(JDD) Orange et Bouygues Télécom avancent sur leur mariage

Orange-Bouygues : les premières avancées des négociations - article attached

INFO JDD - Les grandes lignes du rachat de Bouygues Telecom par Orange se précisent. Des réunions entre les deux opérateurs se tiennent cette semaine.

Orange entame les négociations en vue du rachat de Bouygues Telecom. Selon plusieurs sources, l'opérateur historique et le groupe Bouygues ont signé la veille de Noël un accord de confidentialité, scellant le démarrage de leurs pourparlers officiels. La chaîne TF1, objet de rumeurs, n'est pas concernée. Cette semaine, plusieurs réunions sont prévues entre les deux états-majors pour plancher sur les points clés : valorisation, gouvernance, social et concurrence. Sur ce dernier volet, l'opération passerait, selon nos informations, devant l'Autorité de la concurrence en France et non à Bruxelles. "Les équipes s'entendent bien, les discussions avancent, on saura vite si on va au bout, résume un protagoniste au cœur des négociations. Il n'y a pas d'obstacles pour le moment." Les plus ambitieux espèrent aboutir à la fin du mois, les plus prudents à la fin du trimestre.

5 milliards d'euros de cessions
Bouygues Telecom sera valorisé environ 10 milliards d'euros, dont 8 donneront à Bouygues une participation d'environ 15% dans Orange. Le solde sera payé en cash, comme le PDG du groupe le souhaite. L'État se retrouvera dilué dans l'opération légèrement au-dessous de 20%, voire davantage si la Banque publique d'investissement en profite pour vendre un peu sa part. "Bouygues aura une participation inférieure à celle de l'État, assure une source. Même symboliquement." La question de sceller un pacte d'actionnaires entre eux se pose. Bouygues n'y serait pas favorable. Il sera d'autant plus difficile à mettre en place si les deux participations pèsent plus de 34 %, seuil qui oblige à lancer une OPA. Le plus probable est que chacun garde sa liberté.

Les questions de gouvernance, cruciales, donneraient une place de choix à Bouygues chez Orange. Le nouvel actionnaire hériterait logiquement de deux sièges d'administrateurs, comme l'État, dont un pour Martin Bouygues, ainsi qu'il le demande. Le PDG de Bouygues Telecom, Olivier Roussat, pourrait devenir responsable de l'intégration de l'opérateur. "Il faudra intégrer la direction opérationnelle de Bouygues Telecom, reconnaît un proche d'Orange. Mais ce n'est pas le point central." Concernant l'aspect social, les salariés seraient repris par Orange, qui s'engagerait à ne pas licencier.

Des négociations avec Free
Reste le point le plus sensible : la concurrence. Des cessions d'actifs (antennes, fréquences, abonnés…) à Free et SFR seront indispensables pour remplir les contraintes concurrentielles. Orange, qui n'a pas encore approché ses deux rivaux, souhaiterait qu'elles atteignent 5 milliards d'euros pour récupérer un maximum de cash. La clé de l'opération réside dans un accord avec Xavier Niel, le patron de Free. Sans réseau lors de son lancement en 2012, il a fini par le construire. Il pourrait ne racheter que quelques centaines d'antennes dans les grandes villes alors qu'il avait accepté d'en reprendre 1.000 lors du rachat avorté de Bouygues Telecom par SFR en juin. Ce sera aussi l'occasion pour Free de mettre la main sur des fréquences.

Orange pourrait demander à Free de racheter tout ou partie des 600 boutiques de Bouygues alors qu'il n'en a pas besoin. En échange, le trublion négocierait le rachat d'une partie du réseau fibre d'Orange alors qu'il peine à développer le sien. Free et SFR se disputeront aussi une partie des abonnés mobile et fixe de Bouygues Telecom. SFR serait intéressé par des contrats de clients mobile à petit prix, car ceux d'Orange (Sosh) et de Bouygues (B&You) seront dominants sur le marché. L'opérateur lorgnerait aussi quelques clients entreprise. Ces négociations devraient débuter mi-janvier, quand Orange et Bouygues auront validé les grandes lignes de leur rapprochement.

(ZeroHedge) From $500,000 To $170 Million In A Few Months: The N

From $500,000 To $170 Million In A Few Months: The Next "Subprime Trade" Emerges

Ever since a few far-sighted, contrarian traders made a killing by betting on the collapse of subprime in 2005 and 2006 - and by implication on the implosion of the capital markets - a trade famously resurrected in the latest Wall Street movie The Big Short (whose Michael Burry recently warned that "The Little Guy Will Pay" For The Next Crisis, again) everyone has been dreaming to uncover the next "subprime" - a trade that has a 20-to-1 upside to downside ratio, which can be put on in massive size, and which would lead to a quick and lucrative retirement.

