What Billions actually mean

Check out the infographic below for some comparisons on the billions lost, made, spent and saved.

I’m not entirely covinced about the accuracy of the data, but I think its just meant to be indicative.  And as such its a revelation.  Clearly the cost of the gulf war is just massive.  But the main thing that jumped out at me was looking at Wall Street profits compared to gargantuan GFC cost.  And even if you added all the major international markets profits together its still always going to look like a blip on the scale of what got screwed up.  

If all the possible profits from financial trading were equal to all the possible losses then you would probably be fair in thinking that’s a risk, if we manage it well, worth taking.  But if the possible losses are of such a massive order of magnitude compared with the profits then maybe we need to be rethinking the whole thing. 

Link

Porsches “creeping takeover” of VW

I don’t count myself as any kind of financial expert but I do like this story of how the luxury car company snuck up on hundreds of hedge funds and simply yanked the rug from under their feet.

Porsche had previously owned 42.6% of VW stock but then through buying options on VW shares rather than the shares themselves (which would have required public disclosure) they have effectively increased their share to around 75%.

porsche_logo_6

Once hedge funds realised that the State of Lower Saxony owned about 20% of the shares, leaving only around 5% of VW shares publicly available they went on a buying frenzy.  Why? Because VW was the most heavily shorted stock on the German DAX, meaning they had sold shares they didn’t own and HAD to buy back the shares at whatever cost to close their positions.

On the morning of the 28th of October the VW share price had risen to over a €1000, valuing it for a brief period as the most valuable company in the world.  It also inflated to the point where it was making up to a fourth of the DAX index’s movement.

Porsche have been attacked for a whole host of reasons around this trading practice and have even been accused of being more of a hedge fund than a car manufacturer, which when you realise that they made 

“€3.6bn ($4.6bn) from VW options and €1bn from making cars and in 2007-08 it is likely to have made even more from its stake and derivatives in Europe’s largest carmaker.”, you might think they have a point. (FT)

The Dax have lowered VW’s percentage on the index to 10% and are investigating the practice that Options can be bought without public disclosure.   German financial authorities are investigating Porsche to see whether they’ve done anything illegal and a bunch of Hedge Funds are probably  licking their wounds, just trying to stay alive.


Sad Trader guys

Its like LOLCats but for traders. Sad traders. Sad traders on trading floors.

link

Source: Boingboing

10k Profit off short selling

Get into work, hung-over, and this guy who sits opposite me tells me he’s made a 6k loss on the markets this morning.  I’m staggered, he punts his own money here and there makes a 100 quid, 2 if he’s lucky.

Turns out though he’s moaning that he closed off half his bet last night, and if he hadn’t he would be 15.5k up instead of the nearly 10k he’s made overnight on a £100 bet.

Yesterday at close, he bought Lloyds £100 a point spreadbet at a price of £2.37.

In his own words:

“After close the FSA announced that from today short selling in financial institutions is banned. As Lloyds had been systematically shorted by hedge funds I could look forward to an increase in the Lloyds share price as the hedge funds would need to buy to close their short positions.”

At 9pm, he closed out half his position for £1,6450.00 profit.

“As the markets opened at 8am next day I needed to use my laptop on the train (with mobile broadband) to close the other half of my position.  As I logged on Lloyds shot up to £3.94 so I closed for a profit of £7,850 on the other half of the trade.”

It’s all luck though, he had no idea that  the FSA  would cancel shorting, forcing hedge funds to buy to cover their positions. 

Stockmood

Just come across Stockmood.com on the Techcruch50 site which is hosting a 2 day startup conference in San Francisco.

Stockmood apparently use artificial intelligence to fish through the national press (US, that is) and gather sentiment about particular shares:

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Boardroom drive-by

Http://www.cityam.com/the-capitalist/

Some rather specific difficulties with doing business In Russia. Though my guess is that you might find a couple south Africans with a similiar sounding story.