08 February 2013

Cohering Structure in Markets

Why might we expect a type of financial structure to cohere with the market. What do we mean by a type though, is it exactly that which does cohere. Can we though see a certain absolute in this and suggest the market can be made in such a way that such coherence may not happen, and this likelihood recedes the more one considers aggregations of such statements.

That is one way of looking at an equity market that could be dysfunctional relative to its tendency to grow equity. However it may not be dysfunctional at all in terms of its function to value. Let us note the way the market may have revalued itself in terms after the crisis.

It does not mean that the valuations preceding the crisis were incorrect, it just may mean that the basis on which the valuations happened had changed. Could we regard such a market as more disordered. What might restore order.

However as noted from order to disorder is one thing, but disorder into order. One might assume that such processes are hard wired in the market, so this does not apply at some level.

But it may suggest we need to protect such processes, else we come against systemic issues of reversing disorder. This may not strongly apply in markets, but it have have some say in temporal effects, reflected in valuation patterns.

Could we expect the rule of money flow to disable such processes in some way ? That is another way of looking at the issue this blog has explored of the effect of certain external inputs on the function of the market.

One might expect all such action to be processed, to the extent that it may alter, with possible temporal effect, but the question of the long term functional effect of such alteration remains.

As noted, the possibility of enhancement remains, but again one might ask what the long term effect is. Could we envisage long term enhancement, perhaps from some kind of reinforcement of the base from which future valuations happen, that is from avoidance of degradation from a long slump, but how would this effect small grain views of the market.

What does this do to the structure of individual companies. Not necessarily anything, but the issue is what the market will do or can do with this presented structure.

One can assume that a good leader will be attuned to doing what is necessary to dynamically cohere the company with the market even if its internal function or the market function is not coherent with this.

In certain circumstances there may exist as well a precise feel for the effects of changes in the context of the functionality of the company itself.

This raises the interesting question of the feedback effect of imposed function on the market, back into companies, as we have delineated a possible route for this.

One might ask whether this filter can change disorder into the kind of order the market can work with, that is to cohere, in ordered structured ways, but cohering as well with the essential disorder in markets, by which space is cleared for valuation itself.

Might one expect greater order than might otherwise be expected. Again this might have temporal effects expressed in valuation patterns, more or less than might otherwise be expected, with possible coherence effects.

However this may be something that those future leaders can work better with, which may make for a less ordered market, in the sense of valuation aggregations at various levels of detail.

We could note, though that the type that coheres may remain, biding its time as it were for that coherence again. That is a capacity within the market itself. Could the happenstance of good leaders with that capacity entail disorder into order, but a new order. One might assume that such happenstance is a random occurrence, except that the ecosystem of company formation is not necessarily.