Is Porsche the New Goldman Sachs?

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.