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how junior equity works | equity a form of ownership often represented by shares of stock represents the amount of money that would be returned to shareholders if all of the company s assets were liquidated and its debts were paid off not all shareholders have equal rights though there is a pecking order determining who can claim company assets first and owners of junior aka subordinate equity sit at the bottom of it that means that in the event of a bankruptcy holders of junior equity may get no compensation these owners of common stock have rights to a company s assets only after bondholders preferred shareholders and other debtholders are paid in full the pay out structure of a company in bankruptcy is governed by the absolute priority rule which states that in liquidation certain creditors must be satisfied in full before any other creditors receive any payments junior equity also takes a back seat to preferred stock when it comes to income distribution owners of preferred stock shares receive an agreed upon dividend at regular intervals making these distributions similar to bonds coupon payments owners of common stock may or may not receive a dividend and its amount fluctuates depending on the company s earnings compensating preferred stockholders takes priority example of junior equitylarry s lemonade a publicly traded company needs money to buy more lemons in order to fulfill a major purchase order its management decides to issue bonds to raise money business at larry s lemonade then takes a turn for the worst forcing it to shut down its operation and declare bankruptcy it owes money to its employees and its suppliers as well as its bondholders and shareholders everyone with a stake in the company is eager to collect what they re owed all of the company s assets must be sold to raise money including any leftover supplies equipment warehouses and offices once the business has been liquidated its assets can be distributed the first priority goes to the bondholders those who lent larry s lemonade capital to buy more lemons followed by its other debtors only if and when all of those groups have been paid in full do the junior equity holders of common stock have an opportunity to receive any remaining assets they are very unlikely to get anything back for their investment the opposite of junior equity is known as senior equity or senior security advantages of junior equitywhile the potential risks are greater in junior equity the potential rewards are greater as well common stock has historically outperformed bonds and preferred shares preferred shares typically do not reflect appreciation to the same degree as common stock their prices tend to stay around their initial issue price behaving more like bonds than common stock shares | |
when a company thrives junior equity is generally the best type of stock to hold over the long term | unlike preferred stock owning common stock also gives shareholders voting rights meaning they can have a voice albeit a very quiet one in how the business is run special considerationsa counterpart to junior equity in the debt world is junior debt also known as subordinated debt it refers to bonds loans or other obligations issued with a lower priority for repayment than other more senior debt claims in the case of the issuer s default as a result junior debt tends to be riskier for investors and thus pays higher interest rates than more senior debt from the same issuer | |
what is a junior mortgage | a junior mortgage is a mortgage that is subordinate to a first or prior senior mortgage a junior mortgage often refers to a second mortgage but it could also be a third or fourth mortgage e g home equity loans or lines of credit helocs in the case of a foreclosure the senior first mortgage will be paid down first understanding junior mortgagea junior mortgage is a subordinate mortgage made while an original mortgage is still in effect in the event of default the original mortgage would receive all proceeds from the liquidation of the property until it is all paid off since junior mortgages would receive repayments only when the first mortgage has been paid off the interest rate charged for a junior mortgage tends to be higher and the amount borrowed will be lower than that of the first mortgage common uses of junior mortgages include piggy back mortgages 80 10 10 mortgages and home equity loans piggy back mortgages provide a way for borrowers with less than a 20 down payment to avoid costly private mortgage insurance 1 home equity loans are frequently used to extract equity for a home to pay down other debts or make additional purchases 2 every borrowing scenario should be carefully and thoroughly analyzed restrictions and limits on pursuing junior mortgagesa junior mortgage might not be permitted by the holder of the initial mortgage if there are terms in a mortgage that allow for junior mortgages to be instituted there may be requirements the borrower must meet before doing so for example a certain amount of the senior mortgage may need to be paid off before a junior mortgage can be taken out the lender might also restrict the number of junior mortgages the borrower can take on increased risk of default is often associated with junior mortgages this has led to lenders charging higher interest rates for junior mortgages compared with senior mortgages the introduction of more debt through a junior mortgage could mean the borrower owes more money on their house than it is valued on the market if the borrower is not able to keep up with their payments and the house lapses into foreclosure the lender who provided the junior mortgage may be at risk for not recouping their funds for example the payout to the holder of a senior mortgage could expend all or most of the assets that would mean the lender for the junior mortgage could go unpaid other considerationsborrowers might seek junior mortgages in order to pay off credit card debt or to cover the purchase of a car for instance a borrower might pursue a junior mortgage with a 15 year term to have the funds to pay off a car loan that has a five year term as new debt is introduced through junior mortgages it is possible that the borrower will become unable to repay their mounting obligations since the home serves as collateral even if they pay off senior mortgages borrowers could face foreclosure on junior mortgages that lapse into default | |
what is a junior security | the term junior security refers to a security with a lower priority than others put simply junior security is subordinate to any other type of security this means that junior security holders get paid only after those who own senior securities if and when a company goes bankrupt or is liquidated as such there s a very good chance that some or even all of the junior securities to which a company owes money may not be repaid after any leftover cash is distributed understanding junior securities | |
when a company declares bankruptcy or is liquidated all stakeholders in the company want to be repaid as much of their investment as possible but there are clear rules in place that determine the seniority of different securities this means that the order in which different types of stakeholders are repaid is predetermined where some are senior securities and others junior | junior securities include those such as common stock as noted earlier these securities fall lower on the priority scale when it comes to repayment 1 senior securities end up at the top of the list and are considered the safest types of securities this allows holders of these securities to be paid before any others the most common types of senior securities are generally bonds debentures bank loans and preferred shares repayment depends on the company s capital structure in bankruptcy cases secured and unsecured creditors are paid from the company s assets before stockholders 2 bondholders and lenders of secured debt are typically repaid first cash is divided between senior securities before any junior holders are paid out in certain cases some common shares may get some money back while others may not be repaid at all 3there s a very good reason why some securities are prioritized over others not all securities have the same risk reward profile 4 for instance corporate bondholders may expect to receive an interest rate of 3 5 in today s market whereas shareholders can theoretically obtain unlimited upside potential and dividend payments bondholders must be compensated in the form of lower risk because of the modest returns associated with corporate bonds as such they are given priority over shareholders if the issuing company ever defaults the method of ordering asset repayment in the event of bankruptcy is known as the principle of absolute priority based on section 1129 b 2 of the u s bankruptcy code it is sometimes referred to as the principle of liquidation preference 56example of a junior securityhere s a hypothetical example to show how junior securities work let s say you own a manufacturing company called xyz industries to launch your company you raised 1 million from shareholders and took out a 500 000 mortgage to buy real estate for your factory you then secured a 500 000 line of credit from the bank to fund your working capital needs you see that you have maxed out your line of credit and have an outstanding balance of 350 000 on your mortgage after looking at your balance sheet after liquidating all of your equipment and other assets you raise a total of 900 000 you need to pay out your senior creditors first namely the bank that lent you the mortgage and the line of credit of the 900 000 you raised from selling your assets 350 000 pays off the mortgage and 500 000 goes to the line of credit the remaining 50 000 is distributed to your investors who are last in line because they invested in common shares which are junior security although this represents a very bitter 95 loss for your shareholders remember that if your business had been successful there is no upper limit to the return on investment roi they could have enjoyed that s the risk they assumed when they invested in your business | |
what is a junk bond | junk bonds are bonds that carry a higher risk of default than most bonds issued by corporations and governments a bond is a debt or promise to pay investors interest payments along with the return of invested principal in exchange for buying the bond junk bonds represent bonds issued by companies that are financially struggling and have a high risk of defaulting or not paying their interest payments or repaying the principal to investors junk bonds are also called high yield bonds since the higher yield is needed to help offset any risk of default junk bonds explainedfrom a technical viewpoint a high yield or junk bond is very similar to regular corporate bonds both represent debt issued by a firm with the promise to pay interest and to return the principal at maturity junk bonds differ because of their issuers poorer credit quality bonds are fixed income debt instruments that corporations and governments issue to investors to raise capital when investors buy bonds they re effectively loaning money to the issuer who promises to repay the money on a specific date called the maturity date at maturity the investor is repaid the principal amount invested most bonds pay investors an annual interest rate during the life of the bond called a coupon rate for example a bond that has a 5 annual coupon rate means that an investor who purchases the bond earns 5 per year so a bond with a 1 000 face or par value will receive 5 x 1 000 which comes to 50 each year until the bond matures higher risk equates to higher yielda bond that has a high risk of the underlying company defaulting is called a junk bond companies that issue junk bonds are typically start ups or companies that are struggling financially junk bonds carry risk since investors are unsure whether they ll be repaid their principal and earn regular interest payments as a result junk bonds pay a higher yield than their safer counterparts to help compensate investors for the added level of risk companies are willing to pay the high yield because they need to attract investors to fund their operations junk bonds return higher yields than most other fixed income debt securities junk bonds have the potential of significant price increases should the company s financial situation improve junk bonds serve as a risk indicator of when investors are willing to take on risk or avoid risk in the market junk bonds have a higher risk of default than most bonds with better credit ratings junk bond prices can exhibit volatility due to uncertainty surrounding the issuer s financial performance active junk bond markets can indicate an overbought market meaning investors are too complacent with risk and may lead to market downturns junk bonds as a market indicatorsome investors buy junk bonds to profit from potential price increases as the financial security of the underlying company improves and not necessarily for the return of interest income also investors that predict bond prices to rise are betting there will be increased buying interest for high yield bonds even these lower rated ones due to a change in market risk sentiment for example if investors believe economic conditions are improving in the u s or abroad they might purchase junk bonds of companies that will show improvement along with the economy as a result increased buying interest of junk bonds serves as a market risk indicator for some investors if investors are buying junk bonds market participants are willing to take on more risk due to a perceived improving economy conversely if junk bonds are selling off with prices falling it usually means that investors are more risk averse and are opting for more secure and stable investments although a surge in junk bond investing usually translates to increased optimism in the market it could also point to too much optimism in the market it s important to note that junk bonds have much larger price swings than bonds of higher quality investors looking to purchase junk bonds can either buy the bonds individually through a broker or invest in a junk bond fund managed by a professional portfolio manager improving financials affect junk bondsif the underlying company performs well financially its bonds will have improved credit ratings and usually attract buying interest from investors as a result the bond s price rises as investors flood in willing to pay for the financially viable issuer conversely companies that are performing poorly will likely have low or lowered credit ratings these falling opinions might cause buyers to back off companies with poor credit ratings typically offer high yields to attract investors and to compensate them for the added level of risk the result is bonds issued by companies with positive credit ratings usually pay lower interest rates on their debt instruments as compared to companies with poor credit ratings many bond investors monitor the credit ratings of bonds credit ratings and junk bondsalthough junk bonds are considered risky investments investors can monitor a bond s level of risk by reviewing the bond s credit rating a credit rating is an assessment of the creditworthiness of an issuer and its outstanding debt in the form of bonds the company s credit rating and ultimately the bond s credit rating impact the market price of a bond and its offering interest rate credit rating agencies measure the creditworthiness of all corporate and government bonds giving investors insight into the risks involved in the debt securities credit rating agencies assign letter grades for their view of the issue for example standard poor s has a credit rating scale ranging from aaa excellent to lower ratings of c and d any bond that carries a rating lower than bb is said to be of speculative grade or a junk bond this should be a red flag to risk averse investors the various letter grades from credit agencies represent the financial viability of the company and the likelihood that the contract terms of the bond terms will be honored bonds with a rating of investment grade come from corporations that have a high probability of paying the regular coupons and returning the principal to investors for example standard poor s ratings include as mentioned earlier once a bond s rating drops into the double b category it falls into the junk bond territory this area can be a scary place for investors who would be harmed by a total loss of their investment dollars in the case of a default some speculative ratings include companies having bonds with these low credit ratings might have difficulty raising the capital needed to fund ongoing business operations however if a company manages to improve its financial performance and it s bond s credit rating is upgraded a substantial appreciation in the bond s price could happen conversely if a company s financial situation deteriorates the credit rating of the company and its bonds might be downgraded by credit rating agencies it is crucial for investors in junk debt to fully investigate the underlying business and all financial documents available before buying bond defaultsif a bond misses a principal and interest payment the bond is considered to be in default default is the failure to repay a debt including interest or principal on a loan or security junk bonds have a higher risk of default because of an uncertain revenue stream or a lack of sufficient collateral the risk of bond defaults increases during economic downturns making these bottom level debts even riskier real world example of a junk bondtesla inc tsla issued a fixed rate bond with a maturity date of march 1 2021 and a fixed semi annual coupon rate of 1 25 the debt received an s p rating of b in 2014 when it was issued in october 2020 s p upgraded its rating to bb from b this is still in junk bond rating territory a bb rating from s p means the rating issue is less vulnerable to nonpayment but still faces major uncertainties or exposure to adverse business or economic conditions also the current price of the tesla offering is 577 as of oct 2020 much higher than its 2014 100 face value which represents the extra yield that investors are getting above the coupon payment in other words despite the bb rating the bond is trading at very large premium to its face value this is because the bonds are convertible to equity thus with shares of tesla soaring 600 over the last twelve months ending oct 26 2020 the bonds are proving to be valuable surrogates for the equity | |
