1/4
Very useful thread. I think the most important point is this: "You will never make a loss if you never acknowledge the expense of malinvestment - i.e. if you never write anything off. If you don't expense your losses, they show up as assets on your B/S."
Very useful thread. I think the most important point is this: "You will never make a loss if you never acknowledge the expense of malinvestment - i.e. if you never write anything off. If you don't expense your losses, they show up as assets on your B/S."
https://twitter.com/TheLastBearSta1/status/1438171695685283847
2/4
This is something economists (but not traders) seem to have real trouble understanding and incorporating into their growth models. Losses should always be expensed, and so should reduce income and wealth, but when they are instead capitalized, they show up as...
This is something economists (but not traders) seem to have real trouble understanding and incorporating into their growth models. Losses should always be expensed, and so should reduce income and wealth, but when they are instead capitalized, they show up as...
3/4
higher income and wealth than is economically justified. A company (or country) that systematically capitalizes its losses will seem to grow faster than one that doesn't and will show higher levels of net equity, but that growth and those assets are fictitious.
higher income and wealth than is economically justified. A company (or country) that systematically capitalizes its losses will seem to grow faster than one that doesn't and will show higher levels of net equity, but that growth and those assets are fictitious.
4/4
Those who've read my "bezzle" essay will notice that all these capitalized losses are just forms of bezzle, and like all bezzle creation, while they make the good times better than expected, they make the bad times a lot worse.
carnegieendowment.org/chinafinancial…
Those who've read my "bezzle" essay will notice that all these capitalized losses are just forms of bezzle, and like all bezzle creation, while they make the good times better than expected, they make the bad times a lot worse.
carnegieendowment.org/chinafinancial…
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