Thursday, January 12, 2012

Famous Short Squeezes

Still not 100%, but maybe 75% so its all good.

Market Observations
Not much has changed. Still have one position in TZA but should get stopped out tomorrow. Market and players are way too wild, but that can go on a long time. More on Sunday.

Famous Short Squeezes
2012 has been the year of the short squeezes so far. While short interest has fallen to multi-year lows in the indices, many names still have short positions that are out sized. When the shorts are gone, what happens? Not sure, but I am sure no one will be holding the bag.

Along those lines, here are some famous short squeezes both real and by extrapolation.

Bank of America:
The $5 level was such a sure thing and I think even my broke cousin had a short on. Two things, rules can be broken and nobody cares:

Why short when you can walk away? No idea.

Debacle? Yes that one.
I had forgotten this, but on Twitter @Reinman_MT was fast on the drop.
There was this:
Short sellers desperate to close their positions paid as much as 1,005 euros a share during the session following Sunday's news that there was less than 6 percent of VW voting stock still floating in the market.
At that price Volkswagen's voting stock was worth 296 billion euros ($370 billion), or more than the $343 billion market capitalization of Exxon Mobil
And it ended well:
Merckle's business interests came out on the wrong side of last year's short squeeze of Volkswagen. Rival Porsche silently cornered the market on Volkswagen shares, and when they revealed the extent of their stake, the price of Volkswagen stock shot up to levels that made it briefly the world's most valuable corporation. Many hedge funds who had bet against Volkswagen shares lost huge amounts of money, while Porsche made billions in profit.
Some comments from @Reinman_MT:
"I remember when this happened. Fascinated and horrified at the same time. Points out the risk of shorting very clearly. It's a tale that amateurs (and pros) who blindly short stocks should know. It's true guys; risk are unlimited."
Indeed. Thanks for the added value.

I had a few more but I am running out of gas. Still ill. Wanted to share those and know that short interest is at multi year lows so bag holders may not know who is who.

Have a good night.


GawainsGhost said...

Porsche vs. VW? Back in the 70s, one of our realtors bought a Porsche. To tell the truth, it was the junkiest car I've ever seen.

The best car I've ever ridden in was a Mercedes, convertible coup seville. It was owned by a counselor at the junior high where I taught. This guy, he refurnished Corvettes and sold them, made good money doing it too. Of course, he knew my family. My mother sold him his house. One day, he invited me to lunch. Best car ride I ever had.

I'm glad you're feeling better, GYC. I've never had a sinus infection, but it sounds serious. I had an ear infection once that damn near killed me. I couldn't walk straight, couldn't drive. This constant ringing and pain in my ear, it was awful. Getting to the doctor was a real problem. But a steroid shot and some antibiotics cleaned it right up.

For Friday Night Entertainment, I recommend some good old AC/DC. From Powerage, "Up to my Neck in You."

Probably the best heavy metal rhythym and blues song ever recorded.

Stocks to Buy said...

Great article. Keep it up good work.


Great post