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by Larry Levin

As you all already know, Friday's sell-off was due to the potential sovereign debt default of Dubai World that would exceed Argentina's. There was not a literal default, but a situation that warranted a default-like rating on its debt according to the ratings agencies. Moody's Investors Service and Standard & Poor's cut their ratings on Dubai state companies last week, saying they may consider Dubai World's plan to delay debt payments a default.

But will Friday's equity swoon be a one day event - a buying opportunity - or the beginning of a large correction? This may surprise some of you, but it will probably be viewed as a buying opportunity. After all, in the world of eye-popping bailout and "stimulus" numbers, the potential Dubai World default would be peanuts...a mere $59-billion.

Royal Bank of Scotland Group Plc was the biggest underwriter of loans to Dubai World, while HSBC Holdings Plc has the most at risk in the United Arab Emirates, according to JPMorgan Chase & Co. Does anyone really think that the bank bailouts would end now? If RBS and HSBC were stuck with the bad debt, they will be bailed out and the taxpayer will be left with the cost; ergo, there are no problems for Fraud Street to fret over.

Of course the other side of the argument is that this could start a daisy chain of defaults. "The market is very nervous about exposure to Dubai and RBS's name has been associated with it as both a lender and a book runner," said David Williams, a banks analyst at Fox-Pitt Kelton Ltd. in London. "People are concerned it's going to produce a new wave of losses. Dubai is driving everything in the market at the moment."

It's a possibility to be sure; however, all will be well with several tens of billions of dollars of new bailouts. "Move along people - nothing to see here."



Previous Day's Trading Room Results:

Trade Date: 11/27/09

E-Mini S&P Trades*
(before fees and commissions):


1) No "Secrets" trades filled today.

2) Algorithm positions (2)

3) "Reading the Tape" positions (18) ...combined Secret's, Algo, & "Reading the Tape" total...+2.50


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