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Non-Tech : Bill Wexler's Trading Cabana

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To: RockyBalboa who wrote (3901)	7/27/2008 7:10:11 AM
From: RockyBalboa	Read Replies (2) of 6370

There is a very large pyramid game in Germany underway. Porsche will report a net result of 11 Billion (on turnover of 8.6B) for the quarter as a result of its revaluation of the 31% Volkswagen stake to which it added, but only 1.2B are from operations. Just recently Volkswagen rose to over Eur 200 as speculation about a full a full merger into Porsche looms. At this level, Volkswagen is considered expensive; it sports a P/E of about 20x which is not exactly cheap for a carmaker. The stock is up 61% in one year and valued with a premium of over 100% to its peers, BMW and Daimler. Simply put it is in a bubble state. The german media is gloating about shortsellers who are squeezed to hell on shorting volkswagen. It´s stock price development just doesn´t fit to the general development. de.finance.yahoo.com de.finance.yahoo.com Analysts think that despite the good numbers, Volkswagen is worth 160 and not 200. I am not shorting yet; a strong stock in an otherwise difficult environment (oil prices, car makers) could technically go up further if difficulties ease (and recently they eased, see oil, Euro); I will wait a little and look for catalysts: Development of oil prices. If oil recovers then the public perception will change once more, sending carmakers down. Interest rates. Much of the general bubble is driven by the too low interest rates in Europe. *New developments in the planned acquisition / consolidation by and into porsche. Recently the EU allowed a possible takeover to progress seeing no evil. One thing is clear: Someone has to pay the piper. If not the public through car purchases then existing stockholders will pay dearly,...a temporary overvaluation can not persist.

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