what is a junk fee | junk fees are a series of charges that a lender imposes at the closing of a mortgage these charges are often unexpected by the borrower and not clearly explained by the lender this surprise factor can lead to the impression that these fees are excessive and tacked on to other legitimate closing costs without good reason other junk fees often illegal can be found in consumer financial products like auto loans and deposit accounts and activities like student loan servicing 1 this article focuses on junk fees on mortgages understanding junk feesjunk fees in mortgages are a subset of the costs that appear on every hud 1 settlement statement traditionally that statement was a standalone form that federal law required a lender to provide a borrower at closing it contained a detailed itemization of all costs associated with the loan 3prior to closing at the point when the parties agree to the terms of the loan and begin preparations for closing the lender was required to provide a good faith estimate gfe of those costs in 2015 the consumer financial protection bureau cfpb consolidated these documents into one form the closing disclosure 3junk fees end up increasing the price of buying a home and may not be budgeted into the costs anticipated by a homebuyer in many cases this may financially stretch a buyer to a final cost that they are not comfortable with the costs listed on the hud 1 range from boilerplate items such as home inspection and title search fees to more questionable costs that some consider junk the latter group can contain items such as a document preparation fee an application fee a funding fee a verification of employment fee a sign up fee a translation fee or an automated underwriting fee junk fees can leave a bad taste regarding the homebuying process that should otherwise generally be a happy moment for most people the borrower always has had the right to challenge these fees and negotiate them with the lender but many lenders have found it profitable to assume that borrowers will fail to challenge all of these fees critics of the mortgage industry also have argued that lenders don t adhere to the good faith requirement of the gfe and liberally add fees to the final hud 1 statement that were never included in the gfe consumer financial protection bureau cfpb reforms on the closing processthe consumer financial protection bureau s cfpb s 2015 reforms to the closing process not only streamlined the paperwork associated with the closing process they also established restrictions on fees and adjustments that could be made after the gfe was provided to the borrower 4the cfpb in a march 2023 report on unlawful financial services junk fees pointed out those found in mortgages can include excessive late fees added costs for unnecessary property inspections for accounts in delinquency and a failure to waive certain fees during loss mitigation proceedings 1part of the aim of these changes was to minimize lenders ability to add junk fees that borrowers might overlook the major change that the cfpb instituted in this new set of rules is a limitation on the permissible inflation of charges listed on the lending estimate the document formerly known as the gfe in general no fee can be increased by more than 10 from the listing estimate to the final closing statement if a major change in the circumstances of the loan has occurred the lender must allow the borrower to review a new lending estimate as the restrictions stated by the cfpb may no longer apply 2junk fees found in mortgages largely aren t illegal even with the efforts of the cfpb to protect borrowers against deceptive lending practices the borrower bears the burden of carefully examining and questioning fees that appear unnecessary it is always the lender s goal to close a mortgage so that they can earn revenue therefore they are typically open to negotiation to ensure that the mortgage is finalized | |
what are some junk fees found in mortgage contracts | these can include items such as a document preparation fee an application fee a funding fee a verification of employment fee a sign up fee a translation fee or an automated underwriting fee | |
where can i find a list of fees attached to my mortgage before closing | mortgage fees some of which are considered unnecessary or predatory by consumer advocates are part of the costs that appear on every hud 1 settlement statement in the past that statement was a separate itemized form that federal law required a lender to provide a borrower at closing since 2015 it s been consolidated into the closing disclosure can i negotiate to remove junk fees in my mortgage yes it s possible to ask a mortgage lender to remove or modify some of these fees during the closing process remember that as the borrower it s best to carefully review and question fees in the mortgage that appear unnecessary the bottom linejunk fees in mortgages are multiple charges that a lender imposes at closing they can be unexpected by the borrower and not clearly explained by the lender this surprise factor can lead to the buyer feeling that the fees are excessive and tacked on to other legitimate closing costs without good reason other types of junk fees often illegal can be found and questioned by consumers when taking out auto loans deposit accounts or student loan servicing | |
what is a juris doctor jd | a juris doctor jd is a three year professional degree that confers recognition that the holder has a professional degree in law upon completion of a jd program and passing the bar exam individuals are eligible to practice law in their jurisdiction this means they can represent clients provide legal advice and advocate for their clients in court understanding juris doctor jd a jd degree is a professional graduate degree in law it is the standard degree required to practice law in the united states and in most other common law jurisdictions most jd programs typically involves three years of full time study or its equivalency in part time studies some schools offer a joint j d and mba degree so that students can complete both degrees in less time than it would take to complete each separately other combined graduate degrees include public policy medicine and bioengineering law school applicants must already have a bachelor s degree it typically takes three years to complete the j d degree after which the graduate must pass the bar exam to practice law each state and the district of columbia has its own bar exam obtaining a jd degree is different than passing the bar most often students pursue the materials needed to pass the bar as part of their jd studies history of the jd degreethe first lawyers trained in the united states underwent an apprenticeship and training with a lawyer who served as a mentor the first formal law degree granted in the country was a bachelor of law from the college of william and mary in 1793 harvard university changed the name of the degree to the latin legum baccalaureus known as the ll b and led the 19th century movement for a scientific study of law 1 the ll b remains the standard degree in most of the commonwealth of nations the faculty of harvard law school first suggested changing the degree from ll b to j d in 1902 to reflect the professional nature of the degree in 1903 the university of chicago which was one of only five law schools that required students to have a bachelor s degree before enrollment granted the first j d degree 2 many law schools offered both an ll b to students who entered without a bachelor s degree and a j d to students entering with a bachelor s degree by the early 1960s most students entered law school with a bachelor s degree in 1965 the american bar association recommended the standard law degree be the j d and that decree took effect by the end of the decade 2requirements for a jd degreein order to get into law school you must have an undergraduate degree have passed the law school admission test lsat request your official transcripts from your undergraduate institution s obtain letters of recommendation and write a personal statement while many graduate programs require the completion of certain prerequisite courses there are no such requirements for prospective law students however you must have earned or be on track to earn an undergraduate degree from an accredited institution your undergraduate grade point average gpa is a key indicator law schools consider when evaluating applicants you ll also need to take the lsat the basic fee for the lsat during the 2023 2024 academic year is 222 plus 200 for credential assembly service cas and an additional 45 fee for each cas report sent to the law schools you apply to most people end up paying 500 or more in total lsat fees 3it is generally recommended that you spend at least three months studying for the exam although many people dedicate up to a year studying for the exam there are many resources online to help you study for the lsat including free resources organized prep courses that guide you through the different components of the lsat can be quite expensive some individuals opt to hire a private tutor to help them prepare for the lsat law schools require official transcripts from all undergraduate graduate and certificate programs each copy of your official transcript can cost between 10 and 20 so depending on how many schools you apply to this amount can add up the process of requesting your transcript and then getting them sent to the appropriate institution can take several days so make sure that you give yourself adequate time a personal statement is your opportunity to reveal your personality to the admissions committee it s a good idea if your personal statement covers your career goals and academic achievements although there are many different approaches some schools may have specific prompts they want you to address in your personal statement most law schools will require at least one letter of recommendation your letters of recommendation can be from undergraduate professors or former employers that can speak to various elements of your success tuition varies dramatically between law schools in 2023 top law schools will cost nearly 70 000 while there are plenty of laws schools that charge less than 20 000 4two year jd degreesjob prospects for lawyers fell sharply following the 2008 financial market collapse and law school enrollment dropped by 24 from 2010 to 2013 with tuition continuing to rise some schools have looked at shortening the program 5 drexel rutgers columbia and fordham are among the schools that offer a two year j d option or allow students to start their first year of law school after completing the third year of college common coursework for jd programsjd programs typically structure their coursework to provide students with a fairly comprehensive study during the first year commonly referred to as the 1l year students delve into foundational subjects such as contracts torts property law criminal law civil procedure and constitutional law these courses lay the groundwork for legal analysis and reasoning both of which are leveraged as the student progresses with their degree 6as students progress into their second and third years they often explore more specialized areas of law through these may include corporate law environmental law intellectual property family law international law or tax law students usually also get exposure to legal writing and research courses regardless of their specialization in addition to classes many law schools offer clinical programs externships and internships where students can apply their legal knowledge in real world settings this gives prospective jds an opportunity to function under the supervision of licensed attorneys job prospects for jd degreesaccording to the u s bureau of labor statistics the employment outlook for lawyers is promising with a projected 8 growth from 2022 to 2032 this growth rate exceeds the average for all occupations this growth is expected to result in approximately 39 100 job openings annually during this decade the demand for legal services remains high driven by the legal needs of individuals businesses and government entities however increasing price competition may lead law firms to reconsider staffing and cost saving measures 7job responsibilities for jd holdersa juris doctor graduate performs a wide range of legal tasks and responsibilities which can vary depending on their specialization and practice area here are some common things that a jd holder may do | |
what is a jd degree equivalent to | a jd degree the american law degree is a three year professional degree a jd is the minimum educational level for lawyers the jd is considered a professional doctorate | |
is a jd a lawyer | to become a lawyer you ll need to earn a juris doctor jd degree once you graduate you are entitled to take the bar exam and begin the practice of law obtaining a jd degree alone does not permit you to practice law you must also pass the bar exam every state and the district of columbia has its own bar exam | |
is a jd higher than a masters | while the jd is the only degree necessary to become a professor of law or to obtain a license to practice law it is not a research degree however there are two types of research degrees available to individuals who are interested in studying law these are the master of laws ll m degree which typically requires a jd as a prerequisite before pursuing study and the doctor of juridical science sjd jsd degree which typically requires a master of laws as a prerequisite | |
is someone with a jd a doctor | it is not customary in the u s to address individuals who hold a jd as a doctor in the late 1960s the canons of professional ethics issued a full ethics opinion regarding whether lawyers could ethically use the title doctor the organization came down against this usage with some exceptions it is permissible for lawyers to use the title doctor when dealing with countries where the use of doctor by lawyers is standard practice in addition lawyers are allowed the use of the title in academia as long as the school of graduation considers the jd degree a doctorate degree 8 | |
how many years is a jd degree | a traditional full time jd program lasts three years there are some accelerated programs that allow individuals to complete their degrees in just two years or their undergraduate and jd degrees in a total of six years part time jd programs usually take four years or more to finish the bottom linea juris doctor is a professional graduate degree in law typically required to become a practicing attorney in the united states and some other countries it involves a comprehensive study of legal principles statutes and case law equipping graduates with the knowledge and skills needed for a legal career | |
