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Thread: Economic Warfare

  1. #241
    Council Member Fuchs's Avatar
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    Healthy corporations/companies have good relations with creditors, such as banks. Trust and relations are important in the economy, and the issues you mention do not affect stable relations much.
    A healthy corporation can easily stay liquid, even if it has to stem major short-term payments.


    The problem is that too few corporations have really good management, and consequently too many of them are vulnerable to issues that should not be a problem. Dayuhan is right; a healthy corporation/company will find a lender, at worst with an increased risk premium.
    The problem should be short-term in such a case, and thus the risk premium only applies to a share of the foreign capital for a short period.

  2. #242
    Council Member bourbon's Avatar
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    Quote Originally Posted by Fuchs View Post
    Dayuhan is right; a healthy corporation/company will find a lender, at worst with an increased risk premium.
    The problem should be short-term in such a case, and thus the risk premium only applies to a share of the foreign capital for a short period.
    According to efficient market hypothesis! This completely ignores the reality of disinformation and/or a market panic.
    “[S]omething in his tone now reminded her of his explanations of asymmetric warfare, a topic in which he had a keen and abiding interest. She remembered him telling her how terrorism was almost exclusively about branding, but only slightly less so about the psychology of lotteries…” - Zero History, William Gibson

  3. #243
    Council Member Fuchs's Avatar
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    No, according to the real world.

    We may differ in our ideas about the threshold to healthiness in this case, though.


    There's never everyone in the market a panicking chicken, nor is ever everyone misinformed. Bonds such as long-term business relationship with mutual trust as well as openness in regard to bookkeeping protect against stupidities.


    The rotten apples suffer most, the healthy companies merely get scratched (if they become targeted at all, which is only probable if their whole sector is affected).

  4. #244
    Council Member bourbon's Avatar
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    Quote Originally Posted by Fuchs View Post
    No, according to the real world.
    ....
    There's never everyone in the market a panicking chicken, nor is ever everyone misinformed. Bonds such as long-term business relationship with mutual trust as well as openness in regard to bookkeeping protect against stupidities.
    September 2008 was a market panic. Rumors can drive-off buyers of an investment bank, like “two major clients have stopped trading” or “XYZ is going to buy the bank at 25% below market price”.
    Quote Originally Posted by Fuchs View Post
    We may differ in our ideas about the threshold to healthiness in this case, though.
    Yes, for this purpose we do.
    “[S]omething in his tone now reminded her of his explanations of asymmetric warfare, a topic in which he had a keen and abiding interest. She remembered him telling her how terrorism was almost exclusively about branding, but only slightly less so about the psychology of lotteries…” - Zero History, William Gibson

  5. #245
    Council Member Dayuhan's Avatar
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    Quote Originally Posted by bourbon View Post
    I didn’t know the Peace Corps had an investment banking division, but that’s good to know…
    I left the Peace Corps in 1981. Bit of water under the bridge in the intervening decades.

    Quote Originally Posted by bourbon View Post
    So you are saying that CDS manipulation has a minimal effect on a company’s ability to access credit; and that disinformation and share price manipulation has a minimal effect on investor confidence?
    Quote Originally Posted by bourbon View Post
    September 2008 was a market panic. Rumors can drive-off buyers of an investment bank, like “two major clients have stopped trading” or “XYZ is going to buy the bank at 25% below market price”.
    What you're missing here is duration. Disinformation, rumor, and panic have an impact, but it passes, quickly. The impact is also strongest among individual investors: institutional holders are quite capable of recognizing what's going on and are not so easily swayed... unless of course the underlying conditions justify panic, which in 2000 or 2008 they did.

    Runor and disinformation will create little more than a transient ripple if the company and the markets are in reasonably good condition. If both are bloated, overvalued, hollow, and ready to collapse, any little pinprick will provoke a crash. In that case what needs to be examined is not which pin did the pricking, but how the hollowness and bloat emerged in the first place.

    PS (edit): Remember the old saying... markets are short term idiots and long term geniuses. You make money in between. Markets are inefficient while that short-term idiocy prevails, but over time they do tend to catch up, especially when the inefficiency is a consequence of rumor, panic, or short term manipulation.
    Last edited by Dayuhan; 01-11-2012 at 02:37 AM. Reason: addition
    “The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary”

    H.L. Mencken

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