Here is my last post for the semester.
And I chose this article.
http://www.washingtonpost.com/wp-dyn/content/article/2009/04/21/AR2009042103804.html
AIG's reputation has been severely injured.
However, as we discussed in class the financial products divisions were the ones mainly responsible for this massacre and credit default swap contracts were big part of it.
Insurance division on theother side is performing quite well.
Last week Zurich has bought the auto insurance division of AIG.
Now, AIG is concerned how they should restructure their reputation.
One thing stated on the article was about AIU holdings.
They are basically trying create a holding company that has the name AIU.
I think this is a smart approach towards repositioning of their business lines.
Without being information savvy, who would know that one part of AIG was responsible for the majority of the mess?
As risk managers there are many things we must consider.
In this case AIG's reputation is being considered.
Companies must take necessary steps in order to survive in our world and their values are derived by how good they accomplish those steps.
In Dr. Grace's class we have learned so much.
It was very difficult for me, however, I am glad that I was able to major in RMI.
Tuesday, April 21, 2009
Critique on "To Invest or Not to Invest?"
This post was made by lawson.
http://news.moneycentral.msn.com/ticker/article.aspx?symbol=US:MDC&feed=FOOL&date=20090407&id=9766757
http://www.articlesbase.com/finance-articles/crash-in-stock-market-once-in-a-lifetime-opportunity-667946.html
I was not able to find the link that I once saw on Warren Buffet's comment.
"It is a once in a life time oppurtunity".
Of course, he was referring to our economy's condition.
I totally agree with what lawson said in the post.
Of course, investing and risk was something that is always linked.
However, in general many of the firm's stock price has tanked.
I believe that if we make an investment towards company's stock the only way we could really lose the money is when the company goes bankrupt.
Economic condition would rise in the future and that is guaranteed.
As long as we can see that incline while we live, this time of the history is a very good time to invest into those companies that used to perform very well.
http://news.moneycentral.msn.com/ticker/article.aspx?symbol=US:MDC&feed=FOOL&date=20090407&id=9766757
http://www.articlesbase.com/finance-articles/crash-in-stock-market-once-in-a-lifetime-opportunity-667946.html
I was not able to find the link that I once saw on Warren Buffet's comment.
"It is a once in a life time oppurtunity".
Of course, he was referring to our economy's condition.
I totally agree with what lawson said in the post.
Of course, investing and risk was something that is always linked.
However, in general many of the firm's stock price has tanked.
I believe that if we make an investment towards company's stock the only way we could really lose the money is when the company goes bankrupt.
Economic condition would rise in the future and that is guaranteed.
As long as we can see that incline while we live, this time of the history is a very good time to invest into those companies that used to perform very well.
Monday, April 13, 2009
Does Goldman Sachs represent the recovery of our economy?
http://www.washingtonpost.com/wp-dyn/content/article/2009/04/13/AR2009041302803.html
One of the world's finest financial institution Goldman Sachs reported a profit of $1.81 billion during the first quarter.
While most of the large financial institutions are being troubled this firm has showed its superior vaiability.
About a week ago, one more company delivered us the surprise.
Wells Fargo also made profit during the first quarter.
How happy can Warren Buffet be?
They have done their job in order to create value to the shareholders.
And there must been a lot of risk management involved in the processes.
Does this indicate that the economy is going uphill?
Today on AM750, I heard someone say that economy may be stabilizing.
However, I can not really agree with this comment.
It is just couple of the many firms that are doing well.
In addition, the article said that it can pressure those who are not as healthy to pusue the same acition taken by Goldman Sachs.
And it also states that this can cause a significant issue due to not conserving resources.
To be honest, I think many of the troubled firms can get over this crisis if they become conservative and perform "correct" risk management.
If the model they have is not giving them a return, they can even consider starting over from scratch.
It may cost them a lot initially. However, it might be beneficial for them in the long run.
Many risk managers say that the company must survive through the short run in order to see themselves in the long run.
I think this is very true when it comes to these types of situation.
Companies should carefully analyze their risk management strucnture.
One of the world's finest financial institution Goldman Sachs reported a profit of $1.81 billion during the first quarter.
While most of the large financial institutions are being troubled this firm has showed its superior vaiability.
About a week ago, one more company delivered us the surprise.
Wells Fargo also made profit during the first quarter.
How happy can Warren Buffet be?
They have done their job in order to create value to the shareholders.
And there must been a lot of risk management involved in the processes.
Does this indicate that the economy is going uphill?
Today on AM750, I heard someone say that economy may be stabilizing.
However, I can not really agree with this comment.
It is just couple of the many firms that are doing well.
In addition, the article said that it can pressure those who are not as healthy to pusue the same acition taken by Goldman Sachs.
And it also states that this can cause a significant issue due to not conserving resources.
To be honest, I think many of the troubled firms can get over this crisis if they become conservative and perform "correct" risk management.
If the model they have is not giving them a return, they can even consider starting over from scratch.
It may cost them a lot initially. However, it might be beneficial for them in the long run.
Many risk managers say that the company must survive through the short run in order to see themselves in the long run.
I think this is very true when it comes to these types of situation.
Companies should carefully analyze their risk management strucnture.
Sunday, April 12, 2009
Critique : CEO's compensation
This post was originally made by Dwang.
I agree with him on most part.
He basically explained how CEOs of big companies are being overly compensated.
Yes, it seems as they are being payed way too much.
Even the CEOs of a company which made a mistake on their ratings as Dr. Grace said in class one day.
http://www.aflcio.org/corporatewatch/paywatch/
President Obama and Barney Frank discussed an intresting opinion in the past.
http://blogs.harvardbusiness.org/hbreditors/2009/02/just_how_much_is_a_ceo_worth.html
It is to restrict the salary which the CEO can recieve.
Especially, if they are under the bailout, why must they get paid excessively?
Even with the "skill" they may have, why have them the opportunity to recieve such amount which are well over the average income in this country?
http://en.wikipedia.org/wiki/Household_income_in_the_United_States
However, it did not make sense to me when he compared the minimum wage workers at McDonalds to a CEO of that company.
US is developed through capitalism and capitalism allows hard workers to achieve the rewards.
Therefore, the CEO of a company can not be compared to those who work for the minimum wages.
They must have different backgrounds in terms of both education and experience.
And without this difference, U.S would not have survived until now.
I agree with him on most part.
He basically explained how CEOs of big companies are being overly compensated.
Yes, it seems as they are being payed way too much.
Even the CEOs of a company which made a mistake on their ratings as Dr. Grace said in class one day.
http://www.aflcio.org/corporatewatch/paywatch/
President Obama and Barney Frank discussed an intresting opinion in the past.
http://blogs.harvardbusiness.org/hbreditors/2009/02/just_how_much_is_a_ceo_worth.html
It is to restrict the salary which the CEO can recieve.
Especially, if they are under the bailout, why must they get paid excessively?
Even with the "skill" they may have, why have them the opportunity to recieve such amount which are well over the average income in this country?
http://en.wikipedia.org/wiki/Household_income_in_the_United_States
However, it did not make sense to me when he compared the minimum wage workers at McDonalds to a CEO of that company.
US is developed through capitalism and capitalism allows hard workers to achieve the rewards.
Therefore, the CEO of a company can not be compared to those who work for the minimum wages.
They must have different backgrounds in terms of both education and experience.
And without this difference, U.S would not have survived until now.
Monday, April 6, 2009
Critique on George's Post
This post was made by George on April 6.
He was talking about how he agrees with the decision made by the president.
I personally have the same opinion about this issue.
Government is spending too much money on various things fromt the tax payers pockets.
http://www.usgovernmentspending.com/#usgs30280
the link above indicates the specific spendings which governement is responsible for.
