Foreclosures are becoming a daily story with friends and their family's losing their homes and all the equity that they have built up for years and years. After investigating short selling I came across an interesting article that suggests that short selling is a better option to take than foreclosing your house.
As we discussed in our lecture today, "in a short sale, the lender allows the property to be sold for less than the total amount due on the loan. In some cases, the lender forgives the remaining debt." So you are probably thinking why this is such a good idea? You are still losing a lot of your equity.
There are several advantages to doing a short sell as opposed to a foreclosure. The first and probably the most important, a short sell is much less detrimental to your credit record than compared to a foreclosure. Short selling also takes much less time and is much less expensive than a foreclosure.
Now you are probably thinking if short selling is so much more advantageous, why is everyone not doing it instead of foreclosures? Well, there are also several negative aspects to a short sell. The first obstacle that you as the homeowner would have to overcome is finding a real estate agent that will work for much less commission than in normal circumstances. Secondly, you would have to convince a lender to short sell a property, which could be very difficult. Also, once you have convinced the lender to engage in a short sell, the amount that the lender forgives is also taxable by the government.
Even though short selling is the clear choice over foreclosures, it is till the best idea to try and work out late payments with your lender and avoid putting yourself in the situation where you would have to choose between a foreclosure or a short sale on your home.
http://www.tucsoncitizen.com/daily/local/42927.php
http://real-estate.lawyers.com/residential-real-estate/Selling-Your-Home-For-Less-Than-You-Owe.html
Monday, March 30, 2009
Response to a respite in technological advancement
I ma writing in response to Anna's post entitled: "Will we experience a respite in technological advancement?" Anna states that due to the economy, people have started buying less cell phones, and this will lead a halt or slow down in technological development.
As I am sitting in my lecture writing this (not RMI lecture), I look to my right and my left and every person is either working on their laptop or on their new blackberry or iPhone (or both). As I look around me, I see complicated technological devices and I cannot help to disagree with Anna that technology is still advancing, if not faster than ever. Anna argues that people have started giving up luxury goods due to the recession and I completely agree with her. We all know what is happening to the auto industry, and how people are giving up buying new luxury cars during these times. However, I do not believe that cell phones could be considered as a luxury good. I believe that cell phones have become a necessity! If you do not have a device that is capable of keeping you informed in our fast-paced lifestyles, you are really putting yourself at a disadvantage and ultimately keeps you from your potential income.
Anna brings in a valid point that people are not buying these "luxury" phones since all the big companies are reporting big losses in sales. This could be true since these cell phone contract prices are all based on a time before the current crisis, and people can no longer afford these contracts. This does not mean that technology development will decrease. New powerful cell phones are still being released every other month. Just look at my previous post where I discussed the release of the new Palm Pre and the new Blackberry models that are constantly being released. http://na.blackberry.com/eng/newsroom/news/press/release.jsp?id=1823
Even though there are plenty of cell phone companies in the market, there is still a huge monopoly when it comes to cell phones. These contracts allow potential customers only to buy a particular phone with a particular service provider. This enables service providers to charge monopoly prices, since they are the only company to provide that particular model of cell phone. For example the apple iPhone sells at a very reasonable price, but the iPhone is locked in an exclusivity contract with AT&T, which allows AT&T to charge ridiculous prices for the iPhone 2 year contract. According to a news article on CNN, AT&T is now starting to sell the iPhone at a higher price, but then allows the customer to have the option not to sign the very expensive two year contracts.
AT&T has the right idea. Technology is still developing at an alarming pace and new cell phones are still going to be released very regularly. Thus, service providers need to adjust their strategies and also reduce some of the contract prices in order to attract more customers.
As I am sitting in my lecture writing this (not RMI lecture), I look to my right and my left and every person is either working on their laptop or on their new blackberry or iPhone (or both). As I look around me, I see complicated technological devices and I cannot help to disagree with Anna that technology is still advancing, if not faster than ever. Anna argues that people have started giving up luxury goods due to the recession and I completely agree with her. We all know what is happening to the auto industry, and how people are giving up buying new luxury cars during these times. However, I do not believe that cell phones could be considered as a luxury good. I believe that cell phones have become a necessity! If you do not have a device that is capable of keeping you informed in our fast-paced lifestyles, you are really putting yourself at a disadvantage and ultimately keeps you from your potential income.
