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The Mother of All Squeezes

How Volkswagen went from being on the brink of bankruptcy to the most valuable company in the world in two days

/THREAD/

 1/ At the peak of the 2008 financial crisis, Volkswagen was considered a very likely candidate for bankruptcy.

Heavily indebted and already financially struggling before 2008, with car sales expected to plummet due to the ongoing global crisis.
2/ With GM and Chrysler filing for bankruptcy in 2009, shorting the VW stock would seem a safe bet.

If you are not familiar with stock shorts and short squeezes check my thread below.

https://t.co/ABGshetm9x
3/ On October 26, 2008, Porsche announced it had increased its stake at VW from 30% to 74%.

This was a surprise to many who were led to believe that Porsche wasn't planning a takeover of VW, based on the company's announcements.
4/ Before the announcement, the short interest was approximately 13% of the outstanding shares, a number considered relatively low.

Porsche had a 30% stake, the Lower Saxony government fund held 20% of the shares, and another 5% was held by index funds.
5/ Due to VW's high weighting in the German index (DAX), the VW stock comprised 17% of the total index at the time.

This left 45% of the available shares to cover for the 13% of short shares.

However, with Porsche acquiring an additional 44% the outstanding shares were only 1%.
6/ Porsche in their statement said that they “decided to make this announcement after it became clear that there are by far more short positions in the market than expected.”
7/ They added that “the disclosure should give so-called short-sellers, meaning financial institutions which have betted or are still betting on a falling share price in Volkswagen, the opportunity to settle their relevant positions without rush and without facing major risks.”.
8/ This triggered a panic among short-sellers trying to rush to the exits, after Porsche's announcement on a Sunday with markets closed.

Due to the short squeeze, VW's stock rose 66% on Monday and skyrocketed to more than $1,000 on Tuesday.
9/ At that moment, VW was valued at a market cap exceeding $420 billion, surpassing Exxon Mobil and Microsoft.

In a single day, it became the most valuable company in the world.
10/ However, on Wednesday, Porsche provided 5% of its shares to the short-sellers, bringing the price down by 50%.

By December, it had returned to its normal levels, in the mid-200s.
11/ This trade shouldn't surprise anyone familiar with Porsche's activities.

The company was basically a hedge fund selling luxurious cars on the side.

In 2007, 3/4 of the company's profits were from trading derivatives and the rest from selling cars.
12/ From the 2008 VW squeeze, Porsche profited by more than $8 billion, with its CEO, Wendelin Wiedeking, pocketing a $100 million bonus.

The hedge funds that were involved in shorting the VW stock incurred collective losses exceeding $30 billion.

/END/
If you liked this thread click below and retweet the first tweet, and follow to stay updated.

https://t.co/rahchSIXcC
For more educational threads on financial independence and investing for beginners see below for a collection of threads 👇👇👇

https://t.co/eRwAf5k7oe

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California Gold Rush, the biggest get-rich-quick scheme in American history

How Sam Brannan became the wealthiest man in California without selling a single ounce of gold

/THREAD/


1/ On January 24, 1848, a carpenter named James W. Marshall discovered gold at John Sutter's Mill in Coloma California (close to present-day Sacramento), where he was employed.

Californian residents were the first to rush into the area in late 1848.


2/ By 1849, the word had spread around the world with almost 100,000 gold-seekers and merchants immigrating to California from across the US and abroad, being named forty-niners.

By 1855 the number reached 300,000. It was the biggest immigration movement at the time.


3/ The gold influx into the money supply system rejuvenated the country's economy giving statehood to California.

The rise in population led to an expansion in various sectors, such as agriculture, ranching, and merchandising.


4/ The San Francisco population exploded from 200 residents in 1846 to 30,000 in 1852.

Many cities and infrastructure was built across California.

New methods of mining and transportation were developed creating a technological boom.
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Isaac Newton: A brilliant scientist, a terrible investor

How Issac Newton lost $4 million due to the first stock market bubble in history and insider trading

/THREAD/


1/ Sir Isaac Newton is considered one of the most influential scientists of all time and a key figure in the scientific revolution.

He was a mathematician, physicist, astronomer, theologian, and author.

2/ The most prominent part of his work was the formulation of the laws of motion and the law of gravity.

However, his most prominent failure was losing an entire fortune in the first stock market bubble in history, the South Sea Company in 1720.


3/ Newton was usually a cautious investor.

Before 1720 most of his investments were in safe and reliable securities, various government bonds that delivered a regular stream of income, and shares in a few of the larger companies on the exchange, including South Sea Co.

4/ Newton began in 1720 with stocks and bonds worth approximately £32,000 (close to $6-million in current U.S. dollars).
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The Baltimore Stockbroker Parable

How one stockbroker managed to achieve a 100% success rate in predicting stock movements

/THREAD/


1/ One day you receive an unsolicited newsletter from a stockbroker in Baltimore.

It contains a tip that a certain stock will soon rise sharply.

A week passes, and as he predicted, the stock goes up.


2/ The next week, you get another newsletter from the stockbroker, this time with a tip about a stock that will fall.

And next week, the stock craters.


3/ Ten weeks go by, and each week you receive a tip about a stock that will go up or down.

Every time the prediction comes true.


4/ On the 11th week, you get a solicitation to invest your money with the Baltimore stockbroker for a hefty commission, justified by his successful predictions.

That sounds like a great deal, right?
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Companies to AVOID

/THREAD/

Some tips by Peter Lynch, one of the most successful investors of all time, on which companies to avoid investing in


1. Hottest stock in the hottest industry, with nothing but hope and thin air to support them (MJ stocks in 2017, internet stocks in 2000, electric vehicles in 2020)

Deteriorating balance sheet.

When analysts predict double-digit growth forever, the industry goes into decline.

2. Product/service, not protected by patent or niche, easy to be replicated by competitors, especially in a high-growth industry.

3. The "Next Something"

Everyone wants the next $TSLA, $AMZN, $GOOG

Most likely you won't find a company to replicate their business with that success.

4. Diversification = companies wasting capital on foolish acquisitions, in new sectors they do not understand, and in companies that are overvalued.
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The British Railway Mania

How a disruptive technology created the biggest speculative bubble in the history of England

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1/ Railways were the most disruptive technology of the 19th century, known as the "railway age", transforming England from an agricultural to an industrialized nation.

2/ The development of railway infrastructure and locomotives started at the end of the 18th century but experienced immense growth after 1830.


3/ Hundreds of railway related bills were passed every year with proposed rails totaling 10,000 miles, a third of which was never built due to poor financial planning, competition, or fraud.

4/ In the mid-1840s, the Bank of England cut interest rates rendering government bonds unattractive, and investors more willing to rush in the railway investments.
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1/

Thread:

#DishaRavi, one of the founders of "Fridays for future India" has been arrested promptly by Delhi Police.
Let's look at why this was the best move to make.

Also let's see who she is and what her connection is to Greta.

2/

At first glance, you can find that Fridays for Future is an organization founded by Greta Thunberg with branches who conduct school strikes all across the world. Like so.
India, as you can see, is No. 3. And this is the map within India. South seems to dominate. AND


3/

They have global "protests" in almost all countries.
Coming to Disha Ravi, she's an "activist" from "Fridays for Future India" and was featured in Vogue when she joined, providing an educated guess that she may be leading the movement in India. Now...


4/

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5/

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