Plus the federal deficit is growing rapidly.
At 2000 the federal deficit was at 1789 compared to what we have today 3938.
(amounts are in $billions)
Governments are implementing rapid bailouts for different types of firms and the money they come up with are outrageous.
I believe bank bailouts are a necessary action to take since without those institutions being solvent the economy would not move at all.
However, how much have the government spent so far in order to keep the troubled firms on their foot?
I think there are some other drastic ways to help out the economy.
For example, we are experiencing serious unemployment rates.
http://www.npr.org/templates/story/story.php?storyId=99175006
It was reported that the unemployment has hit the record in the past 16 years.
Even in my country unemployment is becoming a huge issue.(Japan)
http://news.bbc.co.uk/1/hi/business/7973409.stm
Even those people who secured their job position after going through the screening and the interview process are experiencing anxiety.
The biggest reason behind it is that companies are now taking back their words and cancelling the job offer which they have provided to the candidates.
Below is one idea I have in mind.
Select 100 people from the U.S that has high potential in having success if they start a business.
Then the government would allocate $2million dollars each to those 100 who were selected.
Then each companies built would hire 200 employees to work for them.
Then 100 companies * 200employees would result in 20,000 new job openings.
In case of employing 300 employees this number woud increase to 30,000 new job openings.
Of course it would not be this simple to build a model such as this one.
In general I believe that many fail and few survives as a new business.
However, how much did the government spend on this plan?
100 talented individuals who are selected and that are lucky * $2million = $200million
How much spending is this compared to the monstrous bailout the government have went through over in the past?
There may be a lot of issues that may arise from this plan. ex. unfairness to those who gets selected as the candidate. (tax payers claims)
However, I think this type of drastic actions can be offered as well, rather than just dumping money into the troubled companies that does not see hope such as GM which George was talking about.
He was talking about how he agrees with the decision made by the president.
I personally have the same opinion about this issue.
Government is spending too much money on various things fromt the tax payers pockets.
http://www.usgovernmentspending.com/#usgs30280
the link above indicates the specific spendings which governement is responsible for.
Plus the federal deficit is growing rapidly.
At 2000 the federal deficit was at 1789 compared to what we have today 3938.
(amounts are in $billions)
Governments are implementing rapid bailouts for different types of firms and the money they come up with are outrageous.
I believe bank bailouts are a necessary action to take since without those institutions being solvent the economy would not move at all.
However, how much have the government spent so far in order to keep the troubled firms on their foot?
I think there are some other drastic ways to help out the economy.
For example, we are experiencing serious unemployment rates.
http://www.npr.org/templates/story/story.php?storyId=99175006
It was reported that the unemployment has hit the record in the past 16 years.
Even in my country unemployment is becoming a huge issue.(Japan)
http://news.bbc.co.uk/1/hi/business/7973409.stm
Even those people who secured their job position after going through the screening and the interview process are experiencing anxiety.
The biggest reason behind it is that companies are now taking back their words and cancelling the job offer which they have provided to the candidates.
Below is one idea I have in mind.
Select 100 people from the U.S that has high potential in having success if they start a business.
Then the government would allocate $2million dollars each to those 100 who were selected.
Then each companies built would hire 200 employees to work for them.
Then 100 companies * 200employees would result in 20,000 new job openings.
In case of employing 300 employees this number woud increase to 30,000 new job openings.
Of course it would not be this simple to build a model such as this one.
In general I believe that many fail and few survives as a new business.
However, how much did the government spend on this plan?
100 talented individuals who are selected and that are lucky * $2million = $200million
How much spending is this compared to the monstrous bailout the government have went through over in the past?
There may be a lot of issues that may arise from this plan. ex. unfairness to those who gets selected as the candidate. (tax payers claims)
However, I think this type of drastic actions can be offered as well, rather than just dumping money into the troubled companies that does not see hope such as GM which George was talking about.
Another type of Bailout: Now the mutually owned banks.
http://www.boston.com/business/ticker/2009/04/mutually_owned.html
We are not sure if this is going to come in play.
However, it seems very possible that now the mutually owned companies would be taking part in the Fed's bailout program.
One thing I understand about the difference in how 2 of the companies are structured is as follows.
1. Mutuals are owned by policy holders
2. Stock companies are owned by stock holders.
Therefore, stock company's capital would come from issuing debt, issuing stock and retained earnings.
Whereas mutual companies would issue debt and would not be able to issue stocks in order to raise capital.
I honestly do not understand how would mutual companies be troubled as much as the stock companies are.
The appetite for taking on the risks should be much higher in stock companies compared to mutuals. However, there are mutuals that failed.
The main concern I have is not what I discussed above.
As I may have pointed out my opinion about the Fed's bailout in the past blog, I would like to share my point of view on how the money would be spent so that it may be better off for many of us.
Below is my opinion.
I think we all know one thing in certain.
The economy has been in the downfall and we still do not see any improvement.
Fed's decided to implement the bailout plan in order to rescue the troubled institutions.
I think this may be the right thing to do. However, how much are they going to spend?
When there is a visible pothole on the road, there are 2 options in order to improve the existing condition.
1. Spend money immediately in order to repair the hole so that it saves most of us temporarily.
2. Use the money first on researching how the pothole was created.
To me, the first option seems like what the government is doing with the tax payers money.
This may be an okay approach. It would fix the hole and no one gets hurt until there is a crack on the part where it was fixed. We may see a crack on the road that was fixed tomorrow. Or, we may never see the crack for the next 10 years.
2nd option is to spend the money wisely. Performing a research on how the problem occured and how it can be prevented in the future.
In our class discussion today, Dr. Grace talked about the rating agencies are not taking responsibilities for the misleading information that they gave out.
This may be one things which can be improved.
There are many smart risk managers in our society at the corporate level.
Maybe the government can bring in some of those smart people in order to perform these types of tasks for them.
We are not sure if this is going to come in play.
However, it seems very possible that now the mutually owned companies would be taking part in the Fed's bailout program.
One thing I understand about the difference in how 2 of the companies are structured is as follows.
1. Mutuals are owned by policy holders
2. Stock companies are owned by stock holders.
Therefore, stock company's capital would come from issuing debt, issuing stock and retained earnings.
Whereas mutual companies would issue debt and would not be able to issue stocks in order to raise capital.
I honestly do not understand how would mutual companies be troubled as much as the stock companies are.
The appetite for taking on the risks should be much higher in stock companies compared to mutuals. However, there are mutuals that failed.
The main concern I have is not what I discussed above.
As I may have pointed out my opinion about the Fed's bailout in the past blog, I would like to share my point of view on how the money would be spent so that it may be better off for many of us.
Below is my opinion.
I think we all know one thing in certain.
The economy has been in the downfall and we still do not see any improvement.
Fed's decided to implement the bailout plan in order to rescue the troubled institutions.
I think this may be the right thing to do. However, how much are they going to spend?
When there is a visible pothole on the road, there are 2 options in order to improve the existing condition.
1. Spend money immediately in order to repair the hole so that it saves most of us temporarily.
2. Use the money first on researching how the pothole was created.
To me, the first option seems like what the government is doing with the tax payers money.
This may be an okay approach. It would fix the hole and no one gets hurt until there is a crack on the part where it was fixed. We may see a crack on the road that was fixed tomorrow. Or, we may never see the crack for the next 10 years.
2nd option is to spend the money wisely. Performing a research on how the problem occured and how it can be prevented in the future.
In our class discussion today, Dr. Grace talked about the rating agencies are not taking responsibilities for the misleading information that they gave out.
This may be one things which can be improved.
There are many smart risk managers in our society at the corporate level.
Maybe the government can bring in some of those smart people in order to perform these types of tasks for them.