what is jurisdiction risk | jurisdiction risk refers to the risks that can arise when operating in a foreign country or jurisdiction these risks can arise simply by doing business or else by lending or borrowing money in another country risks could also stem from legal regulatory or political factors that exist in different countries or regions in recent times jurisdiction risk has focused increasingly on banks and financial institutions that are exposed to the volatility that some of the countries where they operate may be high risk areas for money laundering and terrorism financing 1 | |
how jurisdiction risk works | jurisdiction risk is any additional risk that arises from borrowing and lending or doing business in a foreign country this risk can also refer to times when laws unexpectedly change in an area in which an investor has exposure this type of jurisdiction risk can often lead to added price volatility as a result the added risk from volatility means investors will demand higher returns to offset the higher levels of risk being faced political risk is a form of jurisdiction risk whereby an investment s returns could suffer as a result of political changes or instability in a country instability affecting investment returns could stem from a change in government legislative bodies other foreign policymakers or military control some of the risks associated with jurisdiction risk that banks investors and companies may face include legal complications exchange rate risks and even geopolitical risks as mentioned above jurisdiction risk has recently become synonymous with countries where money laundering and terrorist activities are high these activities are generally believed to be prevalent in countries that are designated as non cooperative by the financial action task force fatf or are identified by the u s treasury as requiring special measures due to concerns about money laundering or corruption 34 because of the punitive fines and penalties that can be levied against a financial institution that is involved even inadvertently in money laundering or financing terrorism most organizations have specific processes to assess and mitigate jurisdiction risk special considerationsthe fatf publishes two documents publicly three times a year and has done so since 2000 these reports identify areas of the world that the fatf declares have weak efforts to combat both money laundering and terrorist financing these countries are called non cooperative countries or territories nccts 4as of june 2021 the fatf listed the following 22 countries as monitored jurisdictions albania barbados botswana burkina faso cambodia cayman islands haiti jamaica malta mauritius morocco myanmar nicaragua pakistan panama philippines senegal south sudan syria uganda yemen and zimbabwe 5 these nccts have deficiencies when it comes to placing anti money laundering policies as well as recognizing and fighting terrorist financing but they have all committed to working with the fatf to address the deficiencies the fatf placed both the democratic people s republic of korea i e north korea and iran on its call to action list according to the fatf north korea still poses a great risk to international finance because of its lack of commitment and deficiencies in the noted areas the fatf also indicated its concern over the country s proliferation of weapons of mass destruction the organization noted iran outlined its commitment to the fatf but has failed to enact its plan 61examples of jurisdiction riskinvestors may experience jurisdiction risk in the form of foreign exchange risk also known as currency risk so an international financial transaction may be subject to fluctuations in currency exchange this can lead to a drop in the value of an investment foreign exchange risks can be mitigated by using hedging strategies including options and forward contracts | |
what is just compensation | just compensation refers to the compensation individuals receive when their property gets seized by the government for public use for example when the national highway system was constructed in the 1950s many homeowners had their property seized because the government needed the land to build the interstate highway system the just compensation remedy is provided by the fifth amendment s takings clause and is usually considered to be fair market value 1 however what the government considers just compensation may not be regarded as just by the person whose property is seized the government s ability to take private property for public use is called eminent domain understanding just compensationthe idea behind just compensation is to repair the individual s estate as if the property taking did not occur this means paying the fair market value for the property however individuals who lose their homes through an act of eminent domain may not consider the fair market value of the property to be just compensation for their loss because it does not take into account the time stress and cost of moving to a new property just compensation also fails to consider the loss of neighborhood social ties or the emotional connection the owner may have to the property fair value is often disputed in eminent domain cases factors of just compensation | |
when determining just compensation the following issues are considered | the price the property owner would receive if they were willing not forced to sell the land can be used to help determine the fair market value of the land for example if a landowner decided that they wanted a more significant piece of land and auctioned their existing property the auction sale price would be considered fair market value land improvement refers to structures that improve the value of the seized land land improvement may include detached dwellings barns and separate garages intangible land improvements must also be taken into consideration for instance land near an area with natural resources may be considered a land improvement if only a portion of the property is seized residue damage refers to the damage on the remaining property due to the seizure residue damages may include the inability to use the best part of the land any change or shape to the land and the land s new proximity to public infrastructures such as roads or utility equipment although less frequent property owners may benefit from having their land seized for example if part of an owner s land gets seized for a new service road that allows the property to be subdivided that benefit can be used to offset the total compensation received methods for property valuationthere are three generally accepted methods to value a property during an eminent domain case these include the following the market approach is fairly straightforward in that the seized property is compared to recent property sales with similar characteristics this method typically used to appraise residential properties the income approach is used best for properties that generate income in these cases the operating income of the property must be determined first then the income and the capitalization rate are used to arrive at the value the cost approach takes into consideration a very specific structure on the property that is unique enough that the owner would need to recreate it on any future property the value of the empty land would be taken into consideration plus the cost of replacing the new structure and minus the depreciation of the current structure | |
what is just in case jic | just in case jic is an inventory strategy where companies keep large inventories on hand this type of inventory management strategy aims to minimize the probability that a product will sell out of stock a company that uses this strategy typically has difficulty predicting consumer demand or experiences large surges in demand at unpredictable times a company practicing this strategy essentially incurs higher inventory holding costs in return for a reduction in the number of sales lost due to sold out inventory | |
how just in case jic works | the jic inventory strategy differs from the more recent just in time jit inventory strategy where companies try to minimize inventory costs by producing the goods after the orders have come in the jic strategy is more common in less industrialized countries where poor transportation infrastructure natural disasters poor quality control and vulnerability to other suppliers production problems are concerns such instabilities in the supply chain could lead to costly production inefficiencies therefore a manufacturer may decide to pay for excess inventory to avoid production shutdowns for jic manufacturers reorder stock before it reaches the minimum level to continue to sell inventory while the suppliers are supplying the goods the time from when the firm reorders the stock to the time the supplier provides the new stock is known as lead time a jic inventory system tries to keep a minimum level of inventory in case of emergencies jic is typically more costly than jit because it can lead to waste if not all of the inventory is sold and there are additional storage costs due to the additional inventory one major reason for practicing a more costly jic system is the potential losses such as permanent loss of major customers loss of suppliers and supply chain collapse if the jit response contingencies are too slow or fail to keep production flowing additional costs may be incurred the additional costs due to maintaining extra storage and resources may be more cost effective than using a more efficient jit system in a recent turn of events some companies have started understocking their inventories on purpose makers of particular popular items for which buyers are not willing to accept substitutes can use this strategy the just in case strategy is used by companies that have trouble forecasting demand with this strategy the companies have enough production material on hand to meet unexpected spikes in demand higher storage costs are the main disadvantage of this strategy real world examples of just in case jic an example of jic buyers are the military or hospitals these types of organizations must maintain large inventories because waiting for jit producers to ramp up production for needed supplies may result in lost lives and even wars | |
what is just in time jit | the just in time jit inventory system is a management strategy that aligns raw material orders from suppliers directly with production schedules companies employ this inventory strategy to increase efficiency and decrease waste by receiving goods only as they need them for the production process which reduces inventory costs this method requires producers to forecast demand accurately investopedia daniel fishel | |
how does just in time inventory work | the just in time jit inventory system minimizes inventory and increases efficiency jit production systems cut inventory costs because manufacturers receive materials and parts as needed for production and do not have to pay storage costs manufacturers are also not left with unwanted inventory if an order is canceled or not fulfilled one example of a jit inventory system is a car manufacturer that operates with low inventory levels but heavily relies on its supply chain to deliver the parts it requires to build cars on an as needed basis consequently the manufacturer orders the parts required to assemble the vehicles only after an order is received for jit manufacturing to succeed companies must have steady production high quality workmanship glitch free plant machinery and reliable suppliers the jit inventory system contrasts with just in case strategies where producers hold sufficient inventories to have enough products to absorb maximum market demand advantages and disadvantages of jitjit inventory systems have several advantages over traditional models production runs are short which means that manufacturers can quickly move from one product to another also this method reduces costs by minimizing warehouse needs companies also spend less money on raw materials because they buy just enough resources to make the ordered products and no more the disadvantages of jit inventory systems involve potential disruptions in the supply chain if a raw materials supplier has a breakdown and cannot deliver the goods promptly this could conceivably stall the entire production line a sudden unexpected order for goods may delay the delivery of finished products to end clients example of jitfamous for its jit inventory system toyota motor corporation orders parts only when it receives new car orders although the company installed this method in the 1970s it took 20 years to perfect it 4sadly toyota s jit inventory system nearly caused the company to come to a halt in february 1997 after a fire at japanese owned automotive parts supplier aisin decimated its capacity to produce p valves for toyota s vehicles because aisin is the sole supplier of this part its weeks long shutdown caused toyota to halt production for several days 5this caused a ripple effect where other toyota parts suppliers likewise had to temporarily shut down because the automaker had no need for their parts during that time period consequently this fire cost toyota 160 billion yen in revenue 67at the start of the covid 19 pandemic and its ripple effect on the economy and supply chain things like paper surgical masks toilet paper and hand sanitizer experienced disruption this was because inputs from overseas factories and warehouses could not be delivered in time to meet the surge in demand caused by the pandemic 8special considerationskanban is a japanese scheduling system that s often used in conjunction with lean manufacturing and jit taiichi ohno an industrial engineer at toyota developed kanban in an effort to improve manufacturing efficiency 9the kanban system highlights problem areas by measuring lead and cycle times across the production process which helps identify upper limits for work in process inventory to avoid overcapacity | |
what exactly do you mean by just in time | a just in time jit inventory system is a management strategy that has a company receive goods as close as possible to when they are actually needed so if a car assembly plant needs to install airbags it does not keep a stock of airbags on its shelves but receives them as those cars come onto the assembly line | |
is just in time manufacturing risky | a chief benefit of a jit system is that it minimizes the need for a company to store large quantities of inventory which improves efficiency and provides substantial cost savings however if there is a supply or demand shock it can bring everything to a halt for instance at the beginning of the 2020 s economic crisis everything from ventilators to surgical masks experienced disruption as inputs from overseas could not reach their destinations in time to meet a surge in demand 10 | |
what types of companies use jit | the jit inventory system is popular with small businesses and major corporations alike because it enhances cash flow and reduces the capital needed to run the business retailers restaurants on demand publishing tech manufacturing and automobile manufacturing are examples of industries that have benefited from just in time inventory who invented jit inventory management jit is attributed to the japanese automaker toyota motor corporation executives at toyota in the 1970s reasoned that the company could adapt more quickly and efficiently to changes in trends or demands for model changes if it did not keep any more inventory in store than was immediately needed 11 | |
