27 November 2009: Dubai's debt shock rattles global markets
Asian stocks tumbled, with Hong Kong among the hardest hit, and Wall Street fell on its return from Thanksgiving, after state-owned Dubai World asked creditors to delay payments on billions of dollars of debt. Dubai's glittering skyscraper boom had been built on borrowed money, and the request raised fears of sovereign defaults. Abu Dhabi soon stepped in with support, but the scare was an early warning of Europe's debt crisis to come.
The lesson: Spectacular skylines built on borrowed money can wobble when the lenders get nervous.
What it meant for investors
$1,000 in Hang Seng at the start of 2010 → $1,193 today, vs $6,071 in the S&P 500.
We start the clock at the start of 2010, the first year in our price data after the event. That is 1.2 times the money, but $4,879 less than a plain index fund made over the same years.
What Hang Seng teaches: Political and regulatory risk can override strong business fundamentals, and markets tied to one government's priorities deserve a discount for it.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2010 | $21,800 | $1,193 | $6,071 |
| 2012 | $18,900 | $1,376 | $5,312 |
| 2015 | $23,600 | $1,102 | $3,301 |
green = beat the S&P 500 · red = lost money
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