I wrote, on the 1st of December 2009:
Second, a note to all those that think that "markets overreacted" and that "Dubai World's liabilities are so small": the problem is not in my opinion that the liabilities are small or not. It's rather that it just confirms to those who thought the worst is over that they couldn't be further from the truth. It's now time for the sovereigns to default. That's what is scary and dangerous, not the tiny $60 billion of liabilities that Dubai World is defaulting on.Today, Mish writes:
Many think the market reaction to the Dubai default was way overdone. I prefer to think of it as a huge warning shot.Even though the markets are still showing irrational exuberance, these news are all very bullish for gold (which is declining quite violently from a very overbought position) and bearish for stocks in general and any bond other than US Treasuries and German Bunds. Also bearish for the EUR, bullish USD.
According to Fitch, Baltic Ratings Remain Under ‘Downward Pressure’
Fitch Ratings said Latvia and Lithuania’s sovereign ratings remain under “downward pressure” as the Baltic states’ economic plight sends their deficit and debt levels higher.