November 28, 2015

Randy Schultz

The Sun Sentinel

RE: “Hedging” and how it has become a 4 letter word to modern American Liberals as you make perfectly clear in your unlinkable quasi-polemic in today’s Sun Sentinel. Think holy water and vampires.

Mr. Schultz,

Of course President Reagan, AKA The Great Reagan, was right when he said it’s not that modern American Liberals are stupid it’s just that there is so, so much that they don’t know.

“Hedging”, a practice that consumers of commodities use to protect themselves against “Black Swan” price swings, is anathema to all card carrying, fire breathing modern American Liberals for one reason: MARKETS.

Markets are not subject to the quotidian whims of pointy-headed progressive aparatchiks.

Markets, particularly the ones that retain the heady whiffs of freedom, are particularly irksome to modern American Liberals. Since they operate outside the mandatory command and control that today’s Democrats, all proud descendants of T. Woodrow Wilson, seek to impose on everybody and everything under the sun they must be prodded, cajoled, and intimidated to perform on cue. Woes betide any that fail to bend to the whims of the bosses.

  

18 centuries ago Diocletian declared – Caesar dixit? – that the price of bread was too high. He consulted with his very bright experts and set a “fair” price for the product. Progressive ohmadhans, even then, knew that absent the power of the state their good intentions would go nowhere. The “fair” price was enforced by cutting the hands of the renegade bakers off. The net result was no bread at any price because there were no bakers.

Fast forward to a Republican President who thought that prices were too high. Since I am soon to be under the lion’s paw of the ObamaCare Death Panels I( forget how it worked out. It ended well, didn’t it?

ObamaCare was supposed to have bent the curve of medical costs downward, right? Has it?

I cite the above examples as proof that modern American Liberals are living proof of Dr. Johnson’s dictum about the “triumph of hope over experience”.

“In fact, the market itself has been reducing volatility for some time.”

The Sun Sentinel

Today

You

Earth to Randy. Earth to Randy.

Get your head out of your ass.

Markets don’t “reduce” volatility.

Markets “reflect” volatility.

As long as the buyers and sellers are able to draw water from the same well the buyers and the sellers will settle the question of volatility.

I am sure you know what happened to the price of natural gas when the legendary East Texas field came in. It traded at .01 per MCF. The highest price I have ever seen was $13.50 per MCF. That happened when California’s regulators, people who couldn’t organize a 2 car funeral, decided to ignore the hard learned lessons of Diocletian.

The price of a barrel of oil when I did my first transaction was $2.75. 

If FPL knows that it is going to use a certain amount of natural gas in 6 months, in 12 months, or 18 months, particularly if they will be buying it rather than producing it, it is incumbent on them to take whatever steps necessary to protect their shareholders and their customers. Failure to do so would make them poor stewards of their responsibilities.

[Full disclosure requires me to tell you that I “fracked” my first well in 1974. Further, I was CFO of a public company that mined coal in Kentucky and West Virginia. In 1998 I advised a foreign airline how to hedge itself against the vagaries of a functioning market.

For 2 decades I have been keening about the racism and bigotry of T. Woodrow Wilson. Now that the descendants of the long haired, antinomianistic, lower case Fascists of the ‘60s have discovered him I will have to end my long crusade against this horrible man and this terrible President.

I will let the “Trousered Apes” who believe that shitting on a police car is the highest form of civil discourse.

I mention Wilson because he was the favorite President of Progressives until FDR.

One of the things that Wilson did to endear him to the hearts of his Cossack followers was his work with utilities.

In return for allowing their rates to be subject to government review the utilities were guaranteed both a monopoly and a “fair” rate of return.

Pop quiz, you boob.

Define “fair”. Negative examples are verboten. Only declarative sentences and empirically self-evident data are allowed.

It’s ain’t so easy that way, is it?

Kevin Smith

PS – One more thing.

“At least with the hedging program, utilities can’t profit; 

they just avoid losses.”

loc cit

We have a very teachable moment here.

I presume you have automobile and homeowners’ insurance. When it comes time to renew them and you realize that you haven’t used them are you mad at the insurance company? Do you say that since you didn’t use them last year you won’t need them this year?

One more las thing.

Companies are not begun to avoid losses. Companies are begun to make money. Not just to make money but to make oodles and obscene boat loads of money.

Think Apple. Think GOOGLE. Think Solyndra. Think the Kardashians. Think the Clinton Crime Family Foundation. Think George Soros. Think Tom Steyer.

“It’s good to be the King” 

That’s the mantra of modern American Liberals.

It beats Viagra.