At this year's Master Investor there will be a 10 minute debate followed by a show of hands vote. The motion will be "Britain is closer to Iceland than is Dubai." I will speak against the motion, Richard Poulden of Sirrius Exploration who lives in Dubai and who loves the place will speak for it. I have just come back from 4 days in the Emirate where - among other things my partner and I enjoyed a lovely meal on the 52nd floor of an amazing hotel with Mr and Mrs Poulden. My only caveat is that as someone suffering real problems with vertigo, I spent the entire meal worrying about various ways in which the building could collapse.
The trip started badly. As we headed for the airport I started to feel pretty ill. It was not a phone call from Colin Blackbourn and resulting BP monologue that triggered this although it did mean that I was unable to resist as he explainedin more detail why BTG shares were heading higher. By the time I was on the plane life was very uncomfortable and by the time we reached Dubai at 1 am local time I felt utterlynauseous. A bad pot of M&S Taramaslata on Tuesday evening was, I think, the culprit and Thursday was - as a result - a bit of a washout. By Friday I was on the road to recovery and I spent the next two and a half days trying to get my head around the bubble that is Dubai.
The place has its attractions. But, I am afraid to say, for me there are not many. On Thursday the local press heralded a $20 billion bailout of Dubai by its neighbours in Abu Dhabi as signaling the bottom of the market but it is not. That $20 billion is merely a loan enabling local property enterprises (many owned by the Sheikh) to refinance borrowings due for repayment this year. They will have to be repaid at some point. Meanwhile asset values must continue to slump. Why? Because there is a vast glut of office, retail and residential property. Yet in order to keep up the pretence that Dubai is THE place to be, more space is being built everywhere just at a time when the expats are losing their jobs and going home. So the glut increases on a daily basis. Propertyprices in Dubai are down by 30-50%. But still both rental investment prices look high compared to - say- London. My guess is that as Dubai borrows more to build out its planed infrastructure and residential/retail/ commercial property plans and to bribe some of its people (see below) with panes et circuses ( as well as hard cash) the value of its tangible assets will slump. The real problem is that I cannot see why anyone would wish to live there rather than, say, Western Europe and here are 10 reasons why.
1. You either sit in an air conditioned building or suffer unbearable heat. It is too hot to walk even half a mile. Dubai has a climate for camels not people.
2. Like Chelsea FC, Dubai has got no history. I could spend a year visiting the monuments that over 1000 years have made the UK an interesting place to live. Dubai was founded in 1833 and was a village for its first 50 years. Like Sparta it will leave nothing of historic significance as a testimony to its moment of greatness. I saw a shop adverting "modern antiques" and even those destinations flagged as antiquities are like the axe which beheaded Anne Boleyn and is intact except that the handle and the blade have both been changed. The little of history or genuine culture you can see is fake history.
3. Incomes in Dubai may be tax free but it is a horrendously expensive place to exist unless you can live on a diet of sand and cigarettes. A meal for 4 with no drinks & just 1 in 4 people ordering pudding in a mid range restaurant set me back £170. That would buy a meal for 4 with 2 decent bottles of wine and 3 courses in a upper range restaurant in central London.
4.The only jobs are in construction (which will disappear in due course) or financial speculation (which is based on the premise that Dubai has a future). There are no real industries in Dubai - not even oil, production of which is minimal.
5. The natives (c 400,000) have inherently more rights than the expats (c1.1 million) even if the expats were born there of parents also born there. We met one guy whose grandpa was the last person in his family to step foot in Pakistan, 50 years ago. His family still carry Pakistani passports becauseDubai believes in Apartheid. The wealth created by expats (whether highly paid bankers or Indian labourers and drivers) goes disproportionately to Emeratis. Apparently the BBC has just run an expose showing under what conditions the labourers live. I bet they are not great.
6. It is illegal to show affection to your partner in public. Sharia law applies in family courts. Signs suggest that women must dress "modestly" in certain places - such as shopping malls. As Dubai is bailed out by its richer (but more hardline) neighbours these religious pressures are bound to increase. I'd rather not live in such a society.
7. The press tows the party line. Stating that the ruler of Dubai will sort out the crisis, that the economy is set to bounce is all very well but it is not true. In Britain there are a plethora of media outlets and websites which point out that Gordon Brown partly caused our crisis, that talk of green shoots is phooey and which will attack the regime. There is no dissent in Dubai. It is not a free country.