Monday, March 30, 2009
Will insurance companies be able to compete with our government? Maybe not but should government even come in the market?
http://www.nytimes.com/2009/03/30/opinion/l30health.html
I found this interesting article on New York Times.
Health care has long been our concern.
One of our major concerns are whether or not being able to live a healthy life until we reach the "life expectancy".
Major ways to hedge against this type of risks are mainly done by having sufficient insurance coverage.
However, due to the increased cost in health care insurance many of our citizens are left uninsured.
There are many reasons behind the sky rocketing health care costs.
Defensive medicine is one of the major things that contributes to this issue.
http://blogs.usatoday.com/oped/2008/04/wasted-medical.html
Doctors are not Gods. They are human being and they do make mistakes in their line of duty. Unfortunately, all of us have difficulty understanding this fact and bring up lawsuits in order to recover the damages caused to our significant ones. In order to prevent this from happening doctors are intensively examining the patients in order to make themselves sure that nothing is wrong with the patient.
The article which I chose argues whether or not if private insurance companies would be able to compete with the government program. Such as medicare.
The question I must ask is should the government even try to get in the market?
I definately do not think government should step in at all into this field.
I believe nationalized health care type of policy ran by the government would just result in a massive chaos.
As we learned in Dr. Grace's class insurance companies must face both the moral hazard and adverse selection.
The same thing can be said to the government.
Insurance companies itself are having difficulties protecting themselves against these issues.
Can you imagine how much would the government must suffer in order to keep this program in place?
How would the spending go? I think the government is taking up enough money from the tax payers pockets.
This is the reason why I think government should step back from the program.
I found this interesting article on New York Times.
Health care has long been our concern.
One of our major concerns are whether or not being able to live a healthy life until we reach the "life expectancy".
Major ways to hedge against this type of risks are mainly done by having sufficient insurance coverage.
However, due to the increased cost in health care insurance many of our citizens are left uninsured.
There are many reasons behind the sky rocketing health care costs.
Defensive medicine is one of the major things that contributes to this issue.
http://blogs.usatoday.com/oped/2008/04/wasted-medical.html
Doctors are not Gods. They are human being and they do make mistakes in their line of duty. Unfortunately, all of us have difficulty understanding this fact and bring up lawsuits in order to recover the damages caused to our significant ones. In order to prevent this from happening doctors are intensively examining the patients in order to make themselves sure that nothing is wrong with the patient.
The article which I chose argues whether or not if private insurance companies would be able to compete with the government program. Such as medicare.
The question I must ask is should the government even try to get in the market?
I definately do not think government should step in at all into this field.
I believe nationalized health care type of policy ran by the government would just result in a massive chaos.
As we learned in Dr. Grace's class insurance companies must face both the moral hazard and adverse selection.
The same thing can be said to the government.
Insurance companies itself are having difficulties protecting themselves against these issues.
Can you imagine how much would the government must suffer in order to keep this program in place?
How would the spending go? I think the government is taking up enough money from the tax payers pockets.
This is the reason why I think government should step back from the program.
Sunday, March 29, 2009
Critique on Diversification
This post was made by Anna.
I strongly agree with Anna's post.
We have discussed the importance of having our portfolios diversified in order to minimize the risk.
Main strength of diversification is the capability of gain from a particular portfolio being able to offset the loss of another type of portfolio.
I also agree with the 2nd half of her post.
Chosing the passive diversification strategy over the active diversification strategy.
I recognize myself of not knowing much about the world of investment.
However, there are many people who functions as investment professionals.
Those individuals can have confidence and take responsibilities of their own portfolios.
They can even act on our behalf to make wise investments.
For example, mutual funds are considered one of the best ways to easily diversify our portfolios.
http://moneycentral.msn.com/articles/invest/funds/8662.asp
Vanguard 500 is one of the famous ones.
Professionals can invest the collected funds into individual portfolios or the underlying securities.
As a result, investors themselves do not have to worry about buying or selling actively in order to enjoy the gain.
This can save significant amount of time as well as some benefits from your invested funds.
However, research states that majority of the investors do not have well diversified portfolios.
http://www.theskilledinvestor.com/ss.item.29/is-the-average-individual-investor-portfolio-well-diversified.html
Having concentrated investment on one kind of security can be devastating.
Even if people see themselves as proffessional or a expert in investing, they should understand the value of risk management in order to stabilize their profit stream.
As a student graduating this semester, I would like to learn more about mutual funds and start having my own portfolios in the near future.
https://www.fairfieldnationalbank.com/investments/WealthManagement/GrowingYourWealth/ReducingRisk.asp
http://en.wikipedia.org/wiki/Mutual_fund
I strongly agree with Anna's post.
We have discussed the importance of having our portfolios diversified in order to minimize the risk.
Main strength of diversification is the capability of gain from a particular portfolio being able to offset the loss of another type of portfolio.
I also agree with the 2nd half of her post.
Chosing the passive diversification strategy over the active diversification strategy.
I recognize myself of not knowing much about the world of investment.
However, there are many people who functions as investment professionals.
Those individuals can have confidence and take responsibilities of their own portfolios.
They can even act on our behalf to make wise investments.
For example, mutual funds are considered one of the best ways to easily diversify our portfolios.
http://moneycentral.msn.com/articles/invest/funds/8662.asp
Vanguard 500 is one of the famous ones.
Professionals can invest the collected funds into individual portfolios or the underlying securities.
As a result, investors themselves do not have to worry about buying or selling actively in order to enjoy the gain.
This can save significant amount of time as well as some benefits from your invested funds.
However, research states that majority of the investors do not have well diversified portfolios.
http://www.theskilledinvestor.com/ss.item.29/is-the-average-individual-investor-portfolio-well-diversified.html
Having concentrated investment on one kind of security can be devastating.
Even if people see themselves as proffessional or a expert in investing, they should understand the value of risk management in order to stabilize their profit stream.
As a student graduating this semester, I would like to learn more about mutual funds and start having my own portfolios in the near future.
https://www.fairfieldnationalbank.com/investments/WealthManagement/GrowingYourWealth/ReducingRisk.asp
http://en.wikipedia.org/wiki/Mutual_fund
Tuesday, March 24, 2009
Senate Considers Relief for Credit Card Holders
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/24/AR2009032400808.html?hpid=topnews
I retrieved this article from business week.com.
Basically government program is planning to lift the problem we face with credit card holders.
Yes, the credit card comapnies are evil in some ways.
For example, they charge an outrageous interest on credit purchases we make.
However, conditions are already known.
We all know what risks we must bear in order to enjoy the system.
These interest rates are not something which were hidden to make consumers suffer.
What we must consider is the responsibility which each of the individual carries.
Credit is very useful if used properly.
Many students in college uses credit card to pay for the tuition or starts a student loan type of payment.
What should we say?
People use credit cards and credit accounts to build there credit history in order to have successful financial structures for their future.
Some people does not account the limits and keeps on spending.
As a result interest builds on top of interest and will not clear the balance frever.
But, this is how credit card companies makes money and that becomes their revenue.
We all know the system.
Each of us have different risks whether it to be finance, heath etc.
What I think is everyone needs to have responsibility for their own lives and government should not step in too much.
It may save the economy. However, it is done by spoiling our people.
This posting is made for the week of Mar, 17 - Mar 24.
I retrieved this article from business week.com.
Basically government program is planning to lift the problem we face with credit card holders.
Yes, the credit card comapnies are evil in some ways.
For example, they charge an outrageous interest on credit purchases we make.
However, conditions are already known.
We all know what risks we must bear in order to enjoy the system.
These interest rates are not something which were hidden to make consumers suffer.
What we must consider is the responsibility which each of the individual carries.
Credit is very useful if used properly.
