Monday, November 20, 2006

A brief note on financial instruments. Now they are like women or girls, however you like it, but in the sense of a guy. I am just throwing the last words in there, so I don't get the blame for what is below.

For example. Marginal buys. Some can look at them and say they are like falling in love or simply getting a crush on some beautiful girl. When does this happen most often; when we are stupid high school or college students. We are broke, to be clear; no money. We borrow money now for perhaps a distant opportunity, which we assume to be very likely to get profits, in our case sex. So in essence this is buying on margin. What usually happens is that the stock goes way low, the girl tells you to piss off; you get the call from a broker (or in the relationship world get beaten up by her boyfirend) You are broke again.

Now there are of course other examples. Let's go more drastic. Derivative securities. Options. You buy the right, not the obligation to perform something in the future. This is of course prostitution. Ya buy the thing right away. I won't go into the details.

Now when you go from a long-term relationship to a marriage, which will last all of your long and sad life, it gets more complex. It is essentially a callable bond. Let me explain. You start with a bond. You give lots of money away for it, but the steady stream of coupon payments lasts a long time. The longer the maturity the more coupon payments; but the more risk of losing the value of the bond. Just like a relationship. When you get married, your wife calls in the bond, and give you stock. You get your money back, kind of. No more stupid obligations for dates and everything, but those dividends are pretty rare, if you know what I mean.

I gotta stop reading fianance books.

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