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.
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