Monday, February 10, 2014
Cuisinart
Last year was Satan's Year Of Total Victory. A remarkable number of weak institutions that had been leaning toward Satan for a long time finally broke, finally declared official loyalty and adherence to Satan. Mr Elizabeth surrendered the English monarchy to Satan; Miss Justine Welby surrendered the Anglican Faghouse to Satan; and finally Miss Francine surrendered the Roman former "Church" to Satan.
This year I'm seeing a remarkable crop of just plain weird non-logic and anti-logic in all sorts of places. It's not as dramatic or final as those surrenders, but it shows the effect of Satan's Cuisinart in the brains of people who were (presumably!) capable of some sort of rational thought at some point in their lives.
Today's example:
The overuse of financial contracts known as derivatives – which were designed to help companies hedge against risk – was widely blamed for triggering the economic crisis of 2008. None other than Warren Buffet has attacked derivatives as “time bombs – both for the parties that deal in them and the economic system.”Buffet is annoying but sane. He was perfectly correct.
But now, for the first time, researchers have found that hedging can increase firm value. In a pioneering study published in the Journal of Finance, Michigan State University’s Hayong Yun and Stanford University’s Francisco Pérez-González show that electric and gas utilities that used derivatives to hedge against unpredictable weather experienced a “positive and significant effect” on the value of their firms. “Many people have a perception that derivatives are evil, that they helped destroy the economy,” said Yun, MSU assistant professor of finance. “And while there is some truth to the argument that derivatives were overused, our research provides the first fundamental evidence that hedging with derivatives can improve company value.”First: You didn't need evidence that hedging improves share value. Corporations exist solely to increase share value. Everything they do increases share value. For all X, if X doesn't massively increase share value, corporations will stop using X. Corporations use derivatives intensely. Therefore hedging increases share value. Might as well say: "Many people have a perception that the four seasons are troublesome. While there is some truth to the argument that winter causes problems, our research provides the first evidence that the four seasons may happen because the earth's axis is tilted." Second: The fact that companies operate solely to increase share value IS the problem. It's not a natural part of capitalism; in fact it's the precise opposite of normal profit-based capitalism. Derivatives are one evil outgrowth of the main evil problem. You don't need research to see this; you only need a functional memory and a functional logical mind.
Labels: the broken circle
¶ 4:36 AM
