The First World War ended ninety-one years ago.
Archive for the ‘Germany’ Category
Economista Non Grata asks about the rumors that the dollar will be replaced as a reserve currency. Allow me to try to get to it via something completely different – the Krug’s excellent diagram of what is going on in Bernanke’s mind:
There are times I kick myself for not coming up with stuff like this myself. Then I realize I don’t know how to post my own graphics to WordPress. And I don’t have a Nobel Prize. So I’m going to have to use a lot of words. (more…)
Catching up on missed reading and came across this exchange between Bill Simmons and Malcom Gladwell. Gladwell is a famous writer, but his talents are most obvious when commenting on sports – there are several other excellent social commentators, but a comp set that includes Dan Shaugnessy offers far more room to excel. Here is Gladwell on the full-court press in basketball:
one of the most common responses I got was people saying, well, the reason more people don’t use the press is that it can be beaten with a well-coached team and a good point guard. That is (A) absolutely true and (B) beside the point. The press doesn’t guarantee victory. It simply represents the underdog’s best chance of victory. It raises their odds from zero to maybe 50-50. I think, in fact, that you can argue that a pressing team is always going to have real difficulty against a truly elite team. But so what? Everyone, regardless of how they play, is going to have real difficulty against truly elite teams. It’s not a strategy for being the best. It’s a strategy for being better. … I wonder if there isn’t something particularly American in the preference for “best” over “better” strategies. I might be pushing things here. But both the U.S. health-care system and the U.S. educational system are exclusively “best” strategies: They excel at furthering the opportunities of those at the very top end. But they aren’t nearly as interested in moving people from the middle of the pack to somewhere nearer the front.
I might simplify the argument: the full-court press is a strategy that increases volatility but reduces the expected value.
I’m a little confused by the current goings-on in the Piech/Porsche family drama.
As best as I can tell, Porsche has spent years operating as a hedge fund with a side business in sports cars. It has been on a creeping takeover of Volkswagen, and since mandatory takeover laws don’t seem to apply in Germany if you are from a prominent family, they have steadily squeezed the Volkswagen float between themselves and Lower Saxony. This had the fringe benefit of creating earnings at Porsche from the appreciation of the Volkswagen shares, driving up Porsche, allowing them to buy more Volkswagen.
It all came to a head, as I thought I understood it, in October, when Porsche announced that although it held around 40% of the stock of VW, its held options for another ~35%. Again, I’m not sure if the regulators were at Oktoberfest and could not be reached, but you would think that sort of thing would be illegal. Since Lower Saxony has 20%, that means that all of a sudden the float was 5% (when people had thought it was 40%) and everyone who had shorted Volkswagen was caught in the mother of all squeezes. The share price quintupled, and for a brief, shining moment VW was the most valuable public company on the face of the earth. The Porsche boys had cornered the market.
Seems the Germans are even less willing than we are to make creditors sweat – in fact, they won’t even wipe out the equity:
The German bank-rescue fund, Soffin, bid 1.39 euros ($1.84) a share, or about 290 million euros ($385 million), for the Munich-based lender, it said in a statement today. The government aims to acquire all of the outstanding shares with the offer, which is 16 percent above yesterday’s closing price of 1.20 euros.
Why would the government pay anything for the equity instead of letting the bank fail and seizing it?
“With its public offer and the chosen offer premium Soffin underlines that it wishes to stabilize the financial market using a market-oriented approach if possible and by adhering to existing market practice,” said Hannes Rehm, chairman of the fund.