This op-ed of mine was recently published in the Providence Journal:

For nearly 30 years, I’ve made my living identifying golden opportunities to invest in the bonds and other debt instruments of such developing world countries as El Salvador, Nigeria, Turkey and Zambia. I’ve never relied on sophisticated economic analyses or spread sheets; I’ve been a gut player relying on intelligence gathered by walking the streets of those countries and talking to bankers, businessmen, government officials and even taxi drivers.

If they had bonds to sell, which they don’t, at least not yet, I’d be lining up to buy bonds issued by the Palestine Monetary Authority (PMA), which, though it doesn’t have its own currency, is the Palestinian central bank.

Why would I buy their bonds? There is something of a slow economic miracle unfolding in the West Bank…

Read the rest here.

Over the past decade, a free-flowing ocean of capital brought unprecedented prosperity – and unfathomable risks – to everyone from Bangladeshi rice farmers to Bear Sterns brokers. The Gulf city-state of Dubai became one of the iconic symbols of globalization’s latest era, with ambitious, even hubristic development projects that challenged gravity and common sense in equal measure.

Now, however, the home of the Burj al-Arab and the Atlantis-like Hydropolis undersea resort may find that the receding tide of global finance has left it high and dry. The emirate owes nearly $80 billion, $50 billion of which will come due over the next 3 years, most of it in 2011 and 2012.  In the positive column is the rising price of petroleum, the original engine of the city’s growth. Investors tend to assume that the oil-rich federal government in Abu Dhabi will back Dubai’s obligations. On the other hand, Dubai’s finances are murky and secretive – local officials rarely speak about them, and foreigners who mention any negative facts to the press have been silenced, deported, or even prosecuted. In fact, Dubai still has no credit rating for its sovereign debt.

More than perhaps any other place in the world, Dubai relies on heavy inflows of foreign direct investment to fuel its enormous boom in property development.  The late Sheikh Rashid bin Saeed al-Maktoum helped funnel the profits from Dubai’s limited oil resources into long-term development in making the city a hub of trade, tourism and finance. This freed Dubai, to some degree, from the fluctuations of energy prices, but exposed the emirate to potentially devastating bubbles and crashes in trade and finance.

In order to cover its looming obligations, Dubai has moved to issue $6.5 billion in dollar- and dirham-denominated bonds, its first such sale since 2007. There are indications that investors may demand as much as 7 times the previous premium for these mid-term bonds, up to 400 basis points over the benchmark. Dubai’s raised $10 billion earlier in the year by selling bonds to the Abu Dhabi central bank.

Dubai still holds value, to be sure. But with the state’s propensity for obscuring what’s on the books, it’s hard to be sure what is safe and what sits on quicksand.  The sovereign wealth fund Istithmar World is freezing new investments as it struggles to deal with its current holdingsof over $25 billion, which is rumored to be leveraged as heavily as 90%. Property values have fallen 40% and could sink by up to 70%, a shattering blow to the foundations of a city built on the dream of eternally appreciating real estate.

Dubai’s prosperity hinges on a sturdy global recovery; even then, it requires sustained confidence that the high-leverage, high-flying model which built the city can continue. With Dubai World laying off almost 12,000 employees this year, it’s clear that the those days may have passed. The city must refocus on the core of its business in trade and finance, and step back from the publicity-grabbing but unsustainable architecture and acquisitions.

A mood of veiled optimism prevailed at the IMF/World Bank meetings that I attended last week in Istanbul. The usual crop of anti-globalization protesters and anarchists rallied outside the state buildings, but the event was mostly calm.

Emerging markets took center stage as countries like Brazil, formerly a frequent recipient of IMF funds, pledged a $10 billion loan to the fund, part of a total $80 billion coming from the BRIC(Brazil-Russia-India-China) nations. IMF Managing Director Dominique Strauss-Kahn stressed that the shift of 5% of the IMF’s votes to poorer countries was “key to making the fund more credible and legitimate.”

He also called for further measures to strengthen the Chinese RMB and address China’s massive trade surplus, and echoed an oft-repeated plea not to ‘squander the crisis’ by losing the cohesive, international action that characterized the response to the financial meltdown.

After-hours revelry saw the usual cocktail parties and dinners, but outside of the Turkish banks’ lavish galas, conspicuous consumption was down. Citibank – having received $45 billion from the US Government last year – seemed particularly conservative at its party in the Swiss Hotel.

Garanti Bank, a local institution, threw a great party at the Museum of Modern Art, and the association of Turkish Bankers had a wildly extravagant bash at the Feriye Lokantasin on the Bosporus.

Overall, the conference looked forward towards the prospects for recovery, rather than an ongoing or deepening recession.