Dubai Story Reeks of Insider Trading

Three weeks ago, as we were eating turkey, Dubai blew itself up. Quite deliberately. It caused quite a hiccup. Now the problem seems to have been solved thanks to some bailout money from the ‘family’ in Abu Dhabi.

This sounds like the plot of a movie. It’s got all the pieces for a ‘hit’. Intrigue, big money, great location shots (London/Dubai/the desert), the characters are investment bankers, local politicians, Clifford Chance lawyers and Iranian investors. The Iran connection brings in the CIA and therefore the opportunity for high-tech surveillance and gunplay. The necessary sex/romance angles are there.

But this is not the movies. This is the crazy real world. A month ago Nakheel bonds were trading at 110%. They fell below 40 cents two weeks ago. This morning the bonds were trading north of 70. Some of the bonds look to be paid at par.

That is enormous price action in a very short period of time. The opportunity to make money on both the downside and the upside was there. Another way to have played the Nakheel bond story was through the CDS market. Pricing in that market mirrored the action for the bonds. Very big bucks were made and lost as this played out.

To take advantage of this one would have had to have been an insider. No outsider could have sold high and bought low. So the question is how many insiders were there on this deal? My guess: A few thousand.

This deal stinks. It was mishandled from the get go. The critical announcements were made while the U.S. was on holiday. That was not a coincidence. This was orchestrated. If something like this happened with debt securities listed on the NYSE the SEC would be all over it.

This stuff is being played out on a very big stage. Caveat Emptor.