Many students in college uses credit card to pay for the tuition or starts a student loan type of payment.
What should we say?
People use credit cards and credit accounts to build there credit history in order to have successful financial structures for their future.
Some people does not account the limits and keeps on spending.
As a result interest builds on top of interest and will not clear the balance frever.
But, this is how credit card companies makes money and that becomes their revenue.
We all know the system.
Each of us have different risks whether it to be finance, heath etc.
What I think is everyone needs to have responsibility for their own lives and government should not step in too much.
It may save the economy. However, it is done by spoiling our people.
This posting is made for the week of Mar, 17 - Mar 24.
Monday, March 23, 2009
Obama anger at AIG bonus payouts
This post was made by Keval.
I do agree with his opinion.
Many of the tax payers do not agree on having government to bailout troubled financial institutions with their money.
Here are the statistics on the supporters of the bailout.
http://www.rasmussenreports.com/public_content/business/federal_bailout/only_28_support_federal_bailout_plan
However, government is practicing a heavy bailout program.
AIG's opinion on the huge executive bonus payout was to retain their human capital.
However, the executives who recieve these payments are not obligated to stay in the company.
In fact, 11 of the people who recieved the bonus does not even work for them anymore.
http://seymourherald.com/opinion-columns/2009/mar/21/bonuses-for-failure/
I would have to say this is wrong.
Company must demonstrate sound performances in order to gain back the reputation which once they had.
Why would they spend the money that are derived from the U.S citizens to something that would create an additional upheaval?
The money should be spent carefully in order to keep the company in business and only for that sole purpose.
And of course, many of AIG employees themselves are upset about the decision.
Some of the AIG workders even shows up on the news to present their ideas on how they are against this wrong payment program
Some of the bonuse recievers agreed on refunding the money which they have recieved.
Whether the decision is made upon individual agreement or not this is the least they can do to show respect to each of the U.S tax payers.
http://www.cbsnews.com/blogs/2009/03/23/business/econwatch/entry4886952.shtml
It is cruel that those people who worked hard for the company without executing a single wrongdoing would bear the risk of having a bad reputation among the public.
I do agree with his opinion.
Many of the tax payers do not agree on having government to bailout troubled financial institutions with their money.
Here are the statistics on the supporters of the bailout.
http://www.rasmussenreports.com/public_content/business/federal_bailout/only_28_support_federal_bailout_plan
However, government is practicing a heavy bailout program.
AIG's opinion on the huge executive bonus payout was to retain their human capital.
However, the executives who recieve these payments are not obligated to stay in the company.
In fact, 11 of the people who recieved the bonus does not even work for them anymore.
http://seymourherald.com/opinion-columns/2009/mar/21/bonuses-for-failure/
I would have to say this is wrong.
Company must demonstrate sound performances in order to gain back the reputation which once they had.
Why would they spend the money that are derived from the U.S citizens to something that would create an additional upheaval?
The money should be spent carefully in order to keep the company in business and only for that sole purpose.
And of course, many of AIG employees themselves are upset about the decision.
Some of the AIG workders even shows up on the news to present their ideas on how they are against this wrong payment program
Some of the bonuse recievers agreed on refunding the money which they have recieved.
Whether the decision is made upon individual agreement or not this is the least they can do to show respect to each of the U.S tax payers.
http://www.cbsnews.com/blogs/2009/03/23/business/econwatch/entry4886952.shtml
It is cruel that those people who worked hard for the company without executing a single wrongdoing would bear the risk of having a bad reputation among the public.
Monday, March 16, 2009
AIG bonus payout...
http://www.businessweek.com/ap/financialnews/D96VCUQG0.htm?chan=top+news_top+news+index+-+temp_news+%2B+analysis
First of all, I totally do not understand what this company is trying to do.
They know they are under government's support.
And that support is not something small.
It is huge. How much did they recieve in bailout? more than 150 billion dollars.
Now, they are proposing a bonus payout to the executives which totals to $165million.
It is an insurance company. Any risk management?
Maybe for short term yes. Are they expecting the government to bail them out over and over again? I would think that by carefully making decisions they would avoid this type of payouts.
It can destroy the company's reputation, if it did not already.
They must understand that they are using the tax payers money for their own wrongdoing so that they can be in the line of business.
It may not involve any risk management techniques we learn in RMI 4350.
But it is the most basic and easiest to figure out.
This company must redesign their decisions so that it can bring their reputation back eventhough it may take forever.
First of all, I totally do not understand what this company is trying to do.
They know they are under government's support.
And that support is not something small.
It is huge. How much did they recieve in bailout? more than 150 billion dollars.
Now, they are proposing a bonus payout to the executives which totals to $165million.
It is an insurance company. Any risk management?
Maybe for short term yes. Are they expecting the government to bail them out over and over again? I would think that by carefully making decisions they would avoid this type of payouts.
It can destroy the company's reputation, if it did not already.
They must understand that they are using the tax payers money for their own wrongdoing so that they can be in the line of business.
It may not involve any risk management techniques we learn in RMI 4350.
But it is the most basic and easiest to figure out.
This company must redesign their decisions so that it can bring their reputation back eventhough it may take forever.
Comment on Dr. Grace's opinion.
I do agree with Dr. Grace's opinion on how Barrack Obama may be the cause of our economical situation.
It seems as it became very visible at the time when Lehman Brothers filed Ch 11.
Then little after AIG showed the insolvency dragging down its stock price which is now around 50 cents.
John McCain was saying that American economy is solid and strong.
And did people believe him? Maybe yes and maybe no.
Did the public not expect this to happen? Maybe yes to some and maybe no for most of us.
We ran into the economical condition that many says that it would only be experienced every 100 years or so.
We can clearly see that this statement is true.
What happened to DOW at beginning of this month? It dropped below 6800.
Lowest that we have seen in very long time.
We all know that the economy is bad enough.
President Obama's various plans must be driving anxiety to many of us.
For example, the stimulus plan, Nationalized health care which was proposed to take place during the campaign.
It makes little sense to me that these types of plan would lessen the strain that we already experience today.
This website shows the opinion about the stimulus plan.
http://newsbusters.org/blogs/noel-sheppard/2009/03/06/when-will-media-blame-economy-bear-market-obama
Here is reuters report about the health care. By looking at the cost, it does not make any sense to me that obama's health care proposal will put us in good shape.
http://www.reuters.com/article/businessNews/idUSTRE51P84G20090226
In addition, why do we need stem cell research?
At least can we chose the right time to do this?
Why does he need to change the regulation on something that has been set prior so that he can invest tons of money on this weird unnecessary thing?
http://www.reuters.com/article/smallBusinessNews/idUSTRE52F30320090316
In conclusion, I believe that economy is bad enough. And even today, we have not seen the end of it. There must be something done.
It seems as it became very visible at the time when Lehman Brothers filed Ch 11.
Then little after AIG showed the insolvency dragging down its stock price which is now around 50 cents.
John McCain was saying that American economy is solid and strong.
And did people believe him? Maybe yes and maybe no.
Did the public not expect this to happen? Maybe yes to some and maybe no for most of us.
We ran into the economical condition that many says that it would only be experienced every 100 years or so.
We can clearly see that this statement is true.
What happened to DOW at beginning of this month? It dropped below 6800.
Lowest that we have seen in very long time.
We all know that the economy is bad enough.
President Obama's various plans must be driving anxiety to many of us.
For example, the stimulus plan, Nationalized health care which was proposed to take place during the campaign.
It makes little sense to me that these types of plan would lessen the strain that we already experience today.
This website shows the opinion about the stimulus plan.
http://newsbusters.org/blogs/noel-sheppard/2009/03/06/when-will-media-blame-economy-bear-market-obama
Here is reuters report about the health care. By looking at the cost, it does not make any sense to me that obama's health care proposal will put us in good shape.
http://www.reuters.com/article/businessNews/idUSTRE51P84G20090226
In addition, why do we need stem cell research?
