Volkswagen Shorts: Who Goes Under?

The FT has an article on the carnage from Volkswagen (VLKAY.PK).

Einhorn's silence is concerning. It is so for a couple reasons. First, other managers have spoken out in regard to their losses and second, Einhorn has been uncharacteristically silent. In the past he has been very forthcoming on a range of subjects and investors must be concerned about his notable silence now.

Shorting has been hugely profitable the past year but an episode like this underscored the risk involved in it. When you "go long" and buy a stock your loss is limited to 100%, the amount you invested. When you "short", your loss in unlimited. If you short at $10 and it goes to $30, your loss is 200%. In severe short squeezes, it can do so in hours or minutes.

I think many shorts have started to operate as though things will just keep going down, no different than those who bought things assuming the price would just keep going up.

Disclosure: None

Comments

[Pj568:]

This doesn't seem like silence, the article states

"Funds including Greenlight Capital, headed by David Einhorn, and Odey Asset Management have recently told clients that they had big short positions in VW"

2008 Nov 03 01:02 AM