Quote:
Originally Posted by Strange Brew
There is not one magic time of year businesses decide to hedge their exposure. It is a complex decision. Nor are you limited to hedging one year out. You could do more or less depending on your appetite for risk. But even following your example, if the Flames decided to cover their next year F/X risk in the summer, this summer's forward rates are likely going to look pretty grim.
You can't say the Flames aren't exposed to foreign currency risk because "hedging". The difference in the US and Canadian dollars will remain a fundamental component of the Flames business unless one day player salaries are no longer paid in US dollars or the Canadian dollar gets pegged to the greenback.
That's like saying EnCana isn't exposed to price of oil because they can hedge.
|
Of course there isn't a magic time to hedge. But the standard practice, for a firm like theirs, is to do it once you know what your revenue and expense budgets are.
Of course it's a complex decision, but this is a hockey forum, not a white paper on hedging strategies.
And no, of course you're not limited to one year strategies. But again, this is a hockey forum. And the simple fact of the matter is that, due to the cap and salaries, etc being adjusted annually, it is very likely that most teams do in fact stick to one-year strategies.
I never said "the Flames aren't exposed to foreign currency risk because "hedging", you did. Putting words in someone's mouth and then arguing against that is not a valid argument.
The EnCana argument is also silly. First, I never said that. Second, salaries are tied to revenues, which are tied to currencies. They set budgets each year (and that budget is going to be different each year, based on a lot of things including currency levels). Then, when the budget is done, you hedge.
I have already spent way too much time on this. I am not going to sit here and defend multiple hypothetical arguments.
The Flames - and all Canadian teams - hedge. In a past life, I built currency hedging strategies for corporate clients, most of which were in the same, or opposite situation as the Flames. It actually is pretty straight forward.
But no, it doesn't make the issue magically disappear.