The first week of December

Hello December,

You have been such a mixed month so far. Here is a brief (this is what I'm hoping for but it probably won't be) list of what has happened:

- I started work at the Business School properly on December 1. So far, I enjoy the job and I like the professors that I've met, but a few of the Ph.D. students are a bit passive aggressive in the lifts. Hahaha. I have an office, which is really cool, and a staff email address and you can look me up in the Business School Staff Directory on the website, which should inflate my ego for a little while.

- I have continued going to the Law Centre on Thursday nights. This is also really interesting, and it feels good to get involved with something in the community. It also makes me want to be a lawyer.

- The result of the above two bullet points was that I was extremely tired on Friday night, and became a bit hysterical. That night it took me forever to get to sleep because I kept thinking about how I was messing everything up etc. I woke up at 7am the next morning and tried to get up and eat my breakfast but I kind of collapsed getting out of my bed, so I guess I was lying on the floor for a little while. An hour or so later I got myself back into bed and went back to sleep, and felt much better for it. I also had an 11-hour sleep the next night, and quite a long one the night after that, too.

- The result of the above point is that I am now feeling much better about life. I have also put on 2kg, which is great.. now only 3kg left to get back to what I should be. Win. I'm starting to notice the difference because I don't feel like falling over all the time.

- I had an epiphany that my previous epiphany was not as bad as I thought it was. Good things always happen to me when I stop trying to force them to happen. Originally, I found this annoying, but I am now happy about it, because, rather than implying that my efforts are in vain, it suggests that I should just relax about things, which is something that I need to do anyway. I am also beginning to accept some realities in a more positive light. Good Emma.

- I have a new interest: going through magazines like the Herald Homes and interior design stores. Even though I won't be able to afford a house for many years, I like planning what it will be like. For some reason, I seem to like Greek Revival architecture. The columns can be a bit much though.

- My SIM card died on Sunday night, when I was at my friend's birthday party. Apparently my parents called me quite a few times because they thought I had been in a car accident that I wasn't back home. I have not had much success with getting a new one yet, but I will attempt again tomorrow. Unfortunately, adding to the problem is that my phone has also decided to die... so my sister is lending me hers for now, but I think that she'll probably want it back soon, so.. who knows what will happen there.

- Law students are a pain. I had to finish enrolling myself in a timetable for next year this morning because all the eager law students had been enrolling and filling up all the good classes, and I didn't want to be left taking something random like 'Contemporary Maori Issues'. I think I will need a time turner next year as there is so much stuff I am signing up/have signed up for. Semester 1: Agency Law, Land Law, Equity, Company Law, Tax Law, International Finance. Semester 2: Agency Law (cont'd), Land Law (cont'd), Equity (cont'd), Law of Evidence, Corporate Finance Law, Legal Research 2. At the moment, International Finance clashes with Tax on one day... so I'll probably need special permission to do that. Also, I don't know how to enrol in Honours, which is a worry, because I really want to do Agency. Furthermore, yes, you did read that correctly. I am taking Tax. Yes, I did swear that I'd never do it. But.. Tax v Treaty of Waitangi... Tax wins.

- On Sunday morning I went to the supermarket in 277, where they were handing out free samples of iced coffee. I have been converted. How could my life have been missing something so fantastic for such a long time?

That was actually not too bad an attempt at brevity.

The cost of certainty

I have been a bit behind on my blogging lately. I had been meaning to post this a few days ago, but I never got the time... holidays are so tiring. They are meant to be a break! Never mind. Here we go:

Last week, I was having one of those fateful (although not on this particular occasion) post midnight MSN conversations, I (half) tried to explain this concept, and it turned out really badly. Then, on Friday, someone said something to me that brought it up again in my mind. I suppose, given the number of times that I practised the proof of the concept for one of my exams, it's really no surprise that it keeps coming up in my head.

As it happens, certainty of cash flows is a big deal in finance, and in particular in the area of risk management. There are obvious reasons for this, like that it helps with financial planning etc, and also less obvious reasons, like that reducing the variance of cash flows means that you can reduce expected tax (think Modigliani-Miller and such). To create greater cash flow certainty, financial managers, and indeed anyone else who feels like it, use a hedging strategy. Hedging strategies commonly involve the purchase (and, generally, sale) of financial derivatives (e.g. futures, forwards, options) so as to give the hedger a price that they are happy with over the volume of whatever the underlying asset they're interested in is.

For example, imagine that I have a business which sells mozzarella cheese (when I was about 14, I had a friend who didn't know how to say my last name, so he called me 'Emma Mozzarella'). The current price of mozzarella cheese is $50/kg , but I am worried that the price will fall to $30/kg in two months' time, when I have to sell it. The current price of a two month mozzarella cheese futures contract is $40/kg (lower than the current price, reflecting the expectation that the price will fall). Therefore, to hedge against the predicted price fall to $30, I sell a two month futures contract at $40. This gives an immediate cash inflow of $40.

