http://www.marxist.com/hedge-funds-speculation-and-capitalism.htm
The author (Mick Brooks) should make it clearer that "Hedge Funds" are not really in the business of "hedging" (where the latter refers to the way a farmer tries to avoid the downside risk that the crop will be worth less in the fall). Instead, "Hedge Funds" are speculating, by which I mean the taking of risks in order to earn a higher return. A true hedger, on the other hand, accepts a lower average return to avoid risk. (If the farmer "locks in" a price for some of the crop, that requires paying for a special contract. The farmer is often seen as minimizing risk at the same time that a speculator is taking on risk, so that the speculator is in effect providing insurance to the farmer. But the farmer has to pay a price for the insurance.) "Hedge Funds" get higher returns by leveraging (unless the risk-taking fails). True headgers do not want to leverage, because that's risky. (They may not have much choice, however, since repeated cash-flow problems lead to what Bob Pollin calls "necessitous borrowing" and thus leveraging.) -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
