The Servicemembers Civil Relief Act (SCRA) helps military,
reservists and National Guard members meet financial and legal obligations at home while they fulfill active-duty assignments. Though the SCRA has been active for some time, the military and the lending community still need better awareness of this law and its provisions, which can be extremely beneficial to deployed servicemembers and their families.
The SCRA requires mortgage lenders, landlords and other creditors to grant
you special status. By law, they cannot immediately foreclose on your mortgage or other loans and cannot evict you as a tenant. But that’s not all: SCRA also requires lenders to lower the interest rates you pay on existing mortgages, credit cards and personal loans. And lenders must make sure the lower interest rates translate into lower monthly payments.
Some of the SCRA’s most helpful provisions include:
Reduced interest rates and loan payments: Lenders must lower interest rates to six percent on your pre-existing home mortgages, credit cards, car loans
and other personal loans. Any interest you owe above six percent during your period of active duty will be forgiven, not just deferred.
Property protection: Lenders cannot foreclose on your home mortgage or other loans without proving legally that your military duty did not affect your ability to make payments.
Rent protection: If your rent is less than $2,465 per month, your landlord cannot evict you or your family for late payments or any reason without petitioning for a court order.
Rental/auto lease protection:
When you are deployed or relocated, you can terminate a preexisting residential or automobile lease. To terminate a lease, you generally need to give the landlord or lender 30 days written notice.
State tax support: If your spouse works and owes tax in a state other than the state of your permanent legal residence, SCRA will protect your family from double taxation. When that state determines the tax rate on your spouse’s income, they will exclude your servicemember income.
Legal postponement: If your deployment prevents you from attending court or legal meetings related to a divorce or other legal process, you can request deferral for 90 days or longer. To do so, submit a written request to the court along with a letter from your commander that explains why you cannot attend proceedings before a specified date.
In order to claim the SCRA benefits, you’ll have to request them from your lenders and provide proof of your active
status. Although most lenders comply readily when you disclose your military status, some may not be aware of the law. If you encounter any problems, contact your military legal assistance officer.
Combat Zone Protection Active-duty military personnel in combat zones receive certain tax breaks and privileges that help keep their minds on the job at hand.
As a member of the military, you are eligible for an interest-free extension to pay your income taxes because service in Iraq, Afghanistan and other locations may have seriously impaired your ability to pay or file a return. The extension lasts for the initial period of service plus six months and covers a soldier’s spouse as well, regardless of whether they file joint. or separate returns. The extension applies only to federal income taxes. Individuals serving in a combat zone as support for the U.S. armed forces, such as Red Cross workers, accredited correspondents and civilian personnel acting under the direction of the U.S. armed forces are also entitled to the extension.
Active-duty pay earned by U.S. armed forces personnel performing duties in a combat zone is not subject to federal income tax (soldiers are still obligated to pay Social Security and Medicare taxes.) Additionally, active-duty pay is not taxed in the state in which military personnel are currently stationed, only in their official home state of record. Most states exempt all or part of active-duty pay.
Calling home is also encouraged, because telephone calls placed to the United States from a combat zone by a member of the U.S. armed forces are exempt from the federal excise tax on toll telephone service. If you already paid the excise tax, you can file IRS Form 8849 to obtain a refund.
Combat zone military personnel, still under the combat extension, are eligible to make qualified contributions to an IRA for the 2006 tax year after April 16, 2007. Servicemembers who are entitled to a refund but who do not file until they return home from combat duty will receive interest on the refund amount from the IRS. However, the tax return must be filed within the six-month extension window to be eligible for the interest payment.
Thursday, September 20, 2007
Monday, September 17, 2007
TRIA Extension -- Global Impact
At the Les Rendez-Vous des Septembre, Munich Reinsurance Company Chairman of the Reinsurance Committee Torsten Jeworrek indicated that global governments should not rely on reinsurers to fill in capacity gaps should they decide not to back state terrorism insurance pools. Of particular concern is the German government's recent decision to not extend its 8 billion euro guarantee for the EXTREMUS Versicherung A.G. national terror insurance pool. German insurance market insiders are hopeful the German government will change its mind once the U.S. federal government extends its own terrorism insurance pool. Jeworrek said, "We will continue to make use of our flexibility and creativity to find solutions for complex risk situations. However, risk-adequate prices, terms and conditions are a prerequisite for complex risk maintaining stable income and financial strength over the long term, and in the interests of our clients, shareholders and staff." Other participants at the meeting agreed the private terrorism risk market did not have enough capacity to stave off risks related to those events without high premium levels; and in many cases, private insurance capacity for terrorism risks would be inconsistent.