So far the next "subprime trade" remains elusive, with global capital markets continuing to grind ever higher thanks to constant central bank manipulation, as first called out on this website many years ago, and as admitted recently even by such "serious" legacy institutions banks as Bank of America which in an attempt to explain market instability

Central bank’s risk manipulation well explains local tails

 

A good way to explain why we have seen local tail risks arise so frequently since central banks began to heavily manipulate asset prices is with the following analogy, illustrated in Exhibit 1. Essentially central banks, by unfairly inflating asset prices have compressed risk like a spring to unfairly tight levels. Unfortunately, the market is aware the price of risk is not correct, but they can’t fight it, and everyone is forced to crowd into the same trade. By manipulating markets they have also reduced investors’ inherent conviction by rendering fundamentals less relevant.

 

This then creates a highly unstable (fragile) situation that breaks violently when a sufficient catalyst causes risk to rise – overly crowded positioning meets a market with little conviction.

The above explanation leads to a critical line of thought: perhaps the next "subprime" trade is not shorting a mispriced asset at all?

After all, all assets are mispriced as a result of central bank intervention.

As BofA admits "the market is aware the price of risk is not correct, but they can’t fight it, and everyone is forced to crowd into the same trade", which is logical: after all why should one fight the Fed when any time there is even a 5% drop in the S&P500, the Fed can and will either jawbone and threaten to cut rates or launch QE4 or NIRP, or just do it? In doing so, of course, the Fed merely "kicks the can" and with every failed attempt at reprice risk and bring back some trace of price discovery, guarantees that the next market crash will be the most epic ever, one which will wipe out not only the Fed's credibility but the bedrock of the modern financial and economic system, a monetarist system based on neo-Keynesian rules. Frankly, the devastation can not come fast enough.

But first, why not make some money?

And if one is limited from generating 20-1 returns in a market of suppressed volatility due to a global central bank puts, perhaps the next "subprime" trade has to do with the process of actually putting the trade on.

A process which involves ETFs.

To be sure, we - and many others - had issued many warnings about the very nature of ETFs in recent years, especially during 2015. Here is a brief chronology of the countless warnings we have issued on this topic in the past year alone:

All of these warnings became realized on August 24, the day of the infamous ETFlash Crash which even the SEC remarked on in the last week of December with an 88-page note on "Equity Market Volatility on August 24, 2015."  What the SEC essentially said is that it is generally concerned with plumbing and exchange regulation, with an emphasis on ETFs.

To be sure the story of broken markets as a result of the epic proliferation of Exchange Traded Funds continued after August, with stories such as:

Is it possible that "the next subprime trade" was so obvious that it was staring everyone in the face for the past year?

A trade which involved betting on the collapse not of the central-bank supported market, but the death of the instrument which allows this unprecedented global central bank "put" to prop up markets, and which like the infamous coiled spring in the Bank of America "revelation" is just waiting for a catalyst to snap: in other words, betting against ETFs?

Actually the answer is yes, and for some, the "next subprime trade" is already happening.

Meet David Miller and his Catalyst Macro Strategist Fund (ticker: MCXCX). The introduction, provided by WaPo reads like something straight out of a Michael Lewis book:

The Michigan-native is betting against one of the most popular investment vehicles for mom-and-pop investors: exchange-traded funds. The bets have paid off, turning Miller’s little known Catalyst Mutual Funds into one of Wall Street’s most successful players in 2015.

It sure sounds like a story about one of the lucky few who correctly predicted in 2006 what would happen to not just subprime, but the overall market just a few years later... and would retired filthy rich.

The comparisons between Miller's story and the "Michael Burry's" of the subprime era don't end there, because the young asset manager has not only figured out what to bet against, but how to make a lot of money in the process: ever since it started making complicated bets against some leveraged ETFs, Miller’s Catalyst Macro Strategies Funds has since grown from $500,000 in assets at the start of the year to about $170 million. It achieved a more than 50 percent return this year, placing it far ahead of its competitors.

In a year in which virtually not one hedge fund generated notable returns, and most were an embarrassment, it is surprising that not all financial media outlets are talking about Catalyst's performance, which as shown below, is quite impressive. Behold the 2015 performance of the Catalyst Macro Strategy Fund, which according to Morningstar held a total of $169.5 million in assets most recently.

 

Miller's initial target in the broken sector: leveraged ETFs: "Our goal is to identify poorly designed financial vehicles,” said Miller, Catalyst’s senior portfolio manager. “The strategy has certainly worked out well for us."