Anna brings in a valid point that people are not buying these "luxury" phones since all the big companies are reporting big losses in sales. This could be true since these cell phone contract prices are all based on a time before the current crisis, and people can no longer afford these contracts. This does not mean that technology development will decrease. New powerful cell phones are still being released every other month. Just look at my previous post where I discussed the release of the new Palm Pre and the new Blackberry models that are constantly being released. http://na.blackberry.com/eng/newsroom/news/press/release.jsp?id=1823
Even though there are plenty of cell phone companies in the market, there is still a huge monopoly when it comes to cell phones. These contracts allow potential customers only to buy a particular phone with a particular service provider. This enables service providers to charge monopoly prices, since they are the only company to provide that particular model of cell phone. For example the apple iPhone sells at a very reasonable price, but the iPhone is locked in an exclusivity contract with AT&T, which allows AT&T to charge ridiculous prices for the iPhone 2 year contract. According to a news article on CNN, AT&T is now starting to sell the iPhone at a higher price, but then allows the customer to have the option not to sign the very expensive two year contracts.
AT&T has the right idea. Technology is still developing at an alarming pace and new cell phones are still going to be released very regularly. Thus, service providers need to adjust their strategies and also reduce some of the contract prices in order to attract more customers.
Tuesday, March 24, 2009
Blockbuster needs to be innovative
This post is in response to Jon's post where he explains that Blockbuster might soon close their doors due to some stiff competition from online DVD rental stores and also from smaller niche market DVD stores. I have always thought that Blockbuster had done really well since I see store on almost every other corner, I can think of three different Blockbuster locations within 5 miles from my house. So I decided to investigate this a little further and found that some parts of what Jon had said was true, but I found that Blockbuster is being cautious to protect themselves and that they were not going bankrupt.
From an article on CNNMoney.com, Blockbuster's spokesperson Karen Raskopf, said that they had hired a law firm called Kirkland & Ellis. Now this law firm is known to specialize in restructuring and bankruptcy and when Blockbuster made this announcement, their stocks fell 77% on the NYSE on Tuesday. Karen stated that Blockbuster simply hired Kirkland & Ellis to help with their ongoing finance and raising-capital initiative. From the NY Times, Karen added that they were not intending to file for Bankruptcy and they had also spoken to some investment banks regarding the restructuring of their credit line.
Jon makes a valid point when he says that Blockbuster has been struggling to keep up with online rivals such as NetFlix. This is where I see that Blockbuster needs to more innovative. Blockbuster had just signed a deal with CinemaNow that allows Blockbuster to stream movies over the internet. This is a step in the right direction, but Blockbuster had done this just to keep up with NetFlix who already had a similar service in place. Blockbuster now also face even more competition such as the big cable and satellite companies that allow you to order your movies on demand. In my opinion, Blockbuster should cut some of their expenses such as labor costs and property costs, which their competitors do not have. Blockbuster employs a staggering 8000 people worldwide compared to a mere 1200 employees working at NetFlix. I feel that it is time for Blockbuster to adjust their image and realize that in store rentals are a thing of the past.
Secondly, from another article in the NY Times, Blockbuster stated that their fourth quarter revenue fell by 12% and this was due to a decline in movie rentals, a smaller store base and negative foreign currency exchange rates. Even though it is hard to simply increase movie rental sales in the curent economy, Blockbuster could certainly take steps to hedge against their foreign currency risks. The way I see it Blockbuster needs to keep the cost of their risks to a minimum, or at least consistent and they can certainly do this through hedging contracts.
In conclusion, I feel that Blockbuster can certainly make it out of their current economic downturn through being a well managed and an innovative company. Home movies are still in high demand as it is one of the cheapest ways that people entertain themselves. In a time where money is tight, people will most definitely substitute more expensive dinners and going to the movies by staying at home and watching a rental from Blockbuster. They just need to make sure that they bring us the next best thing in home entertainment before NetFlix does.
From an article on CNNMoney.com, Blockbuster's spokesperson Karen Raskopf, said that they had hired a law firm called Kirkland & Ellis. Now this law firm is known to specialize in restructuring and bankruptcy and when Blockbuster made this announcement, their stocks fell 77% on the NYSE on Tuesday. Karen stated that Blockbuster simply hired Kirkland & Ellis to help with their ongoing finance and raising-capital initiative. From the NY Times, Karen added that they were not intending to file for Bankruptcy and they had also spoken to some investment banks regarding the restructuring of their credit line.
Jon makes a valid point when he says that Blockbuster has been struggling to keep up with online rivals such as NetFlix. This is where I see that Blockbuster needs to more innovative. Blockbuster had just signed a deal with CinemaNow that allows Blockbuster to stream movies over the internet. This is a step in the right direction, but Blockbuster had done this just to keep up with NetFlix who already had a similar service in place. Blockbuster now also face even more competition such as the big cable and satellite companies that allow you to order your movies on demand. In my opinion, Blockbuster should cut some of their expenses such as labor costs and property costs, which their competitors do not have. Blockbuster employs a staggering 8000 people worldwide compared to a mere 1200 employees working at NetFlix. I feel that it is time for Blockbuster to adjust their image and realize that in store rentals are a thing of the past.
