Fact accretion, opinion amortization

There is the old saying about profit and cash: the former, it goes, is an opinion and the latter is fact. This is a comment on accounting rules that govern various line-items up to the profit calculation, rules that in principle seek to connect economic qualities and magnitude with timing of their recognition, to most correctly represent the financial profile of an operation.

At least that’s the objective, though “represent” is maybe putting it too strongly. To “estimate” is probably more correct, and in any case the exercise is arguable and subjective. Under the best circumstances, it’s predicated on a stable set of principles that justify the theory in ensuing conversation. The fact underneath it all is still cash, which pays for the sandwiches.

Now, in a period of unprecedented economic volatility, in which investors and operators are looking deeply into the unknown with little confidence in what they think they see, the difference between opinion and fact becomes much more pronounced.

On one hand, the opinion is prone to be more fickle and devalued…


… while on the other hand the fact becomes more highly prized…


… even for those who have plenty of it.


There is a market signal in these patterns. From the funding source perspective, it suggests a movement up the capital structure to more stable levels of collateral; while funding uses are directed at conservation and survival, more so than vision, which is blurry all around.