Last October the financial world was shocked by a devastating short squeeze in German carmaker Volkswagen. A short while the producer of reliable but boring cars was the most expensive company in the world after skyrocketing from around 250 to above 1000 euro. In two days.
The biggest loser on VW squeeze
To be honest, we’ve had a small short position in far out of the money call options on VOW as well. Lost quite a bit on a few dozen short calls. Afterwards we’ve spend a couple of hours speculating on the identity of the biggest loser of the short squeeze. Deutsche Bank? Goldman? A small Landesbank maybe? All wrong. German tycoon Adolf Merckle (1934) bet the house with shorting Volkswagen shares. Lost a billion and all of his industrial empire. Two weeks after French fund manager and Madoff victim René-Thierry Magon de la Villehuchet ended his life, Merckle jumped under a train. Question remains how on earth did his bankers allow him to lose everything on a silly short squeeze.
Bear market suicides
The urban legend of massive suicides during bear markets will be just around the corner. Comedian Will Rogers observed during 1929, “When Wall Street took that tail spin, you had to stand in line to get a window to jump out of, and speculators were selling space for bodies in the East River“. True poetry, but not true. There doesn’t seem to be any significant correlation with market crashes and suicides. Good old Joseph Galbraith even investigated the matter in his famous book and noted the US suicide rate increased between 1925 and 1932. During the crash in 1929, the rates were low.