In Search of the Perfect Investment

Remember cockroaches? See one, kill it.

Two days later, his brother appears. You kill it.

Then a week later, his sister appears.

You get the idea.

Businesses go and up for normal reasons — like a recession, falling commodity prices, a strong dollar…

There are some reasons that are not normal. Lying. Cheating. Bad accounting. Government investigations, etc.

They’re called cockroach stocks. Their problems keep coming back. Like the cockroaches in our kitchen.

WorldCom, Enron and Lehman Bros. were classic cockroach stocks.

The way to play cockroach stocks is to short them.

I shorted Volkswagen (VLKAY) because I smelled a cockroach. My logic was, if they fiddled and lied about their diesel engines, why not others?

I was right. This morning Business Insider reported

A second act in Volkswagen’s massive emissions scandal just began.

Late Tuesday night, VW Group announced that the company had identified “irregularities in CO2 levels” that emerged as part of internal investigations.

As many as 800,000 vehicles could be affected across the entire group, according to the release. …

Here’s what Volkswagen says in its own words:

Under the ongoing review of all processes and workflows in connection with diesel engines it was established that the CO2 levels and thus the fuel consumption figures for some models were set too low during the CO2 certification process. The majority of the vehicles concerned have diesel engines.

Here’s what Credit Suisse goes on (emphasis Business Insider):

At this point the financial impact from today’s release is unclear, as only limited details have been provided. However, given that that provisions per vehicle are 4.1x higher versus the NOx issue, the magnitude could be much bigger in scale. In our view, today’s announcement could concern those who believe that the economic impact is manageable and more than priced in post the drop in share price.

You can read the Business Insider piece here.

Like melodramas? This one is the best.

We saw it last night. Tickets here.

Wonderful signs.

Bathroom in department store:
“TOILET OUT OF ORDER. PLEASE USE FLOOR BELOW.”

In a Laundromat:
AUTOMATIC WASHING MACHINES: PLEASE REMOVE ALL YOUR CLOTHES WHEN THE LIGHT GOES OUT.

In a London department store:
BARGAIN BASEMENT UPSTAIRS…

Notice in health food shop window:
CLOSED DUE TO ILLNESS…

On a repair shop door:
WE CAN REPAIR ANYTHING. (PLEASE KNOCK HARD ON THE DOOR – THE BELL DOESN’T WORK.)

Harry Newton who spent half of yesterday cleaning out the basement under supervision of Susan. It felt good to get rid of all the boxes filled with 30-year old technology. Anyone want some brand-new VCR tapes? Or PC card dial-up modems?