8. I am assured that if you look hard enough that you can find an art gallery.But in Dubaiculture means the pursuit of wealth and crass consumerism demonstrated in vast shopping malls. It does not mean a culture of diversity based on 1000 years of history and freedom of expression nor a rich array of galleries, museums and theatres. I am sure that Dubaiwill buy in fine art as trophy showpieces but can you reallyenjoy a range of the arts in a society where there is no freedom of speech or thought and where - to be honest - most of the inhabitants do not seem to miss higher culture anyway as long as the shopping malls offer the latest fashions.
9. The place is a building site. That will change but right now it is not that pleasant.
10. You can fight the desert for only so long. Billions will be spent turning sand into buildings and grassy embankments but still when the wind whips up the sand blows in. You can chuck billions at fighting nature for only so long. Nature will always win in the end and he sandstorms will whip back in.
The performance of the t1ps SF Growth Fund continues to show that stock picking is the key. It delivered yet another week of absolute gains last week and - as at 13th April - is now more than 20% up year to date. It remains the top performing small cap fund of the past year.
The team behind that fund is now launching its next vehicle, Worship Street Investments which will invest only in PLUS quoted stocks. Our chairman Malcolm Burne and I will be investing our own cash and together with RSH will put up 10% of the total funds raised on the same terms as everyone else. It is intended that Worship Street shares will themselves be PLUS traded and we aim to make this a highly liquid stock by setting the minimum application level at just £250. WE have an all star list of backers who have already committed to put up rather larger sums.
Worship Street will invest only in PLUS stocks. We believe that the illiquidity of that market means that an active player in the secondary market can buy buying patiently and selectively pick up some tremendous bargains.Worship Street will also - selectively- back pre IPOs and Aim to PLUS moves.
The prospectus and application form for Worship Street Equity Investments is available to download from the following website - www.rs-cf.com . In order to download a copy, you will need to register with the website, the link takes you straight through to a registration page where you should register simply as an Investor. However we have known a few people to experience problems with the registration process. If you do have trouble downloading the prospectus, please send an email to monisha.varadan@rs-cf.com and Monisha will email over a pdf copy first thing on Tuesday morning. Finally, if you do not wish to go through the process of downloading the prospectus, write to Monisha and she will make sure a copy is sent in the post.
The show is now more than 85% booked out in terms of the 100 companies attending and more than 90% of the 2000 tickets have also been reserved.
Last week we sent out tickets to those already booked in and started advertising the breakout sessions including my SF t1ps Fund breakfast ( where Medusa, Avisen, Blavod, Northern Petroleum and 1 tbc will present) and lunchtime sessions with Zak and John Piper.
If you have not booked in for April 25th you should do so right now. The speaker list is Luke Johnson, Lucian Miers, Jim Mellon, Nigel Wray, Slater (M), Nick Leslau (back after a 1 year gap), Evil, David Linton myself and Zak.
Tickets cost £49.99 but as a t1ps.com member you can get one for free and bring a mate/wife/partner for a tenner. To book a priority ticket please follow the instructions below. To book one ticket please send an email to mi2009tickets@t1ps.com indicating on the email your full name, postal address and telephone number. If you want more than one ticket please do the same but indicate that how many extra tickets you want and provide a phone number - we will call you to collect payment by credit card for the extra ticket by calling you so that is why we need your number!
WE have just over 100 tickets left so if you wish to attend please book now.
If you have booked and by Wednesday have not received a ticket please call Sarah on 0207 562 3350 or email Sarah.Winston@rivingtonstreetholdings.com
If you have booked a ticket but cannot now make it please let Sarah know so that we can reallocate that ticket to someone else.
I return to England and find that another t1ps followed stock has received bid approaches - Vatukoula. Since he has sent a very gracious email to correct his stance I am sure that one t1ps member would not mind me quoting his thoughts on Vatukoula of 6th April ( one week ago)
I don't mind holding (I guess) if the thing has a chance of being turned around...but if it is a dead duck we need to get out fast before we lose all our money!
I do hope he held on. That small cap shares are not particularly loved is not in dispute. But if here is value inherent in a company it will out in the end either as its stock is re-rated or as a result of bid action. With money cheap those who can secure finance will launch bids. I fully expect to see more such consolidation among small caps over the coming months. As a long term investor it can be disappointing to see companies bought out for less than one's longer term target but it can mean that you enjoy significant shorter term gains so one should not complain. As ever, successful investment is about buying into value and waiting.
I hope that you enjoyed a Happy Easter.
Tom
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