Chocolate and the Efficient Market Hypothesis

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Kraft Foods has made a $16 billion bid to acquire Cadbury PLC, maker of fine British chocolates.  Naturally, Cadbury turned them down:

Prior to Kraft going public with its offer on Monday, Cadbury had already rebuffed the advance in private. In publicly rejecting it, Cadbury said the offer, a 31% premium to its closing share price on Friday, “fundamentally undervalues” the company.

This is precisely what every company always says whenever someone offers to buy them: even though the offer price is 20% or 30% or 40% higher than the current stock price, it always “fundamentally undervalues” the firm.

In other words, corporate CEOs universally reject the efficient market hypothesis, and since Wall Street as a whole seems to agree, that means that essentially the entire finance industry rejects the EMH.  So if that’s the case, why should anyone else believe it?

POSTSCRIPT: Related trivia: my mother once had a cat named Cadbury.  I conducted a blind taste test once of British-made Cadbury’s chocolate and its American-made twin, and everyone involved could taste the difference and preferred the British version.  Cadbury Australia has a phenomenal selection of varieties, far more than the pitiful three or four we have in America.  The last time I was there in the early 90s, one of the varieties was chocolate with a creamy chocolate filling, and it was great.  Sadly, their website suggests it’s no longer made.  Sic transit etc.  On the other hand, some of the other varieties look well worth a try.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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