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.

Update:

"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
(Bloomberg)

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.
Yes.
Billionaire's Poker. "

RELATED

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)

Hedge Fund Drama: Porsche, currency-derivative markets, VW stock options - via the Economist

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.

Yes. Billionaire's Poker.

Porche and VW - Squeezy money: How Porsche fleeced hedge funds and roiled the world's financial markets

"The Last God of Central Bank Still Standing": Paul Volcker on Charlie Rose

Ryan Lanham shared the following link, along with his comment, "Fascinating, long form discussion between Charlie Rose and Paul Volcker. Yet another example of using television to elucidate ideas, rather than yelling and bumper sticker foolishness."


Paul Volker on Charlie Rose, via Big Picture
October 9, 2008
http://www.charlierose.com/guests/paul-volcker

The comments section on the Charlie Rose website is worth reading.

Related:
I found this link to the Political Irony blog:
US Electoral Maps before and after Great Depression

Original source: 270toWin:
"270towin.com is an interactive Electoral College map for 2008 and a history of Presidential elections in the United States. Since electoral votes are generally allocated on an "all or none" basis by state, the election of a U.S President is about winning the popular vote in enough states to achieve 270 electoral votes, a majority of the 538 that are available. It is not about getting the most overall popular votes, as we saw in the 2000 election, when the electoral vote winner (Bush) and the popular vote winner (Gore) were different."

FYI: I'd like to gather more information about hedge funds for an upcoming post. Here is some additional food for thought, via Ryan Lanham:
"I fear the hedge fund unwind is even more dangerous, less transparent, and more immediate of a crisis for the markets than real estate."

Collaborative Interactive Multimedia Economic Timeline

I recently posted a ton of information related to our current economic crisis. but as I scrolled through it, it was clear to me that the blog format simply didn't do the topic justice. It occurred to me that an interactive timeline might be more effective, especially if it was created as a collaboration of people from a variety of disciplines.

Initially, I wanted to create something dynamic, in near-real time, but with my busy life, that would be an impossible feat. So I'm throwing this idea out there for people to think about. I'm searching for examples of interactive time lines, especially those that have a wiki component.

Here are a few examples I found since my long post:

• Editorial cartoons- Robert Ariail' response to a statement uttered by one of our nation's politicians, from the State newspaper, graphically depicts what was going on September 17, 2008: The Fundamentals are Sound

Note: This was taken from Robert Ariail's pages on The State website, and was created by Robert Ariail. I posted here for educational purposes and will taken down upon request.

• Jokes -The JokEc website is dedicated to jokes about the economy, would brighten up the interactive time-line experience. The website is a bit dated, as it was started in 1994. "On the One Hand" is a book full of jokes related to economists, written by economic futurist Jeff Thredgold, CSP.
  

• Quotes about economics from wise people throughout the ages would add an interesting dimension to the time-line.

Jokes and quotes could be incorporated into the time-line as spoken word. Maybe famous actors could do the voice-overs!

There is a rap song about the Economist magazine, written by lyricist Ike Edgerton, a high school student. You can listen to a June 01, 2008 interview with Ike on NPR.

Economic data visualizations would be an asset to the timeline, especially if they were interactive and allowed people to play around with various scenarios. The Visualizing Economics website is devoted to representing economic variables from a historical perspective. Catherine Mulbrandon is the person behind this site.

Here is a quote from her website:

"I believe design can contribute to public debates by creating information-rich, easy-to-understand graphics revealing the meaning of data without hiding its complexity. While the Internet allows even greater access to economic data than ever before, much of it is hidden in databases, spreadsheets and academic papers. At the same time, the discussion of economics in the media can be confusing and contradictory. Often numbers are quoted out of context, while political agendas distort the presentation of economic data. The goal of this site is to help people who are interested in the subject of economics (but are not experts) to understand and participate in public discussions about economics through data visualizations."