While still a tiny part of the market, the growth of leveraged ETFs has been explosive. Nearly nonexistent in 2005, the market has grown to more than $20 billion this year, according to data from Lipper. The market has doubled since 2011.

The regulators have, as usual, been asleep at the wheel, making such debacles as August 24 a recurring reality, and allowing people like Miller to make outrageous profits by betting against the broken market:

[A]s the industry has grown, so have concerns around whether investors understand the risks. The Securities and Exchange Commission proposed rules in December to rein in these type of funds. And the Financial Industry Regulatory Authority, also known as FINRA, has cracked down on brokers who have sold complicated ETFs they didn’t understand.

 

“The SEC and FINRA have been coming down on them, and they still have not gone away,” Miller said. “Money keeps coming into them despite their poor performance.”

But if leveraged ETFs are the "BBB" CDO tranches in the subprime analogy, then regular, and just as broken ETFs, will be the A, AAs and higher which will be the next to flame out: "Even traditional ETFs aren’t immune from market volatility. Over the summer, the price of some ETFs dropped off a cliff, then bounced back within minutes. Investors who automatically sold as their value plunged, faced heavy losses."

Catalyst may have been the first, but many more are coming, looking to profit from problematic ETFs. New York hedge fund Hilltop Park has employed complicated trades to bet against some ETFs, according to The Wall Street Journal.

Perhaps the final analogy to the subprime crisis is the infamous straw that broke the camel's back: back then, just like now, the fulcrum security was safe... until enough bets had been made against it (infamously by such as Goldman itself, which via Abacus and others, was selling exposure to CDOs only to short them at the same time), at which point the bubble bursts.

And while 10 years ago it was the subprime bubble, this time it will be the ETFs that go first as more and more bets against them proliferate, and when they do, it will be all up to the central banks to preserve the last artificial asset prices in "markets" which over the past eight years forgot how to discount reality, and merely reflect the intentions of a few clueless economist hacks.

To help accelerate this process, we present Catalyst Macro Strategy's latest prospectus, with hopes more modern "Michael Burrys" emerge and take on what the fulcrum security of today's broken markets.

(ZH) Noble Group’s "Collateral Margin Call"

Noble Group’s "Collateral Margin Call”  Link : http://bit.ly/1mwblqY


The downgrade of Noble Group by Moody’s depicts an aggressive financial risk and a vulnerable business risk profile

I) the first-order problem is Macro.

"The downgrade of Noble Group to junk status is worrisome, but the main story is about the evolution of the commodity price downtrend. 1st round effects were felt in macro indicators (lower CapEx & growth for producers and following FX/interest rate adjustments). 2nd round effects will be about commodity exporters' governments reactions."

Those effects will dominate in 2016 said Sacha Duparc, Head trader and structurer at Banque Cantonale Vaudoise.

II) Collateral margin call.

The trader has billions of dollars in commodity prepays with NOCs and producer, the value of inventories and receivables collateralized by traders into trade finance arrangements have cratered in the past year.

This collateral value of Noble Group is being depressed, those loans are been called even Noble Group (buoyed by liquidity in 2015) never missed a payment because the market say this property and assets are worth less they claim it is worth on their books.

Banks are requiring at least $1.6 Bn more in additional collateral that Noble Group doesn't have… Noble is being placed into either bankruptcy or they are being placed in a tremendous economic adversity that so far they've not seen in 2015.

"People have been hopeful that Noble might avoid a rating downgrade after the asset sale but it couldn’t,” said a Hong Kong-based credit trader at a Japanese investment bank.

Noble's move to raise US$750 million by selling its remaining stake in Noble Agri. I repeat what was said in a previous comment: Noble Agri Sale was strictly a Collateral margin call.

Noble Group must raise money but their collateral base is new book value of 4,528 million while their Net Positive fair values gains of commodity contracts and derivatives exceeds MTM is over 4,500 million…

By any model, this MTM represents between 90% and 105% of their book value.

Banks aren’t provided with the access of the exact breakout of the 4,500 million and PwC has not been able to review the exact assumptions and models behind these Net Positive fair values gains of commodity contracts and derivatives. Perhaps, Antoine Lavoisier, French nobleman of the 18th century and father of modern chemistry must have a great influence on the financial reporting of Asia’s Largest Commodity trader with "Nothing is lost, nothing is created, and everything is transformed".

Solvency Problem, not liquidity

I will make it clear that it is not Liquidity that banks are asking but for more Collateral from Noble starting this year because they also understand that this MTM gain on commodity contracts and derivatives of Noble will unlikely be realized at more than 10% and therefore is not valid collateral for the trader’s working capital borrowing base requirements.

