POTENTIALLY MAJOR STORY - AT 5:03 P.M. ET:  Lost in the turkey and holiday sales, an economic crisis in the Gulf nation of Dubai has roiled markets and raised gray hairs.  We don't yet know how much damage this can do here.  From The Washington Post:

NEW YORK -- This was the sideswipe investors had feared.

The stock market is in the middle of one of the great rallies of a generation, but for weeks there has been a nagging fear that bad news was never far off. The news came from Dubai, a wealthy Middle Eastern city-state that many Americans probably couldn't find on a map. Concerns that a government-backed investment company risked defaulting on $60 billion in debt ripped through world markets and served as a reminder of how fragile the financial system remains a year after it nearly collapsed.

And...

Worries about bad debt are fresh in investors' minds after the collapse of the U.S. brokerage Lehman Brothers in September last year kicked the U.S. economy deeper into recession overnight as banks halted lending on fears about the extent of bad loans.

The latest concern is that problems in Dubai, which has drawn wealthy tourists and investors from around the globe in the past decade with its Las Vegas-in-the-Middle East appeal, could imperil a nascent economic rebound around the world. This could happen if banks suffer big losses or confidence falters.

"The biggest risk is a domino effect," said Kevin Shacknofsky, portfolio manager of the Alpine Dynamic Dividend Fund in Purchase, N.Y.

COMMENT:  Experts are divided over the impact of Dubai, with some saying it indicates that the financial markets are still fragile and subject to collapse, and others saying this will be taken in stride.  But $60-billion isn't a teenager's weekly allowance, except in Hollywood, and it has to have some impact somewhere. 

We are not out of the woods, especially if consumer spending during this holiday season falls below expectations, or if profits, because of deep discounting, are weak.  Watch the Dubai story.

November 27, 2009