Source: Business Insurance**http://www.businessinsurance.com/cgi-bin/news.pl?newsId=11066
Source: Business Insurance**http://www.businessinsurance.com/cgi-bin/news.pl?newsId=11066
More On Next Year's Premiums
TWO years of unexpectedly quiet hurricane activity in the US have caused a dramatic drop in insurance premiums that, experts say, could spark consolidation amongst brokers and underwriters.
The chief executives of the world's largest insurers and brokers are predicting cover for hurricanes in the US will tumble by at least 10pc in 2008 - on top of a 20pc slump in premiums this year.
They forecast the sharp falls as they headed out to Monaco, where they meet over the next few days to estimate demand for next year's policies. The annual Monte Carlo Rendezvous is the most important event in the industry's calendar where reinsurance companies, which provide cover to insurance businesses, unveil their demands for 2008. Insurance companies tend to pass on any premium changes to their policyholders.
Grahame Chilton, chief executive of the world's third largest reinsurance broker Benfield, said despite some major hurricanes such as Felix, this has been a benign storm season.
"In 2007, catastrophe reinsurance fell by around 5pc and insurance was off by more than 20pc,'' he said. "Without a major loss, we are expecting a reduction of between 5pc to 10pc for reinsurance and for insurance, much more.''
It is thought insurers at Lloyd's of London could reduce the maximum amount of business they can underwrite in 2008 as a result of the sharp premium falls. This could lead to total capacity at the world's largest insurance market dropping from a record level of pounds 16.1bn.
Although a quiet hurricane season could lead to record profits, a fall in prices combined with the negative impact of a weak dollar may lead to takeover activity in the sector. Mr Chilton said: "There will be further consolidation.''
He said the growth of capital markets is likely to continue, with more demand for catastrophe bonds, which give investors a generous interest rate if they take on risk. "For the first time in 2007, cat bonds were more competitive than reinsurance,'' he said.
Stephen Catlin, chief executive and deputy chairman of Catlin - the largest syndicate in Lloyd's - agreed the relationship between reinsurance and capital markets will be a major discussion point. "Some people are always quite protective of their own position,'' he said "But I think there is not enough capital in the reinsurance market to pay for the big exposures in places like Florida. As such, using the capital markets as a buffer is evidently sensible.''
The chief executives of the world's largest insurers and brokers are predicting cover for hurricanes in the US will tumble by at least 10pc in 2008 - on top of a 20pc slump in premiums this year.
They forecast the sharp falls as they headed out to Monaco, where they meet over the next few days to estimate demand for next year's policies. The annual Monte Carlo Rendezvous is the most important event in the industry's calendar where reinsurance companies, which provide cover to insurance businesses, unveil their demands for 2008. Insurance companies tend to pass on any premium changes to their policyholders.
Grahame Chilton, chief executive of the world's third largest reinsurance broker Benfield, said despite some major hurricanes such as Felix, this has been a benign storm season.
"In 2007, catastrophe reinsurance fell by around 5pc and insurance was off by more than 20pc,'' he said. "Without a major loss, we are expecting a reduction of between 5pc to 10pc for reinsurance and for insurance, much more.''
It is thought insurers at Lloyd's of London could reduce the maximum amount of business they can underwrite in 2008 as a result of the sharp premium falls. This could lead to total capacity at the world's largest insurance market dropping from a record level of pounds 16.1bn.
Although a quiet hurricane season could lead to record profits, a fall in prices combined with the negative impact of a weak dollar may lead to takeover activity in the sector. Mr Chilton said: "There will be further consolidation.''
He said the growth of capital markets is likely to continue, with more demand for catastrophe bonds, which give investors a generous interest rate if they take on risk. "For the first time in 2007, cat bonds were more competitive than reinsurance,'' he said.
Stephen Catlin, chief executive and deputy chairman of Catlin - the largest syndicate in Lloyd's - agreed the relationship between reinsurance and capital markets will be a major discussion point. "Some people are always quite protective of their own position,'' he said "But I think there is not enough capital in the reinsurance market to pay for the big exposures in places like Florida. As such, using the capital markets as a buffer is evidently sensible.''
