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Friday, 31 October 2008

Is Porsche the New Goldman Sachs?

Posted on 14:15 by Unknown
On Wall Street, it looks like the cowboy investment bank days are over, with Goldman Sachs and Morgan Stanley trying to become regular banks.

It's Germany, of all places, that seems to be a wheeling-dealing casino these days, because of Porsche.

As I mentioned in an article a couple of days ago, Volkswagen briefly became the world's largest company because Porsche, while trying to buy out VW, acquired control of 75% of its stock and caused a panic among short-sellers.

After I wrote that article, a friend from Switzerland forwarded me this Times of London article that goes into some interesting details.

Interestingly, the 71 year old founder of Volkswagen is the grandson of Ferdinand Porsche. The grandson, Ferdinand Piech, wants to succeed through being a leader in automotive design and engineering.

Porsche, on the other hand, is being called "an investment bank with a car show room attached". Since 2006, Porsche has made 4 times as much money through finance than selling cars.

While the VW takeover has made the heads of Volkswagen and Porsche instant billionaires, the hedge funds who did the shorting have been clobbered with 30 billion euros in losses.

To add insult to injury, the sudden rise in the price of VW have caused the German exchanges to reduce its weighting in the stock indices. This, in turn, causes the German market index funds to have to trim their positions. They were the ones who lent the stock to the hedge funds to short. Now, they want their stock back so they can sell.
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Posted in Business | No comments

Wednesday, 29 October 2008

Volkswagen World's Biggest Company - Fallout for Goldman Sachs and German Banks?

Posted on 11:35 by Unknown
Yesterday, after its stock climbed 250% on Monday and 93% on Tuesday, Volkswagen passed Exxon to become the largest company in the world (by market capitalization).

Volkswagen is now more valuable than Toyota, Honda, Nissan, Daimler, Renault, Peugeot, General Motors, and Ford combined!

Why did this happen?  It's a massive short squeeze.

It turns out that a lot of people shorted Volkswagen stock.  When someone shorts a stock, they sell shares that are borrowed from others.  The key is that, eventually, the party doing the shorting has to return the stock by buying it back.

Porsche is trying to acquire Volkswagen, and they owned 35% of the stock.  The government of the Lower State of Saxony owns 20% of the stock, and are trying to block Porsche's takeover.

Porsche figured out that there were a lot more short positions on VW then expected, and they decided to capitalize on it. If they can't get Volkswagen, they can at least get rich.

Taking advantage of lax German disclosure laws (that are to be strengthened next year),  Porsche secretly bought more stock. 

In addition, they bought call options on WV from Goldman Sachs and German banks (such as Commerzbank).  The banks thus have short call option positions in WV - and would need to buy the stock to cover rising prices.

Over the weekend, Porsche dropped a bombshell by announcing that, not only had they increased their stake in VW from 35% to 42.6%, but they had options to buy another 31.5%.

This means that Porsche controls (directly or indirectly) just over 74% of VW stock.  Since the Lower State of Saxony owns 20%, this leaves less than 5% of VW stock that short sellers and the option sellers (Goldman, etc) can buy to cover their positions.

The shorts and banks are basically screwed, and have to bid up prices higher, while Porsche exercises the options and locks in prices.

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Posted in Business | No comments

Monday, 27 October 2008

Ridiculous, But True, Reasons Employees Missed Work

Posted on 10:17 by Unknown
These are from the results of a recent Careerbuilder Survey:

  • Employee didn't want to lose the parking space in front of his house.
  • Employee hit a turkey while riding a bike.
  • Employee said he had a heart attack early that morning, but that he was "all better now."
  • Employee donated too much blood.
  • Employee's dog was stressed out after a family reunion.
  • Employee was kicked by a deer.
  • Employee contracted mono after kissing a mailroom intern at the company holiday party and suggested the company post some sort of notice to warn others who may have kissed him.
  • Employee swallowed too much mouthwash.
  • Employee's wife burned all his clothes and he had nothing to wear to work.
  • Employee's toe was injured when a soda can fell out of the refrigerator.
  • Employee was up all night because the police were investigating the death of someone discovered behind her house.
  • Employee's psychic told her to stay home.

