Quote:
Originally Posted by bronco67
--and the worst part. They don't produce a single product. That's why they gamble. They have no other talent. Gambling isn't even a talent really, its just desperately hoping you'll get lucky.
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Let's say I offered you the following deal:
If porn profits fall off by 10% or more over the next two years, I'll pay you $30,000.
If porn sales improve you're doing fine and I don't have to pay you anything.
I charge $1,000 for covering your ass in this way.
Do you see the value in my covering your risk for you? Without this plan, a major problem in the industry, like .xxx becoming mandatory, might cause you to haves trouble with your house payment. With this plan, you can take buy a house knowing that you'll be able to make the payments because I've taken over your risk. If porn doesn't do well, I'll pay you cash. See the benefit?
That's basically what hedge funds do. They allow your business to operate with reduced uncertainty, making investments in factories, ships, etc. possible where tge associated risk would otherwise be too high. There is some value in that.
Yes, the above description is simplistic, perhaps overly simplistic, but it represents the value produced by hedge funds.
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