A close friend hedgie in NY reminded me that at the height of 08', a IB sale desk lured them into "taking a position into undervalued trading books of the bank temporarily mispriced because of market illiquidity". At only 66 cents on the Dollar, the deal turned-out to be 0.6 cent sinky.

Enron-esque memes

To put Enron in the context of 1999-2001s, it was not only the world’s largest energy trader; it had also the same gleaming and appeal of the Trafiguras or Vitols of today.

A trading or a mgmt position at Enron meant that you could do a 6 digits salary and touch a 7 digits bonus. Most of it was a management incentive program with the Enron Corp share derivatives used as a currency.

Many people at other firms were lured into mgmt and trading positions by commodity headhunters hired by Enron Corp providing "an offer that nobody could refuse" just months before the collapse.

There are some parallels with Noble Group, one I guess is that Noble recently brought new faces people from other firms in Geneva like Kev Brassington into offers that they could not refuse in their career path.

Enronesques parallels with Trafigura.

Medias have recently bragged about “$775m bonuses” to 600 of Trafigura employees related to bumper profits from oil trading”. However I note in the disclaimer that's as an all stock 5 year LOCK buyback type program, again something tied to its future performance and the commodity curve.

When Enron collapsed, the story that I know is that an average trader and VP have registered 7 digits each (real losses), so it is fair to say that VPs, Management and traders were also conned. More than financial losses, can you think about the moral damages that they still endure because they spent between 12 and 6 months at Enron ?

FT : M&A: now for the hard work

M&A: now for the hard work

There will be more fretting than usual in 2016

The M&A bankers have gone away. The completion drinks parties are a fading memory, and deal mementoes are already gathering dust. What now? Now for the hard work. It is up to the middle managers to deliver what was promised in those slick PowerPoint slides — and up to the buyer’s shareholders (and sometimes the seller’s too) to fret about whether or not the deal is working.

There will be more fretting than usual in 2016. The year just passed has notched up a record for corporate M&A, according to Dealogic, with 38,000 deals amounting to $4.9tn. This has surpassed even the $4.6tn recorded in the heady days of 2007 (albeit not in inflation-adjusted dollars). Healthcare and technology have been the busiest sectors, closely followed by finance and real estate. The top five deals alone were worth $500bn.
All of this means plenty of synergies for middle managers to deliver. Deloitte says that 2015’s deals have promised an annualised $150-200bn of cost savings. Taxed at 25 per cent and capitalised, they should be worth $1.3tn — if they are all delivered.
But synergies tend to be poorly reported by the companies that promise them. Updates on progress towards cost savings may be provided for a year or two, but beyond that point the reports dry up. Revenue synergies — a dubious source of value, but one by which many acquirers set great store — receive even less attention. This matters. A 2011 study by KPMG found that only 31 per cent of deals completed between 2007 and 2009 added value (and in the previous two years it was just 27 per cent). Yes, the period covered the financial crisis, but it is nevertheless a worryingly low number.
One of the problems with evaluating deals is that the counterfactual — the outcome had the businesses not come together — is impossible to know. But this is no excuse for the scant attention paid by companies to acquisitions that are more than a couple of years old. Shareholders are still paying for deals many years after the event. Managers need to prove those deals are working over a similar timescale.

Barron's : Cognizant and Wynn Rumors, Plus analysts’ assessments of three other

Cognizant and Wynn Rumors, Plus analysts’ assessments of three other companies

Insider Transactions

These reports, excerpted and edited by Barron’s, were issued recently by investment and research firms. The reports are a sampling of analysts’ thinking; they should not be considered the views or recommendations of Barron’s. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed. Many of the reports may be obtained through Thomson Reuters at 800-638-8241.

Cognizant Technology Solutions • CTSH-Nasdaq
Outperform • Price $60.73 on Dec. 24
by R.W. Baird
Cognizant, a big information-technology and business-processes consulting firm, was mentioned as one of several potential suitors for Perot Systems, the IT consultant that in 2009 was bought by privately held Dell. We think this acquisition would end up being a positive for CTSH shareholders. While it would likely dilute Cognizant’s revenue growth, it could potentially add 5% to 10% to EPS, and we doubt CTSH’s multiple would fall much lower than the current level as long as organic revenue growth of 10% and more can continue.

Our price target stands at $76.

