trend. After a three-year bear run between 2000 and 2003, the Sensex went up by more than 100% from the 2,900 mark to 6,250, which was followed by a correction of almost 33%. This next bull phase started in 2005.

Going by this theory, analysts expect the markets to see some correction over 12 months. “It could correct up to 11,000 at some time. There are, in fact, likely to be large swings in both directions,” says Rohit Srivastva, fund manager at Sharekhan.

A SundayET article dated January 4 had, citing technical analysis, predicted the market stabilising from April after bottoming out in February/March following the completion of a 13-14 month downtrend.

Ashu Madan, president of equity broking at Religare Securities, believes the Indian stock market is already under a different kind of bull run. “We may be in a consolidation phase but the euphoria has begun to build. For retail investors, this period leading to the bull run will be a litmus test. They should not let their learnings of last market crash act as a baggage now,” he says.

Low readings on India Volatility Index (VIX) too show that the overall perception among investors about market risk has reduced. The VIX is currently trading in the mid 20s, which is in sharp contrast to the same period last year when it was trading in the 50s.

Over a longer period of time, analysts anticipate the markets to touch 25,000 levels by 2012. “Going by the cycle, the Sensex should touch 32,000 levels by mid 2014,” says Sandeep Wagle, chief technical analyst at Angel Broking.
~~ET

Gold isn't best hedge against inflation

Economic chaos? The dollar crumbling? Central banks printing money like crazy? Probably the only real surprise about the surge in gold prices over the past few months is that it took so long to arrive. Last week, gold touched an all-time high of $1,227.50. Back in September, it was still less than $1,000. Chalk that up as a victory for the gold bugs.

This week, the price is heading down, dropping below $1,200. Chalk that up as a victory for the gold sceptics, who regularly point out that the metal’s value is just a sentimental memory from a long-buried era.

In reality, while investors are right to be nervous about inflation, maybe they are catching on that it’s wrong to see gold as the best hedge against a general rise in prices. There are plenty of alternatives: equities, property, oil, luxuries or private equity funds should prove just as effective a way of shielding yourself.


It isn’t hard to figure out why investors had been getting interested in gold again. Central banks are pumping freshly minted money into the system. A few hundred years of economic history says that eventually this will lead to inflation. It might be next year, or the year after.

Alloyed Record

But gold? Whether it’s a hedge against inflation depends on where you want to start drawing the graph. Back in 2002, gold was less than $300. If you bought it then, you’d certainly have protected yourself against rising prices. The 1990s were a different story. Gold started that decade at around $400, and ended it below $300. Not so great. As for the 1980s, forget it: gold lost almost half its value during that decade.

There isn’t much chance, either, of the world’s central banks making their currencies convertible into gold once again. They would bankrupt their governments in the process. In truth, while gold may have a role in protecting against inflation, there are plenty of alternatives.

Rate Squeeze

The only real way to control inflation once it gets started is to raise interest rates high enough to create a deep recession, and so choke off rising prices. That’s what central bankers did in the late 1970s and early 1980s, and may do again sometime around 2015 or 2020. Once that happens, you’ll need to think again — you might not want to be in property or equities. That, however, is some way off. As we move into the early stages of an inflationary era, those five assets should do at least as well as gold, if not better.

Why Dubai matters to the world

After Dubai announced in late November that the state-controlled investment firm Dubai World was seeking to reschedule payments on some $26 billion of debt, global markets went into a tailspin. While foreign bourses quickly rebounded, local shares have taken a pounding, and the credibility of Dubai's leadership has suffered serious damage. Yet lost in all the drama is the fact that Dubai is an important economic experiment in a strategically vital region. The humiliating debt implosion aside, the emirate remains the most dynamic business hub in the Gulf and has become a model for its neighbors.

In a region of conservative, autocratic countries long chained to the boom-and-bust cycles of the oil industry, Dubai stands out for creating an open economy that has diversified well beyond energy. With nowhere near the oil and gas reserves of other Gulf countries such as Saudi Arabia and Kuwait, it had to. "Dubai shows that if you are part of the global economy, you do well; you don't have to have oil," says David Aaron, director of the RAND Center for Middle East Public Policy in Washington.

There's no denying that the emirate overreached and will pay a hefty price. Dubai led the region in allowing outsiders to own property, opening up its real estate market to foreign investment in 2003, and created a mortgage industry to finance their purchases. But lax rules ushered in wild speculation. With real estate prices rising at a double-digit annual clip, investors made a killing buying apartments with low deposits and quickly flipping them. Then when the credit crunch came, buyers fled and developers saw their cash flow dry up. Hardest hit was Nakheel, a subsidiary of Dubai World that created the iconic palm island real estate development off the coast. It has about $8 billion in debt and $13 billion in other liabilities such as bills from suppliers, Barclays Capital (BCS) reports.

