Porsche : “We are not speculators”

6 comments / February 16, 2009

German luxury carmaker Porsche has made 1 billion profit on selling cars in 2008, and 6.8 billion on trading options. Most of the option trading revenue is coming from cornering the market in Volkswagen shares.

Powerplay in derivative markets

Powerplay in the financial markets has been defended by “hedging” themselves against a rise in shareprice of VW shares. Seriously doubt it, but guess they have decent lawyers. They need those to fight off their victims.

DAX options

Harvard loaded with emerging markets

0 comments / February 12, 2009

After reading Paul Kedrosky’s post about Harvard’s portfolio changes I decided to walk through its holdings in the latest SEC 13F report. Top investments where clearly some Emerging Markets ETF’s, but assumed this was because of the concentration of Emerging Market investments in a few lines, while regular stock holdings were scattered in a lot of different single stocks. Wrong.

After liquidating their US stocks in the last quarter of 2008, emerging markets make up for an astonishing 74% of their listed stock portfolio, and in my calculation France has even been shared under the developed markets. They put their money where their mouth is. Apparently Harvard is one of the last believers of the decoupling theory, in which the US economy is slowing down but the emerging markets continue to grow.

Fortis shareholders complicate things

0 comments / February 11, 2009

Sometimes there’s a news story in the financial markets, which requires a lot of homework and flow charts to understand. It’s seductive to skip the whole issue and spend your time on other things. The mess around Fortis is a perfect example of a running news story I’ve decided to stop following. The shares are suspended anyway, I don’t own any of them nor am I planning to buy some in the future.

Fortis cut in four pieces

The bank insurer has its roots in three countries, a lot of different special divisions like the remains of ABN AMRO. A lot of politicians involved, lawyers and taxpayers money. And Madoff, too. The bank more or less failed in the fall of 2008, got split up between the Dutch government, BNP Paribas, Belgium and Luxembourg. You need three-dimensional flow charts to follow all the holdings and transfers.

Today’s real time news from the extraordinary meeting of shareholders proved to be a lot of fun, with an angry crowd of shareholders targeting the board. They turned down the carve up of the bank, making matters extremely complicated. The Dutch government announced today their purchase of Fortis Holland (including ABN AMRO) was a done deal. That’s very nice, but shareholders voted against it. And BNP Paribas may even leave the field altogether.

Report when it makes sense

Almost all the quotes of the CIA Superior in Coen Brother’s recent movie Burn After Reading apply to the Fortis mess as well. “Report back to me when it makes sense“. Hope to read a fine summary in the papers before Christmas.

Land of the sinking sun

1 comment / February 9, 2009

Everybody knows : In the long run, stocks always go up. If you screw up a short term gamble, like buying some troubled financials, reposition your investments as a long term investment. You can afford to ignore further losses, as in the long run it will rebound. Maybe not this year, maybe not even next year but definitely someday your shares will make the u-turn towards green territory.

The positive assumption is especially interesting in Japan. The land of the rising sun is since two decades also known as the land of the sinking stocks and low interest rates. With all the current rate cuts both US and Europe are catching up with them by the way. After a peak in 1989 the Nikkei index has been dropping steadily with a few fake rebounds, spurring optimistic experts to overweight Japan (“this time is different, Japan’s new dawn“).

The year 1989 ended at record of 38915 points, a low in October 2008 traded around 7600 points corresponding with the level of 1982. Nice statistics, interesting numbers and nothing new here, but what does it mean? It means that a retiring Japanse derivative trader at the age of 34 could have invested his savings in the stock market back in 1982. In 2009 he is still waiting for his profits to arrive. He is 61 years old. Maybe the Nikkei will go up in the next years, and his stubborn optimistic investing style will be rewarded with profits after all. That could be the reason the life expectancy in Japan is among the highest in the world (over 81 years) – the whole nation is waiting for the stock market gains.

This proves the famous Keynes quote “In the long run, we’re all dead“. Seriously, I wouldn’t want to be the Japanse trader waiting for 26 years for profits. Scary.

Dutch court: Euronext to pay for broker mistake

7 comments / February 4, 2009

In electronic derivative markets, erroneous order entries are common. Confusing price with quantity, accidentally leaning on the immediate sell buttons or setting automated trading functions in motion while experimenting with different parameters, messing up calls and puts – painful.

These fat finger trades can definitely ruin your day, your career or even worse. No software limitations or exchange rules can guarantee full safety, as traders will come up with new ways to screw up.

Liquidity as cushion

Liquidity is usually deep enough with tight spreads to cushion regular errors. When you still make a mistake which would qualify for “obvious mistake”, the exchange is your last hope. Mistrade regulations can offer rescue in some situations.

Amsterdamtrader