Sysco • SYY-NYS
Neutral • Price $41.53 on Dec. 29
by Guggenheim
The distributor of food and food-service products for restaurants, schools, hospitals, and other away-from-home locations is promoting Tom Bene, currently an executive vice president and the president of food-service operations, to president and chief operating officer effective Jan. 1....We believe this promotion positions him to potentially succeed CEO Bill DeLaney eventually—a positive, especially given the belief that by exerting more pricing discipline SYY can consistently grow gross profit dollars at a faster rate.

For the past few months, we have gradually become more constructive on the food-service distribution sector. Our rationale is straightforward: With the three-largest operators comprising roughly one-third of the market, each highly motivated to act rationally and exert greater pricing discipline, the backdrop for gross and Ebitda margin expansion has improved. Despite that, we remain Neutral and offer no price target to reflect the back-end loaded nature of Sysco’s three-year plan and its rich P/E multiple of 21.7 on our 2016 estimated EPS.

Red Hat • RHT-NYSE
Buy • Price $83.29 midday Dec. 29
by Drexel Hamilton
The company, one of our top tech picks for 2016, is a play on the collaborative open-source software movement, in which a program’s underlying code is provided to users, who can then change and redistribute the code under the same collaborative terms. Red Hat is the No.1 player in the open-source Linux enterprise server market. The development of next-generation applications designed to run on Linuxbased operating systems is directly benefiting Red Hat Enterprise Linux, the largest contributor to the company’s financials.

Our target price: $98.

Bed Bath & Beyond • BBBY-Nasdaq
Strong Buy • Price $48.73 on Dec. 28
by Raymond James
After the close on Dec. 22, management pre-announced fiscal third-quarter 2015 sales and EPS results. It now pegs EPS at $1.07 to $1.10, below its earlier $1.14 to $1.21 guidance, our $1.21 estimate, and the $1.17 consensus. For sales, it put results at approximately $3 billion, at the low end of its previous $2.99 billion to $3.06 billion guidance, our earlier $3.02 billion estimate, and the then in-place $3.02 billion consensus. The company further noted that comparable store sales decreased approximately 0.4%, below its +1% to +3% expectation and our +2% estimate.

We are reaffirming our Strong Buy rating but lowering our target price to $75 from $85 following those results....Bed Bath & Beyond remains a “best in class” home furnishings retailer, and we remain steadfast in our view that it is an excellent fundamental investment.

Wynn Resorts • WYNN-NYSE
Buy • Price $70.12 on Dec. 29
by Gabelli & Co.
Las Vegas-based Wynn Resorts owns and operates the Wynn-Encore resort complex in Las Vegas and owns a 72.3% stake in Wynn Macau (1128.HK), which owns and operates the Wynn-Encore resort in Macau. Wynn Macau is in the process of building a second Macau-based resort, Wynn Palace, which is set to open on June 27, 2016. We expect Wynn Resorts to generate 2016 consolidated revenue, Ebitda, and earnings per share of $4.6 billion, $1.2 billion, and $2.90, respectively.

We would like to weigh in on speculation about potential merger scenarios involving Wynn Resorts and other multinational operators. In short, we view a near-term merger as unlikely. These considerations factor into our thinking: 1) Macau is unlikely to allow one company to have majority control in two of its six concessions. 2) A pending lawsuit between Wynn Resorts and former Wynn director Kazuo Okada could force a cash payment of $2 billion or reinstatement of 24.5 million shares. 3) We view Steve Wynn’s Dec. 8 purchase of one million WYNN shares as a positive, but also as evidence that a deal has not recently been considered.

We also contend that Wynn’s ex-Macau assets are undervalued, and expect management to increase value. We retain our Buy on WYNN shares, which trade at a 28% discount to our 2016 PMV [private market value] of $98 per share.

(ZeroHedge) On The Trail Of Dubai's Stolen Gold: A Robbed Client Breaks The

(ZeroHedge) On The Trail Of Dubai's Stolen Gold: A Robbed Client Breaks The Silence, And A Fascinating Detail Emerges

On The Trail Of Dubai's Stolen Gold: A Robbed Client Breaks The Silence, And A Fascinating Detail Emerges

On Christmas Day, 2015, we told our readers the fascinating tale about the Turkish-Iranian gold smuggling ring - perhaps the biggest and most brazen in history, one which lasted for years, which saw billions in gold transported out of Turkey and into Iran to allow Tehran to circumvent the western financial sanctions using gold as a medium for bater, and which was all made possible thanks to the tiny Emirate of Dubai. 

What made this particular instance of gold smuggling especially memorable is that it reached to the very political top in both Turkey, and Iran, and Dubai.

