Deutsche Boerse

Germany Tries to save the day AGAIN -2008 Part 2 Begins-

Posted by Investing Freak on May 18, 2010
Market Analysis / 2 Comments

So today Germany’s Merkel decided to pull a good trick over the nekkid shorts.

There is much surprise that the German government has declared a ban on naked short selling, including CDS, as of midnight tonight, with no prior notice or the niceties demanded by the banks when government chooses to act. This action seems to have perturbed some and confused many.

Germany is claiming that this move will stop the Speculators

The ban will also apply to naked short selling in shares of 10 banks and insurers that will last until March 31, 2011, German financial regulator BaFin said today in an e-mailed statement. The step was needed because of “exceptional volatility” in euro-area bonds, the regulator said.

HMMM Where oh Where Have I heard this story before…  Oh Yeahh.. September 20, 2008 German regulator bans short-selling in financial stocks

Germany on Saturday halted short-selling in financial shares, when investors borrow company stock to sell it, following the example of Britain and the United States. The ban affects 11 shares including those of AAreal Bank, Allianz, AMB Generali, Commerzbank, Deutsche Bank, Deutsche Boerse, Deutsche Postbank, Hannover Re, Hypo Real Estate, MLP and Munich Re.    BaFin, said short sales were banned with immediate effect until the end of the year, underscoring that they could lead to huge losses in the current global financial turmoil.

Roll Back to May 18, 2010….

Allianz SE, Deutsche Bank AG, Commerzbank AG, Deutsche Boerse AG, Deutsche Postbank AG, Muenchener Rueckversicherungs AG, Hannover Rueckversicherungs AG, Generali Deutschland Holding AG, MLP AG and Aareal Bank AG are covered by the short-selling ban.   “Massive” short-selling was leading to excessive price movements which “could endanger the stability of the entire financial system,” BaFin said in the statement.

I wonder what happened last time they tried protecting the banks? Well I will examine it below but what’s that I hear you say? This Time is Different?  It sure is!!
During the last Crisis we had Lehman go bankrupt and Bear Stearns collapse.  Two years later we don’t have any financial institutions going down. We Have Countries that are crumbling and their “shareholders” (taxpayers and citizens) revolting.    Greece is Bear Stearns because of the trillion dollar bailout and Portugal might as well become Lehman because unless Europe is willing to print a trillion for every country they bail (which I know they can if they want) and euro dropping to parity and beyond with the dollar…. someone will have to hold the bankruptcy stick.

Anyways Lets look at how the last short selling ban affected the financial institutions they tried to protect.

I’m using Dow Jones Germany Index for a Benchmark as to compare returns.

Company Sept to Dec 2008 May 2010 – March 2011
Dow Jones Germany Index (USD) DEDOWD -23% TO
Allianz SE  AVL -30% BE
Aareal Bank AG ARL -64% FILLED
Commerzbank AG CBK -61% OUT
Deutsche Bank AG  DBK -50% ON
Deutsche Boerse AG DB1 -15% APRIL
Deutsche Postbank AG DPB -65% 2011
Hannover Rueckversicherung AG HNR1 -18% WHEN
Muenchener Rueckversicherungs-Ges. AG MUV2 +7% ENDS

Oh myyyyyy Germany Saved the day as speculators were on the sidelines watching and missing out on 18 to 65% gains (its what you do when you short and if you’re not familiar just Google “selling stocks short”)

The Previous ban was 3 months and the protected stocks crashed an average of 46%. The New Ban will be around 11 months and will crash how much? It will crash aplenty so I will not make an exact percentage call on this one. But I will be doing one thing this time around though.  I’m putting German Financials on a Bank Watch List that I will check back on April 1st 2011.

Make plenty of money these next few weeks even if my blogging is sporiadic at best. (Offline life always comes first)


Tags: , , ,