Learner Financier
We have tried to give a formal definition of a Financier (see What is Finance?) But this time it proposes a definition of much greater practical significance.
Financier is basically an illusionist and this definition is what leads to the sympathetic character of Disney. Mickey once tried to imitate his master magician in “The Sorcerer’s Apprentice”, the Walt Disney film Fantasia, but we know that “he shot backfired.” The forces of the water he tried to dominate, almost drowning … Poor.
Fortunately for all children in the world, the illusionist-magician arrived in time to save the situation and managed to control both brooms crazy as the rough waters.
Indeed, as in the tale of Disney, the financiers are good magicians because they work on things that do not exist! And how can this be possible?
We know that our professional financiers, working on all sorts of values and a value is a financial claim. But a right implies both an obligation and so we have that for any piece of paper that represents a value, is an asset to the possessor and a person for whom it is issued.
By making the sum of assets (+) over liabilities (-) gives zero! In fact, the real value is not from the economic point of view because, when we add what we get is a zero round.
Professor Zvi Bodie of Boston University tells us in his famous text “Principles of Investment (1), and I quote” … a bond that is treated as an asset because it gives a right of General Motors … is a liability to the company. So when you add all the balances, these assets are removed, leaving only real assets and net worth of the economy, “unquote.
Thus we come to the incredible conclusion that Mr. financier are a kind of magicians, as they work on the intangible, work on illusions is not ontological substance or in plain words, mental representations are simple! And right there is where the problems arise Financial System!
This partly explains the huge mess of “Credit Default Swaps” which were created to protect bondholders (the principle of municipal bonds, for that of the debacle in Orange County) but like in the fairy Mickey, the instrument is turned against its owners and broadcasters, being able to generate real waters, better known as the subprime mortgage crisis.
Of course, when we speak of mental representations does not refer to mere speculations, but concentrated on mathematical representations and this idea is very important for the proper understanding of the profession. The financiers are able to structure an incredibly growing range of new products, to the point that a final instrument can not save virtually no relation to the “core” that gave birth for the first time.
Since financiers are some big dreams, then there must be some laws, almost esoteric, that govern their activity. Yes, there is a first law of finance that says: “… be extremely careful where you place your attention where it will inevitably be led approaches to it”
Sure! Everything points to become a millionaire financier. Only a few succeed. Is not this a contradiction to the first law? Not at all, is rather a confirmation. The problem is that most of apprentice wizards, rather than placing the focus on what they want (to be millionaires), put the focus on what they do not want (being poor) and is therefore in good part, financiers “amateur” end up like Mickey, with the tables in the head, then focus on something other than what they really want.
The moral to the first law is “be careful what you wish” or more specifically, to invent mathematical representations, or it may come against you, as we have seen.
It is by no accident that this phrase but it is expressed in English, is very much in the mouths of American lawmakers desperately seeking a solution to the subprime crisis, they know that if you rush, the new legislation may break against them as happened with the law Sarbox (2) that seeks to prevent the emergence of a new Enron, but what has been achieved largely at reducing the competitiveness of the financial system of the United States.
In conclusion, a true Financier is a person able to achieve anything it wants if it is able to manage correctly their fantasies and mathematical manipulations, it just works in an ethereal dimension, where imagination is the limit. Do not you Mickey?
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Tags: definition of a Financier, Finance, Learner Financier, professional financiers, true Financier
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