As Reinsurance Prices Drop, Insurers More Likely To Buy
Tue Sep 11, 2007 13:48:00By Lavonne Kuykendall Of DOW JONES NEWSWIRES
CHICAGO (Dow Jones)--The price of reinsurance for U.S. exposures peaked last year in the aftermath of 2005's record storm season, but prices have dropped since and will continue to drop into the beginning of 2008.
A quiet 2006 storm season and a so-far-light U.S. hurricane season this year, along with an increase in available capital, all contributed to a stabilizing of reinsurance rates, according to insurance brokers.
As reinsurers meet this week at an annual conference in Monte Carlo, a series of reports predict falling reinsurance prices as insurers keep more risk on their own books or use catastrophe bonds or other capital markets solutions to reduce their exposure to big insurance claims.
Reinsurance is fast becoming a lower-cost alternative to catastrophe bonds, giving reinsurers an opportunity to grab more business from property/casualty insurers, after two years of seeing risk financing move away from reinsurers to capital market structures such as bonds, according to a report published this week by insurance broker Aon Corp.'s (AOC) reinsurance brokerage unit.
"We see the 2008 market cycle as an exciting and challenging one as reinsurance has the opportunity to play a larger role in capital management strategies," said Bryon Ehrhart, president and chief executive of Aon Re Services, in a Sunday press release.
Large buyers of reinsurance will still expand their use of capital markets, said Aon Re, but will use reinsurers for the majority of their risk financing, as credit market risk spreads continue to widen or become more expensive.
Barring a major catastrophic event, which could send prices back up, insurers will be more likely to use reinsurance markets than equity and debt markets, Aon Re said.
Guy Carpenter, the reinsurance brokerage unit of Marsh & McLennan Cos. (MMC), said in a report this week that the growing popularity of catastrophe bonds has helped discourage startups in the reinsurance market.
In the first half of this year, 15 catastrophe bonds with a total value of $3.2 billion have been created, and the total for the year is expected to easily surpass the total for 2006 of 20 transactions totaling $4.69 billion in risk capital.
Twelve new reinsurers were created in 2006, but only four started up in the first half of this year "as the perceived market opportunity diminished," the report said.
A Fox-Pitt Kelton Cochran Caronia Waller note estimated Tuesday that reinsurance prices will drop by between 5% and 10% for renewals that occur Jan. 1.
-By Lavonne Kuykendall, Dow Jones Newswires; 312-750-4141; lavonne.kuykendall@dowjones.com
(END) Dow Jones Newswires
09-11-07 1348ET
Copyright (c) 2007 Dow Jones & Company, Inc.- - 01 48 PM EDT 09-11-07 This is a real-time news story and may be updated in the near future.
CHICAGO (Dow Jones)--The price of reinsurance for U.S. exposures peaked last year in the aftermath of 2005's record storm season, but prices have dropped since and will continue to drop into the beginning of 2008.
A quiet 2006 storm season and a so-far-light U.S. hurricane season this year, along with an increase in available capital, all contributed to a stabilizing of reinsurance rates, according to insurance brokers.
As reinsurers meet this week at an annual conference in Monte Carlo, a series of reports predict falling reinsurance prices as insurers keep more risk on their own books or use catastrophe bonds or other capital markets solutions to reduce their exposure to big insurance claims.
Reinsurance is fast becoming a lower-cost alternative to catastrophe bonds, giving reinsurers an opportunity to grab more business from property/casualty insurers, after two years of seeing risk financing move away from reinsurers to capital market structures such as bonds, according to a report published this week by insurance broker Aon Corp.'s (AOC) reinsurance brokerage unit.
"We see the 2008 market cycle as an exciting and challenging one as reinsurance has the opportunity to play a larger role in capital management strategies," said Bryon Ehrhart, president and chief executive of Aon Re Services, in a Sunday press release.
Large buyers of reinsurance will still expand their use of capital markets, said Aon Re, but will use reinsurers for the majority of their risk financing, as credit market risk spreads continue to widen or become more expensive.
Barring a major catastrophic event, which could send prices back up, insurers will be more likely to use reinsurance markets than equity and debt markets, Aon Re said.
Guy Carpenter, the reinsurance brokerage unit of Marsh & McLennan Cos. (MMC), said in a report this week that the growing popularity of catastrophe bonds has helped discourage startups in the reinsurance market.
In the first half of this year, 15 catastrophe bonds with a total value of $3.2 billion have been created, and the total for the year is expected to easily surpass the total for 2006 of 20 transactions totaling $4.69 billion in risk capital.