what is a just say no defense | a just say no defense is a strategy employed by boards of directors to discourage hostile takeovers by simply refusing to negotiate and rejecting outright whatever the prospective buyer might offer the legality of a just say no defense may depend on whether the target company has a long term strategy it is pursuing which can include a merger with a firm other than the one making the takeover bid or if the takeover bid undervalues the company understanding a just say no defensethe origins of the just say no defense can be traced to the 1980s when raiders with deep pockets bought undervalued companies dismembering them for a quick profit this prompted defenseless companies to come up with strategies to thwart corporate raiders the just say no defense was named after the anti drug campaign promoted by former first lady nancy reagan 1 the defense left it up to the board to decide whether to accept or reject a bid regardless of how much was being offered reasons could include anything from fear of job security to a general dislike of the acquirer an early use of the term occurred in 1990 when ncr corp rejected at t s initial 90 per share tender offer ncr chair charles exley said the board s stance was to just say no to the telephone giant the target company s board could deal with an unwanted bid by refusing to negotiate and waive potential defense strategies such as a poison pill this stance may be taken to render a takeover impossible alternatively it might be pursued to extract a better offer either from the same bidder or better yet from a friendly white knight example of a just say no defensethe case of paramount communications vs time helped establish the just say no defense as a viable anti takeover strategy time was close to merging with warner communications but then received a bid from paramount that its board rejected because the publishing company had already negotiated a long term plan with warner in july 1989 the case was heard in the court of chancery in wilmington delaware 2the delaware courts had established precedents for corporate board actions during mergers and acquisitions in two previous cases the delaware supreme court ruled in the 1985 case involving unocal that directors defending their company from a raider may respond only in a reasonable way 3 meanwhile in the 1986 revlon case the court ruled that if the board decides to sell a company it must accept the highest bid and not show any favoritism 4fortunately for time the judge supported its board as the corporation s fiduciaries in this matter even if shareholders might well have preferred to accept paramount s bid adding that corporate law does not compel directors to follow the wishes of the majority of the shares to support the decision for the time warner merger the judge wrote directors not shareholders are charged with the duty to manage the firm on appeal the delaware supreme court upheld the decision unanimously 2criticism of a just say no defensea just say no defense isn t necessarily in the best interest of shareholders since board members can employ it even if an offer is made at a significant premium to the current share price adding to this frustration is a number of stories of companies using this tactic to hold firm and rebuff offers that in retrospect they would have been better off accepting one example is yahoo which engaged in a just say no battle to fight off a 44 6 billion bid from microsoft msft in 2008 and then ended up selling off its core business several years later for 4 83 billion 56special considerationsthere is a significant risk that a just say no defense won t be accepted by the courts if the price offered looks fair and shareholders support it the board s option to just say no may not be viable still that doesn t mean that directors won t give it a go yes failure is possible but so too is the prospect of securing the company s freedom or failing that at least squeezing out a better price for the business | |
what is the just say no strategy | a just say no strategy is a defense strategy used by the board of directors of a firm to prevent a hostile takeover the strategy involves refusing to negotiate and rejecting all outright offers that a potential acquirer makes | |
what is the poison pill defense | a poison pill defense is a strategy employed by a company to prevent a hostile takeover it is used when a potential acquirer owns a large portion of a company s outstanding shares a poison pill strategy allows existing shareholders but not the potential acquirer to purchase additional shares at a discounted price thereby diluting the value of the potential acquirer s shares to control a significant portion of the company again the potential acquirer would have to spend more money purchasing shares making the attempted takeover more expensive | |
are takeovers good for shareholders | takeovers are generally better for the company being acquired as the share price goes up for that company whereas takeovers are generally less beneficial for the shareholders of the acquiring company as the share price usually goes down takeovers are complex strategies and depending on how they are enacted and carried out once complete all shareholders can benefit or none at all | |
what is a justified wage | a justified wage is a pay level for a job that is determined by market dynamics as well as the degree of skills and experience that the job requires it is a wage level that is high enough to attract qualified candidates but low enough to be affordable to the business the justified wage may be viewed as the amount above the mandated minimum wage that an employer must pay to attract a candidate with the capabilities that the job requires the term fair compensation is often used interchangeably with justified wage in political and economic discussions understanding a justified wagea justified wage begins with the economic factors of supply and demand in the workforce a scarcity of job candidates with the skills needed will increase the justified wage offered there also are many job specific factors such as the levels of work experience education and training the job requires the supply of applicants who meet the requirements is important a wage is justified when it is seen as acceptable to potential candidates and economically feasible for the employer | |
when the economy is in a recession the actual level of wages for many workers drops to the minimum wage or a little above there are too many candidates for too few jobs and the businesses that hire may be barely breaking even during the great recession that started in 2008 even investment banks justified paying lower wages due to their slowing revenue growth | the federal minimum wage has been 7 25 per hour since 2009 many states cities and counties have set higher minimum wages twenty two states increased their minimum wages on jan 1 2024 1example justified wages for employeescompanies may compare their employees salaries and work experience when determining a justified wage for example one current employee has 10 years experience and receives a salary of 65 000 based on this information management determines that another employee s justified wage is 60 000 given that they have eight years experience management may also consider other factors when establishing a justified wage such as the responsibilities the employee will have and the revenue that their work will generate for instance the amount of commissions a stockbroker writes justifies their wage employees can have input into their justified wages during pay reviews by discussing how they are adding value to the company example justified wage for ceos | |
how is the minimum wage justified | the federal government has set a minimum wage since 1938 the goals were to stabilize the economy and to protect the health and well being of american workers it also addressed the needs of a substantial portion of the population low wage workers who lacked the bargaining power to demand a subsistence wage states and counties particularly those in parts of the country with high living costs set their own minimum wages at a higher level that the federal requirement of 7 25 2 | |
is a justified wage the same as equal pay | an employer who determines an individual s pay based on the concept of a justified wage has no logical reason to consider gender race or ethnicity for that reason a justified wage presumably is equal pay | |
how do i make an argument for a higher wage | one of the key considerations when an employer sets a justified wage is the person s contribution to the bottom line when you re asking for a raise be prepared to discuss how you ve contributed to the company s success if you can cite numbers does the competition pay better than your company is the average pay for your job position higher look for hard numbers to strengthen your case3 the bottom linethe concept of justified wages is used primarily by employers and personnel departments to determine a pay scale that is reasonable and acceptable to both the employer and the employee understanding the many factors that go into setting a justified wage can help employees negotiate a higher wage based on the skills and experience they bring to the job and the prevailing economic conditions that inform wage decisions | |
what is k | k is added to the end of a nasdaq stock ticker when the shares offer no voting rights the letter k is one of many nasdaq ticker symbol extensions that tell investors various things about that particular stock k is also the ticker symbol of the kellogg company listed on the new york stock exchange nyse understanding kthere are currently few stocks with no voting rights in the market because investors tend to shun such assets these stocks typically trade at a discount to their counterparts that do have voting rights a shareholder vote is considered a fundamental right for investors 2 without voting rights shareholders generally feel that they are vulnerable to arbitrary or irrational business decisions by management in cases where a lot of trust is placed in management because it has historically delivered significant shareholder value over a long stretch of time shareholders may not mind holding k shares other extensions including nyseon the nasdaq a d at the end of a ticker represents a corporate reorganization 3 the letter t represents a security with warrants or rights 4 w is for warrants 5z and l are more ambiguous and could mean multiple things but are usually tied to some preferred security 67p o n and m signify whether a security is a first second third or fourth preferred issue respectively 8910more common extensions include a and b these represent class a or class b shares 1112depending on the trading or charting platform or data source extensions may be directly added to the other ticker symbol characters or they may be separated by a for example brk a and brk b are the class a and class b shares of berkshire hathaway inc listed on the nyse 1314 in this case the class bs are non voting shares the nyse also has extensions or identifiers example of k shares in the real worldthe non voting shares for liberty global plc lbtyk is an example of a stock that has had longevity because of a single man john malone a pioneer in the cable industry who has a faithful following of shareholders he was a former ceo of the company and is presently chair of the board 15 the k shares tend to slightly underperform the lbtya shares which are class a voting shares 1617if shareholder sentiment about management is less clear a responsible firm would take action to eliminate a class of shares with no voting rights if it already had such a class this occurred with comcast corporation cmsca whose ceo brian roberts does not enjoy the same elevated status as john malone in the cable industry in december 2015 one share of cmcsk converted into one share of cmcsa which has voting rights shareholders applauded the move 18 | |
what is the k percent rule | the k percent rule was a proposal by economist milton friedman that the central bank should increase the money supply by a constant percentage every year understanding the k percent rulethe k percent rule proposes to set the money supply growth at a rate equal to the economic growth rate each year gross domestic product gdp is a metric that shows the percentage growth of all goods and services produced in an economy in the united states the typical gdp growth rate is 2 4 based on historical averages 1 the k percent rule would allow the level of money supply in the economy to grow with the gdp growth rate friedman claimed that the best way to bring stability to the economy over the long term was to have central banking authorities automatically grow the money supply by a set percentage or amount the k variable each year irrespective of economic conditions 2freidman argued the money supply should rise at an annual rate between 3 to 5 the k percent rule doesn t allow fed officials any leeway when making monetary decisions friedman believed that monetary policy would be more effective under a rules based system since discretionary policy might lead to mistakes and excessive monetary responses to economic conditions 2the federal reserve is the central bank of the united states and is charged with managing the money supply if economic growth slows the fed can increase the money supply through various tools which effectively increases lending through the banking system for example a cut in interest rates typically leads to a flurry of consumers to borrow more money which is used to purchase homes cars and other products these purchases stimulate the economy by creating spending and jobs which in turn increases economic growth 3in addition to proposing the k percent rule milton friedman was a nobel prize winner in economics and the founder of monetarism a branch of economics that singles out monetary growth and related policies as the most important driver of future inflation 4 inflation is a measure of the pace of rising prices in an economy if prices rise too fast the wages paid to workers would have less purchasing power friedman believed that monetary policy was a major contributor to cyclical fluctuations in the economy trying to fine tune the economy by varying monetary policy depending on economic conditions was dangerous because too little was known about its effects the rule friedman argued would help prevent mistakes by federal reserve officials for example in the 1930s the fed decreased the money supply in the u s economy which exacerbated the depression 5discretionary monetary policywhile the u s federal reserve board is well versed on the k percent rule s merits in practice most advanced economies do base their monetary policy on the state of the economy when the economy is cyclically weak the federal reserve and others look to grow the money supply at a faster rate than the k percent rule would suggest conversely when the economy is performing well most central banking authorities seek to constrain money supply growth however current u s monetary policy is not a rules based system that is only triggered based on economic conditions instead the policy is discretionary based on promoting economic growth and price stability also fed officials can use that discretion and flexibility to help combat economic shocks and financial crises for example during the 2007 2008 financial crisis the fed initiated multiple policies to bring the economy back to growth including reducing interest rates to nearly zero and implementing a buying program of u s treasuries and other securities having the fed as a buyer of debt created an enormous injection of cash into the banking system 6 | |
what is the k ratio | the k ratio is a valuation metric that examines the consistency of an equity s return over time the data for the ratio is derived from a value added monthly index vami which uses linear regression to track the progress of a 1 000 initial investment in the security being analyzed formula and calculation of the k ratiothe k ratio can be calculated as | |
what the k ratio can tell you | the k ratio was developed by derivatives trader and statistician lars kestner as a way to address a perceived gap in how returns had been analyzed because an investor s key interests are returns and consistency kestner designed his k ratio to measure risk versus return by analyzing how steady a security portfolio or manager s returns are over time the k ratio takes into account the returns but also the order of those returns in measuring risk the calculation involves running a linear regression on the logarithmic cumulative return of a value added monthly index vami curve the results of the regression are then used in the k ratio formula the slope is the return which should be positive while the standard error of the slope represents the risk in 2003 kestner introduced a modified version of his original k ratio which changed the formula of the calculation to include the number of return data points in the denominator he introduced a further modification which added a square root calculation to the numerator in 2013 1example of how to use the k ratiothe ratio measures the return of the security over time and it is considered to be a good tool to measure the performance of equities because it takes the return trend into account versus point in time snapshots the k ratio allows for a comparison of cumulative returns for different equities and equity managers returns over time it differs from the widely used sharpe measure by taking into account the order in which returns occur in practice the k ratio is designed to be viewed in tandem with and in addition to other measures of performance in addition to their use in analyzing individual stock returns style categories and fund managers k ratios can also be calculated for bonds k ratios will differ across asset classes domestic stocks versus bonds versus emerging market stocks within asset classes e g large cap versus small cap and by time period | |
