This post was originally made by Dwang.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.
Sunday, April 12, 2009
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.
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