One of two things can happen from here.

The first situation that could occur is that my expectations are correct, and the price of mozzarella does fall to $30/kg. Therefore, when I close out my futures position by buying a futures contract in two months' time, at $30kg (the market price = futures price at maturity), I make $10 profit (as I initially sold at $40 and bought at $30). Therefore the price that I receive at maturity for my mozzarella is $30+$10=$40, and, happily, I have protected myself from the extent of the price fall, by hedging at $40 so that I don't have to receive $30 in the market at maturity. What a thrill.

However, sometimes what people expect will happen does not always turn out to be the case. Let's say that I had been living in my own little world, forming my own unobjective and narrow-minded views about the price of mozzarella cheese. Let's say that, having hedged by selling two month mozzarella futures at $40/kg, the price of mozzarella actually increases to $60/kg. Therefore, I sell at $40 (as detailed above), and buy at $60/kg (I buy because I have to close out the futures market position by doing the equal and opposite of my original selling position, and it is at $60/kg as at maturity, spot price = futures price). I make a $20 loss (having sold at $40 and bought at $60).

So I guess the point of my mundane mozzarella example is to say that certainty is not always a fantastic thing. Certainty has a cost. In the second example, even though there is certainty, and I am better off than I thought that I was going to be, I can never be as well off as I could have been, had I not hedged. Because I chose the certainty of $40/kg, it means that when the market turned up, I couldn't take advantage of the $60/kg price.

Life is a bit like this too. We see certainty as a good thing and are always trying to achieve it, if we're unlucky, then this 'certainty' isn't necessarily the great thing that it's cracked up to be.

That said, if/when I do end up in the second position, I shouldn't be too unhappy. After all, I chose the $40.

The worst font in the world

Lucida Handwriting. Seriously, it is disgusting.

Contract notes in the background, btw. Spot the typos.

The last day of November

It's not actually 30 November yet, but given that it's 11.48pm as I write this, I figure that it will be by the time of posting... so, you know, forward thinking and all that.

My life post 15 November (end of exams) in bullet points:

- I went to Melbourne for four days. Melbourne is amazing. I love the shopping (Chapel Street! and the department stores and the designers) and the parks (the Fitzroy Gardens and the Treasury Gardens sont tres pittoresques; had I been in Melbourne longer, I would like to have strolled through them) and the food (Lygon Street: the only place outside Italy where I've been able to find fobby Italian shops) and the MCG (Jolimont Street is so nice, and the topiary elephants were impressive... so much prettier than Eden Park). I wish that I lived in Melbourne.

- Realising the importance of things that used to be important but that I had left behind. This includes all the areas of study that someone like my mother would ask "what are you going to do with that?" about. Languages and literature and history and philosophy are all so important. I've started reading my old books (see below) and re-learning Italian and Latin, and it's weird to think of how empty and boring my life had been without things like this. I remember when I first started university, I thought that Commerce students were really boring, because they couldn't talk about literature or philosophy, and didn't know what I meant when I said "grazie mille". Over the years I feel like I've started to become one, and it is boring and somewhat depressing. Even though so many people (including me, for a while) write off the arts subjects as being useless, I think they are essential.. not necessarily as a degree, but for life inspiration and fulfillment and higher order thinking, you can't go past them.

- 21st birthday parties. I've been to two this week. For the party on Friday, I had to get out my six inch heels for the first time since May, and I tripped over three times walking from the car to the venue (about ten metres). My ankles are feeble. It was nice to see everyone again, and also to be a bit more the centre of attention than usual, because I hadn't seen people since the end of exams and had missed parties/gatherings/miscellaneous social events when I was in Melbourne. I had a ridiculous amount of Coca Cola to drink, because it's pretty much the only non alcoholic beverage that bars seem to serve (I hope my teeth don't rot). Because really, there is nothing uglier than a drunken woman.

- Reading. This started when I found some of my old Robert Harris books, and started to read them again, starting off with Pompeii and then with Imperium and Lustrum. I like the latter two in particular, because they focus on Cicero, while most Roman historical fiction tends to focus on Julius Caesar. The books are also good because they portray JC from the more typical Italian point of view (that he was a tyrant). I also realised that I know someone who is a bit of a real life Cicero.

