The idea that, if you mitigate the consequences of a particular type of accident, then that type of accident will necessarily occur much more frequently, more than negating the initial benefit.
The CF assumes that human nature is perverse and seeks to equalize consequences. Hence, improved automotive technologies such as air bags, ABS, space frames, etc. will be offset (or more than offset) by careless driving, leading to increased highway fatalities.
FALSIFICATION: Empirical evidence shows that, while reducing consequences increases risky behavior, overall safety/health outcomes are better. Insurance companies with a stake in reducing claims verify this.
More generally, the CF confuses all forms of risk-taking, such as faster highway speeds, with fecklessness. Increased speed and convenience (for motorists) has utility; and there is no principle in welfare economics that says risk-taking will increase by an amount sufficient to offset the safety measures.
The CF assumes that human nature is perverse and seeks to equalize consequences. Hence, improved automotive technologies such as air bags, ABS, space frames, etc. will be offset (or more than offset) by careless driving, leading to increased highway fatalities.
FALSIFICATION: Empirical evidence shows that, while reducing consequences increases risky behavior, overall safety/health outcomes are better. Insurance companies with a stake in reducing claims verify this.
More generally, the CF confuses all forms of risk-taking, such as faster highway speeds, with fecklessness. Increased speed and convenience (for motorists) has utility; and there is no principle in welfare economics that says risk-taking will increase by an amount sufficient to offset the safety measures.
The massively overrated book *Freakanomics* (Dubner & Leavitt) includes many examples of the curmudgeon's fallacy.
by Abu Yahya August 22, 2008
(FINANCE) a situation in which an investor stands to gain if a particular investment instrument (stocks, bonds, gold, real estate) goes up in value. One "takes a long position" with respect to a particular item.
There are several ways of taking a long position; an obvious way to go long is to actually own the thing itself. Supposing you are taking a long position on Intel common stock (NASDAQ:INTC), here are some other ways:
* Buy a call option for INTC, especially with a strike price higher than the current spot price.
* Write a put option for INTC, committing yourself to buy more INTC stock if the price goes down over the near term
* Buy a futures contract for INTC at spot (or more).
CAVEAT LECTOR: there are many _potential_ definitions of long position; I have given the broadest one available.
There are several ways of taking a long position; an obvious way to go long is to actually own the thing itself. Supposing you are taking a long position on Intel common stock (NASDAQ:INTC), here are some other ways:
* Buy a call option for INTC, especially with a strike price higher than the current spot price.
* Write a put option for INTC, committing yourself to buy more INTC stock if the price goes down over the near term
* Buy a futures contract for INTC at spot (or more).
CAVEAT LECTOR: there are many _potential_ definitions of long position; I have given the broadest one available.
MICHAEL: I want to flatten my long position on T-bills.
ANNA: I would recommend buying a covered interest swap with another major currency, like yen.
ANNA: I would recommend buying a covered interest swap with another major currency, like yen.
by Abu Yahya April 10, 2010
(FINANCE) a type of financial derivative; a certificate that gives the owner the right to buy (or sell) a fixed amount of a specific thing for a specific price (the strike price).
An option to buy something else is called a call option; an option to sell something else is called a put option. An option has a strike price, which is the price at which you are entitled to buy (or sell) the underlying commodity, or stock, or foreign currency, or whatever.
Options allow the owner to speculate in the possibility that market prices will change in a certain direction, without actually spending the value of the underlying item. For example, suppose WTI crude is $85.75/bbl. In order to make $1000 off of a $0.25 increase in the price, you ordinarily would need to own 4000 bbls of crude, which you can't afford. So, instead, you buy a call option for 4000 bbls with a strike price of $85.75/bbl (i.e., exactly what it is now). This option will cost a tiny amount of money. If the price goes up to $86.00/bbl, you don't own the oil, but your options are now worth $1000 to somebody who wants to buy that oil.
An option with intrinsic value (for example,a call option whose strike price is less than the spot price) is "in the money." An option with no intrinsic value is "out of the money."
An option to buy something else is called a call option; an option to sell something else is called a put option. An option has a strike price, which is the price at which you are entitled to buy (or sell) the underlying commodity, or stock, or foreign currency, or whatever.
Options allow the owner to speculate in the possibility that market prices will change in a certain direction, without actually spending the value of the underlying item. For example, suppose WTI crude is $85.75/bbl. In order to make $1000 off of a $0.25 increase in the price, you ordinarily would need to own 4000 bbls of crude, which you can't afford. So, instead, you buy a call option for 4000 bbls with a strike price of $85.75/bbl (i.e., exactly what it is now). This option will cost a tiny amount of money. If the price goes up to $86.00/bbl, you don't own the oil, but your options are now worth $1000 to somebody who wants to buy that oil.
An option with intrinsic value (for example,a call option whose strike price is less than the spot price) is "in the money." An option with no intrinsic value is "out of the money."
BILL: So, options are just like gambling, am I right?
ANNA: For most people. But if you're already in the business of buying or selling a particular thing, an option can protect you against a bad price movement.
BILL: But options on stocks? I mean, unless a company wants to reward its own executives, or something?
ANNA: Well, you might need options on stocks to hedge risk, if you're a fund manager. That way you can focus on long-run investing.
