Sunday, December 12, 2004 ... Deutsch/Español/Related posts from blogosphere

Saving Coca Cola

This is just a small addition to the comments about the hedge funds and short selling.

There exists an incredible anti-capitalist financial terrorist and moron, a 44-year-old former Wall Street broker called Max Keiser who decided, together with Zac Goldsmith, a journalist from "The Ecologist" and a son of a more famous father, to destroy the Coca Cola corporation by short-selling its stocks. ... (Arabs' description of the fellow terrorist)

He blames Coca Cola for containing sugar, for using its own logo, for violations of the human rights in Colombia, for poisoning land in India, for racism, and so forth. Keiser's brain simply seems a bit damaged, to say the least.

The Coca Cola company stocks are worth roughly 95 billion dollars. One stock is about 40 dollars these days. It used to be 40 dollars in the past, and it was about 50 dollars a year ago. It can return to 50 dollars again.

Keiser wants to short-sell a lot of their stocks - and bet that the stock will be something like 22 dollars in one year. This means that he will buy a negative amount of the stocks with a contract to return to zero in 12 months. In other words, he sells stocks that he does not own yet, and he actually buys them in 1 year, for a smaller price as he hopes. This "short-selling" is the main strategy used by the hedge funds - it is betting on the drop of their price.

He started with 100,000 dollars and it seems that he has already collected roughly 1 million dollars to invest and he expects to collect about 100 million dollars from the big investors. He claims that his profit will be distributed to the "victims of Coca Cola". Simultaneously, he collects names of the people who decided to boycott the company. Of course, this list is a big joke because most of the list is made of people who don't drink Coke anyway, and those who drink it will continue to do so.

He is a sufficiently big dope to have revealed his plans. Well, now everyone knows that once he starts - and he will probably announce exactly what he's doing - the price of the Coca Cola stock will be artificially undervalued by his short position that can be as large as hundreds of millions of dollars, i.e. fractions of a percent.

Of course, even though I like Coke, I have no idea where the stock is going. What he's doing is simply a lottery. But one attractive feature of this project is that one can actually help to destroy this gentleman and the other communist and eco-terrorist people who help him. In less than one year, it's enough to look at the price of the stock. If it's gonna be below 35 dollars, I would let him win. If it's gonna be above 35 dollars, the people on the stock market who don't like the anti-capitalist terrorists should buy some Coke stocks before he will have to cover his short positions - which will push the price up a little bit.

Actually I think that even the U.S. administration should help to punish this attempted attack on the economy. If disgusting terrorist projects like the project of Max Keiser were succeeding, many other radical people could start to follow his example - and Al Qaeda could become a small threat in comparison. It's in the very interest of freedom in this world to help to make his project unsuccessful.

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reader Anonymous said...

I agree with your comment that even the federal government could play a role in temporarily pushing the coke stock if necessary. It would be much nicer though if private investors chose to do this.

It's sort of like smoking. Do I think it is highly desirable if every person in America individually decides to quit? I surely do. Do I want the federal government to get involved with promoting this goal. No -- or at least only on an extremely limited basis.

There are more of these ridiculous anti-corporatist pigs around than one might guess. Did you notice the massive amount of anti-tobacco corporations comercials on TV? I despise their self-righteous demeanor.

George Soros, Max Keiser and the like must be stopped. Hopefully this is possible by legal non-violent means, like buying stocks at the right time. The challenge is big and the stakes are bigger.


reader Luboš Motl said...

No doubt, I agree that it would be much more encouraging if the price of the stock was saved naturally in the market!

reader Arun said...

The day Coca Cola stands up for my rights, I'll stand up for its. Anyway, I don't think a multi-billion dollar company like Coca Cola cares for my opinion; only that I should buy its product.

reader Arun said...

By the way, neither Coca Cola nor Pepsi have any respect for the free market or competition. What is the primary means a new entrant can try to gain market? On price. However, Coca Cola and Pepsi dictated to the grocery chains that they cannot do certain promotions on any competitor's product. It is as though IBM enforced via its market power that Compaq could not sell its product at less than a certain price.

Loyalty to people is good. Loyalty to a corporation? It is an impersonal monster that rolls over people and crushes them when suitable. Max Keiser and Coca Cola Corporation deserve each other.

I think universities were invented to hold otherwise intelligent people who have little clue about the real world. It mostly catches left-wing types, but there is a healthy smattering of right wing nuts also. Real world conservatives have few illusions.

reader Luboš Motl said...

Arun, you're really very far from reality.

Respecting the free market is something totally different than helping your competitors, and if you're confusing these two things, you're very far from understanding the real world.

Second, you heavily overestimate "Max Keiser". Of course that this story is not about the danger of collapse for Coca Cola: it is about a possible profit of a financial terrorist.

reader Anonymous said...

A terrorist is someone who uses terror for gain, i.e., frighten (by threat of violence) a population or government into agreeing to do things they would not do otherwise. What Kaiser claims he wants to do, namely short sell a stock (Coca Cola) and thus bring down its value, is something practised by all major financial players, often with the hidden purpose of buying up a company or liquidating a competitor. There is no threat of violence or anything else. If you call this terrorism, you will have to shut down all financial markets, because everyone is doing the same thing. People like George Soros play these games with national currencies, even.

reader Luboš Motl said...

