Friday, May 30, 2008


Mild-mannered, boring non-volatile (BBG Beta = 0.68) and owner of lots of legacy property , Nagoya Railroad Co Ltd (TSE Code=9048) was derailed into the close, this last trading day of May. Someone, somewhere was willing to spend approx $1mm to move the market value of this venerable transit company on the close a cool $270,000,000. THAT is leverage.

One would be forgiven for thinking this a fat-fingered trading error, which while possible, remains remotely so. It is a staggering amount of market value change for a reasonably sized company for a very small "investment". Undoubtedly the lucky buyers will make hay on Monday, while those benficiaries as of this Friday will find themselves poorer when trade resumes, provided their trains do not prove to be contaminated with dioxins.

Yes, mark-to-market is a beautiful thing for the price makers. But it demonstrates that all prices must be taken with a grain of salt, and in context.

1 comment:

Anonymous said...

Hi Cassandra, this was going on all over the place today, for instance checkout Hopson in HK or Haw Par in Singapore. Some of it undoubtedly was MSCI related by more seemed to be driven by dubiuos mtm related activities. Think they know they can get away with it because many of the prop books/arb a/cs that would have previuosly taken the other side are constrained and/or afraid.