Brotherly Love

$10 billion dollars. And it may not even cover the tab.

In a little-known incident, the author C.S. Lewis was once approached by a local pub-owner, who asked him to make good on the bar-bill his brother Warnie ran up the night before. Lewis was devoted to his sibling and was deeply concerned about his drinking. Embarrassed by the attention, he growled to the man while he dug for the change, “You could have waited.”

In the same way, Abu Dhabi is picking up the tab for the bender that its cousin Dubai has been on the past decade. Abu Dhabi extended Dubai a $10 billion lifeline. In addition to avoiding the embarrassment of Dubai looking outside for its bailout, Abu Dhabi may get control of an airline, a port operator, and the only freshwater port in the Persian Gulf.

For month’s Dubai’s leader, Sheikh Muhammad bin-Rashid Al-Maktoum has been boasting his fiscal health and his ties to Abu Dhabi–even telling skeptics to just “shut up.” Indeed, as the global economic crisis has deepened, Muhammad’s assertions have become increasingly bold, even reckless. Now that the bill has come due, he may have to cool it himself.

In the end, C.S. Lewis paid his brother’s debt. But he made it clear that there were limits on brotherly indulgence. Dubai may have to learn the same lesson.

Douglas R. Tengdin, CFA
Chief Investment Officer
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