Saturday, November 8, 2008

29th October 2008 - The day everybody looked the other way

It does not really matter whether you live in Germany or not, either way you probably will not remember what happened on that day. Let me help you out :

One day before the share of Volkswagen AG was manipulated to perform a +90% jump in one day to a record value of 945 Euros per share. Since this share has a strong weight in the German DAX index and most other shares did not change much in value that day, it resulted in an upward jump of the DAX index by +10%. While this event was reported extensively on the news the event of the following day was blacked out completely from the media :

On October 29th the Volkswagen AG share fell from 945 Euros to 517 Euros which is nearly the same as where it started two days before. So by applying common sense anyone should conclude that due to the high weight of the Volkswagen AG share the DAX should make a -10% correction on this day, to compensate the +10% upward jump from the day before.

Well it didn't. On October 29th the DAX index changed by -0,31%

How could that be ? Well let me show you some of the other DAX shares on that day :

Allianz AG : +26,24%
Metro AG : +24,50%
Siemens AG : +24,07%
Daimler AG : +21,45%
EON AG : +19,88%
BASF AG : +19,29%

Anything wrong with this picture ? We are talking changes on one regular trading day where non of these companies made any special announcements that would justify such a significant shift.

To complete the picture of the day : 22 of the 30 DAX shares jumped at least +10% on that day. 29 of the 30 DAX shares gained that day, only Volkswagen AG dropped by -45,29%

The question is how could this happen ? Anybody in the know should be familiar with the "plunge protection team" that officially does not exist and inofficially takes care that no sudden plunges in any index takes place.

The German BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht) is supposed to monitor the stock market and avoid fraud. October 29th 2008 was a day, where it obviously was asleep at the wheel, just as all the rest of the media. If nobody cares about such obvious manipulation of markets, maybe we deserve to get screwed even worse in the not too distant future.

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