ANNA: For most people. But if you're already in the business of buying or selling a particular thing, an option can protect you against a bad price movement.
BILL: But options on stocks? I mean, unless a company wants to reward its own executives, or something?
ANNA: Well, you might need options on stocks to hedge risk, if you're a fund manager. That way you can focus on long-run investing.
by Abu Yahya April 05, 2010
(FINANCE) when somebody buys a corporation using borrowed money ("leverage"), with the expectation that the new owner will able to pay for it from the corporation's own profits.
Kohlberg Kravis and Roberts (KKR) developed the LBO back when Jerome Kohlberg, Jr. and Henry Kravis were still partners at Bear Stearns (1960's). The technique was refined by Michael Milken's methods of underwriting and trading junk bonds. At the same time, corporate raiders and takeover artists like T. Boone Pickens perfected greenmail as a way to make money from failed hostile takeovers.
Kohlberg Kravis and Roberts (KKR) developed the LBO back when Jerome Kohlberg, Jr. and Henry Kravis were still partners at Bear Stearns (1960's). The technique was refined by Michael Milken's methods of underwriting and trading junk bonds. At the same time, corporate raiders and takeover artists like T. Boone Pickens perfected greenmail as a way to make money from failed hostile takeovers.
In constant US dollars, the largest leveraged buyout deal in history was the KKR takeover of RJR Nabisbo for $31.1 billion (1989). In 2006, several deals of even larger size were planned or attempted, but adjusted for inflation, they were not as large.
by Abu Yahya September 04, 2010
(SOCIOLOGY) merchant class in a colony; usually dependent on exports of raw material from the colony (or former colony) in exchange for overpriced imports from the former colonial power.
As a class, the compradors are usually nationalistic--they usually want the trappings of independence. However, they are totally dependent on the global economy and its structure of hegemony. The rich nations benefit from excellent terms of trade, specialization in manufactured goods or intellectual property, etc.
After nominal independence, the comprador class usually become very powerful in the former colony; major powers like the USA or the EU ensure the comprador remain the de facto leaders of the colony. Anti-US rhetoric is usually just political theater or may reflect petty rivalry on the part of the compradors with their foreign masters.
As a class, the compradors are usually nationalistic--they usually want the trappings of independence. However, they are totally dependent on the global economy and its structure of hegemony. The rich nations benefit from excellent terms of trade, specialization in manufactured goods or intellectual property, etc.
After nominal independence, the comprador class usually become very powerful in the former colony; major powers like the USA or the EU ensure the comprador remain the de facto leaders of the colony. Anti-US rhetoric is usually just political theater or may reflect petty rivalry on the part of the compradors with their foreign masters.
Eventually, the terms of trade become so bad that the relationship breaks down and the country suffers a sovereign debt default, revolution, or permanent FUBAR status. At this point the comprador class has to share power with the local Junker class.
by Abu Yahya May 17, 2010
to introduce a thing as currency, e.g., silver, gold, copper. In nearly all cases, when something has been monetized, it is legal tender and debtors are legally obligated to accept it as payment for debt.
Debt can also be monetized. A government can either buy the debt of companies whose growth it favors as a matter of policy (as in pre-War Japan) or permit its own bonds to be be used as banking reserves (for the creation of money).
Debt can also be monetized. A government can either buy the debt of companies whose growth it favors as a matter of policy (as in pre-War Japan) or permit its own bonds to be be used as banking reserves (for the creation of money).
by Abu Yahya January 23, 2009
(FINANCE) a financial derivative that consists of a contract to buy a fixed amount of a thing at a fixed price at a fixed time in the future,. For example, a commodity future may specify 1000 British barrels (bbl) of West Texas Intermediate (WTI) crude oil for $85.75/bbl, for delivery at Cushing, OK, on 31 November 2010.
Futures are "written" by the person with the commodity to sell, and sold to either a financial speculator or else to someone who wants the product--in this case, an oil refinery. Sellers/owners do this because they want to be assured of a fixed price for the thing they're selling. The official reason for buying a future is to get a fixed price for something. This allows businesses to plan ahead.
However, since futures contracts are traded on secondary markets, it's possible to make (or lose) a lot of money trading them.
Futures are "written" by the person with the commodity to sell, and sold to either a financial speculator or else to someone who wants the product--in this case, an oil refinery. Sellers/owners do this because they want to be assured of a fixed price for the thing they're selling. The official reason for buying a future is to get a fixed price for something. This allows businesses to plan ahead.
However, since futures contracts are traded on secondary markets, it's possible to make (or lose) a lot of money trading them.
SOMEBODY: A futures contract can be extremely valuable for doing business. One of the best examples was Southwest Airlines, which weathered the oil crisis of 2007-2008 with futures for aviation fuel. When the market price of fuel doubled, Southwest was able pay a low, low contract price.
SOMEBODY ELSE: Doesn't it ever backfire?
SOMEBODY: Yes, the market price could fall through the floor and you'd be stuck paying THAT instead of the new, lower price. But at least you know what your cash flow will be.
SOMEBODY ELSE: Doesn't it ever backfire?
SOMEBODY: Yes, the market price could fall through the floor and you'd be stuck paying THAT instead of the new, lower price. But at least you know what your cash flow will be.
by Abu Yahya April 05, 2010