Last year, Dubai First bank launched a lifestyle credit card for VVIPs. What was the difference - it had diamonds in it. The FT reports that a Kazakh bank, Kazkommertsbank, in assoication with Mastercard is launching a similar card. Although, this is a limited edition offering, it would seem strange that information about annual fees and spending limits have been passed to the public. Surely, if you have that much money, you don't need limits?
Instead of taking funds from the UK government’s rescue package for its banks as it has done for the likes of Lloyds and HBOS, Barclays has turned to Middle East investors to bolster its balance sheet. Barclays, which is the UK’s second biggest bank, is raising up to GBP 3.5 billion ($5.69 billion) in what is being described as a ‘personal investment’ from HH Sheikh Mansour Bin Zayed Al Nahyan, a member of Abu Dhabi’s royal family.
If all the warrants issued are exercised, Sheikh Mansour will end up with a 16.3 per cent stake in Barclays while Qatar Holding will have 12.7 per cent and Challenger Universal will hold 2.8 per cent of the bank.
The deals are not cheap for the bank. On part of the new funds it will be paying interest at an eye-watering 14 per cent for 10 years on Reserve Capital Instruments dated June 2019 – the highest rate any bank has had to pay for capital. What’s more, it is significantly more expensive than the 11-12 per cent that had been on offer from the UK government. Barclays claims the net, after-tax, rate of 10 per cent is cheaper than funds from the government but it’s been suggested by some analysts that the bank will be paying interest for several years more than its rivals.
In some ways it looks pricey - because Abu Dhabi and Qatar have been given the right to buy 18.1% of Barclays shares at any time in the next five years at the current bombed-out share price or £3bn in total. And £2.8bn of mandatorily convertible notes give the two buyers a dividend of 9.75%, and the ability to buy a further 33.5% stake in Barclays next June at a discount of a fifth to Barclays' share price over the past couple of days. So Qatar and Abu Dhabi could together control just under a third of the entire bank.
But why would Barclays want to do something like that - well it differentiates it from the dead dogs of the UK banking industry who are now slaves to the UK government. What it does is maintain its commercial independance, albeit answering to different shareholders. What it also does is allow payment of those crazy bonuses to people like Bob Diamond.
It also appears to have cut out the middle man. Gordon Brown in on a trip to the Middle East to ask for assisitance from the oil rich nations to stablise by abandoning attempts to increase the price of oil by cutting production and by investing their multi-trillion dollar profits in ailing economies.
Those of you that have read the grapeshisha blog for some time may remember that just under 2 years ago I predicted that Barack Obama could be the first black president. On the eve of the American Elections whether Obama wins or not, the US has catapulted a real leader, to within a touching distance of the presidency. That, in itself, is a great thing. Obama should not be viewed by the colour of his skin. He should be viewed as a man who will talk sensibly, who will be truthful and who will serve his country well. He is a man of stature, and a man of morals.
For those who are yet to be inspired by him, you must watch his 2004 DNC speech which is truly inspirational.
What does it mean for the UAE? What does it mean for the Middle East? Well, we're not quite sure. His policy doesn't yet seem defined, but there will be logic - and there wont be a war just for the sake of it. While the power of the US will wane over the coming years, the US is still important in a global context. In scale alone and GDP it is big, and will always remain so, no matter how smart the Middle East, China and India get. The good thing is, that if Obama does become president, the Middle East will be dealing with a stand up guy.
But, as you know, US elections are a close thing to call - and this year it may result in a dance off between Obama and McCain:
And, so if you are in America, and want to make a difference, YALLA VOTE!
This is the moment when we must come together to save this planet. Let us resolve that we will not leave our children a world where the oceans rise and famine spreads and terrible storms devastate our lands.
In some news that we already knew was happening, the FT make some observations on the current situation in the main markets that have property, namely Abu Dhabi and Dubai. Both are very different markets.
“A real estate correction could happen, but UAE banks are cushioned... the banks are safe,” Sultan Nasser al Suweidi, the central bank governor, said at a conference held by the Arab Monetary Fund in Abu Dhabi, the capital of the UAE. ... Despite many warnings of corrections in recent years, property prices have continued to soar in the UAE, driven by booming economic growth, negative real interest rates, and a vast influx of expatriates.
The real worry is whether the banks will be able to survive, but that shouldnt' be a problem. The real issues is the rememdy of the current situation. Whether there is was going to be a global economic downturn, there is an argument that Dubai is oversupplied but at the wrong price, and Abu Dhabi is undersupplied, thus driving rental prices up. Dubai's price may therefore be driven down over the medium term as landlords look to rent their property. As for Abu Dhabi - if there ain't a place to stay, there ain't a place to stay - and rental prices will remain at that level until property gets released onto the market. Abu Dhabi, now, is reminiscent of Dubai in 2003 - but different in a whole lot of ways.
An interesting set of boxes depicting the spending consumption of some key states in the world. The UAE spending patterns are this:
Clothing and Footwear - $4.1bn Electronics - $1.0bn Alcohol and Tobacco - $0.3bn Household Goods - $3.9bn Recreation - $2.3bn
The UAE spends nearly double in clothing and footwear than it does on recreation. (The UAE spends a lot to look good, but doesn't go out much?)
The UAE spends almost as much on household goods as it does on clothing and footwear. (The UAE spends as much on fridge freezers as it does on tailoring its clothing?)
The UAE spend less per capita on alcohol and tobacco than most countries (Duh - alcohol is haram!)
UAE Recreation Spending
UAE Household Goods Spending
UAE Electionics Spending
UAE Clothing and Footwear Spending
UAE Alcohol and Tobacco Spending
Data is one thing - interpreting it is another thing. Compare differences with other countries and see what comes out. It makes for an interesting exercise.
People in Greece spend almost 13 times more money on clothing as they do on electronics. People living in Japan spend more on recreation than they do on clothing, electronics and household goods combined. Americans spend a lot of money on everything.
Will the UAE be hit by the credit crunch? Will Dubai's growth be hit by the financial crisis? How will Abu Dhabi fare in light of the current recesion and economic downturn? These are all big questions that noone really is sure about. But it's always good to see where the UAE has come from with some hard data. Below are three graphs, showing a comparison to China and India (because they are the markets always mentioned when one mentions growth) and also included is Saudi Arabia, because that is the biggest economy in the Middle East and people often discount it because they don't understand it. Despite all the headlines that Dubai and Abu Dhabi bring, Saudi is the holy grail, if you would, of the Middle East. The charts show UAE GDP trends, ie specifically UAE Nominal GDP, UAE Nominal GDP per capita, UAE Real GDP Growth. The data comes from the IMF, and shows trends from 1980 to 2007 with projections for 2008, 2009, and onwards to 2013. Although the credit crunch and global recession, it's interesting to see the UAE relative to some key economies.