Dubai: Do Sell

I’ve been thinking about what’s the biggest investment bubble in the world right now. After careful consideration, I decided that Baidu (BIDU) comes in a close second. In fact, it’s so close that it has the syllables right, just in the wrong order. Not even Baidu can match what’s going on now in Dubai.
Dubai is one of the emirates of the United Arab Emirates. This city is being built up so quickly it’s almost like science fiction. The Burj Al Arab (pictured above) is the largest hotel in the world. It’s over 1,000 feet tall and sits on an artificial island just off the beach. Each room comes with its own butler. The hotel is so big, the Statue of Liberty can fit in the atrium. Pedestal too. (If you’re interested in staying there, here are some details.)
The world largest building is also being built here. Oh, did I mention the new airport? It will be the size of Heathrow and O’Hare combined. It doesn’t end there. There’s the Dubai Waterfront. I don’t even know how to describe this one. It’s basically a giant artificial city being built on the water. Imagine the Tower of Babel, but with WiFi. The development will be larger than the island of Manhattan. Nearly one of every four construction cranes in the world is currently in Dubai. This is just absurd.
As you might expect, Dubai has a stock market and it’s doing rather well. I believe this is the entire listing. Their market is making our Nasdaq bubble look like a wimp. In the last 12 months, the Dubai market is up 162%. In the 12 months before that, it was up 181%. Going back three years, the Dubai market is up over 1,000%. One observer said that Dubai is “like Singapore on steroids.”
There’s also an indoor ski slope, and an underwater hotel is being planned. The city is being flooded with workers from all parts of the world. According to a survey, Dubai will need 150,000 new housing units a year.
This is a good time to remember that there’s an interesting correlation between market crashes and the largest buildings in the world. The Empire State Building went up just as our market crashed. The Petronas Towers were built as the Asian Tigers fell apart. The World Trade Center and Sears Tower accompanied the crash of the early 1970s. Even the Nasdaq’s shiny new office was opened just before its bubble burst.
The price of oil is already well below its high price. What’s good for consumers here isn’t good news for Dubai. I think Dubai is ready for a fall.

Posted by Eddy Elfenbein on November 23rd, 2005 at 3:20 pm

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.