I got my life with a forward contract for a premium price thinking that the spot price will be high in future.
I hedged it with another person who agreed to join hands in this contract.
After more than a quarter century I realized that, it wasn't a forward but future contract. The regulator here, had fixed the price tag while entering the contract. (Ignorance of law is no excuse !!)
Hedging doesn't mean anything in the time of crash.
We together agreed that life takes it own time to get corrected. We are forgetful about the crash and keep investing with different notions. Till the time we live, we are bound to go through the recessions, go through the booms.
**Thanks to Credit Suisse "Banking on Voluteers" tag line.
Even if you try the mathematical way, a forward rate contract in lieu of hedging the future spot rate; the result, by and large will be the same. Well this is not my principle. 2 wise men MM devised principles called MMI, MMII and MMIII; the finance subject equivalent of Newton's 3 laws in Physics.
ReplyDeleteWhats the point Im trying to drive here? Uncertainty is the only certainty in life as far as future (or forwards in the financial world are concerned). In bom times, a person may make a lot of hay with both spot rates and forward rates. The reality of life is that the entire contract business (vis a vis life) is a zero sum game. The only certain fact of the long run is death. All your liabilities will be written-off or heired to some other person; all your assets will certainly be heired to somebody. So as far as life is concerned, why not live it here-now?
Agree, living today is the best deal. However the general approach is, tomorrow will be better than today and work today to live completely tomorrow.
ReplyDeleteThanks for the comment