A fundamentally bad
investment can still deliver good returns with leverage or subsidies. If the
return is higher than the rate of borrowing, leverage magnifies it (in both
directions). If money costs nothing (interest rates are zero), all an
investment needs is a pulse and someone willing to give you their money for
free. A subsidy means the investment is wanted for non-financial reasons (or the
subsidy can eventually be removed). I don’t like investments like that. I also
believe that Endurance and Resilience are fundamental. Endurance provides
stability. Resilience provides liquidity. They can’t be directly focused on
maximising sustainable growth. Some focus has to be given to strength in solid
foundations and the flexibility to adapt. But the intention there is to release
the potential of fundamentally good investments. Real creativity. Not to give precious
soil and water to things we don’t really want to grow.
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