what is a kagi chart | the kagi chart is a specialized type of technical analysis developed in japan in the 1870s it uses a series of vertical lines to illustrate general levels of supply and demand for certain assets including the price movement of rice a core japanese agricultural product thick lines are drawn when the price of the underlying asset breaks above the previous high price and is interpreted as an increase in demand for the asset thin lines are used to represent increased supply when the price falls below the previous low | |
what does a kagi chart tell you | on the kagi chart an entry signal is triggered when the vertical line changes from thin to thick and is not reversed until the thick line changes back to thin like any other chart these signals should be filtered based on other fundamental or technical criteria as simply buying or selling every time time kagi chart switches from thick to thin could prove costly and unprofitable the line turns thick when a new high is made if the line was thin the line stays thick as long as a new low isn t made the line turns thin when a new low is made and stays that way until a new high is made turns thick the kagi chart will move up and down as the price moves by the reversal amount or more these charts are independent of time and only change direction once a predefined reversal amount is reached the reversal amount is discussed below kagi charts having no regard for time have the advantage of reducing noise noise is a particular drawback of traditional candlestick charting methods because a change in price direction occurs only after a specific threshold is reached some traders may find kagi charts useful in terms of isolating the trend and viewing direction more clearly depending on the trading or charting platform used the kagi chart line may not be thin or thick but rather colored such as red and green the color changes signal a drop below a recent high or low kagi chart reversal amounta kagi chart will reverse direction when the price has moved the other direction by a specified amount or more assume a trader is trading apple inc aapl and they want the chart to show when there is a 10 reversal a kagi chart can show that if the kagi chart and price is moving higher to 300 the kagi will not reverse until the price drops below 290 if the price rises to 350 the kagi won t reverse until the price drops below 340 if the price falls to 340 the kagi will not reverse higher until the price moves back above 350 the 10 reversal is a moving target the 10 reversal can be based on closing prices or highs and lows the reversal amount doesn t need to be a fixed amount it can also be based on average true range atr which means the reversal amount will change as volatility changes | |
when the kagi chart reverses it draws a horizontal line at the low or high price close high or low depending on which is selected and then reverses it will continues to move vertically until there is a reversal | these are directional changes on the chart the lines changing color or switching from thick to thin highlights when a prior kagi chart high or low is breached kagi chart trade signalsas discussed kagi chart signals are best used in conjunction with other forms of analysis that said kagi charts do have some unique trade signals based on their formations multiple kagi patterns are covered in the book beyond candlesticks by steve nison for the best outcomes kagi charts should be combined with other technical analysis tools such as sentiment indicators and moving averages example of how to use a kagi chartthe follow chart shows a kagi chart of apple based on 1 hour closing prices the reversal amount is 5 the chart shows examples of rising shoulders which highlight the price rising in an uptrend the series of falling waists signals the price is in an downtrend there are also three examples of the three buddha bottom highlighted which signaled buying opportunities as a general note the kagi switches to green when the price moves above the prior kagi high and switches to red when the price drops below the prior kagi low the difference between kagi charts and renko chartskagi and renko charts are both based on reversal amounts renko charts are created by bricks that only move at 45 degree angles and never occur beside each other each brick is a specified amount in order to get a reversal on the renko chart the price must move two brick distances since there are no side by side bricks the limitations of using kagi chartskagi charts are sensitive to their settings and with poor settings they can be as noisy as other charting methods once a good setting is found for a particular asset that setting may not work well on another asset the trader therefore may need to find kagi settings that work for each asset traded for some traders the trend may be harder to identify with the kagi charts with the line thickness or color changing as well as the chart itself moving up and down in vertical lines while trade signals with kagi charts will have some similarities to other chart types like candlesticks kagi charts have unique features which may require additional study to take advantage of many of the general buy and signals generated by kagi charts won t be profitable over many trades until combined with other forms of analysis to help filter trades | |
how do you read a kagi chart | unlike a traditional line graph a kagi chart does not show changes over time in a linear fashion instead the kagi line moves up or down whenever the price changes by more than the reversal amount the kagi line becomes thick when it breaks past a previous high and it becomes thin again when it breaks below a previous low these two variables can be used to identify entry and exit points | |
what is the difference between kagi and candlestick charts | a candlestick chart is a simplified way of showing the highest lowest opening and closing prices for each trading day while omitting most of the noise of daily price fluctuations a kagi chart only changes direction for price movements of a certain size and the thickness or color of the lines reflects a break past an established high or low it is important to note that kagi charts do not reflect price changes over time instead the movements in a kagi chart indicate price changes over a certain size overall kagi charts contain less information than candlestick charts making them easier to read for some traders | |
what does the line thickness of a kagi chart mean | the thickness of a kagi line shows the trend of an asset s price action the line becomes thick or green colored when the price establishes a new high and stays that way until the price establishes a new low when the price falls to a new low for the time period the kagi line becomes thin and stays that way until it reaches a new high the bottom linea kagi chart is a technical tool that can be used to identify major movements in the price of an asset unlike line charts or candlestick graphs a kagi chart simply shows major price movements and the establishment of new highs or lows however kagi charts are less intuitive than other types of chart and may require more expertise to interpret correctly | |
what is the kairi relative index kri | the kairi relative index is a technical analysis metric that traders use to indicate when it is time to buy or sell an asset it measures the deviation of the price from the simple moving average sma of that asset s price over a period of time typically 10 to 20 days 1if an asset s price is much higher than the sma of the asset over a chosen time period the kairi relative index favors selling if an asset s price is much lower than the simple moving average then the index favors buying the asset the formula for the kairi relative index kri kairi relative index kri close s m a n s m a n 100 where s m a simple moving average n number of periods averaged in sma begin aligned textit kairi relative index kri qquad bigg frac textit close sma n sma n bigg times100 textbf where sma text simple moving average n text number of periods averaged in sma end aligned kairi relative index kri sman close sman 100where sma simple moving averagen number of periods averaged in sma | |
what does the kairi relative index tell you | the kairi relative index was invented by an investor in japan it came into widespread usage in the middle of the 20th century but by the 1970s it had been superseded by more sophisticated metrics like the relative strength index rsi the kri is measuring how far away the price is from its moving average assets that move a lot will tend to have larger values than assets that don t move a lot for example an extremely low reading on the spdr s p 500 etf spy is between 7 and 15 and a high reading is four to 10 on the upside a volatile stock may have extreme readings of 40 or 50 therefore when the indicator is applied to a stock or other asset note the extreme levels the indicator has reached in the past on that asset those are the areas to watch for on the indicator in the future | |
when the indicator rises to an extremely high reading for that particular asset the indicator is saying the price is overbought and could decline consider waiting for confirmation before selling such as the price starting to fall | example of how to use the kairi relative indexon the chart below the kri is added to a apple inc aapl weekly chart over more than seven years extreme readings on the upside have typically been 15 or above extremely low readings have been below 10 some of these extremes are marked by vertical lines on the chart with green lines representing kri buy signals and red lines representing kri sell signals while some of these trades would have worked out mainly because apple was in an overall uptrend during the period many signals would have resulted in poor entry and exit points if the kri was used on its own several buy signals occurred when the price of apple was still declining several sell points occurred too early as the price will still moving higher waiting for confirmation of a price reversal once the kri had reached an extreme would have helped prevent some of these early entries and exits difference between the kri and the macdthe kri measures the distance of closing prices to the sma the moving average convergence divergence macd measures the distance between two exponential moving averages a signal line is then typically applied to the macd to generate trade signals limitations of using the kairi relative indexthe kri is tracking how far an asset is from its moving average extreme readings are considered sell or buy signals but users must also note that the more extreme the reading the stronger the trend is prices need to run fast and hard in order to move away from the moving average therefore trying to short a rapidly rising market or buy a rapidly falling market can be like stepping in front of a freight train it is prudent to wait for some other form of verification that the price is actually turning when the kairi indicator reaches an extreme level trades may use other technical indicators or price action to signal the price is turning the kri may turn lower or higher without the asset s price turning lower or higher this can happen because the distance between the price and the sma narrows but the price can still continue in its current direction a simple moving average is the main component of the kri indicator averages are historical in nature and may not provide insight into what will happen in the future | |
what is kaizen | kaizen is a japanese term meaning change for the better or continuous improvement it is a japanese business philosophy that concerns the processes that continuously improve operations and involve all employees kaizen sees improvement in productivity as a gradual and methodical process the concept of kaizen encompasses a wide range of ideas it involves making the work environment more efficient and effective by creating a team atmosphere improving everyday procedures ensuring employee engagement and making a job more fulfilling less tiring and safer understanding kaizensome of the key objectives of the kaizen philosophy include quality control just in time delivery standardized work the use of efficient equipment and the elimination of waste the overall goal of kaizen is to make small changes over a period of time to create improvements within a company that doesn t mean alterations happen slowly the kaizen process simply recognizes that small changes now can have huge impacts in the future improvements can come from any employee at any time the idea is that everyone has a stake in the company s success and everyone should strive at all times to help make the business model better many companies have adopted the kaizen concept most notably toyota employs the kaizen meaning and philosophy within its organization it esteems kaizen as one of its core values to improve its production system toyota encourages and empowers all employees to identify areas of potential improvement and create viable solutions 1toyota s process of identifying solutions is called kaizen blitz | |
how does kaizen work | kaizen involves five key principles know your customer let it flow go to gemba or the real place empower people and be transparent 2these five principles lead to three major outcomes elimination of waste also referred to as economic efficiency good housekeeping and standardization ideally kaizen becomes so ingrained in a company s culture that it eventually becomes natural to employees the kaizen meaning posits that there is no perfect end and that everything can be improved upon people must strive to evolve and innovate constantly the basic idea of kaizen is that people who perform certain tasks and activities know the most about them empowering those people to effect change is the best strategy for improvement teamwork is core to kaizen where regular team meetings are held involving discussions about improvements changes and projects | |
what are some benefits of kaizen | kaizen offers companies many valuable benefits some of them are kaizen and the pdca cycleimprovements generally follow the pdca cycle format pdca stands for plan do check act the plan portion includes proposing and mapping out changes so that everyone knows what to expect when teams try to solve a problem the do stage implements the best solution for the problem the check step involves evaluating the solution to the problem to see if it worked | |
when a company acts it determines whether or not the solution should become a company standard or if it needs further changes if managers decide to implement more changes kaizen goes back to the plan step and the process starts over | just in time inventory strategyone of the key goals of the kaizen process is to reduce waste and increase efficiency in the production cycle a just in time jit inventory strategy allows management to minimize excess inventory by matching the delivery of raw materials from suppliers with production schedules the jit strategy is part of the toyota production system tps named for the company that popularized it jit helps companies cut costs because manufacturers do not have to pay inventory carrying costs it also reduces waste because companies are not left with extra inventory should a customer cancel or postpone an order 4kanban is an inventory control system used in conjunction with a jit strategy it provides employees with visual cues that tell them it is time to order parts and materials as they run out the system relies on colored cards that track production and alert employees when it s time to replenish a needed part or material it enables employees to quickly order the correct number of parts from the supplier and have them delivered to where they are needed in the factory the goal of kanban is to ensure the efficient running of the factory assembly line and to prevent bottlenecks from occurring | |
what are the 5 elements of kaizen | the five kaizen elements or principles are know your customer let it flow go to gemba empower people and be transparent 2 people also sometimes ask what kaizen 5s refers to it s a process often used in lean manufacturing and relates to five steps of improvement sort set in order shine standardize and sustain 5 a 5s event follows each of these steps one day at a time | |
