Comments on: Volkswagen: The Biggest Company in the World?

By: Cheap Car Insurance Site

Cheap Car Insurance Site — Tue, 19 Jan 2010 06:37:17 +0000

Toyota’s cut in production helped VW take the top spot. Toyota could ramp up manufacturing again as the recession ends and move into the No.1 spot once more.

By: CV

CV — Sat, 29 Nov 2008 04:18:51 +0000

@Bast: Think of “being told all is well” in a relative sense. Canada and Australia are doing well relative to Iceland, which is a basket case. We are also doing well relative to the the US, UK and Europe, whose the entire banking systems were on the verge of collapse but saved at the last minute by, let’s not say it too loud, governement nationalisation. That should cheer you up somewhat.

I’ve never before heard the term “survivor” used in the context of the real estate market. I like it. However, I feel it’s a bit premature to suggest we’ve survived anything as we’re only just entering a global recession the likes of which we have not faced since The Great Depression. Oh. And Australia. We’re cactus. The resources bid lead by China has gone. If only we’d de-coupled from the rest of the world like everyone said we had….

By: Bast

Bast — Thu, 13 Nov 2008 04:24:47 +0000

Hello from Canada, Mule!

Nice post, but I’ve read three times and am still not crystal clear on what happened or why. That’s what happens when you go get yerself a medieval history degree! Ah well. But I do have a query – today our exhalted (read, stupid) Finance Minister Jim Flaherty annouced another $50 billion bail-out for Canadian mortgages. That, along with the $25 billion announced earlier, puts us on par per capita with the US bail-out. But we are being told all is well, our banks are stable, well regulated, and our real estate market is a survivor. Can I get a view of that from Australia, Mule, please? All of the propaganda here makes it really difficult to get a beat on what’s really going on. Muchas gracias! (At least the Spanish part of the degree was worth something….)

By: Michael Michael

Michael Michael — Thu, 13 Nov 2008 01:21:12 +0000

Nice explanation – another question: at which point does the buyer of an option decide whether it’ll be cash-settled or physically settled? By which I mean, are they just buying options per se, and only when it comes time to exercise or not deciding on physical or cash? Cos if all the Porshe ones were cash, I don’t really see how that’s ‘building a[n ownership] stake in VW’. Cos that’d be like saying if I bet on ‘Viewed’ in the cup (which I didn’t) I had an ownership stake in the horsie. No?

By: Natalie

Natalie — Wed, 12 Nov 2008 22:06:45 +0000

So, do you think this was this semi-planned on Porsche’s part, or more of a chain reaction that just happened to work out (very) profitably for them?

@ Steve Reynolds: “Great to know my little VW is now 74% a Porsche. I feel (more) like a wanker already.” I concur. :)

By: stubbornmule

stubbornmule — Wed, 12 Nov 2008 06:33:39 +0000

@Michael Michael: and as for hedge funds/hedge banks. Hedge funds are very lightly regulated investment funds which make extensive use of leverage, derivatives and short-selling in pursuit of superior returns for investors (and superior fees for the fund managers). There is no such thing as a "hedge bank". I used the phrase "hedging banks" to refer to the banks who had sold options to Porsche and were then buying Volkswagen shares in order to hedge these options. I have now rephrased that section to avoid giving the impression that I was talking about a peculiar beast called a "hedging bank". Hope that clears things up!

By: stubbornmule

stubbornmule — Wed, 12 Nov 2008 06:13:59 +0000

@Michael Michael: I take your point, I have assumed too much. I will add a footnote to elaborate on options, cash settled or otherwise.

The reason the price got so high in October comes down to supply and demand. There was not much supply, effectively only 6% of the shares on issue were available for trading (the so-called “free float”) but there was plenty of demand from hedge funds who were losing money on their short positions and had to buy shares to close out their positions. Limited supply, strong demand translates to high price. I am sure that many observers would have concluded that the prices reached were not sustainable in the longer term and there may even have been a few other investors selling at that price and perhaps even a few brave short-sellers, but the sheer weight of numbers was on the side of buying not selling.

As for the fire analogy, what I had in mind was Porsche as the prankster yelling “fire” for the sheer amusement value of watching everyone else panic.

By: stubbornmule

stubbornmule — Wed, 12 Nov 2008 06:04:53 +0000

@Steve: While I wouldn’t want to make too sweeping a generalisation, as I understand it the loophole is a German peculiarity and, given that German regulators are investigating, it may be closed fairly soon.

By: Steve Reynolds

Steve Reynolds — Wed, 12 Nov 2008 03:06:25 +0000

Great to know my little VW is now 74% a Porsche. I feel (more) like a wanker already.

One question … this loophole exempting cash-settled options from continuous disclosure requirements – does that “opportunity” exist in other markets, or is it only in Germany?

By: Michael Michael

Michael Michael — Wed, 12 Nov 2008 01:57:51 +0000

Problem: I’m [expletive] smart and yet I didn’t understand this post. Please fix. In particular, explain in your or anyone else’s inimitable style:
1) what’s a share option and how is it different from a direct share purchase
2) how is a hedge fund different from a hedge bank
3) explain cash-settled option, or option in general (hint: just using italics _doesn’t_ explain something, it just makes it look scary)
4) why – in Oct 08 – did people feel the share price of VW was unlikely to fall – i.e. is it a ‘good thing’ for the share price that porshe owned so much

Also, is “yelling ‘fire!’” the right analogy? Sure it panicked the short-positioned, but you said Porshe yelled fire, but surely they weren’t panicked, too?

Otherwise, nicely done!