Twelve new reinsurers were created in 2006, but only four started up in the first half of this year "as the perceived market opportunity diminished," the report said.
A Fox-Pitt Kelton Cochran Caronia Waller note estimated Tuesday that reinsurance prices will drop by between 5% and 10% for renewals that occur Jan. 1.
-By Lavonne Kuykendall, Dow Jones Newswires; 312-750-4141; lavonne.kuykendall@dowjones.com
(END) Dow Jones Newswires
09-11-07 1348ET
Copyright (c) 2007 Dow Jones & Company, Inc.- - 01 48 PM EDT 09-11-07 This is a real-time news story and may be updated in the near future.
Sunday, September 16, 2007
Significant Workers Comp. Change In NY
WC Policy Change Affects Insured Employers in NY
Under a new law that took effect on Sunday, September 9, insured employers who have employees in New York must provide "full" workers compensation coverage in the state, according to the state's Workers Compensation Board.Before this law was enacted, a multi-state employer could cover employees in New York under an "all states" endorsement to its workers comp policy unless the employer exceeded certain benchmarks, such as the amount of money its workers earned while in the state, stated Steve Carbone, head of education for the board's Bureau of Compliance.
With this new law, all insured employers must specifically state that they have coverage for New York workers under item 3A of a policy's information page, Mr. Carbone said. The new mandate stems from a workers comp reform law signed into law on March 13, 2007.
Mr. Carbone was unable to elaborate as to why legislators made the policy language mandatory. But he noted there have been instances of out-of-state contractors failing to adequately insure when hiring New York-based subcontractors with New York employees.Employers that are self-insured in other states, but not New York, must also comply, Mr. Carbone said. Penalties for failing to comply can add up, according Mr. Carbone.The statutory penalty for failing to comply is $1,000 for each 10 days that an employer does not have coverage. In addition, a noncompliant employer with five or fewer employees can be found guilty of a misdemeanor and fined an additional $5,000.An employer who has six or more employees can be found guilty of a felony and fined an additional $50,000. Employers without adequate workers compensation coverage can also be sued by an employee in civil court.
Under a new law that took effect on Sunday, September 9, insured employers who have employees in New York must provide "full" workers compensation coverage in the state, according to the state's Workers Compensation Board.Before this law was enacted, a multi-state employer could cover employees in New York under an "all states" endorsement to its workers comp policy unless the employer exceeded certain benchmarks, such as the amount of money its workers earned while in the state, stated Steve Carbone, head of education for the board's Bureau of Compliance.
With this new law, all insured employers must specifically state that they have coverage for New York workers under item 3A of a policy's information page, Mr. Carbone said. The new mandate stems from a workers comp reform law signed into law on March 13, 2007.
Mr. Carbone was unable to elaborate as to why legislators made the policy language mandatory. But he noted there have been instances of out-of-state contractors failing to adequately insure when hiring New York-based subcontractors with New York employees.Employers that are self-insured in other states, but not New York, must also comply, Mr. Carbone said. Penalties for failing to comply can add up, according Mr. Carbone.The statutory penalty for failing to comply is $1,000 for each 10 days that an employer does not have coverage. In addition, a noncompliant employer with five or fewer employees can be found guilty of a misdemeanor and fined an additional $5,000.An employer who has six or more employees can be found guilty of a felony and fined an additional $50,000. Employers without adequate workers compensation coverage can also be sued by an employee in civil court.
New Jersey insurance agents praised Gov. Jon Corzine for signing into law a bill that bans so-called step-down provisions in businesses' motor vehicle liability insurance policies and frees agents from a having to advise something that their insurers will not allow.
The Professional Insurance Agents of New Jersey Inc. supported the bill, S-1666/A-3038, which reverses an effect of the New Jersey Supreme Court's decision in Pinto v. New Jersey Manufacturers Insurance Co.
In the Pinto case, the court decided that step-down provisions in business auto policies, which allow insurance companies to reduce the coverage available to employees not individually named on their employer's business auto policy, are enforceable. Instead of receiving the uninsured and underinsured motorist limits stated on their employer's policy, an employee who is injured while occupying a business vehicle receives the lesser coverage limits of his own personal auto policy or that of a family member if he does not have his own policy.
