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Dragging VW through the hedge funds, Goldman?

 Behind many of the big mobile deals of the last half decade, you could expect to find red-hot Goldman Sachs whizz-kids. Now, the former "masters of the universe" have been found in the automobile trade. Specifically, working in a back-room at VW. And VW shares hit an unprecedented peak, and who suffered?

It's a simple question, with one simple answer: the hedge funds suffered. Initial estimates suggest that one large hedge fund has had to buy so many inflated VW shares at a thousand-odd Euros each (to cover short selling) that they may go bankrupt. Others have lost spectacular amounts, even by hedge fund standards.

Of course, when they suffer, so do the rest of us, eventually, but when the hedge funds suffer, one demographic at least, does not suffer.

Specifically, the big merchant banks won't shed tears. As one insider told me recently: "The former Masters of the Universe have not enjoyed the crash, because suddenly, their decisions don't count for anything until they check with The Boss. And the boss is the hedge funds. They say what happens, when, and how much."

The Goldman gang was known to be particularly resentful of the change of status; and when it turned out that they were behind VW, while Deutsche Bank was working with Porsche, it's quite possible that the hedge funds smelled a rat.

According to "Today" on the BBC this morning, the hedge funds are going to lodge a complaint with the German Government. Exactly what they suspect Porsche and VW and their bankers might have done, I can't say. But word on the street suggests that they'll get a frosty reception, because the German finance minister has already gone on the record as disapproving of the antics of hedge funds.

You can't really blame the hedges; and you can see why they don't have any faith in the short term future of European equities. Business is bad, likely to get worse. And there are lots of big merger and takeover deals which might brighten the picture... but won't.

They have had to be postponed because investment money simply isn't there; which means no big bubbles around takeover targets for the City traders to play with in the bath.

So the funds are selling short anything that looks like a commercial public company. VW is a motor car maker; doubly vulnerable, they thought. Wrong! But how did Porsche come to get all those shares? Apart from "cheaply" of course?

Nobody will say, and hence the suspicions in some hedgerows that something untoward must have happened.

But if you're looking for the most likely target for the eventual rage of the hedge funds, perhaps you might look at Fidelity. Apparently, not only did they lend all their VW shares to the funds, but they also sold them to the funds later - at the inflated peak price - when the "shorting" all went wrong. And the funds had no choice buy to buy.

Expect hedge funds to carry on shorting, nonetheless; and don't be too surprised if mobile, as well as automobile, companies, suffer from it.