Anybody besides me, find it funny, that one of the proposed tools for saving the troubled GSEs is to buy warrants?
WARRANTS…basically, a fancy call option, just another DERIVATIVE.
BUT…we all know, SMART derivative sellers rake it in, so I’m all for their plan and glad somebody was smart dumb enough to think of it.
Based on this, I think it’s fair to call Webster’s, have them change the definition to the following:
Warrants – A contract between two parties; one that hopes a business succeeds, and the other that will need to spend/lose money, irrecoverably, for the same business to succeed.
For the laymen, the government is going to buy contracts, that give them the right to buy NEW shares, in the future, at a certain price, in exchange for cash today. If the shares are worth less than the agreed upon price it was stupid for the buyer, and beneficial to the seller.
This relation sort of makes sense. You know, for the same reason it would make sense for a parent to pay off some of the debt, of a maxed out credit card in their kid’s name, after their kid lost his money lending money to his friends who bought too much AMERICAN BUBBLE gum. But, if the bubble gum loans ever turn a profit…the parents will at least have the option, to get a cut. That’s fair, I guess.