At least can we chose the right time to do this?
Why does he need to change the regulation on something that has been set prior so that he can invest tons of money on this weird unnecessary thing?
http://www.reuters.com/article/smallBusinessNews/idUSTRE52F30320090316
In conclusion, I believe that economy is bad enough. And even today, we have not seen the end of it. There must be something done.
Saturday, March 7, 2009
Information risk management
http://www.itworld.com/it-managementstrategy/63782/information-risk-management
We are living in the information age, where information is power.
Every company has their own valuable information.
For example, for insurance companies, the past data from their loyal customers can become a significant strenght over their competitors.
When technology develops, we start to rely more and more on the advanced system.
In this example, ING Renault Formula 1 team demonstrated its ability to deal with their information.
One problem they have encountered was the crashes caused by massive amount of datas transferred to their server weekly. Recieving more than 400,000 emails which also contained spam mails were giving them headache.
However, they have built a filter which efficiently reduces the unnecessary information income.
This resulted in reducing the chance of them having to crash by 40%.
Information can be crucial if not stored properly and can lead to devastating consequences.
It is interesting to see this risk management playing this type of role.
In this era, individuals must identify each of their existing risks and come up with their unique way of minimizing the cost which is related to those risks.
We are living in the information age, where information is power.
Every company has their own valuable information.
For example, for insurance companies, the past data from their loyal customers can become a significant strenght over their competitors.
When technology develops, we start to rely more and more on the advanced system.
In this example, ING Renault Formula 1 team demonstrated its ability to deal with their information.
One problem they have encountered was the crashes caused by massive amount of datas transferred to their server weekly. Recieving more than 400,000 emails which also contained spam mails were giving them headache.
However, they have built a filter which efficiently reduces the unnecessary information income.
This resulted in reducing the chance of them having to crash by 40%.
Information can be crucial if not stored properly and can lead to devastating consequences.
It is interesting to see this risk management playing this type of role.
In this era, individuals must identify each of their existing risks and come up with their unique way of minimizing the cost which is related to those risks.
Friday, March 6, 2009
Barbie at 50: is Mattel's star still in fashion?
Everyone knows barbie.
And its famous around the world.
Even when I used to live in my country barbie dolls were famous.
This year it is barbie's 50th birthday.
Things have changed compared to the first time when it was released. For example,,,
1. Fashion and trend
2. Technology available (production & consumer access such as internet)
Now customers can go to Mattel's website to dress up barbie dolls.
However, no matter how famous the dolls have been it can lose its share if they do not do enough research and some of it must be managing risks.
For instance, they must be up to date on their knowledge about the child's preference.
In addition which types of features they can add and which not to add.
They must constantly balance their cost and revenue so that they can deal with rapid change in the consumer environment.
http://www.reuters.com/article/lifestyleMolt/idUSTRE52603B20090307
And its famous around the world.
Even when I used to live in my country barbie dolls were famous.
This year it is barbie's 50th birthday.
Things have changed compared to the first time when it was released. For example,,,
1. Fashion and trend
2. Technology available (production & consumer access such as internet)
Now customers can go to Mattel's website to dress up barbie dolls.
However, no matter how famous the dolls have been it can lose its share if they do not do enough research and some of it must be managing risks.
For instance, they must be up to date on their knowledge about the child's preference.
In addition which types of features they can add and which not to add.
They must constantly balance their cost and revenue so that they can deal with rapid change in the consumer environment.
http://www.reuters.com/article/lifestyleMolt/idUSTRE52603B20090307
Can this Mall make it?
NYSE is down badly.
Economy is still clearly showing a decline.
However, there are aggressive individuals who seeks to battle this difficult time of the history.
Xanadu. This is the name of the mall which is planned to open during Summer 2009.
It is not an ordinary shopping mall which we have experienced in the past.
it is considered one of the largest commercial real estate project in the country.
The features are astonishing.
it is not too much to say that this mall provides more entertainment than shopping.
Such things like indoor ski fields and surfing pool may give you a better idea.
The CEO who is responsible for the project is Larry Siegel from Xanadu Corp.
It may be that the project has already been launched but this group must be doing intense risk management.
And I believe with their projection, they are all out for making money on this location near Manhattan NY.
This project would be very interesting on viewing how consumers reaction.
The CEO also mentioned that the spending seen on Manhattan area has the most immunity to the current economy in the U.S.
These types of information can also be very valuable when determining the VaR which we discussed in class.
Economy is still clearly showing a decline.
However, there are aggressive individuals who seeks to battle this difficult time of the history.
Xanadu. This is the name of the mall which is planned to open during Summer 2009.
It is not an ordinary shopping mall which we have experienced in the past.
it is considered one of the largest commercial real estate project in the country.
The features are astonishing.
it is not too much to say that this mall provides more entertainment than shopping.
Such things like indoor ski fields and surfing pool may give you a better idea.
The CEO who is responsible for the project is Larry Siegel from Xanadu Corp.
It may be that the project has already been launched but this group must be doing intense risk management.
And I believe with their projection, they are all out for making money on this location near Manhattan NY.
This project would be very interesting on viewing how consumers reaction.
The CEO also mentioned that the spending seen on Manhattan area has the most immunity to the current economy in the U.S.
These types of information can also be very valuable when determining the VaR which we discussed in class.
Monday, March 2, 2009
AIG recieving more
March, 2 Government has announced another bailout for AIG.
And perhaps the article states that it will not be the last.
AIG has reported a huge loss of $61.7 billion in the 4th quarter.
I am currently in Japan and most of the news channel is talking about this case.
However, what I felt different from watching American news is that they talk much about the companies which are functioning under AIG such as
-ALICO Japan
-AIG Edison
Since the first bailout, those 2 companies were trying to find the buyer of the company.
And at one point Aflac was considering the purchase of Alico.
However, that proposal has gone away.
What I belive is that , Alico Japan is separate from AIG's business structure and they should be having business according to japanese laws.
Moreover, if they have differnt business structure, I will not be surprised if they carry different type of risk management strategy.
Believe it or not these companies are proposing strong solvency ratio and guaranteeing a strong asset management.
And perhaps the article states that it will not be the last.
AIG has reported a huge loss of $61.7 billion in the 4th quarter.
I am currently in Japan and most of the news channel is talking about this case.
However, what I felt different from watching American news is that they talk much about the companies which are functioning under AIG such as
-ALICO Japan
-AIG Edison
Since the first bailout, those 2 companies were trying to find the buyer of the company.
And at one point Aflac was considering the purchase of Alico.
However, that proposal has gone away.
What I belive is that , Alico Japan is separate from AIG's business structure and they should be having business according to japanese laws.
Moreover, if they have differnt business structure, I will not be surprised if they carry different type of risk management strategy.
Believe it or not these companies are proposing strong solvency ratio and guaranteeing a strong asset management.
Stocks are falling for most but not for all.
http://www.businessweek.com/investor/content/mar2009/pi2009031_014366.htm?chan=top+news_top+news+index+-+temp_news+%2B+analysis
There are 376 financail or invested firms listed on U.S exchanges.
Eversince the financial crises began, most of the firms listed are going through singnificant losses.
Therefore, most of the investro's expectations could not be satisfied.
However, there were few firms which boosted their performances.
Amont the 376, 10 or 2.7% since the start of the crises.
I respect these 10 firms in many ways.
They must have done intensive Risk Management within their companies, simply eliminating the risks which other comapny was exposed to.
I think the beauty of risk management is if done properly, even when the world economy is suffering, it allows individuals or firms to enjoy the stability during the unexpected very bad year or very bad day.