The decision placed agents in an impossible situation, according to PIANJ President Jack Lynn. The ruling held that insurance producers have a duty to tell employers that if they want to avoid imposition of the step-down provision, they have to name their employees on their auto policy. However, most insurance companies will not allow employers to include employees as named insureds on a business auto policy.
"The impractical duty created by the Pinto decision had substantially increased the risk of litigation against insurance producers and placed them in an untenable position with their customers," said Lynn.
The new law eliminates the need to name employees on a business auto policy in order prevent the step-down provision. It also protects employees who are injured in work-related accidents by offering the full protections afforded under their employer's insurance policy.
The Professional Insurance Agents of New Jersey Inc. supported the bill, S-1666/A-3038, which reverses an effect of the New Jersey Supreme Court's decision in Pinto v. New Jersey Manufacturers Insurance Co.
In the Pinto case, the court decided that step-down provisions in business auto policies, which allow insurance companies to reduce the coverage available to employees not individually named on their employer's business auto policy, are enforceable. Instead of receiving the uninsured and underinsured motorist limits stated on their employer's policy, an employee who is injured while occupying a business vehicle receives the lesser coverage limits of his own personal auto policy or that of a family member if he does not have his own policy.
The decision placed agents in an impossible situation, according to PIANJ President Jack Lynn. The ruling held that insurance producers have a duty to tell employers that if they want to avoid imposition of the step-down provision, they have to name their employees on their auto policy. However, most insurance companies will not allow employers to include employees as named insureds on a business auto policy.
"The impractical duty created by the Pinto decision had substantially increased the risk of litigation against insurance producers and placed them in an untenable position with their customers," said Lynn.
The new law eliminates the need to name employees on a business auto policy in order prevent the step-down provision. It also protects employees who are injured in work-related accidents by offering the full protections afforded under their employer's insurance policy.
Market Risk
Location: New YorkAuthor: Beaumont VanceDate: Thursday, September 13, 2007
One of my favorite sources of business wisdom comes from a Sufi sage named Nasurdin. Many of his stories are applicable to risk management, probably because he was fond of pointing out where people are most blind or foolish; we just happen to be blind and foolish when it comes to risk and uncertainty.
As I read through the parade of daily articles about the current subprime meltdown, each trying to be more hysterical than the last, I am reminded of one of these famous Sufi stories. While traveling down the road one day, Nasurdin ran into a man who was depressed. The man revealed that he had suffered a long string of bad luck and, as a result, had lost everything except for the belongings he was carrying in his bag. So Nasurdin, being something of a mischievous sage, stole the man's remaining belongings and ran away down the road.
A mile ahead, Nasurdin placed the bag he had just stolen in the middle of the road, and hid in the bushes. Some time later the destitute man whom Nasurdin had robbed came upon his bag and started jumping up and down for joy. "What luck! What fantastic luck" the man exclaimed at having recovered his lost goods. Nasurdin, watching from the bushes shook his head and said, "What it takes to make some people happy!"
We often focus on our current state of loss to determine our level of happiness. If we win $100, and then lose $50, we often are unhappy, perceiving a loss. But if we lose $100, and then get it back, we are happy, perceiving a gain. Our perception of loss or gain depends not on the net result, but on how we frame it. Kahneman and Tversky devoted a great deal of time and effort to detail how framing radically changes the way we make decisions involving risk.
They showed that very often what we decide depends far more on how we frame a problem than on the actual facts. When it comes to assessing risk and probabilities, we are often fools. The subprime meltdown is a case-in-the-making for this foolishness. Of the many articles I have read in different, well-respected publications, none makes any mention of the amount of money that has been made to date on the mortgage market. None note that billions of dollars have been earned over the past years prior to the current losses. It is a grave omission; by discussing only the current loss, divorced of any reference to related past gains, the net result of the business is thoroughly obfuscated. This matters immensely in how we react to the current losses.
If a company like Goldman Sachs has earned $100 billion on mortgage backed securities over the past 5 years (I am just making this up for argument's sake) , then is a current loss of $5 Billion truly significant? Well, it is if Goldman forgets about the $100 billion and takes a highly risk averse stance. Being overly risk averse can cause as much loss as being overly risk taking.
But there is far more at stake here. Already many banks, perceiving only the downside, are pulling back their capital. Their peers, sensing that this is the right thing to do are also pulling out capital. The current mind set is "psychotic " according to Tony Crescenzi, a broker on Wall Street. The virtual cessation in trading of commercial paper has threatened to arrest the short term borrowing upon which many businesses rely to conduct operations. The effect is that of a run on the bank. When capital dries up, the economy slows and everyone loses.
