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A Proposal for Federal Protection From Catastrophe Divides Insurers (NYT)
Watch out General Re and your Cayman Islands-based cohort, the federal government is increasingly getting into the re-insurance game. In a bid to protect themselves against catastrophic losses, many retail insurers are asking the government to guarantee aid in the event of major losses. This is flat out ridiculous. For one thing, the whole point of buying insurance is to insure against catastrophes, and the one risk in writing insurance isin too many catastrophes, or really large ones. Trying to take out the catastrophes pretty much negates the whole point of insurance. This is why we have reinsurance, so that insurers can by policies to protect them. Fortunately, not all insurers have their heads screwed on backwards. Some are noting that federal guarantees would have the effect of lowering premiums in disaster-prone areas (Hello FEMA), which will only lead to more enormous disaster and payouts. Bingo.
Kodak Posts Eighth Loss on Costs to Eliminate Jobs (Bloomberg)
Just to be clear, Kodak is still struggling to deal with the explosion of digital cameras. We've been hearing for years now about the aggressive restructuring going on at the world's largest photography company, and how it would leverage its brand into becoming an important player in digital photography. It was even on the cover of Barron's back in 2004, touting it as a turnaround play. Well, the company is still reporting quarterly losses, eight in a row now, and it lowered its outlook for next year. So any comeback looks like it'll have to wait awhile.
Morgan Stanley May Double Down on Hedge Funds (Dealbook)
It's always trouble when you start doubling down. You think to yourself, "Ok, I just had a string of bad natural gas trades, but if I double down, then eve one moderate win will make up for it". And then that fails, and then you double down again, looking for a big win, and so on, until you're busted. In the broader picture, it hasn't been a great year for hedge funds; many of the outsize returns we're used to seeing just haven't materialized. Nevertheless, Morgan Stanley is "doubling down" on the funds, taking stakes in them on a daily basis. The firm is close to buying hedge fund FrontPoint partners, which comes on the heels of taking a stake in Avenue Capital Group, which specializes in distressed debt. Eventually, one of these bets will come up big.
UBS profit drops; trading income falters (Marketwatch)
It's the season of discontent for any bank that has Suisse in their name. First, Credit Suisse may go skimpy on the bonuses this year due to big trading losses, and now UBS turns it some pretty weak numbers, again on trading losses. The company turned in earnings that were down 21%; the big culprit seems to have been a wrong bet on interest rates. It's instances like these which really make some of these banks look like hedge funds. One mistaken bet on interest rates led to a 21% decline? That's pretty crazy.