Secondly, from another article in the NY Times, Blockbuster stated that their fourth quarter revenue fell by 12% and this was due to a decline in movie rentals, a smaller store base and negative foreign currency exchange rates. Even though it is hard to simply increase movie rental sales in the curent economy, Blockbuster could certainly take steps to hedge against their foreign currency risks. The way I see it Blockbuster needs to keep the cost of their risks to a minimum, or at least consistent and they can certainly do this through hedging contracts.
In conclusion, I feel that Blockbuster can certainly make it out of their current economic downturn through being a well managed and an innovative company. Home movies are still in high demand as it is one of the cheapest ways that people entertain themselves. In a time where money is tight, people will most definitely substitute more expensive dinners and going to the movies by staying at home and watching a rental from Blockbuster. They just need to make sure that they bring us the next best thing in home entertainment before NetFlix does.
Monday, March 23, 2009
JP Morgan's New Jets On HOLD
As I have now read over 10 or so blogs about the AIG bonuses and I thought that I would throw in my two cents as well. Even though there are numerous arguments that I have read now concerning both sides of the story, whether it was contractual agreements that forced bonuses to be payed out or whether it was filthy, greedy wall-street executives that are trying to milk every last cent of the taxpayers' money. Everyone is outraged! Even to that point where employees of AIG are being threatened and the CEO of AIG, Liddy is refusing to give out the names of the employees (watch the details).
I feel that what this big mess basically comes down to proper management and social/moral responsibility. I found an interesting article in the New York Times, titled: "JPMorgan to repay TARP money before buying jets". JPMorgan had planned on buying two new Gulfstream 650 airplanes and renovating their hangar to house these new planes at a cost of $138 million. In light of recent events JPMorgan had decided to put these purchases on hold and to concentrate on repaying $25 billion that they had received from TIPS (Troubled Asset Relief Program). Similarly CitiGroup had also put their plane orders on hold. Even though the CEO of JPMorgan considers these expenses as "the cost of doing business" projects like renovating a plane hangar with "quarry tile" are still very fancy, luxurious and unnecessary expenses.
At least JPMorgan had done (which I would consider) as the right thing to do by deferring these unneccesarry expenses, both from a management stand point and a moral stand point. Anyone could easily compare this situation to their personal finances; you can spend your paycheck on your bills and credit card debt or you can just ignore your important expenses and go on big shopping spree and blow your entire paycheck.
In conclusion, AIG should have done the same. Re-write employee contracts and sort out bad management and concentrate and getting the company back on its feet, rather than spending money that is not theirs on lavish bonuses.
I feel that what this big mess basically comes down to proper management and social/moral responsibility. I found an interesting article in the New York Times, titled: "JPMorgan to repay TARP money before buying jets". JPMorgan had planned on buying two new Gulfstream 650 airplanes and renovating their hangar to house these new planes at a cost of $138 million. In light of recent events JPMorgan had decided to put these purchases on hold and to concentrate on repaying $25 billion that they had received from TIPS (Troubled Asset Relief Program). Similarly CitiGroup had also put their plane orders on hold. Even though the CEO of JPMorgan considers these expenses as "the cost of doing business" projects like renovating a plane hangar with "quarry tile" are still very fancy, luxurious and unnecessary expenses.
At least JPMorgan had done (which I would consider) as the right thing to do by deferring these unneccesarry expenses, both from a management stand point and a moral stand point. Anyone could easily compare this situation to their personal finances; you can spend your paycheck on your bills and credit card debt or you can just ignore your important expenses and go on big shopping spree and blow your entire paycheck.
In conclusion, AIG should have done the same. Re-write employee contracts and sort out bad management and concentrate and getting the company back on its feet, rather than spending money that is not theirs on lavish bonuses.
Monday, March 16, 2009
Palm Pre
Since I am a bit of a gadget geek, Jon's post on the new Palm Pre caught my interest. Jon basically explained that the new Palm will not be able pull the company out of the whole that they have been in over the last decade, without using some contracts to hedge against their risks.
I agree with Jon that the new phone will not be able to rescue the company by itself, but I found a few articles that would suggest that Palm could revive their current economic status through proper risk management decisions.
Palm was the blackberry about a decade ago and there are still plenty of loyal Palm followers out there. Thus this is the first point; in several lectures we have discussed the importance of a company's reputation to its sales and customer loyalty. An example of this is the iPhone. The success of the release of the iPhone relied heavily on the previous success of iPods and the reliability of Apple's handheld devices. Everyone knows that palm devices were cutting edge and reliable when they first came out and everyone had to have one. Thus I feel the new Palm Pre will be a success as it is riding on that reputation that Palm had created over a decade ago.
The next important factor is proper management. The crucial factor with the Pre is the timing of the release of the phone. McNamee, who is a major investor stated in an interview that people always want to buy the coolest new thing. That was the case with the iPhone. Now, two years later after the release of the iPhone, people are going to want to buy the latest gadget after their cell phone contracts have expired. Thus the Pre is going to be released at the optimum time for it to have the greatest chance of succeeding.