Well, George Soros is another disgusting person - but the reason why I call Keiser financial terrorist (more than Soros) is exactly because he fits your definition of terrorism. It's someone who threatens a society or a company, using limited tools and targeted violence, and wants this society or company to be damaged just for the sake of it - i.e. for political purposes.

Soros has been doing something similar with the British pound, for example, but for the very purpose of reaching profit. Once again, it's also immoral, but it differs from Keiser by his motivations.

A U.S. soldier is finally doing a similar job like the insurgents, too - but the US soldier is NOT an insurgent, and I hope that you will be able to understand the differences in both cases.

reader Anonymous said...

I'm loathe to ruin this discussion by bringing any reality into it, but here are some facts:

1. Short-selling is quite risky. For one thing, there is no limit to how much money you can lose. If you buy stock and the company goes under, you may lose what you paid for the stock. If you sell it short, the company has a huge success and the value of the stock triples, you lose twice the value of the initial stock (plus the fee for borrowing the stock).

2. Short selling is not the main strategy used by most hedge funds. If it were, they would all go under during periods when the market goes way up. When they do short-sell, it is generally to "hedge" (this is why they're called "hedge funds") some other transaction where they have some financial exposure if the stock goes down.

3. If you short-sell Coca-Cola stock as part of this boycott, you are betting that the market (which knows about your boycott plans) has priced the stock too high because it doesn't believe your boycott will have much effect. You may have great faith that your boycott will work, but historically these things don't. And if this one doesn't, you may lose a huge amount of money.

4. In most cases, the price of a company's stock is not very relevant to the success of their business. If Coca-Cola stock gets driven down by financial manipulations, but their business remains strong and they keep selling a lot of Coke, their company will be fine, and sooner or later the stock will go back up. The health of the company and its ability to invest in the future is mainly determined by its profits, not by its stock price.

Accusing this guy of terrorism is idiotic, but I wouldn't be surprised if he does run into legal problems. Trying to drive a company's stock down while planning on profiting from short selling can get you into legal trouble. And telling people they should short-sell without explaining the risks to them also could be problematic.

Actually I'm currently engaging in my own minor Coke boycott. I used to drink huge amounts of the stuff, but I realized that if I want to keep from getting overweight, I can't drink that much of it. And diet Coke tastes terrible.


reader Anonymous said...

A U.S. soldier is finally doing a similar job like the insurgents, too - but the US soldier is NOT an insurgent, and I hope that you will be able to understand the differences in both cases.
Of course. Everyone understands the difference. The US soldier has invaded a country that did not attack the US, and is destroying houses, roads, water supply and other civilian infrastructure, and killing, maiming, torturing and dispossessing civilians. The insurgents are fighting the invaders and those who help them. Rather like the Czech `resistance' fighting the Russian soldiers. Sorry, that must have been a parallel universe -- in this one there was no Czech resistance worth talking about, and Russian tanks were welcomed with roses in Prague. Just like the neoconpoops fantasized about Baghdad.

reader Luboš Motl said...

For the commie who wrote the previous, disgusting message about the US army:

One does not have to compare the US army to Brezhnev. The Czech Republic has seen what is the US army itself.

My town - Pilsen - was liberated in 1945 by General Patton, much like Iraq was liberated last year. The difference is that we had Hitler controlling us, and theirs was called Hussain.

By the way - this is about Coke. The US troops gave everyone Coke and chewing gums, and everyone was absolutely happy.

The Russian occupation in 1968 is analogous to Hussain's occupation of Iraq. If the West responded, maybe there would have to be a chance that Czechoslovakia could have avoided normalization. I would have certainly been grateful to the US military for destroying a couple of houses with the communists.

Comparing Hussain with Dubcek proves that your brain does not operate satisfactorily. Hussain was a totalitarian leader, much like Brezhnev of Hitler. What you wrote it insulting and disgusting.

reader Anonymous said...

No Lumo, what YOU wrote is insulting and disgusting. To all Iraqis. And anyone who cares about them. But perhaps you don't care about them.

reader Anonymous said...

He blames Coca Cola for containing sugar, for using its own logo, for violations of the human rights in Colombia , for poisoning land in India, for racism, and so forth. Keiser's brain simply seems a bit damaged, to say the least.

Excuse me,but I know at first hand the human right violations perpetrated by Coca Cola in Colombia and frankly I find quite disgusting the disdain you treat this theme. I dont care about Kaiser and his 'terrorist' activities.
Mr Motl, obviously you are a very intelligent person, but the zealousy and bigotry of many of your opinions and the contempt you treat people who have positions opposite to yours is quite apalling.

Have a nice day.

reader Luboš Motl said...

Yes, if you mean the Iraqis who liked Saddam Hussain and who are now making mess and creating violence in Iraq, you're right that I don't care about them too much and I don't care whether they're insulted by my not caring about them. ;-)

Whom I care about in Iraq are the people who like freedom and who want to do something positive, such as this guy:

reader Luboš Motl said...

Concerning Colombia, according to all available data, there is no serious sin that the company did there. A worker who worked there was killed, but killed by the paramilitary units. Colombia is a sort of messed up country, such things unfortunately occur, but they're not Coca Cola's fault. The communist guerillas are creating more violence than the other sources of violence.

And if someone argues that the company should support strong labor unions in any country, be sure that I am not gonna support something like that because I know where too strong labor unions can lead.

reader Anonymous said...

Thanks for the comments. I just gave you a plug in my last post. Again, great site.

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