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Originally Posted by Jay Random
Expenses decline faster if the team moves out players without retaining salary.
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obviously
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Meanwhile, revenues from single ticket sales, concessions, etc., etc., are being received in devalued Canadian dollars, and that can't be hedged in any meaningful way.
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wrong.
Revenues are received in their base currency: $1CAD will always equal $1CAD. Some expenses are received in USD, which will fluctuate (relative to the base currency). All you have to do is buy USD in a forward contract, locking in the Canadian dollar equivalent. Done. Risk is totally hedged.
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Nor is currency hedging a cost-free operation; it can never be done with 100% efficiency.
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wrong.
Forward contracts have no cost (other than the bid/ask spread). As for efficiency, 100% isn't necessary. If you have about $50M in expenses and you hedge anything close to $50M, you have eliminated the risk, for all relevant intents and purposes.
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So the team's revenues are lower than forecast, playoff revenues will be nil this year, and the payroll has been close to the cap all season. I strongly suspect the Flames are going to finish the year in the red if they don't move out significant salary, and every dollar they retain makes that harder to achieve.
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Revenues are not lower - other than playoff revenue, which I would think they did not budget for anyway.
You are a good poster Jay. But you are wrong on how currency hedging works.