There are 376 financail or invested firms listed on U.S exchanges.
Eversince the financial crises began, most of the firms listed are going through singnificant losses.
Therefore, most of the investro's expectations could not be satisfied.
However, there were few firms which boosted their performances.
Amont the 376, 10 or 2.7% since the start of the crises.
I respect these 10 firms in many ways.
They must have done intensive Risk Management within their companies, simply eliminating the risks which other comapny was exposed to.
I think the beauty of risk management is if done properly, even when the world economy is suffering, it allows individuals or firms to enjoy the stability during the unexpected very bad year or very bad day.
Sunday, February 22, 2009
Stress test on the bank: Testing Stability
From http://www.nytimes.com/2009/02/23/business/23bank.html.
What can happen in the worst day of that firm?
What can their loss be?
How much would the loss be?
This is what we have been discussing in the 4350 class.
This stress test that is going to be tested against the U.S banks exactly aims to answer the question listed above.
It would take several weeks to complete the test and depending on the result we would know if the company needs more capital or it is good as it is now.
Due to this stockholders for these U.S banks started to worry about the value of those stocks.
It is a good thing to measure the outcome in "what if" scenario.
And risk managers often approaches to risk in such manner.
However, it says that the scenario that will be given has the possibility of "highly will not happen" to the firm.
I hope that the outcome of the test does not scare the shareholders to the point where they decide to massively give up on their investment portfolios which they have with the company.
I think that can create a even worse chaos.
What can happen in the worst day of that firm?
What can their loss be?
How much would the loss be?
This is what we have been discussing in the 4350 class.
This stress test that is going to be tested against the U.S banks exactly aims to answer the question listed above.
It would take several weeks to complete the test and depending on the result we would know if the company needs more capital or it is good as it is now.
Due to this stockholders for these U.S banks started to worry about the value of those stocks.
It is a good thing to measure the outcome in "what if" scenario.
And risk managers often approaches to risk in such manner.
However, it says that the scenario that will be given has the possibility of "highly will not happen" to the firm.
I hope that the outcome of the test does not scare the shareholders to the point where they decide to massively give up on their investment portfolios which they have with the company.
I think that can create a even worse chaos.
Report: 4 million Americans lost health insurance since recession began
From http://www.bizjournals.com/albany/stories/2009/02/16/daily58.html.
Health insurance plays a critical role on personal finance.
From risk management point of view it is very important to have available coverages in time of need.
However, the economic crisis has driven the people out of their policies.
And report also says that much as 14,000 people could be losing their coverages daily.
In the past, I have researched about the rising health care issues for RMI 4010.
The health care price has gone up 2 times the amount of our inflation.
As unemployment rate rise, the people who are uninsured would go up by a large amount.
As we can expect the condition can get worse, each people must perform their personal risk management to stay in good shape .
Things can happen when you least epect it.
Health insurance plays a critical role on personal finance.
From risk management point of view it is very important to have available coverages in time of need.
However, the economic crisis has driven the people out of their policies.
And report also says that much as 14,000 people could be losing their coverages daily.
In the past, I have researched about the rising health care issues for RMI 4010.
The health care price has gone up 2 times the amount of our inflation.
As unemployment rate rise, the people who are uninsured would go up by a large amount.
As we can expect the condition can get worse, each people must perform their personal risk management to stay in good shape .
Things can happen when you least epect it.
Miners killed in China : at least 74 dies
From New York Times Feb 22, 2009
http://www.nytimes.com/2009/02/23/world/asia/23miners.html?hp
Okay, here is what happened.
China is known as having the most dangerous mining industry measured by the death rates.
This accident happened in the Tunlan Coal Mine in Shanxi province.
Xinhua( China's state news agency) reported thatt he blast or an explosion occured at 2:17AM.
The mining company was called the Shanxi coking Coal group.
This group, listed on the Shanghai Stock Exchange, is one of China's largest producers of coking coal. Which totals to be about five million tons a year.
Surprisingly, this coal mine was considered safe in China sinece it had no accident reports for the past 5 years.
ONLY 5 years.
This accident ranked itself for the 2nd deadliest accident since December of 2007, where it killed 105 miners.
However, due to the nature of being able to make tons of money, coal mine business seems to be attractive among the chinese.
There must be a way to manage these type of losses.
Because having 74 people being killed in a single accident seems very serious.
Government as well as other types of institutions must figure out the way to avoid these riks.
Risk managers in China should be able find a big niche market just by consulting with these large coal mining companies and providing them with an idea of safety standard.
http://www.nytimes.com/2009/02/23/world/asia/23miners.html?hp
Okay, here is what happened.
China is known as having the most dangerous mining industry measured by the death rates.
This accident happened in the Tunlan Coal Mine in Shanxi province.
Xinhua( China's state news agency) reported thatt he blast or an explosion occured at 2:17AM.
The mining company was called the Shanxi coking Coal group.
This group, listed on the Shanghai Stock Exchange, is one of China's largest producers of coking coal. Which totals to be about five million tons a year.
Surprisingly, this coal mine was considered safe in China sinece it had no accident reports for the past 5 years.
ONLY 5 years.
This accident ranked itself for the 2nd deadliest accident since December of 2007, where it killed 105 miners.
However, due to the nature of being able to make tons of money, coal mine business seems to be attractive among the chinese.
There must be a way to manage these type of losses.
Because having 74 people being killed in a single accident seems very serious.
Government as well as other types of institutions must figure out the way to avoid these riks.
Risk managers in China should be able find a big niche market just by consulting with these large coal mining companies and providing them with an idea of safety standard.
Monday, February 16, 2009
calling out "too risky" is sometimes not good?
Ariticle found here.
http://www.businessweek.com/ap/financialnews/D969BKFO0.htm
Major advantage of having risk management is to secure the survival of the firm.
As a student in RMI, we are getting better with many risk managing techniques.
It can be insurance.
It can be non-insurance transfer.
Some type of retention, whether it be active or passive.
Avoidance ( creates "risk free" as we discuss in 4350).
Risk control that can either be prevention or reduction.
It does not have to be a risk manager that goes through the process of knowing how risky the decision or action that the firms are currently making.
In the article it states that the former head of regulatory risk was fired for warning the CEO of riskiness of the firm.
Is it wrong to bring this type of opinion up to the boss?
If you get fired everytime when you warn something about risk how can risk managers have jobs?
It seems like the people who are firing is telling us to manage the risk of you being fired and not the risk that the actual company holds.
It is not a small company when we hear HBOS.
I think many firms should understand how important it is to manage risk.
If every single company did their job by having good risk management,
alot of what we see in the economy could have never happened.
http://www.businessweek.com/ap/financialnews/D969BKFO0.htm
Major advantage of having risk management is to secure the survival of the firm.
As a student in RMI, we are getting better with many risk managing techniques.
It can be insurance.
It can be non-insurance transfer.
Some type of retention, whether it be active or passive.
Avoidance ( creates "risk free" as we discuss in 4350).
Risk control that can either be prevention or reduction.
It does not have to be a risk manager that goes through the process of knowing how risky the decision or action that the firms are currently making.
In the article it states that the former head of regulatory risk was fired for warning the CEO of riskiness of the firm.
Is it wrong to bring this type of opinion up to the boss?
If you get fired everytime when you warn something about risk how can risk managers have jobs?
It seems like the people who are firing is telling us to manage the risk of you being fired and not the risk that the actual company holds.
It is not a small company when we hear HBOS.
I think many firms should understand how important it is to manage risk.
If every single company did their job by having good risk management,
alot of what we see in the economy could have never happened.