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Posted in Humor | No comments

Thursday, 23 October 2008

Woman Arrested For "Virtually killing" Her Online Husband

Posted on 10:31 by Unknown
Science Fiction is Becoming More of A Reality ;-)

In Japan, a woman was playing a virtual life game, and her character was "married" to another character.  That character's owner "divorced" her character, making her angry.

She logged on to the game using his password (which she somehow got), and she killed off his character.

Now, she has been charged with illegally accessing a computer and manipulating electronic data.
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Posted in Law | No comments

Thursday, 16 October 2008

Social Security Payments Going up 5.8 Percent

Posted on 13:19 by Unknown
The Social Security Cost of Living Adjustment (COLA) will be 5.8% for next year.

This percentage is based on the Consumer Price Index. This is the biggest one year COLA increase since the 7.4% increase in 1982, and it's more than double last year's increase of 2.3%.

This could be a sign that inflation is increasing. Since the country is also slowing down into a recession, could this mean that we will suffer stagflation like the 1970's?

Also, this means that if you do not get a 5.8% raise this year, you will effectively be suffering a pay cut.
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Posted in Government, Politics | No comments

Wednesday, 15 October 2008

Your Investment Goals...

Posted on 10:38 by Unknown
http://www.youtube.com/watch?v=WjJWr3n2wFs
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Posted in Personal Finance | No comments

Tuesday, 14 October 2008

Taking stock of what’s right with the United States

Posted on 22:20 by Unknown



Taking stock of what's right with the United States

Fri 10 Oct 2008

This is one in a series of articles addressing current market conditions.

Below is recent commentary from Joseph P. Quinlan,  Investment Strategies Group chief market strategist, who lends perspective on the current state of the financial markets.

The U.S. financial crisis has shaken investor confidence in the U.S. economy, and for good reason. After nearly a decade of excessive borrowing and lax financial regulation, the economy is in the grips of a painful deleveraging process. Bank failures, home foreclosures, credit card delinquencies — these variables and others have brought the U.S. economy to a virtual standstill.

Against this dire backdrop, we thought it would be a good time to step back from the drama of Wall Street and Washington and unemotionally reassess the prospects of the U.S. economy. Below is a list of items that we believe show what is right with the United States from an economic and market perspective, offered in an effort to help investors think rationally about the economy's future.

1. The United States is the largest and most productive economy in the world.1

With just 4.5% of the global population, the United States accounts for 25% of global gross domestic product (GDP) and produces more output in a year (about $14 trillion) than the next four largest economies — Japan, China, Germany and the United Kingdom — combined. America 's economy is more than four times the size of China 's.

2. The United States is the world's leading manufacturer of goods.2

Contrary to popular media reports, the United States is still in the business of making "stuff." Indeed, the United States is a manufacturing powerhouse — ranked No. 1 in output. America 's share of global manufacturing output was 20.5% in 2006 (the latest year of available data), little changed from 1990 (22%) and nearly unchanged from 1980. China ranked a distant second (13%). U.S. manufacturing output exceeded that of Japan and Germany combined in 2006.

3. The United States is the largest exporter of goods and services in the world.3

The United States has posted a trade deficit in goods every year since 1975, a notorious economic feat. However, the deficit masks the fact that the United States is a significant exporter of both goods and services. When goods and services are combined, America emerges as the world's top exporter, with combined exports totaling $1.6 trillion in 2007, or 9.4% of total global trade.

4. The United States remains the world's favorite destination for foreign direct investment (FDI).4

Despite the chatter about U.S. outsourcing and jobs being shipped to China is this simple truth: the United States remains the most attractive market in the world for foreign investors. Why? The allure of the United States comes from many factors, including its vast and wealthy market, large skilled labor pool and transparent rule of law. FDI inflows to the United States totaled $1.3 trillion between 2000 and 2007 — the comparable figure for China was $483 billion, or roughly one-third of America 's total. America 's share of global inward FDI was nearly 16% between 2000 and 2007, versus a 5.8% share for China . Meanwhile, U.S. FDI inflows were three times as large as China 's during the 1990s.