what is the kaizen method | it s a business philosophy with guiding principles and tools that seeks to involve all employees in the gradual and continuous improvement of various areas of a company the kaizen method focuses on engaging employees and using teamwork to create a successful and enjoyable work environment | |
what is an example of kaizen | toyota is a famous example of a company using kaizen to sustain its success another commonly known example of kaizen in action involves ford motor company which embraced kaizen to cut the time it took to complete various manufacturing processes | |
what are the main tools of kaizen | the kaizen methodology uses different tools depending on the goal for instance the 5s tool is often used in lean manufacturing and to ensure that workplaces are efficient productive and safe jit and kanban are used for inventory control the five whys what when where why and who is a tool used to reveal the root cause of a problem value stream mapping is an analytic tool that is used to identify places to eliminate waste follow up events are tools used to sustain improvements | |
what is a kamikaze defense | a kamikaze defense is a defensive strategy sometimes resorted to by a company s management to prevent a takeover by another company while these strategies are named after the suicidal kamikaze attacks used by japanese pilots during world war ii they rarely destroy the company nevertheless a kamikaze defense involves taking measures that are detrimental to the firm s business operations or financial condition the idea is to reduce the target company s attractiveness to a hostile bidder a kamikaze defense is desperate but the hope is that the takeover bid will be thwarted understanding kamikaze defensesa company where management does not want it to fall into another group s hands may try a kamikaze defense as a last resort in an intended acquisition process an interested party will usually build up a small stake in the target company and approach the board of directors with an offer to buy the company suppose the board rebuffs the offer which would invariably be the case if the board and its financial advisors believed that the offer substantially undervalued the company then the interested party could assume a more aggressive stance to take over the company suppose the would be acquirers feel like they are getting nowhere with more pressing negotiations in that case they may attempt a hostile takeover against the board s wishes in response the target company could seek out a white knight this friendly party would generally hold together the current business operations of the company existing management would usually prefer that rather than disrupting or dismantling their company which is often the end result of a successful hostile takeover another takeover defense mechanism is the adoption of a poison pill that is generally considered a shareholder unfriendly move but it is mild in comparison to full kamikaze strategies a kamikaze defense may succeed in the end but the company would leave itself in a weakened state kamikaze defenses are often undertaken by management to protect their own interests or at the behest of the company s founders and their heirs kamikaze defenses rarely work to the benefit of ordinary shareholders types of kamikaze defensesthere are several different ways that companies can make themselves less attractive takeover targets usually at considerable cost to themselves | |
when a company sells the crown jewels management sells off its best assets to make it a less attractive target and raise cash | for example a struggling firm might own valuable commercial real estate in key locations the hostile takeover might be aimed at getting that real estate at below market prices by selling that commercial real estate in the market the firm might get more money for it and deter the takeover on the other hand this kamikaze defense also means the company loses the use of that property for future operations which could be highly damaging the scorched earth policy is named after a morally dubious and often illegal military strategy in which a retreating army destroys crops and supplies to slow down an enemy advance when a company s management pursues a scorched earth policy they also try to remove assets that might be valuable to their opponents and run legal risks for example they could fire skilled employees who are difficult to replace and fail to perform proper maintenance ultimately destroying equipment this kamikaze defense can cause serious legal problems if workers are endangered or the parties behind the takeover bid get an injunction in the fat man strategy the company s management loads up on debt and acquires lots of assets or even other firms to make the company a less attractive takeover target at its best the fat man strategy simply makes the target company too large and unwieldy for the other company to acquire the resulting larger company might still be viable just too big to buy on the other hand the kamikaze aspect comes into play if the new acquisitions were overpriced or a poor fit for the company if that happens the takeover target might survive the hostile takeover attempt only to fail later on due to excessive debt | |
what is kanban | kanban is an inventory control system used in just in time jit manufacturing it was developed by taiichi ohno an industrial engineer at toyota and takes its name from the colored cards that track production and order new shipments of parts or materials as they run out kanban is a japanese word that directly translates to visual card so the kanban system simply means to use visual cues to prompt the action needed to keep a process flowing understanding the kanban systemthe kanban system can be thought of as a signal and response system when an item is running low at an operational station there will be a visual cue specifying how much to order from the supply the person using the parts makes the order for the quantity indicated by the kanban and the supplier provides the exact amount requested for example if a worker is bagging product on a conveyor belt a kanban may be placed in the stack above the last 10 bags when the worker gets to the card he gives the floor runner the card to bring more bags a station further from the supply room might have the kanban placed at 15 bags and a closer one at five the flow of bags and the placement of cards are adjusted to make sure no station is left bag less while the belt is running the kanban system can be used easily within a factory but it can also be applied to purchasing inventory from external suppliers the kanban system creates extraordinary visibility to both suppliers and buyers one of its main goals is to limit the buildup of excess inventory at any point on the production line limits on the number of items waiting at supply points are established and then reduced as inefficiencies are identified and removed whenever a limit of inventory is exceeded it points to an inefficiency that needs to be addressed as containers of parts or materials are emptied cards appear color coded in order of priority allowing the production and delivery of more before a hold up or shortage develops a two card system is often used transportation cards also referred to as t kanban authorize the movement of containers to the next workstation on the production line while production cards also referred to as p kanban authorize the workstation to produce a fixed amount of products and order parts or materials once they have been sold or used kanban often requires company wide buy in to be effective each department must be relied upon to perform their necessary tasks at a specific time in order to transition the process to future departments without such buy in kanban methodologies are futile kanban core practicesthe kanban method has several core principles that define how processes occur and how team members should be involved in the process at the heart of kanban the process must be visually depicted whether by physical tangible cards or leveraging technology and software the process must be shown step by step using visual cues that make each task clearly identifiable the idea is to clearly show what each step is what expectations are and who will take what tasks old fashioned but still used today methods included drafting kanban tasks on sticky notes each sticky note could be colored differently to signify different types of work items these tasks would then be placed into swim lanes defined sections that group related tasks to create a more organized project today inventory management software typically drives kanban process as kanban is rooted in efficiency the goal of kanban is to minimize the amount of work in progress teams are encouraged to complete prior tasks before moving on to a new one this ensures that future dependencies can be started earlier and that resources such as staff are not inefficiently waiting to start their task while relying on others a company must internally assess the appropriate amount of wip to be carrying as it works through the kanban process this is often tied to the number of people along the process as the number of workers tied to a project decreases so does the allowed quantity of items being worked on this limitation also communicates to other teams or departments that they must be considerate of their ask of other teams as each group of individuals may be imposed a working limitation as a process is undertaken a company will be able to identify strengths and weaknesses along the workflow sometimes limitations are not met or goals not achieved in this case it is up to the team to manage the workflow and better understand the deficiencies that must be overcome a critical part of kanban is to observe and eliminate bottlenecks prior to them occurring this includes forecasting production and resource utilization as a process becomes more predictable a company will find it is easier to make commitments to customers or make processes even more efficient by fully scaling back additional unused resources as part of visually depicting workflows processes are often clearly defined departments can often easily understand the expectations placed on their teams and kanban cards assigned to specific individuals clearly identify responsibilities for each task by very clearly defining policies each worker will understand what is expected of them what checklist criteria must be met before completion and what occurs during the transition between steps | |
when using the kanban method companies often gather information analyze how processes are flowing and implement changes to further improve the process this feedback loop allows employees to continuously improve and make incremental changes that are easier to adapt to the feedback may be positive feedback or negative feedback the kanban approach enables workers to understand failures early in the process and allows the company to adapt to a correct path before inefficiencies become a larger issue | because tasks are broken down into very small kanban cards individuals must often rely upon each other when using the kanban method individuals often on different teams must collaborate and discuss transitions between swim lanes while other individuals must group to identify and resolve issues quickly under kanban changes to the process must be broadly communicated as adjustments made in one area may have a wider impact in other kanban boardthe kanban process utilizes kanban boards organizational systems that clearly outline the elements of a process a kanban board often has three elements boards lists and cards kanban boards are the biggest picture of a process that organizes broad aspects of a workflow for example a company may choose to have a different kanban board for different departments within its organization such as finance marketing and others the kanban board is used to gather relevant processes within a single workspace or taskboard area kanban lists are the to do items within each board for example a manufacturer may have each stage of manufacturing as a list item as kanban lists often represent different stages of production within a similar field kanban lists may also flow from one task to another often one task will end and another task will pick up with the next action item following the completion of the prior list item last kanban cards live within lists and represent the most minute detailed action items needed to complete the list these cards are the specific items that must be addressed in sequential order to complete the list for example a manufacturer must contact the supplier confirm raw material availability submit the order receive the inventory items and begin manufacturing each of these steps can even be refined further into more specific kanban cards that represent mini projects the example below depicts the an example of a kanban or pull system with well defined tasks swim lanes and an overall demonstration of the flow of tasks u s general services administrationelectronic kanban systemsto enable real time demand signaling across the supply chain electronic kanban systems have become widespread these e kanban systems can be integrated into enterprise resource planning erp systems these systems leverage digital kanban boards lists and cards that communicate the status of processes across departmentstoyota ford motor company and bombardier aerospace are among the manufacturers that use e kanban systems these electronic systems still provide visual signals but the systems are also usually enabled to automate parts of the process such as transport through the factory or even filing purchase orders scrum vs kanbanscrum and kanban both hold methodologies that help companies operate more efficiently however each have very different approaches to achieving that efficiency scrum approaches affix certain timeframes for changes to be made with kanban changes are made continuously the scrum methodology breaks tasks into sprints defined periods with start and end periods in which the tasks are well defined and to be executed in a certain manner no changes or deviations from these timings or tasks should occur scrum is often measured by velocity or planned capacity and a product owner or scrum master oversees the process on the other hand kanban is more adaptive in that it analyzes what has been done in the past and makes continuous changes teams set their own cadence or cycles and these cycles often change as needed kanban measures success by measuring cycle time throughput and work in progress kanban should not be confused with kaizen the methodology of continuous improvement benefits of kanbanthe idea of kanban carries various benefits ranging from internal efficiencies to positive impacts on customers the purpose of kanban is to visualize the flow of tasks and processes for this reason kanban brings greater visibility and transparency to the flow of tasks and objectives by depicting steps and the order in which they must occur project participants may get a better sense of the flow of tasks and importance of interrelated steps because kanban strives to be more efficient companies using kanban often experience faster turnaround times this includes faster manufacturing processes quicker packaging and handling and more efficient delivery times to customers in turn this reduces company carrying costs such as storage insurance and risk of obsolescence while also turning over capital quicker for more efficient usage companies that use kanban practices may also have greater predictability for what s to come by outlining future steps and tasks companies may be able to get a better sense of risks roadblocks or difficulties that would have otherwise slowed the process instead companies can pre emptively plan to attack these deficiencies and allocate resources to combat hurdles before they slow processes the ultimate goal of kanban is to provide better service to customers with more efficient and less wasteful processes customers may be charged lower prices with faster processes customers may get their goods faster by being on top of processes customers may also be able to interact with customer service quicker and have resolutions met faster disadvantages of kanbanfor some companies kanban is not possible to be implemented or not feasible to practice first kanban relies on stability a company must have a predictable process that cannot materially deviate for companies operating in dynamic environments where activities are not stable the company may find it difficult to operate using kanban kanban is often related to other production methodologies just in time scrum etc for this reason a company may not reap all benefits if it only accepts kanban practices for example a company may understand when it will need raw materials when reviewing kanban cards however if the company does not utilize just in time inventory it may be incurring unnecessary expenses to carry the raw materials during periods when it is sitting idle kanban also has the demand of needing to be consistently updated for a few reasons first if completed tasks are not marked off the team analyzing next steps may not adequately assess where along the process the team is at second there is no timing assessments to different phases so team members must be aware of how much time is allocated to their task and what future deadlines rely on the task at hand | |
