Being Cliche Doesn't Make It Less True

A nice, concise, direct post titled "Want To Be Taken Seriously?  Become a Better Writer."

The title says it all.  All students (among many, many others) should read and embrace every word.

- Rick

The Urban Institute today released a report titled "Lost Generations?  Wealth Building among Young Americans."  Here's a summary and representative passage:

For many, the American dream of working hard, saving more, and becoming wealthier than one's parents holds true.

Unless you're under 40.  Today, those in Gen X and Gen Y have accumulated less wealth than their parents did at that age over a quarter-century ago.  Their average wealth in 2010 was 7 percent below that of those in their 20s and 30s in 1983.

Certainly, this has implications for future actuarial applications in retirement, pensions, personal wealth, etc.  Not to mention just plain old personal considerations...

- Rick

Cat(Scan) Got Your Tongue?

It's not uncommon for people, especially earlier in their careers, to find themselves not saying much in group settings.  As this article, "Speaking Up Is Hard to Do: Researchers Explain Why" from The Wall Street Journal (Feb. 7, 2012) mentions, it is not always simple shyness at work.  Neorologically, it turns out that, under certain circumstances, we actually become less intelligent in group settings...

- Rick

In Case You're Dying for Cash

Here's a long, but good, article from the August 10 New York Times, titled "Are You Worth More Dead Than Alive?"  Some might indeed think it's a bit of an uncomfortable topic -- basically, people and companies betting on when someone will die.  But the world of viatical or life settlements is a growing reality, and of course it's related to actuarial science in both its reliance on life expectancy calculations, and its financial implications.

Essentially, someone in need of cash (perhaps for medical bills because of a terminal illness, or perhaps even for a healthy person's desire to, say, travel in her/his retirement years) sells their life insurance policy to the highest bidder.  The purchaser takes over the premium payments and becomes the beneficiary upon the death of the original insured.

Interesting subject from a number of perspectives:  cultural, financial, moral, regulatory,...

- Rick

Are Companies "Risk-Neutral"?

I've always wondered why it's so readily common in finance to assume that a company is "risk-neutral."  The common idea is that people are risk-averse, but organizations are risk-neutral.

And yet, that's always bothered me, because a company doesn't make decisions - rather, the people that comprise the company and the corporate culture make operational and strategic corporate decisions.  And if people tend to be risk-averse -- doesn't that attitude toward risk carryover into their working lives and activities?

Here's a paper posted on the Social Science Research Network (SSRN, at www.ssrn.com) titled "Behavioral Consistency in Corporate Finance: CEO Personal and Corporate Leverage," which seems to point in the direction of my concern.  Here's the abstract:

"We find that firms behave consistently with how their CEOs behave personally in the context of leverage choices. Analyzing data on CEOs' leverage in their most recent primary home purchases, we find a positive, economically relevant, robust relation between corporate and personal leverage in the cross-section and when examining CEO turnovers. The results are consistent with an endogenous matching of CEOs to firms based on preferences, as well as with CEOs imprinting their personal preferences on the firms they manage, particularly when governance is weaker. Besides enhancing our understanding of the determinants of corporate capital structures, the broader contribution of the paper is to show that CEOs' personal behavior can, in part, explain corporate financial behavior of the firms they manage."

- Rick

Recent increases in Fertility Rates

An abstract from an article in the April 2012 issue of the Journal of Population Economics finds

"... fertility increases among college graduate women, especially at older ages since the mid- to late 1990s. There are also increases in fertility among less-educated women, but these are concentrated at younger ages."

- Rick

Intergenerational Debt

A nice piece from Niall Ferguson in The Telegraph, "We're Mortgaging the Future of the Younger Generation."  Some quotes:

"Often these debts get discussed as if they themselves were the problem, and the result is a rather sterile argument between proponents of “austerity” and “stimulus”. I want to suggest that they are a consequence of a more profound malaise." 

"The heart of the matter is the way public debt allows the current generation of voters to live at the expense of those as yet too young to vote or as yet unborn. In this regard, the statistics commonly cited as government debt are themselves deeply misleading, for they encompass only the sums owed by governments in the form of bonds." 

"... the official debts in the form of bonds do not include the often far larger unfunded liabilities of welfare schemes like – to give the biggest American programmes – Medicare, Medicaid and Social Security."

- Rick