5. America is home to the world's top global brands.

More than half (52%) of the world's top 100 brands were American in 2008, according to the research firm Interbrand. Of the top 10 global brands, eight were American, giving Corporate America an unequaled global footprint relative to its international competitors.

6. The United States remains the world's technology leader.

The United States remains the most innovative economy in the world. America 's risk-taking, entrepreneurial streak underpins its technological leadership — a leadership that continues to attract the best and brightest from around the world to live and work in the United States . Reflecting this dynamic, America is the largest market in the world for information technology spending on hardware, software and services.

7. The top-ranked universities in the world are in the United States.5

Though America 's public school system leaves a lot to be desired, when it comes to higher education, some of the best universities in the world are in the United States . Nearly 40% of the universities in the Quacquarelli Symonds World Rankings' top 100 universities are found in the United States , with American universities holding the top two positions as of October 2008. In the 2006-2007 academic year, American universities hosted nearly 600,000 international students, one-fifth of all international students, making the United States the top destination for foreign scholars — followed by the United Kingdom, France, Germany, Australia and China.

8. The U.S. dollar is still the world's top reserve currency.6

The U.S. dollar remains the reserve currency of choice for many nations — it accounted for roughly 65% of global central bank reserves last year. The euro ranked second, with a 25% share. While the U.S. financial crisis has served to undermine foreign investor faith in the U.S. dollar, the dollar remains strong.

9. The U.S. military is a significant resource for technological innovation.

Because of its broad commitments at home and abroad, U.S. military expenditures have increased sharply during the past few years, and the U.S. military is likely to remain a major focal point for government spending for the foreseeable future; even if private firms become cautious and back off on research efforts, U.S. military research is likely to continue — and in recent decades, U.S. military research has incubated key technological breakthroughs that have gone on to be commercially feasible. Consider the Internet, a system initially developed by the U.S. military that has helped change the way the world transmits information. When assessing the U.S. economy's flexibility and capacity for innovation, the resources of the U.S. military, particularly in research, should not be underestimated.

10. The U.S. ranks No. 1 in global competitiveness.7

Based on the latest competitiveness survey from the World Economic Forum, the United States ranks as the world's most competitive economy — a position underpinned by America 's innovative capabilities and top research universities, among other variables. Whether the United States maintains its top ranking next year remains to be seen — the financial crisis, no doubt, will take some gloss off the U.S. economy. That said, the key point is that, on a relative basis, the U.S. economy remains among the most competitive in the world.

The bottom line

We won't deny that there are a few things broken in the United States right now, with the impaired U.S. financial sector chief among them. True, all is not perfect — America 's crumbling physical infrastructure, unwieldy health care system and debtor nation status require immediate attention. In addition, the world is not standing still; many nations — think China — are rapidly becoming more adept with technology, creating their own global brands and expanding their manufacturing capabilities. They are spending more on education and weapons and will no doubt create a much more competitive landscape in the years ahead.

That said, the view is that "all is not lost", as the United States remains the most competitive and resilient economy on the planet. Our hunch is that the U.S. economy will prove to be far more resilient and dynamic than what the doomsayers would have you believe.

Yes, these are difficult days for the U.S. economy, but we are bullish on the future. The foundational building blocks of the economy remain quite strong — in the end, we believe this underlying strength will help lift the economy out of its current funk.

 

NOTES:

1 Data source: International Monetary Fund (IMF), data through December 31, 2007

2 Data source: IMF, data through December 31, 2006

3 Data source: World Trade Organization, data through December 31, 2007

4 Data source: United Nations Conference on Trade and Development, data through December 31, 2007

5 Data sources: Quacquarelli Symonds (QS); International Institute of Education; "top-ranked" refers to both #1 and #2 rankings, according to QS ratings of top 100 universities for 2008.

6 Data source: IMF, data through December 31, 2007

7 Data source: World Economic Forum, 2008–2009 Global Competitiveness Report, October 2008

 

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Posted in Personal Finance | No comments

Friday, 10 October 2008

Interesting Article about the Financial Crisis

Posted on 13:39 by Unknown

This is an interesting article about the financial crisis and how AIG might have been at the center of it.