what are the rules of kanban | under the kanban method companies must be continually improving providing feedback loops to workers and striving to be efficient with resources kanban requires companies to visually depict processes assign tasks to swim lanes and ensure individuals are communicating changes across the entire process or project | |
why do we use kanban | kanban strives to save companies time money and other resources by ensuring there is minimal downtime between tasks in addition kanban attempts to target bottlenecks before they occur ensuring that steps can be taken in advance to avoid having work in process sit idly back while problems are fixed | |
is kanban agile or lean | kanban bridges both agile and lean frameworks it is agile in that processes are visually depicted in advance of occurring this means changes can be made in advance of issues in addition kanban is a pull system in that work is pulled through a process when each prior step is completed instead of having inventory pile up from one stage to another kanban aims to have just enough inventory working its way through a manufacturing process the bottom linethe kanban approach is a methodology that aims to minimize waste downtime inefficiencies and bottlenecks along a workflow process projects are visually depicted using boards lists and cards that show responsibilities across departments when executed appropriately kanban can minimize manufacturing expenses utilize labor more efficiently improve customer service and minimize delivery times | |
what is a kangaroo bond | a kangaroo bond is a type of foreign bond issued in the australian market by non australian firms and is denominated in australian currency the bond is subject to the securities regulations of australia a kangaroo bond is also known as a matilda bond | |
how a kangaroo bond works | bond issuers that want access to investors and lenders in the australian debt market would issue a bond referred to as a kangaroo bond named in recognition of the country s national animal emblem a kangaroo bond is a foreign bond issued in australian dollars by non domestic entities including corporations financial institutions and governments simply put a foreign bond is issued in a domestic market by a foreign issuer in the currency of the domestic country foreign bonds are mainly used to provide issuers with access to another capital market outside of their own to raise capital major corporations and or investment firms looking to diversify their holdings and improve their overall currency exposures can use kangaroo bonds to raise funds in australian dollars kangaroo bonds are typically issued when interest rates in australia are low relative to the foreign corporation s domestic rates thus lowering the foreign issuer s overall interest expense and cost of borrowing benefits of a kangaroo bonda company may choose to enter a foreign market if it believes that it would get attractive interest rates in this market or if it has a need for foreign currency when a company decides to tap into a foreign market it can do so by issuing foreign bonds which are bonds denominated in the currency of the intended market a kangaroo bond is an attractive investment venture for domestic investors who are not exposed to currency risk since the bonds are denominated in their local currency furthermore investors who wish to diversify their portfolios beyond their local borders may opt for these bonds and earn incremental yield in effect kangaroo bonds provide an opportunity to invest in foreign companies without having to manage the effects of currency exchange fluctuations many issuers do not necessarily have a need for australian dollars when they issue kangaroo bonds proceeds from the sale of the bonds are typically converted back to a currency that the issuer requires through financial instruments such as cross currency swaps these swaps are used to hedge the foreign exchange risk associated with the issuer s obligation to pay coupons and repay the principal in australian dollars for example through a cross currency swap a kangaroo bond issuer can lend australian dollars at the bank bill swap rate bbsw plus the basis while paying the fed funds rate plus some margin for u s dollars the risk associated with raising capital in a foreign currency can often be mitigated with risk management techniques such as cross currency swaps example of a kangaroo bondin january 2018 emirates nbd dubai s largest bank priced a a 450 million 362 03 million 10 year bond part of a a 1 5 billion kangaroo bond program with a 4 75 percent indicative annual coupon the reason for the bond issuance was to diversify the bank s source of funding and to facilitate its expansion into new markets major issuers of kangaroo bonds have typically been from the united states and germany other foreign bonds include samurai bonds maple bonds matador bonds yankee bonds and bulldog bonds | |
what are kangaroos | kangaroo is a slang term used to describe the australian stocks that comprise the country s benchmark all ordinaries index the index consists of stocks of the most actively traded australian companies understanding kangaroosthe kangaroos comprise the all ordinaries index which represents the most quoted benchmark index for the country s equities market the australian stock exchange is in charge of calculating and distributing the index and its returns the market weighted all ordinaries index which launched on december 31 1979 is the oldest index in australia and includes about 500 companies 1 the index began at a base value of 500 00 corresponding to the contemporaneous aggregate market value of all the member companies in the index at the end of trading on the last day of 1979 2subsequent values of the index are calculated as the base number 500 times the proportion of the current aggregate market value of index members to the aggregate market value at the beginning of the index the market capitalization of the companies included in the index represents a dominant share of the value of all shares listed on the australian stock exchange for inclusion all ordinaries index companies have to have a market value of at least 0 2 of all domestic equities quoted on the exchange and have an average turnover of at least 0 5 of its quoted shares per month 3 market values of those stocks meeting these criteria vary so share price movements among larger cap companies exert a greater influence on the index than smaller companies financial companies make up the largest component of the index when broken down by industrial sectors followed by raw materials and industrial sectors because it is weighted by market capitalization and indexed to aggregate market value the all ordinaries index reflects total market performance rather than the typical performance of individual stocks notably the index does not include dividends paid to shareholders as a result the index does not reflect the total returns made from share market investments over any particular period the australian stock exchange updates the index portfolio at the end of every month to make sure that the companies remain eligible for inclusion changes in the portfolio companies such as delistings additions and capital reconstructions can also lead to index changes during the month kangaroos in the bond marketkangaroos can refer to australia s bond market as well in this case a kangaroo bond is a foreign bond issued in australia s market by a non australian firm but denominated in australian dollars the issuer s goal would be to diversify their debt and gain exposure to investors and lenders participating in australia s debt market among those that issue kangaroo bonds are corporations financial institutions and governments historically market participants from the u s and germany have been significant issuers of kangaroo bonds typically the kangaroo bond sees increased issuance when interest rates in australia are low relative to the foreign corporation s domestic rates thus lowering the foreign issuer s overall interest expense and cost of borrowing 4similar in concept to kangaroo bonds foreign bonds issued on other markets include the likes of samurai bonds maple bonds matador bonds yankee bonds and bulldog bonds | |
what is kappa | kappa is the measurement of an option contract s price sensitivity to changes in the volatility of the underlying asset volatility accounts for recent changes in price historical changes in price and future price moves for a trading instrument like an option volatility is intended to capture the amount and speed at which the price moves up and down understanding kappakappa also called vega is one of the four primary greek risk measures so named after the greek letters that denote them since vega is not actually a greek letter the v in vega stands for volatility just as the t in theta stands for time it is sometimes referred to as kappa the prices of options contracts are influenced by a number of different factors the option greeks are four ways of measuring factors that influence the price of options traders use these measures when analyzing options this set of risk measures kappa theta gamma delta indicates how sensitive an option is to time value decay changes in implied volatility and movements in the price of its underlying security kappa measures risk by calculating the amount that an option contract s price changes in reaction to a 1 change in the implied volatility of the underlying asset by establishing a neutral position a trader can hedge against some of the implied volatility kappa is higher the further away an option s expiration date is kappa falls as the expiration date approaches because the price of an option becomes more sensitive to the price volatility of the underlying asset as its expiration date gets closer options that are expiring immediately have negative kappa this is because options that are expiring in the future have greater premiums assigned to them than those options that expire immediately | |
when there are large price movements that indicate volatility in the underlying asset kappa changes kappa falls as the option gets closer to its expiration date kappa measures the price change for each percentage point change in implied volatility implied volatility is a prediction it may vary from the real future volatility implied volatility is calculated using a model that determines what the current market prices are estimating an underlying asset s future volatility will be | kappa can be calculated for individual options as well as an options portfolio when kappa is determined for an options portfolio it is referred to as net kappa net kappa is determined by adding up the kappas of each individual position the other three options greek are delta gamma and theta delta measures the impact of a change in the underlying asset s price it is the ratio that compares the change in the price of an asset usually marketable securities to the corresponding change in the price of its derivative gamma measures the rate of change of delta it is the rate of change in an option s delta per 1 point move in the underlying asset s price theta measures the impact on the price as time passes its time decay | |
karl marx 1818 1883 was a philosopher author social theorist and economist he is famous for his theories about capitalism socialism and communism | marx in conjunction with friedrich engels published the communist manifesto in 1848 later in life he wrote das kapital which discussed the labor theory of value the first volume was published in berlin in 1867 the second and third volumes were published posthumously in 1885 and 1894 respectively investopedia joshua seongearly life and educationborn in trier prussia now germany on may 5 1818 marx was the son of a successful jewish lawyer who converted to lutheranism before marx s birth marx studied law in bonn and berlin where he was introduced to the philosophy of g w f hegel he became involved in radicalism at a young age through the young hegelians a group of students who criticized the political and religious establishments of the day marx received his doctorate from the university of jena in 1841 his radical beliefs prevented him from securing a teaching position so instead he took a job as a journalist and later became the editor of rheinische zeitung a liberal newspaper in cologne after living in prussia marx lived in france for some time and that is where he met his lifelong friend friedrich engels he was expelled from france and then lived briefly in belgium before moving to london where he spent the rest of his life with his wife marx died of bronchitis and pleurisy in london on march 14 1883 and was buried at highgate cemetery in london his original grave was nondescript but in 1954 the communist party of great britain unveiled a large tombstone including a bust of marx and the inscription workers of all lands unite an anglicized interpretation of the famous phrase in the communist manifesto proletarians of all countries unite marx s theoriesmarx was inspired by classical political economists such as adam smith and david ricardo while his own branch of economics marxian economics is not favored among modern mainstream thought marx s ideas have greatly impacted societies most prominently in communist projects such as those in the ussr china and cuba among modern thinkers marx is still very influential in the fields of sociology political economy and strands of heterodox economics in general marx claimed there are two major flaws inherent in capitalism that lead to the exploitation of workers by employers the chaotic nature of free market competition and the extraction of surplus labor ultimately marx predicted that capitalism would eventually destroy itself as more people become relegated to working class status inequality rose and competition would lead the rate of corporate profits to zero this would lead he surmised to a revolution where production would be turned over to the working class as a whole marx s work on understanding capitalism as a social and economic system remains a valid critique in the modern era in das kapital capital in english marx argues that society is composed of two main classes capitalists are the business owners who organize the process of production and who own the means of production such as factories tools and raw materials and who are also entitled to any and all profits the other much larger class is composed of labor which marx termed the proletariat laborers do not own or have any claim to the means of production the finished products they work on or any of the profits generated from sales of those products instead labor works only in return for a monetary wage marx argued that because of this uneven arrangement capitalists exploit workers this exploitation is the reason according to marx that employers can generate profits they extract a full day s worth of effort and production from workers but only pay them a smaller fraction of this value as wages marx termed this surplus value and argued that it was nefarious like the other classical economists karl marx believed in a labor theory of value ltv to explain relative differences in market prices this theory stated that the value of a produced economic good can be measured objectively by the average number of labor hours required to produce it in other words if a table takes twice as long to make as a chair then the table should be considered twice as valuable marx understood the labor theory better than his predecessors even adam smith and contemporaries and presented a devastating intellectual challenge to laissez faire economists in das kapital if goods and services tend to be sold at their true objective labor values as measured in labor hours how do any capitalists enjoy profits it must mean marx concluded that capitalists were underpaying or overworking thereby exploiting laborers to drive down the cost of production 1while marx s answer was eventually proved incorrect