However, while the broad framework of Turkey's exporting of gold to Iran, initially directly and then via Dubai, had been already in the public domain, Zero Hedge first revealed the man, or rather people, who made it all possible: the Dubai gold "trading" company of Gold.A.E. - is a subsidiary of Gold Holdings Ltd, a company which is owned by SBK Business Holdings and Abu Dhabi's second in command, the son and avisor to the ruler of Abu Dhabi, Sheik Sultan bin khalifah Al Nahyan.

The reason why Gold.A.E. suddenly, and very dramatically, emerged on the global arena is because as we first reported a week ago, the company's "new" management team admitted that after many months of "inquiries", it had discovered that not only had the "old" management, led by the now former CEO of Gold A.E., Mohammad Abu Alhaj disappeared, but that all the money - and gold - held at Gold.A.E. which once again was primarily a "trading" front for the Turkish-Dubai-Iran gold smuggling triangle, had been stolen.

Here, for those who missed it the first time, is the letter that Gold.A.E.'s stunned clients received in late December:

Dear Client

 

A group of minority shareholders of GOLD HOLDING suspected that there were questionable financial transactions being undertaken in Gold AE DMCC ("the Company"). Acting on these suspicions they initiated internal investigations. During the course of the investigations the entire then management team abruptly resigned with no notice. Since the majority shareholders also seemed to be unavailable, the minority shareholders did not accept this resignation. However, these persons went to DMCC, submitted their resignations and managed to get their visas cancelled.

 

Following this, in august 2015, Mr. Andre Gauthier has been appointed as the manager of the Company so that investigations continued and once completed necessary action can be taken to secure the interests of the clients and shareholders of the company. His appointment took effect from August 9 ,2015 . When he took over, new management realized that he now had access to more information concerning the activities of the previous management and, he realized that there had been substantial withdrawals from the company's account to the personal accounts of some of the management and the majority shareholders.

 

Management has also uncovered information with respect to the existence of a bank account with Arab Bank (Switzerland) Ltd in Switzerland in the name of the Company. An attempt has been made to approach this bank but, since none of the current management or minority shareholders are signatories to the account and, due to the stringent Swiss banking laws and regulations regarding confidentiality, no additional information or access has been provided by the bank.

 

In order to try and secure/recover monies that had been taken out of the accounts of the company, Mr. Gauthier in his capacity as manager has filed various cases as against the recipients of the funds from the Company (Dubai Police ( Bur Dubai Police Station), Case No: 24378). The minority shareholders are doing everything within their powers to support him in his efforts to recover these monies that were withdrawn from Gold AE in questionable circumstances.

 

DMCC has alleged that some of these activities undertaken by the previous management are in breach of DMCC's rules and as such they have taken the decision to terminate the license of the Company. We are working closely with DMCC to find a solution and in the meanwhile, we request that you bear with us. In the meanwhile, as a statutory consequence of the license being terminated, the trading platform of the Company has to shut down as of the date of termination of the license which is 24th November 2015.

 

We trust the forgoing is of assistance.

 

Sincerely,

 

On behalf of GOLD AE MANAGEMENT

Or, as we said a week ago, one can summarize the letter above by loosely paraphrasing South Park's infamous episode: "aaaannd it's gone. The gold is all gone."

In a follow up article, "The Mystery Of Dubai's Vaporized Gold: The Plot Thickens", we presented readers with the version of events as laid out by the local press, in this case Arabian Business, which tried to assign responsibility for the theft, while in the process exonerating SBK Holdings and its billionaire owner - one of the most important people in the United Arab Amirates - and "washing" their hands of any accountability.

Recall, "the rush to make sure any link between the criminal Gold.AE and its parent, SBK Holdings-owned Gold Holding is immediately severed. A spokesperson for the DIFC said: "We wish to make it clear that although Gold AE is a subsidiary of M/s Gold Holding, which is a DIFC-based holding company, Gold AE and M/s Gold Holding Ltd are two separate entities."

"We wish also to clarify that M/s Gold Holding Ltd is, to our knowledge, not involved in any trading operations, client-facing business affecting clients of Gold AE or the provision of any financial services. Accordingly, it is not regulated by the Dubai Financial Services Authority."

But was Gold Holding involved in the smuggling of billions in gold out of Turkey and into Iran? And then, back to Mohamed Abu Alhaj, who just a year ago was the widely respected CEO of Gold AE.

When Arabian Business emailed the public inquiries email address for Gold Holding,info@goldholding.com, it received a reply from Mohammad Abdel Khaleq Abu Al Haj, who is a member of Gold AE’s previous management team facing allegations of fraud.