The U.S. Government to the Rescue (Again)
Article on business week.
http://www.businessweek.com/investor/content/feb2009/pi20090213_135410.htm?campaign_id=investing_related
Basically, government is trying to help out by buying "toxic" assets from financial institutions.
They would create a program to encourae private sector investors to buy bad mortgate assets.
Recently, government seems to be paying a lot from tax payers.
Including the aid to the automobile industry.
I thinks banks are in need of aid.
If banks fail, nothing is going to move.
Here is what I think.
Government thinks tax payers do not know how to spend their own money...
So let us spend it for you...
How much can each tax payers get if these "rescue funds" are allocated equally back?
This is very personal opinion, however, I believe that government should have better risk management in terms of what would happen by giving out the money as they are now.
Yes, I understand that GM and others are creating a report on how they can cut costs and pay the money back.
But will this be a good enough action to have the tax payers money spent like that?
http://www.businessweek.com/investor/content/feb2009/pi20090213_135410.htm?campaign_id=investing_related
Basically, government is trying to help out by buying "toxic" assets from financial institutions.
They would create a program to encourae private sector investors to buy bad mortgate assets.
Recently, government seems to be paying a lot from tax payers.
Including the aid to the automobile industry.
I thinks banks are in need of aid.
If banks fail, nothing is going to move.
Here is what I think.
Government thinks tax payers do not know how to spend their own money...
So let us spend it for you...
How much can each tax payers get if these "rescue funds" are allocated equally back?
This is very personal opinion, however, I believe that government should have better risk management in terms of what would happen by giving out the money as they are now.
Yes, I understand that GM and others are creating a report on how they can cut costs and pay the money back.
But will this be a good enough action to have the tax payers money spent like that?
Risk : mutual funds
Many investment vehicles are available in today's market.
Needless to say many of them are very structured in a very complicated way.
There are many ways you can invest.
Investing in mutual funds are what many people do these days.
And as part of the class having diversified portfolio is one way to mitigate our risk.
Mutual funds can be a great benifit that creates return on investment.
And it can simply help us to diversify.
However, what happened during January 2009?
Bernard Madoff has made investros recognized how risky it can be when not knowing how returns are made.
Each day in class we discuss how firms are valued.
And first thing we do is to determine the way that they make money.
By knowing those information, we can then apply the costs assosiated with each of the firms and start a valuable anaysis.
Isn't this similar to what we should do to our investment?
People are investing in something many calls it as a "Black Box".
Should we feel comfortable as long as its giving us the return?
No we shouldn't feel comfortable.
Always know how it is making money.
If investors understands how to manage those risks effectively, the market itself should see an improvement.
http://www.businessweek.com/investor/content/dec2008/pi20081216_994051.htm
Needless to say many of them are very structured in a very complicated way.
There are many ways you can invest.
Investing in mutual funds are what many people do these days.
And as part of the class having diversified portfolio is one way to mitigate our risk.
Mutual funds can be a great benifit that creates return on investment.
And it can simply help us to diversify.
However, what happened during January 2009?
Bernard Madoff has made investros recognized how risky it can be when not knowing how returns are made.
Each day in class we discuss how firms are valued.
And first thing we do is to determine the way that they make money.
By knowing those information, we can then apply the costs assosiated with each of the firms and start a valuable anaysis.
Isn't this similar to what we should do to our investment?
People are investing in something many calls it as a "Black Box".
Should we feel comfortable as long as its giving us the return?
No we shouldn't feel comfortable.
Always know how it is making money.
If investors understands how to manage those risks effectively, the market itself should see an improvement.
http://www.businessweek.com/investor/content/dec2008/pi20081216_994051.htm
Sunday, February 8, 2009
Follow up on state farm's decision.
Few weeks ago, I have posted the decision that was made by state farm insurance.
The decision was for them to pull out from the HO insurance market at the state of Florida.
Now, I would like to discuss the potential consequenses of this decision.
First of all, we all know what state farm is and how huge it is.
It had the #1 market share in FL.
This decision for state farm is one of the biggest news in the property and casualty sector of today's insurance division.
The biggest loss I assume does not just lie in the HO insurance.
Now a days, many of the insurance companies offers good rates for combination of having HO insurance plus the automobile insurance.
And what I assume is that many who own the house owns a car...
It must have been a crucial decision that a state farm announced in order to suffer the loss that would be seen without participating in this market segment.
The decision was for them to pull out from the HO insurance market at the state of Florida.
Now, I would like to discuss the potential consequenses of this decision.
First of all, we all know what state farm is and how huge it is.
It had the #1 market share in FL.
This decision for state farm is one of the biggest news in the property and casualty sector of today's insurance division.
The biggest loss I assume does not just lie in the HO insurance.
Now a days, many of the insurance companies offers good rates for combination of having HO insurance plus the automobile insurance.
And what I assume is that many who own the house owns a car...
It must have been a crucial decision that a state farm announced in order to suffer the loss that would be seen without participating in this market segment.
Earnings: The Sting of the Strong Dollar
volatility, uncertainty are some of the terminology we hear frequently when taking RMI courses
volatility of market and volatility of currency are giving much of U.S firms headaches.
However, it is not only the U.S companies that are suffering from change in U.S dollars.
During December, I have visited my country. ( Japan)
Major automobile companies in Japan has announced decline in the profit line and the annual sales estimate was off due to the change in value of Yen vs. Dollar.
Toyota has not seen losses for a while on their operation and sales.
However, due to the economic condition last year they have reported a loss in the firm.
One of the reason that brought them a loss was the annual estimate.
They have done the estimate of sales and expense in assumptions of X yen = Y dollars.
We can imagine what would the consequences would be if there are significnat change in either side of this simple currency formula.
Toyota has announced that move even in 1 Yen compared to dollar can cause them a loss of 1million dollars.
Hedging was one of the techniques we have discussed in class.
Such as Delta or American Airlines hedging against oil prices,
American Barrick hedging against gold prices.
In today's market condition, hedging with currency forwards can create a very big value to each of the firms operating in numerous regions.
volatility of market and volatility of currency are giving much of U.S firms headaches.
However, it is not only the U.S companies that are suffering from change in U.S dollars.
During December, I have visited my country. ( Japan)
Major automobile companies in Japan has announced decline in the profit line and the annual sales estimate was off due to the change in value of Yen vs. Dollar.
Toyota has not seen losses for a while on their operation and sales.
However, due to the economic condition last year they have reported a loss in the firm.
One of the reason that brought them a loss was the annual estimate.
They have done the estimate of sales and expense in assumptions of X yen = Y dollars.
We can imagine what would the consequences would be if there are significnat change in either side of this simple currency formula.
Toyota has announced that move even in 1 Yen compared to dollar can cause them a loss of 1million dollars.
Hedging was one of the techniques we have discussed in class.
Such as Delta or American Airlines hedging against oil prices,
American Barrick hedging against gold prices.
In today's market condition, hedging with currency forwards can create a very big value to each of the firms operating in numerous regions.
High beta financial stocks
As we discussed numerous times in class Beta is a measure used to see the volatility or tendencty of movement of Stock vs. Market.
Beta of 1 moves perfectly along with the market.
Beta of 2 moves twice as much as the market.
and it is the index represented by S&P index.
When investing in stock market, individuals must think about the return and the risk associated with each of the stocks.
And one technique to increase wealth was to have diversity in our portfolio.
Risk management can show a lot of its value in such category as well.
Now, how much a Beta can grow?
I have searched for high Beta companies online and below are some of the companies.
from business week/
1. Citigroup B= 3.2
2. Office Depot B=3.1
3.Ford B=2.9
These seems very high in Beta.
