Risky business

Six years after the financial meltdown there is once again talk about market bubbles. The New York Times asks, “Are stocks succumbing to exuberance? Is real estate? We thought we had exorcised these demons. It is therefore with something close to despair that we ask: What is it about risk taking that so eludes our understanding, and our control?imgres

“Part of the problem is that we tend to view financial risk taking as a purely intellectual activity. But this view is incomplete. Risk is more than an intellectual puzzle — it is a profoundly physical experience, and it involves your body. Risk by its very nature threatens to hurt you, so when confronted by it your body and brain, under the influence of the stress response, unite as a single functioning unit. This occurs in athletes and soldiers, and it occurs as well in traders and people investing from home. The state of your body predicts your appetite for financial risk just as it predicts an athlete’s performance.

“If we understand how a person’s body influences risk taking, we can learn how to better manage risk takers. We can also recognize that mistakes governments have made have contributed to excessive risk taking.

“Consider the most important risk manager of them all — the Federal Reserve. Over the past 20 years, the Fed has pioneered a new technique of influencing Wall Street. Where before the Fed shrouded its activities in secrecy, it now informs the street in as clear terms as possible of what it intends to do with short-term interest rates, and when. Janet L. Yellen, the chairwoman of the Fed, declared this new transparency, called forward guidance, a revolution; Ben S. Bernanke, her predecessor, claimed it reduced uncertainty and calmed the markets. But does it really calm the markets? Or has eliminating uncertainty in policy spread complacency among the financial community and actually helped inflate market bubbles? Continue reading “Risky business”

Those starting college worry about money

The 2013-14 academic year marks a half-decade since the economic recession hit, but concerns about the costs of attending college are influencing incoming freshmen more than ever, a new survey shows as reported by InsideHigherEd.

“While more than three-quarters of this year’s freshmen were admitted to their first-choice institution, an all-time low of 56.9 percent chose to attend it. Nearly 46 and 48 percent — both all-time highs — said price and financial aid, respectively, were “very

images-1

important” in their decision about which institution to attend. Among students who were accepted but did not enroll at their first-choice institution, about a quarter said lack of financial aid from that college was a very

important factor in their decision, and 60 percent said the same of being offered financial aid from the institution they chose to attend.

“The record-setting numbers are not an anomaly. Last year’s survey found that financial concerns increasingly affected students’ decision-making in ways both educational (where to attend college and what to study) and personal (why to attend and whether to live on campus). So it appears the impact of the 2008 economic recession has only gotten stronger from year to yea

“As state economies have recovered, we haven’t really seen all of those dollars come back into higher education, and it’s concerning that they may be gone for good,” said Kevin Eagan, interim director of the Cooperative Institutional Research Program at the University of California at Los Angeles, which publishes the report annually. “Institutions cannot be too comfortable resting on their laurels and expecting that academic reputation will carry as much weight, or more weight, than any other factor in whether admitted students choose to enroll.”

“The annual survey is The American Freshman: National Norms. The report is usually released in January, but last fall’s federal government shutdown delayed the results because the U.S. Education Department’s Integrated Postsecondary Education Data System, on which CIRP relies for the report, was blocked for a time. The survey includes 165,743 first-time, full-time students entering 234 four-year American colleges and universities of varying selectivity and type. Continue reading “Those starting college worry about money”

Accounting for victims

images-2There are a number of tools economists, government agencies and lawyers use to translate a death or injury into financial terms, says today’s Wall Street Journal. “These include deriving estimates from surveys about how much value people would place on, say, losing a limb or their sense of hearing; creating a life plan for medical care to estimate long-term expenses; and basing the value of a lost life on how many years it likely would have lasted if not for the unforeseen event that ended it. Feinberg said ze doesn’t take any of these into consideration. “It simply is not doable in the timeframe needed to streamline the program and get money out the door,” ze said. “I don’t think external resources are going to help you very much in what is essentially an emotional assignment.”

“As for parsing such factors as the age of victims, Feinberg said, “Spare me. You’re tying a program like this up in knots.” Ze added, “There is no substitute for getting money out the door.”

“Also, no donors specifically indicate they want their contribution to go to the neediest victims, Feinberg said.

“Kaitlynn Cates, a marathon spectator who suffered a severe calf injury, said ze understood a “sense of immediacy” demanded Feinberg disburse the funds quickly, and not based on a forensic analysis of need. If one victim was no longer able to provide for five children, “I would be the kind of person who says give it to the five children before you give it to me, but I understand from higher levels that would cause problems,” Cates said. Continue reading “Accounting for victims”

Prestige versus value in college choice

Having a choice is generally a good thing, and being able to choose among several college acceptances should be a wonderful thing indeed, as Paul Sullivan wrote this past week in the New York Timesimages

“But let’s face it: the cost of a college education these days ranges from expensive to obscenely expensive. So the decision is likely to be tougher and more emotional than most parents and children imagined as they weigh offers from colleges that have given real financial aid against others that are offering just loans.

“While some students will be able to go to college only if they receive financial aid and others have the resources to go wherever they want, most fall into a middle group that has to answer this question: Do they try to pay for a college that gave them little financial aid, even if it requires borrowing money or using up their savings, because it is perceived to be better, or do they opt for a less prestigious college that offered a merit scholarship and would require little, if any borrowing? It’s not an easy decision.

Full story: http://www.nytimes.com/2013/04/20/your-money/measuring-college-prestige-vs-price.html?pagewanted=all&_r=0

Bye-bye Blackberry

The story is simple: BlackBerry has lost nearly half its users in the past year.imgres

Research in Motion said on Thursday that it lost a million BlackBerry owners worldwide during the company’s last financial quarter. The New York Times reports that the company “has other bad news as well, a month before introducing its new BlackBerry 10 phones to the public. Revenue fell 48 percent in the company’s fiscal third quarter, ended Dec. 1, to $2.7 billion from $5.2 billion a year earlier. RIM reported net income of $9 million, down from $265 million last year. The company said that using nonstandard accounting methods to adjust for the tax gain and other pretax charges led to an adjusted net loss of $114 million for the third quarter, or 22 cents per share. Continue reading “Bye-bye Blackberry”