Dubai's leadership has doubtless mishandled the recent turmoil. The emirate's debt problems have been looming for at least a year, but ruler Sheikh Mohammed bin Rashid Al Maktoum has made little progress in coming to grips with the challenge. As recently as October, Dubai raised nearly $2 billion in new money through an Islamic bond issue. Asked about the emirate's ability to pay its debts, Sheikh Mohammed told reporters: "I assure you, we are all right."

Part of the problem is that while Dubai is more open than its neighbors, it's no Jeffersonian democracy. It is dominated by a handful of people, and their decision-making and finances remain opaque. The debt crisis illustrates that. Until recently, no one knew how much debt Dubai had and which state-linked companies it might back in a crunch. Just as murky was the extent to which its wealthier neighbors, chiefly Abu Dhabi, were willing to bail it out. Investors who had assumed the best got spooked when it appeared Dubai couldn't meet its obligations. "To lower the perception of risk, Dubai must become more transparent quickly," says Matthew Vogel, head of emerging markets research at Barclays Capital in London.

Dubai's success hasn't gone unnoticed in the neighborhood, and nearby states are following its lead. Gas-rich Qatar is promoting its own
financial center. Abu Dhabi has announced an $8 billion financial-services joint venture with GE. And it's working hard to transform itself into a higher-end version of Dubai with even fancier hotels and branches of the Louvre and Guggenheim museums. Even hyperconservative Saudi Arabia has taken a leaf from Dubai's book by liberalizing its financial system to draw in Western investment banks such as Morgan Stanley (MS) and Deutsche Bank (DB).

What these countries see in Dubai is a chance to move beyond the petro-economy that has provided their wealth but does little to create jobs. The Gulf region has millions of young, underemployed people who want a better life—and who risk being drawn toward Islamist extremism if they don't get it. Some of the most talented of these have made their way to Dubai, where they find a more meritocratic culture that offers seemingly endless opportunities. "They look at this place as somewhere that allows them to do things that they can't do [at home]," says Tarik Yousef, dean of the Dubai School of Government. "It has been built out of nothing."

Hard Choices

While Dubai's neighbors want to emulate its success, that doesn't mean they won't exact a serious political toll for the recent turmoil. The U.A.E., a federation of seven city-states ruled by hereditary clans, is largely bankrolled by Abu Dhabi, but Dubai is its business center. Sheikh Mo, as Dubai's leader is popularly known, is vice-president and prime minister. Abu Dhabi's ruler, Sheikh Khalifa bin Zayed Al Nahyan, serves as president, and he's unlikely to simply write a check to bail out Dubai. Instead, he will probably force Sheikh Mo to make hard choices about developer Nakheel and other troubled enterprises. Some in Abu Dhabi will even want to see Dubai pay for its profligacy by turning over stakes in major assets. The two sides "will sit down and say this is sustainable, this isn't," says Hashem Montasser, Dubai-based managing director of EFG-Hermes, the leading regional investment bank. "I am sure there will be differences."

Until Dubai cleans up its act, it will be much harder to find the money needed to keep building the new highways, the public transit system, and other big infrastructure projects that have helped give it its edge. Already businesses in the emirate say it's tough to line up bank credit, and that won't ease anytime soon. "We are expecting it to be very difficult for Dubai-based entities to raise money," says Farouk Soussa, a Standard & Poor's (MHP) analyst in Dubai.

Given Sheikh Mo's missteps in the current crisis, he may find himself increasingly under the thumb of his neighbors in Abu Dhabi. It hasn't gone unnoticed that solo portraits of him on billboards in prominent locations across Dubai have been replaced by signs showing both the Dubai leader and Sheikh Khalifa.

Dubai may no longer be allowed to run an independent foreign policy. Sheikh Mo has long kept the city-state close to Iran—and tapped into its capital—while most other Gulf states see the Islamic Republic as one of their greatest enemies. And Abu Dhabi, which worries that the U.A.E. is losing its character due to excessive immigration, may push to tighten up on visas for visitors from Iran, Russia, and elsewhere. "The entire U.A.E. will gravitate toward Abu Dhabi," says Ian Bremmer, president of New York-based risk consultancy Eurasia Group. "That means Dubai will become more conservative socially and politically. Dubai's branding will be toned down."

"Don't Count Dubai Out"

That toned-down branding means the emirate will surely rein in some of its excesses. Although the skyline and palm islands won't disappear, further over-the-top development will likely be put on hold. The city-state has "realized it's no longer about building the world's tallest tower," says Saud Masud, research chief for Swiss bank UBS (UBS). "Now it's about Dubai's legacy and its long-term future." And the crisis could help spur greater transparency—admittedly the weakest part of Dubai's economic model, says David Kirsch, an analyst at Washington-based consultancy PFC Energy. "This will put more pressure on Dubai to tighten up on regulations and improve governance," Kirsch says.