 

Al Haj insisted in his email that Gold AE’s existing management team were responsible for the alleged fraudulent activity. He also claimed that requests by him for meetings with shareholders to discuss management issues had been refused.

In short: one side saying the other is guilty, the other side responding identically, blaming the first side. Meanwhile the money - and gold - of the clients of this company, perhaps the most important gold holding company in the Persian Gulf, has been stolen.

* * *

So while we continue to dig into the mystery of Dubai's stolen gold, one which has received absolutely no mention in the western press - in fact the only reason anyone mentioned Dubai in recent months was the dramatic burning of The Address hotel on New Year's Eve (as covered here), we got the following curious email from a former client of the company; a client whose gold is now all gone.

I'm a client of Gold.ae and live in JLT, just a short distance from where the company had their office in Saba 1 Tower, Cluster E, so I was able to carry out reasonable due diligence (for this country) prior to making any investments in PM's. I understood that Gold.ae was under the patronage of the Dubai Royal Family and had received several awards in the UAE prior to my personal involvement. Of course there was absolutely nothing to suspect any wrongdoing at this time, in fact the contrary would be true.

 

I did not trade with the company in the traditional sense of short term buying and selling but invested in Gold and Silver over a period of time with the view of holding for the long term. I was comfortable with this because the PM's were stored in the vault in Almas Tower (Almas meaning diamond in Arabic) under the guidance of DMCC. This vault was said to be the most secure in the region. My personal investment / loss is in the region of $[redacted].

 

The first I heard about the recent failing of the company was on the 23rd of December, I did not receive the earlier email dated 16th December. The company made no attempt to contact me prior to that. I have however since been in regular contact with a senior manager, my 'source' who now works out of the Gold Holding office in DIFC. He has been very helpful in passing on information and has given me the contact number of Mr. Andre Gauthier, the new CEO. Interestingly, since you published your recent article he has stopped answering his mobile. Maybe you would like to try and speak with him on our behalf, his mobile number is: 00971 50 [redacted]. You may have more luck speaking with him than the clients suffering large losses!

And here is the punchline from our source's letter:

My source has told me that he now understands that the company knew something was terribly wrong in the March - May period of this year, but it took until December for the company to notify their clients. One has to ask why nothing was done during this timeframe? My source has informed me the main individuals responsible for this are; Mohammed Abu Al Haj, Chairman and founder, Mohammed Ebdah, COO, Mohammed Adnan Younis, Sales Director and Rania, Board member. I've been told all involved are Jordanian, however, one has a Canadian passport, one has a US passport. As you know the management team conveniently resigned their positions and DMCC accepted to cancel their visas. Two of them have since set up separate companies in the UAE.

Yes, the story in which the former management team is scapegoated has been previously reported, but the main question, as our source on the ground asks, is why the all important, Gold Holdings - a company embedded into the political oligarchy of Dubai, and thus of the Persian Gulf - waited seven months before alerting clients that all their funds had disappeared. Even MF Global had just a few days to inform its clients it had gone bankrupt and thousands of small commodity traders had been Corzined.

Because as hard as we try to believe that the person whose task was to break into the Turkish market (and then Russian as we will show shortly), all signs point to the holding company as being instrumental in the vaporization of Dubai's gold.

According to a recent Gold Holdings presentation we have exclusively obtained, Gold Holdings was quite eager to disclose its desire to become the leading and most important gold company in the Persian Gulf, "A new integrated Gold and silver investment vehicle", one which covered everything from mining, to processing, to refining, to trading, to distribution, to jewelry.

This is what the October 2014 presentation boasted about Gold Holding's ambitions - nothing short of global gold commerce dominance:

  • To be a premier precious metals investment vehicle, physical.
  • To provide shareholders with high quality, long-term exposure to precious metals.
  • To offer mine owners an attractive alternative to debt or equity.
  • To be a significant and Reliable trader of Gold and Silver

Here is a map showing the tentacles of Gold Holding: note the core presence in Turkey.

 

The company's Org Chart is extensive, and clearly discloses the infamous Gold A.E., which curiously is shown as registered for trading not only in Dubai, but in... Shanghai? As for the distribution network, it clearly reaches all key regional money centers, and yet Iran is oddly missing...

 

Here is another Gold Holding chart showing where according to the old management team the risk lay; not surprisingly the biggest risk - that of corporate fraud and embezzlement - was at the Trading level, where the risk was supposed to be the lowest. Oops.

 

The final slide we want to bring attention to is the one laying out the Board of Directs of Gold Holding: it lists not only the abovementioned Sheikh Sultan Bin Khalifa Bin Sultan Al Nehayan as the Chairman, but the alleged mastermind behind the theft, Mohammad Abu Alhaj, in his role as board member and CEO of... Gold Holding?