However, according to website at Schaeffers research,
1.Mercadolibre Inc. B=4.55
2.LMI Aerospace Inc. B=3.82
3.LDK Solar Co. LTD B=3.72
I personally think investors should have a very good understanding of the company if they are going to be investing into any of these companies. I don't know how these companies are more volatile than companies such as Citi or Ford, which it is now in ditress.
Beta of 1 moves perfectly along with the market.
Beta of 2 moves twice as much as the market.
and it is the index represented by S&P index.
When investing in stock market, individuals must think about the return and the risk associated with each of the stocks.
And one technique to increase wealth was to have diversity in our portfolio.
Risk management can show a lot of its value in such category as well.
Now, how much a Beta can grow?
I have searched for high Beta companies online and below are some of the companies.
from business week/
1. Citigroup B= 3.2
2. Office Depot B=3.1
3.Ford B=2.9
These seems very high in Beta.
However, according to website at Schaeffers research,
1.Mercadolibre Inc. B=4.55
2.LMI Aerospace Inc. B=3.82
3.LDK Solar Co. LTD B=3.72
I personally think investors should have a very good understanding of the company if they are going to be investing into any of these companies. I don't know how these companies are more volatile than companies such as Citi or Ford, which it is now in ditress.
Tuesday, February 3, 2009
Hard to Say "Stop"
Today, value of risk managers are rising rapidly.
It has grown its status more than just compliance advisor or backroom suppoerter.
Fall down of Lehman brothers seems as it triggered the big mess that wehave right now.
How were the risk been percieved at Lehman, Merril Lynch, AIG, and the big 3?
It seems as it was hard for them to say "Stop" or "No".
Greed is something each of us have and how to manage that can be a hassle.
However, a successful risk managers must analyze the exposure of risk along with the severity.
Even in times of making a lot of money to its firms or organizations, people should not forget what derives value to the firm.
It is the long run outcome of the firm and its absolutely wrong to plan for a short time big reward.
Firms must survive the short run and live long enough to see the long run outcome in order to be valued in the society.
Say "No" when there are figures which may jeopardize the future of an entity.
It has grown its status more than just compliance advisor or backroom suppoerter.
Fall down of Lehman brothers seems as it triggered the big mess that wehave right now.
How were the risk been percieved at Lehman, Merril Lynch, AIG, and the big 3?
It seems as it was hard for them to say "Stop" or "No".
Greed is something each of us have and how to manage that can be a hassle.
However, a successful risk managers must analyze the exposure of risk along with the severity.
Even in times of making a lot of money to its firms or organizations, people should not forget what derives value to the firm.
It is the long run outcome of the firm and its absolutely wrong to plan for a short time big reward.
Firms must survive the short run and live long enough to see the long run outcome in order to be valued in the society.
Say "No" when there are figures which may jeopardize the future of an entity.
Winning strategy for 2009: insurance sector
As we discuss everytime in class, each firm has its own value and various methods of deriving revenue.
Insurance company whether it is Life/Health or P&C creates revenue through competitive pricing among the rivals.
We know that today, U.S economy is at recession.
With the individual income level flattening or declining, insurance industries are suffering.
Big part of revenue for insurance companies are functions of
Price
market segmentation
cash-flow-generation
the liquidity to its consumers( from consumers view)
However, analysts from various insurance companies are now experiencing the difficulties in arriving at proper forecasting due to the volatile market situation or economic instability.
Concentrating on having heavy risk management may create value in these type of situations and clear some of the anxieties among people.
Insurance company whether it is Life/Health or P&C creates revenue through competitive pricing among the rivals.
We know that today, U.S economy is at recession.
With the individual income level flattening or declining, insurance industries are suffering.
Big part of revenue for insurance companies are functions of
Price
market segmentation
cash-flow-generation
the liquidity to its consumers( from consumers view)
However, analysts from various insurance companies are now experiencing the difficulties in arriving at proper forecasting due to the volatile market situation or economic instability.
Concentrating on having heavy risk management may create value in these type of situations and clear some of the anxieties among people.
Wednesday, January 28, 2009
The Wall Street Journal:State Farm Won't Cover Properties In Florida.
So here is my 2nd post.
Today I want to discuss about the article found on Jan.28,2009 from Wall Street Journal.
As the title indicates its pretty clear, State Farm (The nation's largest insurer of autos and home) decided it is pulling out of the Florida homeowners insurance market.
Reason: The risk Florida faces against Hurricanes are enourmous.
In order to insure these risks State Farm must charge higher premiums to insureds.
However, 47% raise in their rate has made the Florida regulators to reject this request.
Now, that Florida has uninsured homeowners left in state, it is interesting to see who is gonna take over the market.
However, one thing we can expect is Florida's homeowners will suffer the somewhat high rate regardless of who is going to be the insurance provider.
Who will be willing to take on the risk which State Farm has withdrawn from?
Would it be someone that focuses on niche market or someone that writes general coverages?
State Farm is saying that it takes about 2 years to drop all the policies.
Today I want to discuss about the article found on Jan.28,2009 from Wall Street Journal.
As the title indicates its pretty clear, State Farm (The nation's largest insurer of autos and home) decided it is pulling out of the Florida homeowners insurance market.
Reason: The risk Florida faces against Hurricanes are enourmous.
In order to insure these risks State Farm must charge higher premiums to insureds.
However, 47% raise in their rate has made the Florida regulators to reject this request.
Now, that Florida has uninsured homeowners left in state, it is interesting to see who is gonna take over the market.
However, one thing we can expect is Florida's homeowners will suffer the somewhat high rate regardless of who is going to be the insurance provider.
Who will be willing to take on the risk which State Farm has withdrawn from?
Would it be someone that focuses on niche market or someone that writes general coverages?
State Farm is saying that it takes about 2 years to drop all the policies.
Monday, January 19, 2009
1/19/09 New York Times
My first post!!
Found the article about health care in today's paper (NY times) page A19
Impact of Paerson's Plan to Plug Health Care Age Gap May Be Limited.
The main concern
"Vast numbers of young adults between the ages of 19 and 29 not having health insurance"
Couple reasons why
1. Young people often start their careers working part time or for employers who do not offer health coverage.
2. People decide not to buy insurance because of the cost.
3. People decide not to buy insurance because belief of their youth making them invincible.
To plug the gap, Gov.Paterson is preparing a plan that will allow many more young adults to be claimed as dependents on their parents' health insurance plans. (step towards NY universal health care.)
However, reports states that other states implementing similar system did not see a significant improvements.
I think it is very difficult for the U.S to bring in universal health care, even at the state level.
We must consider the number of frauds that exist in our society as it is now and the potential growth of those numbers as a consequence.
Also when we look at Canada, the waiting times for doctors can be rediculous.
Also we must consider the number of illegal immigrants in our country.
How many would commit fraud by selling or lending false "health care card" type of items?
I just think its very very difficult.
Found the article about health care in today's paper (NY times) page A19
Impact of Paerson's Plan to Plug Health Care Age Gap May Be Limited.
The main concern
"Vast numbers of young adults between the ages of 19 and 29 not having health insurance"
Couple reasons why
1. Young people often start their careers working part time or for employers who do not offer health coverage.
2. People decide not to buy insurance because of the cost.
3. People decide not to buy insurance because belief of their youth making them invincible.
To plug the gap, Gov.Paterson is preparing a plan that will allow many more young adults to be claimed as dependents on their parents' health insurance plans. (step towards NY universal health care.)
However, reports states that other states implementing similar system did not see a significant improvements.
I think it is very difficult for the U.S to bring in universal health care, even at the state level.
We must consider the number of frauds that exist in our society as it is now and the potential growth of those numbers as a consequence.
Also when we look at Canada, the waiting times for doctors can be rediculous.
Also we must consider the number of illegal immigrants in our country.
How many would commit fraud by selling or lending false "health care card" type of items?
I just think its very very difficult.
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