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Macron promet que le service national universel verra bien le jour - 19 January 2018
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LR Copé ne fera pas à Wauquiez le cadeau de son départ du parti - 18 January 2018
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Wauquiez déplore que Juppé se retire sur sa montagne - 17 January 2018
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Le groupe des députés PS doit rester un sanctuaire, plaide Faure - 16 January 2018
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Patrimoine de David Douillet la Haute autorité pour la transparence saisit la justice - 15 January 2018
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Wauquiez avec Macron les immigrés clandestins seront de plus en plus nombreux - 14 January 2018
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Trump visé par un déluge de condamnations après ses propos racistes - 13 January 2018
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Exhortations et mises en garde: Le Maire sur une ligne de crête diplomatique - 12 January 2018
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Jean-Marie Le Pen va publier ses mémoires juste avant le congrès du FN - 11 January 2018
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Parti socialiste C’est catastrophique, on a touché le fond se désole François Hollande - 10 January 2018
Group Admins
Facts and Fictions in the Securities Industry
Groupe Public active il y a 7 ans et 9 moisThe securities industry worldwide is constructed upon the quicksand of self-delusion and socially-acceptable confabulations. These serve to hold together players and agents whose interests are both disparate and diametrically opposed. In the long run, the securities markets are zero-sum games and the only possible outcome is win-lose.
The first “dirty secret” is that a firm’s market capitalization often stands in inverse proportion to its value and valuation (as measured by an objective, neutral, disinterested party). This is true especially when agents (management) are not also principals (owners).
Owing to its compensation structure, invariably tied to the firms’ market capitalization, management strives to maximize the former by manipulating the latter. Very often, the only way to affect the firm’s market capitalization in the short-term is to sacrifice the firm’s interests and, therefore, its value in the medium to long-term (for instance, by doling out bonuses even as the firm is dying; by speculating on leverage; and by cooking the books).
The second open secret is that all modern financial markets are Ponzi (pyramid) schemes. The only viable exit strategy is by dumping one’s holdings on future entrants. Fresh cash flows are crucial to sustaining ever increasing prices. Once these dry up, markets collapse in a heap.
Thus, the market prices of shares and, to a lesser extent debt instruments (especially corporate ones) are determined by three cash flows:
(i) The firm’s future cash flows (incorporated into valuation models, such as the CAPM or FAR)
(ii) Future cash flows in securities markets (i.e., the ebb and flow of new entrants)
(iii) The present cash flows of current market participants
The confluence of these three cash streams translates into what we call “volatility” and reflects the risks inherent in the security itself (the firm’s idiosyncratic risk) and the hazards of the market (known as alpha and beta coefficients).
In sum, stocks and share certificates do not represent ownership of the issuing enterprise at all. This is a myth, chung khoan (https://www.dmca.com/) a convenient piece of fiction intended to pacify losers and lure “new blood” into the arena. Shareholders’ claims on the firm’s assets in cases of insolvency, bankruptcy, or liquidation are of inferior, or subordinate nature.
Stocks are shares are merely options (gambles) on the three cash flows enumerated above. Their prices wax and wane in accordance with expectations regarding the future net present values of these flows. Once the music stops, they are worth little.
Also Read:
The Friendly Trend
Models of Stock Valuation
Portfolio Management Theory and Technical Analysis Lecture Notes