It is also hard to see Dubai losing its role as the region's leading business hub. It's true that Qatar's Doha, Abu Dhabi, and even the Saudi capital, Riyadh, are scoring some successes in attracting banking and other businesses. And with greater access to capital, they'll be able to close the infrastructure gap with Dubai. But few expatriates are going to want to settle in those places, which don't really want lots of foreigners and their unfamiliar ways anyhow.

While Dubai's current problems may be severe, the viability of its economic model remains sound. Demand for business services is down now, but it will surely bounce back once the credit crunch eases. "Don't count Dubai out," says Carlyle Group co-founder David Rubenstein. "It has world-class infrastructure, a high-quality talent pool, and will continue to be an important financial center for decades to come." Singapore, which has served as an inspiration for Dubai, learned from the crash of 1997-1998 and emerged much stronger from it. Dubai, too, now has the opportunity to take lessons from its mistakes and thrive once again.
~~ET

What went wrong in Dubai

The boom years of the early 21st century were good for many people, but perhaps no one enjoyed them more than Sheikh Mohammed bin Rashid al Maktoum, the ruler of Dubai. Stripped to its essentials, Dubai is a sweltering strip of sand blessed with a natural harbour known as the creek, which has been an entrepot for merchants and smugglers for centuries. Building on his father's vision, Sheikh Mohammed turned Dubai into a 21st Century boomtown, luring western financiers and tourists with gleaming steel and glass towers, vast beaches, and green golf resorts.

Now Sheikh Mohammed is calling for a standstill on debt repayments at one of his most important companies, Dubai World, least temporarily rocking world markets and raising huge questions about the future of Dubai. The Standard & Poor's 500 index of 500 stocks fell 1.7% in abbreviated trading Friday, to 1,091.49, and the MSCI Emerging Markets Index had slipped 1.8% as of 2:12 p.m.

Dubai was always a momentum play. Unlike Saudi Arabia or Abu Dhabi, the hugely wealthy emirate to the West, Sheikh Mohammed had scant oil production to fuel his grandiose ideas. Instead he sold the world on his vision of Dubai as a hub for the Middle East, western Asia, and Africa, attracting investment from his wealthier neighbors—both Arabs and Iranians—and increasingly, from the West and Russia.

For a while, it worked. Western bankers fell over each other to book space in his Dubai International Financial Center, a handsome if somewhat over-the-top real estate project aimed at being the Wall Street of the Gulf. The cream of technology companies and media companies, from Cisco Systems to Microsoft, set up shop in Dubai's Internet City. CEOs and politicians came to Dubai to pay court to the ruler, whom they treated like a sage.

Sheikh's subordinates competed rashly

Sheikh Mohammed patronized a corps of young technocrats, who worshiped "The Boss" and raced to enact his visions. He told them there was nothing they couldn't do if they put enough imagination and energy into it. When Mohammed Alabbar, the chairman of developer Emaar Properties, came to the Sheikh with a plan to build a skyscraper in what was becoming the new downtown of Dubai, the ruler urged him to build the tallest building in the world. That's exactly what Alabbar did; today the Bourj Dubai is nearly completed, soaring above an artificial lake that boasts an elaborate set of fountains that cost $250 million. For a relatively small place, Dubai has acquired an extraordinary collection of futuristic towers—some of them unfinished or empty. The cityscape looks like something out of Buck Rogers.

A man in a hurry, Sheikh Mohammed created rival building arms and investment managers and spurred them to compete with each other for land and capital. At one point he had at least three private-equity operations going at once under his aegis. These units invested heavily outside of Dubai at the top of the market, using borrowed money. Banks, too, bought into the Sheikh's vision, or at least wanted to be included in the charmed circle.

When the credit crunch came, Dubai was badly exposed to known debt of $80 billion to $90 billion, and possibly even more. The Sheikh and his lieutenants, who had seemed masters at selling Dubai to the world, suddenly seemed inept. That Dubai has a serious problem has been well known for more than a year. Little progress has been made to resolve it.

It almost seems as if the ruler and those around him are in denial, not wanting to acknowledge the extent of their troubles—even to themselves. Earlier this year the ruler appointed a frank-speaking young finance minister, Nasser al Shaikh, who tried to force some of Dubai's big companies to sort out their problems. He was promptly fired.

A mystery: Abu Dhabi's $10 billion

In another sign of stress earlier this month, Omar bin Sulaiman, the well-regarded governor of the financial center, was also ousted. Three of the Sheikh's closest advisors were removed from the board of the Investment Corp. of Dubai, which manages the government's stakes in some of the big companies such as Emirates Airline. These moves may have been designed to appease critics in Abu Dhabi and Dubai's own worried merchant community.