Taking risks is what business is all about. Taking risks means that there will most likely be losses. If one is fortunate enough to suffer a loss of $95 for every $100 made, the net effect is still a positive cash flow. But if one forgets the gains and makes decisions based only on the losses, money can't be made. One becomes like those who endured the Great Depression and kept all of their money hidden in their mattresses.
Risk aversion can be an appropriate response. But it depends on the facts. As past sages such as Nasurdin, Kahneman and Tversky have shown us, our position on risk is often based on emotion or self deception rather than realities. This is why it is so incredibly important that specialists in risk and uncertainty (not just mathematical models, but the concepts) must be involved in strategic decision making. I fear that if we are not there to bring some sanity and logic to decision making, we will continue to get irrational exuberance followed by runs on the bank. We don't have to live this way.
One of my favorite sources of business wisdom comes from a Sufi sage named Nasurdin. Many of his stories are applicable to risk management, probably because he was fond of pointing out where people are most blind or foolish; we just happen to be blind and foolish when it comes to risk and uncertainty.
As I read through the parade of daily articles about the current subprime meltdown, each trying to be more hysterical than the last, I am reminded of one of these famous Sufi stories. While traveling down the road one day, Nasurdin ran into a man who was depressed. The man revealed that he had suffered a long string of bad luck and, as a result, had lost everything except for the belongings he was carrying in his bag. So Nasurdin, being something of a mischievous sage, stole the man's remaining belongings and ran away down the road.
A mile ahead, Nasurdin placed the bag he had just stolen in the middle of the road, and hid in the bushes. Some time later the destitute man whom Nasurdin had robbed came upon his bag and started jumping up and down for joy. "What luck! What fantastic luck" the man exclaimed at having recovered his lost goods. Nasurdin, watching from the bushes shook his head and said, "What it takes to make some people happy!"
We often focus on our current state of loss to determine our level of happiness. If we win $100, and then lose $50, we often are unhappy, perceiving a loss. But if we lose $100, and then get it back, we are happy, perceiving a gain. Our perception of loss or gain depends not on the net result, but on how we frame it. Kahneman and Tversky devoted a great deal of time and effort to detail how framing radically changes the way we make decisions involving risk.
They showed that very often what we decide depends far more on how we frame a problem than on the actual facts. When it comes to assessing risk and probabilities, we are often fools. The subprime meltdown is a case-in-the-making for this foolishness. Of the many articles I have read in different, well-respected publications, none makes any mention of the amount of money that has been made to date on the mortgage market. None note that billions of dollars have been earned over the past years prior to the current losses. It is a grave omission; by discussing only the current loss, divorced of any reference to related past gains, the net result of the business is thoroughly obfuscated. This matters immensely in how we react to the current losses.
If a company like Goldman Sachs has earned $100 billion on mortgage backed securities over the past 5 years (I am just making this up for argument's sake) , then is a current loss of $5 Billion truly significant? Well, it is if Goldman forgets about the $100 billion and takes a highly risk averse stance. Being overly risk averse can cause as much loss as being overly risk taking.
But there is far more at stake here. Already many banks, perceiving only the downside, are pulling back their capital. Their peers, sensing that this is the right thing to do are also pulling out capital. The current mind set is "psychotic " according to Tony Crescenzi, a broker on Wall Street. The virtual cessation in trading of commercial paper has threatened to arrest the short term borrowing upon which many businesses rely to conduct operations. The effect is that of a run on the bank. When capital dries up, the economy slows and everyone loses.
Taking risks is what business is all about. Taking risks means that there will most likely be losses. If one is fortunate enough to suffer a loss of $95 for every $100 made, the net effect is still a positive cash flow. But if one forgets the gains and makes decisions based only on the losses, money can't be made. One becomes like those who endured the Great Depression and kept all of their money hidden in their mattresses.
Risk aversion can be an appropriate response. But it depends on the facts. As past sages such as Nasurdin, Kahneman and Tversky have shown us, our position on risk is often based on emotion or self deception rather than realities. This is why it is so incredibly important that specialists in risk and uncertainty (not just mathematical models, but the concepts) must be involved in strategic decision making. I fear that if we are not there to bring some sanity and logic to decision making, we will continue to get irrational exuberance followed by runs on the bank. We don't have to live this way.
Subscribe to:
Posts (Atom)
