SERVING THE QUANTITATIVE FINANCE COMMUNITY

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by torontosimpleguy
February 5th, 2010, 2:47 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

<t>QuoteOriginally posted by: daveangelforget about the "smart" investor - we are talking about a world where M&M assumptions hold.I think I explained myself clearly. Debt can't be equal to equity since they have different "mathematical properties."One is growing exponentially, another is not (a...
by torontosimpleguy
February 5th, 2010, 2:34 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

<t>QuoteOriginally posted by: listMMT does not deal with dynamics. It is an algebra relationship and any reference on growth or exponential are irrelevant. The question is whether or not : price of a company = E + D at any t or price of a company = Cost ( t , E , D ) and nothing else.What is the com...
by torontosimpleguy
February 5th, 2010, 1:50 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

<t>QuoteOriginally posted by: hamsteryep. that's the reason why indebted entities are condemned to grow, eg politicans worship economic growth (to serve public debt), a ceo of a mnc is pressured to enter new markets (to serve the mncs pension liabilities, and much more). of course there is no infini...
by torontosimpleguy
February 5th, 2010, 1:47 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

QuoteOriginally posted by: taneururerIn other words, in a corporate structure, debt cannot exist without equity (ignoring a firm that is in a bankruptcy state).The point is different,E = A - DAnd debt grows faster since it has exponential nature. So equity will eventually vanish.
by torontosimpleguy
February 5th, 2010, 1:46 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

<t>QuoteOriginally posted by: daveangelDo you think that an investor in a world where M&M conditions hold will pay more than $1000 for the equity in A or buy the debt issued by company B for less than $1000 ?"Smart" investor wouldn't invest in company with debt structure as I said (long-term zer...
by torontosimpleguy
February 4th, 2010, 9:41 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

QuoteOriginally posted by: daveangelHow can A be < 0 ? A >= 0.if the Assets in company A are the same as company B then they will have the same value in the future.It's after company A repays its huge debt. Company B has no debt.
by torontosimpleguy
February 4th, 2010, 9:39 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

<t>QuoteOriginally posted by: daveangelif debt has exponential nature then the asset side also has exponential nature. Assets (as earnings) can't have exponential value.Quotei dont why we have to take the argument into the future when we can with present values.Because present value is a 'convention...
by torontosimpleguy
February 4th, 2010, 9:34 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

<t>QuoteOriginally posted by: daveangelif A = D + E holds now, it should hold in the future. E may be zero but it does not negate M&M.M&M says that these two companies are the same.Company 1:A = D1 + E1, where D1 >= 0, E1 >= 0Company 2:A = D2 + E2, where D2 >= 0, E2 >= 0=====================...
by torontosimpleguy
February 4th, 2010, 9:23 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

<t>QuoteOriginally posted by: daveangelI am not sure what your point is...I repeat for you: My point is that debt can't be equal to equity (as M&M said) since they have different nature. Debt has exponential nature and equity doesn't. That is my point.P.S. You just can't admit that M&M "theo...
by torontosimpleguy
February 4th, 2010, 9:13 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

QuoteOriginally posted by: daveangeleasy - you refinance.How can I refinance such huge amount?Did you look at my example?$1 -> $2.4*10^42
by torontosimpleguy
February 4th, 2010, 8:46 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

<t>QuoteOriginally posted by: gardener3QuoteOriginally posted by: torontosimpleguyQuoteOriginally posted by: gardener3For the debtholder to reinvest the interest payments in the form of new debt they need to find new assets or companies to lend.Nope. It is a 'hidden' assumption. One can, for example...
by torontosimpleguy
February 4th, 2010, 8:42 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

<t>QuoteOriginally posted by: gardener3It doesn't seem like anyone has read the M&M paper. You guys are dismissing the the theory for all the wrong reasons. M&M does not say that all companies have the same risk, or that the return on equity is the same for a levered and unlevered firm. In f...
by torontosimpleguy
February 4th, 2010, 8:27 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

QuoteOriginally posted by: gardener3For the debtholder to reinvest the interest payments in the form of new debt they need to find new assets or companies to lend.Nope. It is a 'hidden' assumption. One can, for example, envision zero-coupon bond as a debt.
by torontosimpleguy
February 4th, 2010, 8:16 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

<t>QuoteOriginally posted by: daveangelbut it does not show a violation of M&M.It's an analogy. In M&M one adds E and D.With car he added car without breaks and breaks. And he showed that after summation result is different from new car.So, he is saying that in M&M result after summation...
by torontosimpleguy
February 4th, 2010, 7:45 pm
Forum: General Forum
Topic: The most foolish theorem ever...
Replies: 134
Views: 44539

The most foolish theorem ever...

<t>QuoteOriginally posted by: daveangelmove the warranty to the LHS ... I see no difference. any extra you pay will be for the warranty and not the car.1. Let's forget about warranty for a second.He says that car with broken and fixed breaks values less than new one.It's a reasonable assumption.2. N...
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