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.

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

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.

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.

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.

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.

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.

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

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.

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.

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.