- Reading II: Lori Gottlieb. A few years ago, I saw an article about her in the newspaper, just before her best known book, Marry Him: the case for settling for Mr Good Enough. The book caused a huge fuss within feminist circles, outraged by the thought of giving instructions to women to settle for anything but the best. That's not actually the point of the book. The point is that a lot of women enter relationships (and I guess I'm probably guilty of it too), for various reasons including things they see in movies and magazines and maybe even fairytales (?), with ridiculously high expectations that can never be met, and for a relationship to be successful, both parties need to have realistic expectations. Although everyone has heard the message before, the bluntness with which it is conveyed is what makes the book hilarious. For example, this, from the author:

Many women in their twenties or early thirties are either breaking up with really good guys, or refusing to even go on a first date with a really good guy, because there’s not instant “chemistry” or because the guy is kind (but not a mind-reader), successful (but not wealthy enough), cute (but balding), and funny (but not Jon Stewart), and they think there’s someone better out there. So they pass up the ‘8’ in order to hold out for the ‘10’ – and then suddenly they’re 38 or 40 and now they can only get a ‘5.’ The ‘8’ would have been the catch. Most of us would be very happy married to the ‘8.’ But we don’t realize this at the time. This whole business of “having it all” is a problem because guess what, most of us aren’t ‘10s’ either. Some guy is going to have to put up with our flaws and give up certain things he may want in a partner, too. Maybe he wanted someone taller, or someone with a better sense of humor or someone less sensitive. We tend to forget about that because our female friends are always telling us how fabulous we are, and soon we think we’re so fabulous that we always find a reason that this guy or that guy isn’t good enough for us.

I find this hilarious. True too, I guess, but mainly hilarious. My mother hates it. Hahaha.

- And seriously, why does everyone insist upon declaring their undying love to me on MSN after midnight? It becomes somewhat overwhelming. Always a relief when it's only platonic.

PS: this is more a reminder to myself than to anyone else, but I need to go through and punctuate this properly and put hyphens in and so on. But I wanted to get this done before sleeping. Bonne nuit to my five followers! hahahaha.

ave atque vale?

"My Lords, since the populist image of the geriatric judge, out of touch with the real world, is now reflected in the statutory presumption of judicial incompetence at the age of 75, this is the last time I shall speak judicially in your Lordships' House. I am happy that the occasion is one when I can agree with your Lordships still in the prime of judicial life who demonstrate so convincingly that common sense and the common law here go hand in hand."

This was per Lord Bridge of Harwich in Ruxley Electronics & Construction Ltd v Forsyth [1995] 3 All ER 268 (HL).

So I read this and started reading about what the statutes say about judicial incompetence and also life peerages. As it turns out, if I ever got to the House of Lords (which will never happen as it's now called the Supreme Court of the United Kingdom (ew)), I would be a Baroness of ...Mission Bay.

orly?

"This appeal... raises a question of some importance to the very large number of people who are in the habit of using deck chairs to sit by the seaside at holiday resorts."

The above is a quote from the judgment of Slesser LJ in Chapelton v Barry Urban District Council. In this case, Mr Chapelton hires a deck chair for himself and for a Miss Andrews (who was this Miss Andrews? A girlfriend? A lover? His mother?). They both set up their chairs on a flat part of the beach, and then Chapelton goes to sit down on his and he falls through the canvas, jarring his back. As it happened, Chapelton received a receipt, the back of which said "The Council will not be liable for any accident or damage arisng from hire of chair". Fortunately for Chapelton, the receipt was not reasonably recognisable as a contractual document (because it was a receipt) and so Chapelton required a greater effort from the Council to ensure that he received notice of the terms, and thus they were never incorporated into the contract between the parties. Chapelton wins.

What a feel good story. They should make a feature-length film out of it, or something.

Law 211 says it's Parliament's function, but common sense says maybe a demolition team?

"As I said in Whiting v Diver Plumbing & Heating Ltd [1992] 1 NZLR 560 it may not be a bad thing if a cart and horse were driven through the Contracts Enforcement Act, but I do not consider that to be a proper judicial function."

This was per Tipping J in TA Dellaca v PDL Industries Ltd. Dellaca is the leading NZ case (as far as I'm aware) on the equitable doctrine of part performance. In Dellaca, Tipping J has to contend with two conceptions of what part performance is: acts done in reliance of the alleged contract, or acts done in 'performance' of it. In helping define an act of part performance, helpfully, he comes up with this:

"...it seems to me that there is an underlying theme throughout all the speeches that the act to qualify as one taken in part performance must be an act which, as Viscount Dilhorne put it, can reasonably described as an act of part performance in ordinary parlance."

Tipping J does actually go on to set out useful criteria for acts of part performance. I thought I should add that because the quote above could give quite a misleading view of the judgment. It did, however, provide light relief for me while reading what is quite a lengthly judgment.

As history would have it, the Contracts Enforcement Act has since been repealed and the relevant Statute of Frauds provisions are now included in the Property Law Act 2007.