"One of the most masterful hacks of the financial system in history."
A “short squeeze” sounds innocuous enough...
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Re: A “short squeeze” sounds innocuous enough...
#2Ivan Krstić was the security lead for the One Laptop Per Child project. Here's his completely unrelated retelling of the downfall of Adolf Merckle, one of the world’s richest men, who committed suicide yesterday by throwing himself under a train. Merckle is actually ancillary to the story; it's really more about how Porsche perpetrated "one of the most masterful hacks of the financial system in history." It's fascinating!
Re: A “short squeeze” sounds innocuous enough...
#3The key phrase is "infinite squeeze" which is a condition where shorts are forced to buy at any price determined by owners,
http://www.economist.com/displaystory.cfm?story_id=12523898&...
...this is the worst possible condition of a financial market, in which a class of investors can literally dictate prices without limit (IIRC, German authorities stepped in at some point to prevent catastrophe).
Re: A “short squeeze” sounds innocuous enough...
#4[deleted]
Re: A “short squeeze” sounds innocuous enough...
#5The key phrase is "infinite squeeze" which is a condition where shorts are forced to buy at any price determined by owners, http://www.economist.com/displaystory.cfm?story_id=12523898&... ...this is the worst possible condition of a financial market, in which a class of investors can literally dictate prices without limit (IIRC, German authorities stepped in at some point to prevent catastrophe).
And since (theoretically) there's no upper bound on the price of a stock, then (theoretically) there's no upper bound on the losses one can incur when engaging in short-selling practises either.
Porsche is an evil genius of Finance. Their predatory trading practises have become legendary. Some more links on this:
http://www.nuclearphynance.com/Show%20Post.aspx?PostIDKey=12...
http://ftalphaville.ft.com/blog/2008/10/27/17465/the-disrepu...
Re: A “short squeeze” sounds innocuous enough...
#6It ends with a bit of a thud, but I had no idea Ivan Krstic was this good a writer. Really great pacing.
Re: A “short squeeze” sounds innocuous enough...
#7This is a brilliantly clear explanation.
Re: A “short squeeze” sounds innocuous enough...
#8Question: how is it that nobody knew how much VW Porche owned?
Is there no way to see who owns a certain stock, or what stock a company owns?
Re: A “short squeeze” sounds innocuous enough...
#9Question: how is it that nobody knew how much VW Porche owned? Is there no way to see who owns a certain stock, or what stock a company owns?
I'm sure disclosure laws vary by country, but in the U.S. companies must provide this information to the SEC (via form 13-F and others).
On an unrelated note, I believe a better suited word in this case is "innocuous," not "inconspicuous."
Re: A “short squeeze” sounds innocuous enough...
#10The key phrase is "infinite squeeze" which is a condition where shorts are forced to buy at any price determined by owners, http://www.economist.com/displaystory.cfm?story_id=12523898&... ...this is the worst possible condition of a financial market, in which a class of investors can literally dictate prices without limit (IIRC, German authorities stepped in at some point to prevent catastrophe).
What happens in the case of an "infinite squeeze" where the party who owes stock to another cannot pay it back?
Is this a risk the lender has to deal with, that they may not ever see the stock they lent out again because the party they lent it to squandered it? Seems to me in the "short squeeze" situation the value of the stock cannot be infinite -- it is bound by the terms of the contract to which the shares were lent out.