Articles
A Lesson in Banking
January, 2012
We are part of the Loan Committee and have to decide based on this information whether to grant each of these sales associates a loan, or not. To do so, we might look over the data in general and get an idea of what is being looked at and then, perhaps, manipulate the numbers in some fashion to see how each of the associates stacks up in terms of income, expenses, and indebtedness to decide which are the better candidates to pay the bank back and qualify for a loan.
The loan applicants are sales associates that sell products for individual companies. The amount of company product the sales associate sells each year is called Gross Sales. Out of Gross Sales, the company takes a percentage and then there are various deductions. What each sales associate actually receives in their bank account yearly is their Take Home Pay.
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Is it possible to predict the future?
December, 2011
I was asked this question in an on-line business administration class of some 20 students a few years ago. Everyone, including the professor, said "No". They wrote various reasons why not. They stated that if we knew the future we would all be millionaires, and we aren't. Further, we would not be surprised by natural disasters, and we are. Many concluded that no one can predict the future except God.
I was the lone assenter. I said yes, it was possible in many instances. We do it every day. Among the examples I gave were tides.
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The Story of Modern Finance
November, 2011
I have heard a lot of talk about Credit Default Swaps and how bad they are. On the other hand, not many people know how they work, and why they might serve a useful purpose. The Greece situation has put such financial products center stage again.
Let’s start with the idea of a swap. A swap is a contract between two parties where they exchange the features of one financial instrument for the features of another financial instrument for mutual benefit.
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The Mathematics of Dissent
October, 2011
Is it better to be led by a group or an individual? I have heard it said that a group survives better run by an individual leader than by a committee. I have also heard that humanity is subject to “Groupthink” and the “Herd Mentality”. So which is it?
On the individual side, using history as a guide, I can find some very bright, resourceful leaders (Churchill, Washington) and I can sure find some that would have been better left untried (Nero, Caligula). So the individual has a track record of some success, but it has not been 100%, by any measure.
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“What’s Happening in the Markets?”
September, 2011
Due my extensive background in finances, I have been asked by several friends to write about what I think is currently happening with the markets, so here are a few thoughts:
The US markets have been in a long-term trading range. The S&P 500 (an index made up of 500 medium to large companies) hit a high in 2000-2001 at 1600, fell to around 800 in 2003, went back to 1600 in 2007 and dropped again to 800 in 2009. Lately, it has hit close to 1400 and has come down to the 1100 level oscillating between roughly 1100 and 1200 with huge moves on a daily basis.
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Thoughts on Medellin
August, 2011
Medellin International Airport is situated at a much higher altitude than the city of Medellin which is located in a river valley about an hour’s drive away by car. As the plane was preparing to land, I could see that the country appeared hilly with interspersed patches of trees and open spaces.
Medellin's temperature is similar to that of the Northern California coast. The higher plateau, where the airport is located, is called Rionegro. Everything is incredibly green. Medellin is 5000 feet above sea level while Rionegro and the lip of the valley are at 7000 feet. One can easily feel out of breath. One’s initial look at Medellin stretching out 2000 feet below as one starts down the side of the valley is spectacular.
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Colombia - GDP Growth Could Surpass United States and Europe
July, 2011
Colombia was one of the three countries that emerged after the collapse of Spanish-ruled Gran Colombia in 1830. The other two were Venezuela and Ecuador. Overall the country is almost twice the size of Texas and ranks 30th in terms of world population. Median or midpoint age range is approximately 28 years old with 75% of the population living in urban areas. Colombia is the third largest exporter of oil to the United States. Currently it ranks 88th in the world in terms of GDP growth; its growth rate was estimated at 4.3 % in 2010. Compared to the United States and Europe, it looks like Colombia is expanding faster. And with government emphasis being currently placed on interconnectivity between urban areas, expansion will continue (provided it is able to handle the damage to the current infrastructure created by recent heavy rains). Major exports are oil, coffee, coal, nickel, emeralds and textiles, with currency getting stronger over the last five years compared to the dollar.
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