 

Wait, wasn't Abu Alhaj supposed to be the CEO of Gold.A.E., the subsidiary of Gold Holding? Now this is odd because recall that in the Arabian Business article excerpted above, a spokesperson for the DIFC, or the Dubai International Financial Center (a Federal Financial Free Zone administered by the Government of Dubai), there is no direct link between Gold Holding and Gold AE:

"We wish to make it clear that although Gold AE is a subsidiary of M/s Gold Holding, which is a DIFC-based holding company, Gold AE and M/s Gold Holding Ltd are two separate entities."

 

"We wish also to clarify that M/s Gold Holding Ltd is, to our knowledge, not involved in any trading operations, client-facing business affecting clients of Gold AE or the provision of any financial services. Accordingly, it is not regulated by the Dubai Financial Services Authority."

It appears "your" knowledge was wrong, because unfortunately it does not make any sense that the person in charge of Gold AE was also, according to the company's own investment roadshow, the CEO of Gold Holding Ltd, and as much as the media and current management wants to make it seem there was an more than arms-length distance between the two in order to blame the theft on the "old management team", the reality is that as recently as late October 2014, or just a few months before the new management team allegedly discovered the supposed "substantial withdrawals from the company's account to the personal accounts of some of the management and the majority shareholders."

In short, the official story in which just one man is scapegoated for the theft of millions in paper and gold currency, makes less and less sense the more we dig.

Which brings us to our conclusion from a week ago:

So, is the former CEO of Gold.AE the criminal mastermind, the person who was responsible for the Turkish gold presence in Dubai, and the one who defrauded Gold.AE... or is he merely the fall guy: after all the new management team, according to Arabian Business, had been at the company since March: how could it take it 9 months to uncover that the company was nothing but a hollow shell, whose assets had been pilfered by the previous management.

 

And if indeed this crazy story which has every possible James Bond element in it culminates with a case of scapegoating, does that immediately mean that Sheikh Sultan Bin Khalifa, a person at the top of the Gulf's political and financial oligarchy, is involved. Because if he is, so is the US, as nothing happens in the United Arab Emirates without the United States being aware of it. Finally, if that is the case, it means that not only did the US sanction what has been the world's biggest gold smuggling ring, but that it implicitly gave Iran its blessing to use barterable Turkish gold in order to bypass sanctions imposed by... the United States!

Less than a week later, and we are getting closer to showing that we may indeed be looking at a case of not only massive corporate fraud, but even more troubling, a case of blame the other guy, when in reality the person accountable is one of the most important - and richest - people in the country, if not the entire middle eastern region.

But before we focus on the dramatic geopolitical implications of this James Bondian story that gets more complex and fascinating the more we dig, we would first like to help the small investors get back their investment, and all the money (and gold) that was stolen from them.

As such we open it up to our readers as well: below we present the latest until now confidential roadshow by Gold Holding, with hopes that someone will be able to spot something "out of place", in hopes of escalating this case of corporate fraud to the highest possible criminal instance in the UAE... which however will never be high enough if, as we now suspect, it culminates with the second most powerful person in Dubai.

 

* * *

And finally, while not directly related to the topic of Gold AE's massive fraud, here is the remainder of the Gold Holding investment presentation: we find it remarkable because after having covered the Turkish market, the Dubai company had its eyes set on a vastly bigger market. Russia.

 

... and not only that, but it was here where we found what may be the most fascinating detail of today's article, namely Gold Holding's (aka Dubai's) hint that Russian gold no longer has to be denominated in US Dollars for transaction purposes. Instead, it can be denominated in Yuan.... as can Venezuela, Brazil, Argentina and Africa gold transactions, in the process bypassing the SWIFT payment system entirely, and all official traces and records that a gold transaction ever took place!

 

Now this is simply stunning because over the past several years one of the biggest questions has been how did China smuggle thousands of tons of gold from around the world without the world, at least officially, noticing.

Well, recall how this entire story first developed: it was all thanks to Dubai acting as a middleman in smuggling billions of dollars worth of gold from Turkey to Iran, without anyone noticing for years. Could it be that maybe this tiny yet ultra rich Emirate has also been instrumental in facilitating the transfer of tens of billions of dollars from the west (mostly the UK and Switzerland) but also every other gold producer, and into China?

Because if so, it would promptly answer virtually every unanswered question about the global shadow, and very much undocumented, physical gold wave: one which takes the gold vaulted in the west, and moves it all the way as far east as Beijing... and all with Dubai's blessings?