Hedges Grow in Dubai

Plus: What happens when hidden airline fees stop hiding? ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

February 21, 2023

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Good morning.

Socialism works in mysterious ways.

To address inflated food prices, which have outpaced the rest of China, the Beijing city government will provide some 300,000 low-income residents with stipends of 40 yuan monthly, CNN reported. Let’s just enter that into our highly sophisticated exchange rate calculator… and it comes out to… $6. That’ll fetch you, maybe, a plate or two of steamed buns for breakfast and lunch — don’t worry about the other 88 or so meals in the month.

Morning Brief

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Is Dubai the new Miami?

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United Airlines gets a smidge more family-friendly.

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Homes are for living in, Portugal says.

International

Dubai Wants to be a New Hub For Hedge Funds

The United Arab Emirates has a message for hedge fund managers and golfers alike: if you like South Florida, you’re going to love the Middle East.

In a bid to become a shining new commerce hub, the city of Dubai is luring roughly 50 major hedge funds to the business-friendly waters of its Dubai International Financial Centre (DIFC). Hopefully, they know how to make sweet tea, too.

Over the Hedge

Like its neighbors Saudi Arabia and Qatar, the United Arab Emirates wants the world to know that it is open for business — with creature comforts few other nations in the world can match. To attract American hedge funds, the DIFC is lowering the fees needed to obtain a license to operate there, as well as reducing the capital requirements for a domestic fund. And that’s in addition to the obvious perks: tax-free status, a friendly time zone for businesses spanning both Asia and North America, plus close proximity to $1.2 trillion of ready-to-be-tapped sovereign wealth funds in Abu Dhabi and a quick private jet flight to the Saudis’ sovereign wealth spigot.

And by “open for business” they mean really open. While much of the world is collaboratively squeezing Russia’s upper crust, the UAE has been welcoming. Tens of thousands of Russians have shipped out to the UAE over the past year to out-maneuver the various sanctions and restrictions imposed by Europe and its allies, the Financial Times reported. And just earlier this month, Russia’s MTS Bank became the first foreign bank in years to score a UAE operating license.

A few US hedge funds have already agreed to join them in the DIFC, and more are assuredly on the way:

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After securing a DIFC license in 2020, Izzy Englander’s $50 billion Millennium Management has built an office of roughly 30 staffers in Dubai, Bloomberg reports. Not far behind is ExodusPoint Capital, co-founded by Millennium’s spurned heir-apparent Michael Gelband, who followed Englander to Dubai this past June.

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Overall, the roughly 50 hedge funds in talks with the DIFC cumulatively manage over $1 trillion in assets, says Salmaan Jaffery, DIFC chief business development officer.

Of course, the downsides to operating in Dubai are obvious but worth noting: picture West Palm without the mojitos… or the religious freedom.

City on a Sand Dune: Not to be outdone by the UAE’s hedge fund blitz, the Saudis’ Public Investment Fund late last week unveiled its new crown jewel: The Mukaab, a shimmering, wholly-planned business-commerce-residential mega-complex 20-times the size of the Empire State Building that is planned for downtown Riyadh. It sort of looks like a Las Vegas resort, only without the drinking and the gambling and other stuff that happens — and stays — in Sin City.

– Brian Boyle

Aviation

United Won’t Make Parents Pay to Sit Next to Children Under 12

(Photo credit: Scarlet Sappho/Flickr)

Now you won’t have to pay extra to have your toddler sit next to you on a flight instead of next to some random passenger who would have gladly paid for them to sit literally anywhere else.

United Airlines announced Monday it will allow adults with children under the age of 12 to book seats together without incurring an additional fee. The “decision” comes as the US government is gearing up to crack down on the bouquet of hidden fees that have become commonplace when booking a flight.

Flying Blind

When Frank Sinatra released “Come Fly With Me” in 1958, an airline ticket got you plenty of room to stretch out, plus a cocktail and a fully cooked meal. Then, in 1978, the US airline industry was deregulated. This set off a frenzy of airlines vying to offer cheaper fares, which ultimately led to the commercial landscape we see today — one of seemingly endless hidden fees, increasingly meager snacks, and shrinking legroom.

Fees to select seats started to crop up in the early 2010s, and while many airlines say they try to seat families together wherever possible, it’s not a guarantee. The US Transportation Department fired a warning shot last year telling airlines to eliminate fees for families with children under 13 and this month the White House turned up the pressure.

While the US is leading the charge against seat-selection fees as a proxy tax for offspring, it’s not a uniquely American problem:

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British financial advice website moneysavingexpert.com said in a blog post last month that a family of four could end up spending an extra $289 on a return trip just to sit together.

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United’s capitulation comes just as the industry is girding itself for a return to pre-pandemic travel volume, barring any more unfortunate FAA glitches.

“What we’re really selling on an airplane is square footage,’’ United CEO Scott Kirby told The Wall Street Journal in June, explaining the company’s mindset on fees.

Green Fees: While the US tries to prune back extra charges, Europe looks set to bump up the price of the average plane ticket. The EU has given initial approval for a new law that would tax airlines for their carbon emissions, and analysts told the Financial Times the scope of the law would mean carriers will need to pass at least some of the cost onto passengers, translating to roughly €10 extra per return flight. There’s no chance US airlines would ever do something like that after they scrap the hidden seat selection fees… right?

-Isobel Asher Hamilton

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Housing

Portugal Could Force Property Owners to Rent Out Vacant Homes

The Portuguese have a saying that goes “Each monkey to its own branch,” but the government has a problem with empty branches.

Portugal’s Ministry of Infrastructure and Housing wants to force owners of vacant homes to make them available to long-term tenants at economical costs to correct a growing housing crisis, Bloomberg reported Monday.

All That Glitters

While the government says the measure will address a dearth of affordable housing, property owners say it violates their constitutional rights. The Portuguese Association of Real Estate Developers and Investors is even calling it “an attack” on private property. Housing Minister Marina Goncalves defended the decision saying, “The state does not enter and occupy people’s homes and then say, ‘Now I’m here.’ We have steps that will be taken.” That’s a relief, we think.

Portugal has remained on the poorer end of the spectrum of Western Europe for quite some time. Following a financial crisis and a 2011 bailout by the European Union, Portugal has managed to raise $7.3 billion through its Gold Visa — established a decade ago to attract non-EU investment — with 90% of it going into the real estate sector, according to Bloomberg.

Unfortunately, the program worked all too well:

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While Portugal attracted a sustained wave of wealthy, foreign investors, communities are now facing low housing stock and high prices, meaning the same locals who were struggling financially 10 years ago are hurting even more.

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In 2015, the average price of a home per square meter in the capital city of Lisbon was €1,300. By 2023, it had shot up nearly 200% to €3,800, and the Portuguese government estimates 730,000 homes are going unused.

Sorry, Ponyboy: Last week, Prime Minister Antonio Costa announced Portugal will stop issuing new gold visas as part of its effort to curb the housing crisis. In addition, the country’s “More Housing” plan aims to limit rent increases, fast-track new building permits, and ban all new short-term rentals in cities. The measures are still under discussion, and some will require Parliamentary approval.

–Griffin Kelly

Extra Upside

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The craft beer craze heads East: BrewDog will expand to China.

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MLB creates “economic reform committee,” after billionaire Mets owner spent too much on free agents.

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