Worried backers of Dubai always assumed that Abu Dhabi would come to Sheikh Mohammed's rescue if he got into real trouble. That has been true to an extent. Earlier this year the central bank of the United Arab Emirates, which is mostly funded by Abu Dhabi, the wealthiest of the emirates, loaned Dubai $10 billion. What has happened to the money is something of a mystery.

This all came to a head on Nov. 25, when Dubai rocked world markets by announcing that it would seek a standstill on debt repayments of ports operator and real estate developer Dubai World, the most troubled of state-controlled Dubai Inc. companies. The timing was horrendous, coming on the eve of an Islamic holiday, as well as the U.S. Thanksgiving. Worried investors—who only recently had begun putting new money into Dubai on the presumption that the worst was over—scrambled for information. Little was forthcoming. Reporters raced around the city, chasing press conferences that were never held. In a bizarre statement on Nov. 26, Sheikh Ahmed bin Saeed Al Maktoum, a Dubai official, said: "The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react."

What prompted the Dubai leadership to behave this way? There has been much speculation that an increasingly sceptical Abu Dhabi had refused to come to Dubai's rescue. But Abu Dhabi appears to have been blindsided by the debt gambit. Only hours before, two Abu Dhabi banks agreed to subscribe to $5 billion in Dubai bonds. Dubai's conduct looks more likely to stem from a combination of lack of awareness and denial, which may well be making things worse than they need to be for Dubai and its ruler.

What happens now? Abu Dhabi will come under pressure to provide more help to avoid being tarnished by a meltdown next door. Sales of Dubai's overseas assets, such as New York clothier Barneys, may be accelerated to raise funds. Sheikh Mohammed will try to preserve his independence and dignity. But already—in what some interpret as a sign of Abu Dhabi's growing influence—Sheikh Khalifa, that nation's ruler, is now pictured with Sheikh Mohammed on a huge poster at a traffic circle in Dubai.
~~ET

FACTBOX on Dubai crisis:

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Who is who in Dubai corporate map?

Dubai, the member of the United Arab Emirates federation in deep financial straits, is struggling to meet debt obligations of up to $80 billion.

On Wednesday, the government said it will ask creditors of its flagship firms Dubai World and property group Nakheel for a debt standstill as it restructures the Dubai World group.

Who runs Dubai?

Each of the seven emirates is run by its own ruling family, many of whose members have substantial business interests. Dubai is ruled by the Al Maktoum family. The line between personal property of rulers and Dubai "state" ownership is blurred.


What are Dubai's main companies?


Dubai government owns three major corporate entities, Dubai Holding, run by Mohammed Al Gergawi; Dubai World, run by Sultan bin Sulayem; and the Investment Corporation of Dubai (ICD).

Last week Dubai's ruler reshuffled the board of ICD, which manages his wealth, bringing in two of his sons as directors and removing Gergawi and Mohamed Alabbar, chief of Emaar Properties.


Which major firms do they own?


Dubai World, Sheikh Mohammed bi Rashid al-Maktoum's investment vehicle, includes shipping giant DP World and developer Nakheel, which is behind the famous man-made palm-shaped islands which came to define Dubai in the minds of many around the world during the boom years.

Dubai Holding includes property developers Sama Dubai, Dubai Properties and Tatweer, which are all being merged with Alabbar's Emaar - part of ICD.

ICD also includes key entities involved in running the emirate, such as the Dubai Electricity & Water Authority and the Road and Transport Authority, as well as Dubai Aluminum (Dubal) and the flagship airline group Emirates.


Dubai world can't meet debt obligations?


Most of Dubai's debts, which have been exposed by the financial crisis, have arisen through Dubai World.

Wednesday's announcement came about because the conglomerate wanted to delay repayment of a $3.5 billion sukuk bond due on December 14.



What has Abu Dhabi done?


Abu Dhabi, ruled by the Al Nahayan family, has not stepped in to directly bail out Dubai, which would carry direct political implications for Dubai's freedom of maneuver as a maverick member of the UAE.

Dubai, for example, maintains wide trade links with Iran despite ongoing tensions between the UAE and the Islamic Republic over a territorial row and Iran's nuclear plans.

A more influential Abu Duabi might want to curb such ties. The federal central bank, based in Abu Dhabi, has bought $10 billion from a $20 billion bond program announced by the Dubai government earlier this year.

On Wednesday two Abu Dhabi banks bought another $5 billion worth of the bonds.


What about Abu Dhabi's finances?


Abu Dhabi is where most of the UAE's oil is located.

The UAE, with a population of less than 5 million, is the world's third largest oil exporter and has the world's largest sovereign wealth fund, the Abu Dhabi Investment Authority.

Its assets are thought to be worth around $500-$700 billion.
~ET