Tuesday, January 6, 2009

Germany's "Warren Buffet", Billionaire Adolf Merckle, Commits Suicide - Update to the Hedge Fund Drama about Porsche & VW stock options

On October 30th, I posted about my confusion about hedge funds and shared a link to an interesting article in the Economist: "Porche and VW - Squeezy money: How Porsche fleeced hedge funds and roiled the world's financial markets"

Well, I am still confused, and saddened. Much has unraveled since that post. Last month, it was Bernie Madoff and the non-existent funds of philanthropic organizations that must close operations, resulting in negative consequences for many.

German billionaire Adolf Merckle's recent suicide adds to the drama.


Mr. Merckle was known as Germany's "Warren Buffet". He was a well-respected man who was involved in the short squeeze on hedge funds, orchestrated by Porsche.

Here is the initial information, from the Wall Street Journal, via the Associated Press:

"BERLIN -- The family of Adolf Merckle said the German billionaire committed suicide after his business empire got into trouble because of the global financial crisis.

A brief family statement Tuesday did not give details on the circumstances of the 74-year-old investor's death. It said the problems his holdings suffered due to the financial crisis "broke" him and "he ended his life."

Mr. Merckle's business interests included drug maker Ratiopharm International GmbH and cement maker HeidelbergCement AG.

The newspaper Die Welt reported that Mr. Merckle was struck by a train near Ulm, Germany and died Monday night."

"Mr. Merckle has recently been in the news with reports that he lost money in transactions involving Volkswagen AG shares when the company's stock surged at the end of October."

—Dow Jones Newswires contributed to this story. Copyright © 2009 Associated Press

Mr. Merckle's money was involved in hedge funds involved in short selling- betting that VW's stock would go down, but lost money when it went up instead.


"The plight of his firms caused by the financial crisis, the uncertainties of recent weeks as well as the powerlessness of not being able to do anything, broke this passionate family businessman and he ended his life," a statement said.

Merckle, 74, headed the world's 94th biggest fortune, according to Forbes magazine, with a total net worth last March of $9.2 billion." - Wealth Bulletin

'Broken' Billionaire Merckle Killed Self, Family Says

Here is an excerpt from my earlier post about hedge funds, short selling, VW, and Porsche:

"No matter how hard I try, I still don't quite understand hedge funds.

According to an article in today's Economist (10/20/08), "hedge funds sold shares in VW that they did not own." From what I can tell, companies such as Morgan Stanley and Goldman Sachs and the likes might have "exposure" to VW. There is no telling, right?!

I guess if things were transparent, the general public might have a better idea of what is going on, and perhaps have a better chance of making better data-driven financial decisions. Right now, people are third-guessing. What a game the world has been playing!

From the article:

"Adam Jonas of Morgan Stanley warned clients on October 8th of the danger of playing “billionaire’s poker” by betting against Porsche."

That sounds about right.
Billionaire's Poker.


Billionaires' lustre dims as crisis grips -Reuters 12/30/08, Via Guardian

Merckle’s VEM Investment Unit Says Bank Claims Frozen (Update2) -Bloomberg 12/30/08
"Adolf Merckle, whose holdings span the cement, machinery and drug industries, was battered by wrong-way bets on Volkswagen AG, a drop in the value of his HeidelbergCement AG stock and increasing debt at his companies. The 74-year-old, whose estimated $9.2 billion fortune put him 94th on Forbes’ list of the world’s richest people, had previously threatened to seek insolvency for VEM if banks didn’t provide financing."

FACTBOX - German billionaire Merckle's business conglomerate -
Thomson Financial News 1/6/09

"Porche and VW - Squeezy money: How Porsche fleeced hedge funds and roiled the world's financial markets" (This article is a must-read, along with the comments.)

"Porsche crashes into controversy in the ultimate 'short squeeze'"

""This is the culmination of long-held plans to take over VW. Porsche engineered the squeeze as one of the most brilliantly conceived wealth transfers ever: they've got the hedge funds positioned to pay for Porsche's acquisition of VW. The only thing they underestimated was the scale of the fallout," said an insider

The Madoff Economy (New York Times Op-Ed, Paul Krugman, 12/19/08)

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