Lastly, I found another article on unwiredview.com that does not take a risk management view on this situation, but more from a perspective of economics. The basic law of supply and demand states that if the supply of a product is limited, demand for that product will go up, and thus the price of the product will rise. Palm is planning to limit their supply to only 200 000 units of the Pre. This limitation will increase demand for the Pre, but even though the prices are fixed with signing cell phone contracts, this increase in demand might be a strong enough incentive for people to switch from their curent cell phone contracts and pay the high cancellation fees.
So hopefully through proper risk management decisions and a bit of good luck we can see the Pre make Palm great again and save them from their 6 straight quarter lossess of over $650 million.
I agree with Jon that the new phone will not be able to rescue the company by itself, but I found a few articles that would suggest that Palm could revive their current economic status through proper risk management decisions.
Palm was the blackberry about a decade ago and there are still plenty of loyal Palm followers out there. Thus this is the first point; in several lectures we have discussed the importance of a company's reputation to its sales and customer loyalty. An example of this is the iPhone. The success of the release of the iPhone relied heavily on the previous success of iPods and the reliability of Apple's handheld devices. Everyone knows that palm devices were cutting edge and reliable when they first came out and everyone had to have one. Thus I feel the new Palm Pre will be a success as it is riding on that reputation that Palm had created over a decade ago.
The next important factor is proper management. The crucial factor with the Pre is the timing of the release of the phone. McNamee, who is a major investor stated in an interview that people always want to buy the coolest new thing. That was the case with the iPhone. Now, two years later after the release of the iPhone, people are going to want to buy the latest gadget after their cell phone contracts have expired. Thus the Pre is going to be released at the optimum time for it to have the greatest chance of succeeding.
Lastly, I found another article on unwiredview.com that does not take a risk management view on this situation, but more from a perspective of economics. The basic law of supply and demand states that if the supply of a product is limited, demand for that product will go up, and thus the price of the product will rise. Palm is planning to limit their supply to only 200 000 units of the Pre. This limitation will increase demand for the Pre, but even though the prices are fixed with signing cell phone contracts, this increase in demand might be a strong enough incentive for people to switch from their curent cell phone contracts and pay the high cancellation fees.
So hopefully through proper risk management decisions and a bit of good luck we can see the Pre make Palm great again and save them from their 6 straight quarter lossess of over $650 million.
Ski Resort Risk Management
I went skiing over spring break and when I was on the Ski lift, I kept looking up at the thin cable holding over a hundred people, so I started thinking about what could go wrong and what risk management techniques ski resorts have in place. I found an interesting article written by a lawyer and he discusses several risk management steps that a ski resort can take with ski lift operations so that they can have a better chance of winning cases if they get sued.
The simplest step that a ski resort can do is post up clear signs that warns skiers of the potential injuries or death that can occur when they go skiing. Ski resorts should also make guests sign clear waiver that also states the risk that is involved in skiing. This is the most effective and important factor that can protect ski resorts in legal cases. Additional signs that provide instructions to skiers around the ski lift is also necessary. Other signs on the ski slope, like "slow" signs will also reduce the risks of accidents.
Another important risk management technique is the proper training of the ski lift operators. If ski lift operators can give proper instructions to skiers, they can reduce incidents caused by a lack of employee training. In addition ski resorts should also place visible fences on the edges of the trails and also pads on the ski lift towers.
Lastly, ski resorts should keep good records of all accidents that take place. This includes records like photography, witness accounts and employees that worked at the time of the accident. If a ski resort is being investigated in a legal case, it has the best chance of defending itself if they have all the evidence of the risk management techniques that they have in place.
www.halleland.com/pdf/RiskMgmt_SkiLift.pdf
The simplest step that a ski resort can do is post up clear signs that warns skiers of the potential injuries or death that can occur when they go skiing. Ski resorts should also make guests sign clear waiver that also states the risk that is involved in skiing. This is the most effective and important factor that can protect ski resorts in legal cases. Additional signs that provide instructions to skiers around the ski lift is also necessary. Other signs on the ski slope, like "slow" signs will also reduce the risks of accidents.
Another important risk management technique is the proper training of the ski lift operators. If ski lift operators can give proper instructions to skiers, they can reduce incidents caused by a lack of employee training. In addition ski resorts should also place visible fences on the edges of the trails and also pads on the ski lift towers.
Lastly, ski resorts should keep good records of all accidents that take place. This includes records like photography, witness accounts and employees that worked at the time of the accident. If a ski resort is being investigated in a legal case, it has the best chance of defending itself if they have all the evidence of the risk management techniques that they have in place.
www.halleland.com/pdf/RiskMgmt_SkiLift.pdf
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