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Posted in Personal Finance | No comments

Taking out the DOG...

Posted on 12:49 by Unknown
My portfolio is down like everyone else's.

Instead of adding any new regular stock positions, I bought DOG.

DOG is an ETF that is the inverse of the Dow index.  So it goes up when the Dow goes down, and vice versa.

Needless to say, I wish I had bought it at the beginning of the year.  It is up about 50% for the year.

Anyway, I bought some on Wednesday for $79.22/share and bought some more today at $87.66 per share.

Who knows - maybe we are at the bottom and the stock market will only go up from here.  If so, this position will lose money while my others gain.

On the other hand, if the market keeps going down, at least the gains will offset the bleeding. 

You can find more interesting ProShare Funds here.

They have funds for most major indexes that return two times, negative one times, and negative two times all major indices.

For example, DOG returns the reverse of the Dow, DDM returns two times the Dow, and DXD returns two times the reverse of the Dow.

So, for example, while DOG is up about 50% for the year, DXD is up around 118%.  DDM is down 61%.

DIA, which returns the Dow, is down 34%.

I would be careful about using the double ETFs, because of the leverage.
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Posted in Personal Finance | No comments

Thursday, 9 October 2008

Lazy Way to Success Video

Posted on 16:13 by Unknown
Fred Gratzon, author of "The Lazy Way to Success" - which I really enjoyed - has created a 5 minute video on his website.

This movie is really great and creative - with very good production values.

Fred's philosophy is like Tao - avoiding hard work and, instead, succeeding through creativity and leverage through intelligent "play".
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Posted in Videos | No comments

The Treasury Department has issued a new one dollar bill...

Posted on 12:33 by Unknown
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Posted in Financial Crisis, Government, Politics | No comments

Tuesday, 7 October 2008

A Cartoon for the Times...

Posted on 09:32 by Unknown
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Posted in Real Estate | No comments

Monday, 6 October 2008

Home Sells For $1.75 on Ebay

Posted on 16:01 by Unknown
A Chicago woman won an auction for an abandoned home in Saginaw, MI with a bid of $1.75.
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Posted in Real Estate | No comments

Kashkari to Lead $700 billion bailout

Posted on 11:29 by Unknown
Neel Kashkari, a 35-year old former Goldman Sachs exec and TRW engineer who worked on NASA projects, will lead the $700 billion bailout fund.

He got his engineering degrees from University of Illinois at Urbana-Champaign, and got his MBA from Wharton.

http://news.yahoo.com/s/ap/20081006/ap_on_bi_ge/meltdown_kashkari
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Posted in Government, Politics | No comments

Thursday, 2 October 2008

Gas Shortage in the Southern United States

Posted on 14:33 by Unknown
Here is a good post that describes, from a personal point of view, about the gas shortage in the Southern United States - caused by Hurricane Ivan damaging the Houston area refining infrastructure.
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Posted in Business | No comments

Better than a Flu Shot!

Posted on 14:29 by Unknown
Miss Beatrice, The church organist, Was in her eighties And had never been married. She was admired for her sweetness And kindness to all.

One afternoon the pastor Came to call on her and she showed him into her quaint sitting room. She invited him to have a seat while she prepared tea.

As he sat facing her old Hammond organ, The young minister Noticed a cute glass bowl Sitting on top of it. The bowl was filled With water, And in the water Floated, of all things, a condom!

When she returned With tea and scones, They began to chat.

The pastor tried to stifle his curiosity About the bowl of water and its strange floater, but soon it got the better of him and he could no longer resist.

'Miss Beatrice', he said, 'I wonder if you would tell me about this?' Pointing to the bowl.
        
'Oh, yes,' she replied, 'Isn't it wonderful? I was walking through The Park a few months ago And I found this little package On the ground.

The directions said To place it on the organ, Keep it wet and that it would prevent the spread of disease.

Do you know I haven't had the flu All winter.'
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      • Is Porsche the New Goldman Sachs?
      • Volkswagen World's Biggest Company - Fallout for G...
      • Ridiculous, But True, Reasons Employees Missed Work
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      • Interesting Article about the Financial Crisis
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      • Better than a Flu Shot!
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