Enterprising Investor Forum

Some of you may have been following the Porsche/VW saga these past weeks or you may have simple heard about what was going on. Here is a very quick & simplistic summary of what happened:

• Hedge funds and other investors where heavily shorting VW stock
• Porsche revealed a 74% stake in VW and options to buy more instead of a presumed 40 something % stake
• Practically no float for the shorts to cover with (state of Saxony is a major shareholder)
• VW shares rocketed to over €1,000 from €210
• It appears the shorts could have lost a as much as €30bn
• Authorities had to step in…
• We have probably witnesses the biggest short squeeze of all times!

DealBook has just published a really interesting article on this event which we feel is required reading for anyone interested in what recently happened and/or about cornering stocks.

Read the article on the DealBook site by clicking: here.

Carlos Slim, Mexican telecoms tycoon and the second richest man in the world is still sitting on the sidelines but will be slowly entering the market, increasing equity investments.

Interestingly enough, he is still quite bearish and critical of recent events. He is known to step up to the plate and be greedy when others are fearful but he is still very concerned about the current turmoil and what the possible ramifications of this crisis will be.

His funds are still hording cash and are still waiting for the right moment to step up the equity allocation. As the CNBC commentator say, he is a bit of a market timer but we agree with his view that it is still to early to truly understand what the long-term impacts of the current crisis will be and what the ramifications will be - the economy remains a serious concern.

Enjoy!

Here we have some classic Jim Rogers, spiced up by a little quarrel with the CNBC commentators:

• Deflation of the stock market
• Inflation will come
• The sell-off is just temporary, the world is not going to end
• Long commodities!
• Paulson and Bernake should resign and abolish the federal reserve
• Let people who make mistakes collapse!
• US has to avoid being another Japan…

An interesting and entertaining interview…

As the street seems resigned to the idea of a deep and severe recession, markets around the world are not offering any comfort - as Barron’s says, there is nowhere left to hide in equities.

As we have been saying in the past, things will probably get worse before they get better but how bad can they get? Despite being cautions about the current situation, it does look like we have probably seen most of the sell-off… we should be about 80% done, don’t you think?

Investors should remember that despite the fact that we are in unchartered territory, the world is not going to end. Sooner or later people will have managed to get their finances back on track and and they will start to buy clothes, laptops, go on holiday and maybe even go out and buy a car! Naturally, this is not going to happen overnight but some of the equity prices out there seem to suggest just that it will never happen….

Having said this, we would like to add a world of caution. We feel that there will be very interesting investment opportunities out there but it will be extremely important to do your homework on the companies you plan to invest in. The recent turmoil has changed so many assumptions, forecasts and business realities whilst sparking a negative domino effect that very few people truly comprehend … understanding what impact these events will have on future company/industry prospects will be crucial.

Make sure you do your homework before getting back in!