The Germans overreact

Listed on London Stock Exchange:

BARC 298.90p -10.00p (-3.24%)

CAU 42.75p -2.00p (-4.02%)

CRWN 30.50p 0.00p (0.00%)

FPER 5.00p -0.13p (-2.53%)

FCCN 45.50p +4.75p (+9.64%)

GAR 1.75p 0.00p (0.00%)

JKX 239.90p -6.60p (-2.68%)

LLOY 55.80p -1.88p (-3.26%)

LLPE 60.75p +0.75p (+1.25%)

MAI 148.00p -10.50p (-6.62%)

QQ. 117.2p -7.70p (-6.16%)

RBS 45.25p -2.01p (-4.25%)

UNG 2.75p 0.00p (0.00%)

Listed on New York Stock Exchange:

C $3.75 -$0.23 (-5.78%)

The German government banned naked short selling [which is short selling but involves not even asking the holder before shorting] on eurozone sovereign bonds, credit default swaps and shares in the top ten German financial institutions. The institutions are Allianz SE, Deutsche Bank AG, Commerzbank AG, Deutsche Boerse AG, Deutsche Postbank AG, Muenchener Rueckversicherungs AG, Hannover Rueckversicherungs AG, Generali Deutschland Holding AG, MLP AG and Aareal Bank AG. This, fears over China's economy overheating and US financial reform scared the investors so much that they overreacted and sold their holdings in massive numbers causing the markets to fall by 4.08% (using FTSE All-Share index values) this week. The ban was intended to stabilise the markets and preserve confidence in the euro. My positions were affected badly that the portfolio gain from last week have reversed into loss of about 2.19%. Even JKX, which has strong fundamentals, LLOY and RBS, which have minimal exposure the to Greek debt, did not withstand the selling pressure from traders and investors blinded by panic and short term views. In my opinion, the EU must save the euro at all costs otherwise it will be politically embarrassing to the founders of the single currency. They may pump more funds into the eurozone economy and find more ways to provide stability to the markets, even if the actions are draconian. 

Finally I want to make a good point. Critics might say that I should have took profits in mid April and known that the markets would get this ugly. To be honest, predicting the general direction the markets go are hard enough in the short term. It is a bit easier in the long term. To predict the exact severity of the direction is just asking for trouble in terms of losing money. It is easy for them to look back and say I should have took profits before the markets fell once they knew the full facts. The point is that relying on precise predictions regarding the severity of events will lead to trouble. Going very slightly off the point, relying on analysts' forecasts so much will lead to the same thing.