Ever since 2009 – when Dubai’s financial system nearly came a cropper because of the non-payment on a Nakheel sukuk – I’ve been on the lookout for “black swans” in the UAE.
The “highly improbable event” theory – made famous by former bond trader Nassim Nicholas Taleb – focuses on the extreme impact of a rare and unpredictable occurrence, like the sighting of a black swan.
You might argue that the Nakheel sukuk failure was not really that unpredictable, especially in the midst of the global financial crisis. But I – and almost everybody else – missed it and misjudged its significance.
Not to be caught out again, I now regularly go on a “black swan hunt”, deliberately seeking out signs of the fluttering of dark feathers that could herald another crisis.
Last week the obvious place to start looking was the Capital Markets Summit (CMS) in Dubai’s Madinat conference centre. If a gathering of expert bankers, regulators and leaders of Dubai’s equity markets could not spot the signs of impending trouble, who could?
People I talked to there recognised that Dubai, as a global trading hub and a growing financial centre, is vulnerable to the chaos and uncertainty unleashed by President Trump’s tariff wars. That is the “known unknown” factor that could affect the UAE’s economic wellbeing.
But overall the event was a celebration of Dubai’s dynamism and financial resilience. There were no black shadows looming over the summit.
I next went searching in the gold market. Dubai (City of Gold in the title of an excellent book about the emirate by Jim Krane now needs updating but is still worth the read) is famously gold-crazy.
Bullion prices are trading near all-time highs, so you might have expected that to deter shoppers at the Emaar Gold and Diamond Park off Sheikh Zayed Road – but no. The car park was packed with people carriers unloading tourists, and the shops inside were doing a brisk trade.
Could that be taken as a sign that investors, fearful of an impending financial crisis, were rushing to the “safe haven” of gold in a risky world? Perhaps. On the other hand, the rise in the gold price has been so steep over the last year that you may expect a value-destroying correction soon.
I asked a trader if gold prices would stay above the AED400 a gram they touched recently. “That depends on Trump,” he replied, shrewdly.
So, I could detect no black swans hovering over financial and gold markets. What about that other big money-spinner in the UAE, tourism?
Nothing to see there, either. Emirates Airline announced its third consecutive year of record profits, and forecast ongoing growth despite global economic headwinds.
On the subject of tourism, at the CMS there was much interest in the plans to launch a Disney theme park in Abu Dhabi, with one curmudgeon pointing to what he called the “curse of Disney”.
Apparently there is some vague correlation between the opening of a Disney park and a period of economic downturn for the host country, based on the experiences of the Paris, Tokyo and Shanghai parks.
But the evidence is sketchy and open to multiple interpretations, and in no way constitutes a “black swan”. I’m sure the Abu Dhabi park – still many years off opening anyway – will be a great driver of tourist revenue for the UAE.
Another subject of discussion at CMS was the extravagant event that had taken place in the same venue the previous week – Token2049, a crypto jamboree called “a madhouse of a conference” by the august Wall Street Journal.
Some may regard zipline rides, fake camels done up in crypto livery, exotic Japanese actresses and all-night desert raves as a harbinger of impending disaster, and for me there definitely is a touch of the black bird around such excesses.
However the closest I got to the Taleb phenomenon was also at the Madinat.
Right next door to the Arabic elegance of the CMS, the cavernous Al Johara ballroom had been laid with fake football turf, goal posts erected and football videos streamed to launch the collaboration of the UAE property developer Damac with Chelsea Football club.
Speaking as a lifelong fan of Tottenham Hotspur – Europa League finalists and bitter rivals of Chelsea – anything to do with the Stamford Bridge club gives me the jitters.
So, wherever the black swan is currently nesting, I suspect it is close to the crypto or real estate sectors. We have to hope it does not spread its wings further.
Frank Kane is Editor-at-Large of AGBI and an award-winning business journalist. He acts as a consultant to the Ministry of Energy of Saudi Arabia