and later economists adopted the subjective theory of value his simple assertion was enough to show the weakness of the labor theory s logic and assumptions marx unintentionally helped fuel a revolution in economic thinking another important theory developed by marx is known as historical materialism this theory posits that society at any given point in time is ordered by the type of technology used in production under industrial capitalism society is so ordered with capitalists organizing labor in factories or offices where they work for wages prior to capitalism marx suggested that feudalism existed as a specific set of social relations between lord and peasant classes related to the hand powered or animal powered means of production prevalent at the time marx s written worksduring his lifetime karl marx wrote and published no less than fifteen complete multi volume books along with numerous pamphlets articles and essays he could often be found writing in the reading rooms at london s british museum 2perhaps his most famous work the communist manifesto summarizes marx and engels s theories about the nature of society and politics and is an attempt to explain the goals of marxism and later socialism when writing the communist manifesto marx and engels explained how they thought capitalism was unsustainable and how the capitalist society that existed at the time of the writing would eventually be replaced by a socialist one das kapital was a full and comprehensive three volume critique of capitalism by far the more academic work it lays forth marx s theories on commodities production labor markets the social division of labor and a basic understanding of the rate of return to owners of capital marx died before the third volume was finished which was published posthumously by engels based largely on marx s notes today many of the ideas and critiques of capitalism remain relevant such as the emergence of monopolistic mega corporations persistent unemployment and the general struggle between workers and employers the exact origins of the term capitalism in english are unclear and certainly marx was not the first to use the word capitalism in english however he contributed to the rise of its use and interest in the concept 1according to the oxford english dictionary the english word was first used in 1854 in the novel the newcomes by author william thackeray who intended it to mean a sense of concern about personal possessions and money in general while it s unclear whether either thackeray or marx was aware of the other s work both men meant the word to have a pejorative ring adam smith also famously wrote about the capitalist economic system in his 1776 masterpiece the wealth of nations and marx was well aware of smith s writings contemporary influencemarx s work laid the foundations for future communist leaders such as vladimir lenin and josef stalin operating from the premise that capitalism contained the seeds of its own destruction his ideas formed the basis of marxism and served as a theoretical base for communism nearly everything marx wrote was viewed through the lens of the common laborer from marx comes the idea that capitalist profits are possible because the value is stolen from the workers and transferred to employers marxist ideas in their pure form have very few direct adherents in contemporary times indeed very few western thinkers embraced marxism after 1898 when economist eugen von b hm bawerk s karl marx and the close of his system was first translated into english in his damning rebuke b hm bawerk showed that marx failed to incorporate capital markets or subjective values in his analysis nullifying most of his more pronounced conclusions still there are some lessons that even modern economic thinkers can learn from marx though he was the capitalist system s harshest critic marx understood that it was far more productive than previous or alternative economic systems in das kapital he wrote of capitalist production that combined together of various processes into a social whole which included developing new technologies 3he believed all countries should become capitalist and develop that productive capacity and then workers would naturally revolt leading to communism whereby the workers would become the dominant social class and collectively control the means of production but like adam smith and david ricardo before him marx predicted that because of capitalism s relentless pursuit of profit by way of competition and technological progress to lower the costs of production that the rate of profit in an economy would always be falling over time dr james bradford brad delong professor of economics at uc berkeley wrote in 2011 that marx s primary contribution to economic science actually came in a 10 paragraph stretch of the communist manifesto in which he describes how economic growth causes shifts among social classes often leading to a struggle for political power this underlies an often unappreciated aspect of economics the emotions and political activity of the actors involved a corollary of this argument was later made by french economist thomas piketty who proposed that while nothing was wrong with income inequality economically it could create blowback against capitalism among the people thus there is a moral and anthropological consideration of any economic system the idea that societal structure and transformations from one order to the next can be the result of technological change in how things are produced in an economy is known as historical materialism | |
what is karl marx s main theory | karl marx s theories on communism and capitalism formed the basis of marxism his key theories were a critique of capitalism and its shortcomings marx thought that the capitalistic system would inevitably destroy itself the oppressed workers would become alienated and ultimately overthrow the owners to take control of the means of production themselves ushering in a classless society | |
what is karl marx best known for | karl marx is best known for his theories that led to the development of marxism his ideas also served as the basis for communism his books das kapital and the communist manifesto formed the basis of marxism | |
what is marxism vs communism | marxism is a system of socioeconomic analysis while communism is a form of economic production that extends to government or political movements marxism is a broad philosophy developed by karl marx in the second half of the 19th century that unifies social political and economic theory it is mainly concerned with the battle between the working class and the ownership class and favors communism and socialism over capitalism the bottom linekarl marx remains controversial but his writings still remain relevant today even as mainstream economics has relegated marxism as a heterodox school of thought marx did have a lot to say about the capitalistic system of production and roundly critiqued it for generating social and wealth inequalities negative externalities and class struggle ultimately marx s predictions about the impending collapse of capitalism and the communist revolutions that would follow proved incorrect this has led many to discount marx and marxian thought still marx s insights remain influential and inspiring to others | |
what was the katie couric clause | the katie couric clause was a slang term to refer to a controversial rule that the securities and exchange commission sec considered implementing in 2006 known formally as the executive compensation and related party disclosure clause the clause which was ultimately not adopted would have expanded on existing executive compensation rules requiring companies to disclose the pay of up to three of the highest paid non executive employees at a company the existing laws that the clause would have expanded upon require firms to report the salaries of ceos cfos and other high ranking executive officers of public companies 1the katie couric clause was so called because it would have likely forced cbs to disclose the pay of katie couric who became cbs s highest paid newscaster in april 2006 with a reported salary of us 15 million over five years her deal with cbs followed a 15 year tenure with nbc where she co hosted the today show 2understanding the katie couric clauseboth major media companies such as cbs nbc and the walt disney co and large wall street firms opposed the sec s controversial proposal media companies and financial services firms were thought to be the types of firms most affected by the proposal since they often pay high salaries for employees who aren t c suite executives such firms are often reluctant to disclose detailed executive compensation information because they see it as an invasion of employees privacy and also expose proprietary information that would enable competitors to poach their employees while the employees in question would not have to be named many believe that it would not be hard to attach a name to the details current sec rules demand that salaries of the top five executives in publicly traded companies be disclosed 3 if the katie couric clause had been adopted companies would have had to disclose total compensation of up to three non executive employees whose pay exceeds that of any of its top five managers supporters of this proposal say this rule would create greater transparency and give investors increased access to information which should result in better informed decisions current sec rules on executive compensationthe katie couric rule was not adopted by the sec in 2006 but new regulations on the disclosure of information concerning executive compensation were required as a result of the 2010 dodd frank financial reform legislation which was enacted after the fallout from the 2008 credit crisis 4 dodd frank contained executive compensation related provisions while not all of those provisions were approved by the sec there are a few key ones that have been put in place 3for example the sec adopted new rules in 2015 requiring companies to disclose the ratio of pay between its chief executive officer ceo and its median employee 5 also under current rules a company must disclose the amount and type of compensation paid to its top five executives specifically its ceo chief financial officer and the three other executive officers who are the most highly compensated 3other changes in sec reporting requirements mean companies must include an executive compensation discussion and analysis section along with pay documentation in all sec forms the section must include an explanation of how the compensation was determined and what it includes 3supporters and detractors of executive compensation rulessupporters of executive compensation rules say they are necessary for corporate transparency and give investors important information about a corporation s structure in terms of the pay ratio rule a high ratio of ceo to median worker pay may suggest that the board is overpaying for its executives disclosing the pay of the top five executives is seen as also providing clarity about whether the board is overpaying its executive and using its money wisely the cfa institute a global association of investment professionals has advocated for an increase in disclosure of high level executive compensation practices at companies as well as pay structures determined by performance based metrics 6but many large corporations object to the series of provisions arguing it will negatively impact their hiring practices and encourage firms to outsource their low paying labor to services companies for example shortly after the passage of dodd frank in 2010 the securities industry and financial markets association sifma with members among the largest broker dealers sent a notice to the federal deposit insurance corporation fdic opposing proposed bank executive compensation rules arguing that any such regulations would limit its members ability to attract and hire the talent needed 7 | |
how much was katie couric paid | in 2006 couric s salary was estimated to be 15 million a year becoming cbs s highest paid newscaster other high paid female journalists include diane sawyer megyn kelly and rachel maddow 8 | |
what is executive compensation | executive compensation or executive pay is the total compensatory package received by members of the executive team from their employing firm it comprises both financial compensation and other non financial benefits | |
what is a c suite executive | c suite executives are the executive level managers within a company c suite executives include the chief executive officer ceo the chief financial officer cfo the chief operating officer coo and the chief information officer cio the bottom linethe katie couric clause officially known as the executive compensation and related party disclosure clause was first proposed in 2006 and ultimately rejected if passed it would have required publicly traded companies to disclose the salaries of their top five earning executives and non executives the need for transparency in executive compensation was addressed however in the dodd frank financial reform legislation of 2010 for example companies must now include an executive compensation discussion and analysis section in their sec forms explaining how compensation is calculated and what benefits it entails | |
what is the kazakhstan national fund | the kazakhstan national fund is a sovereign wealth fund for kazakhstan that is operated by the national bank of the republic of kazakhstan understanding the kazakhstan national fundthe kazakhstan national fund was established in 2000 primarily to act as a stabilization fund to lessen the impact that volatility in oil gas and mineral prices have on the republic of kazakhstan the kazakhstan national fund is financed from surplus revenues gained from taxes on the development of oil gas and mineral reserves the kazakhstan national bank lists assets for the fund at 59 8 billion as of january 2021 some 123 6 billion of that total was in gold 1 the fund has no website and issues no public reports on its activities the kazakhstan national fund is a secretive organization and little information can be found as to its governance holdings or investment strategies kazakhstan national fund s assets frozenin october 2017 bank of new york mellon bny following a belgian court order froze 22 6 billion in assets held by kazakhstan s national fund as part of a legal battle between the government and a moldovan investor reuters reported that the freeze was connected to years long political infighting in the country and the possibility of corruption associated with the fund 2 in january 2018 a dutch court overturned the freeze but with several strings attached and in april 2020 a british court too weighed in on the case but did not grant broad relief to the kazakh government seeking to remove those concessions ordered by the dutch court 3 they deferred that decision to the original belgian court which heard the case in december of 2020 but has yet to reach a verdict as of february 2021 at stake among all of these disputes are whether sovereign wealth funds are investment arms of governments or independent institutional investors these kinds of funds of which norway s is the largest at over 1 trillion hold more than 7 trillion worth of wealth spread all over the globe as a result the ultimate decision on this case is closely watched by governments around the world | |
what is the kbw bank index | the kbw bank index is a benchmark stock index of the banking sector the index was first developed by the investment bank keefe bruyette and woods kbw which specializes in the financial sector it includes a weighting of 24 banking stocks selected as indicators of this industry group the stocks represent large u s national money center banks regional banks and thrift institutions understanding the kbw bank indexthe kbw index utilizes a float adjusted modified market capitalization weighting method the index components are chosen by a committee of five persons 4 kbw employees and one full time employee of the nasdaq exchange that meet quarterly their selection criteria seek to replicate certain market industry and geographic segments by selecting from among the largest banking firms that meet the initial eligibility criteria 3the index focuses specifically on banking and de emphasizes components that would be heavily insurance related or investment oriented for example goldman sachs metlife and berkshire hathaway are notably absent from its components though these stocks are listed in the holdings of other similar indexes index componentsas of may 2021 the individual index components included 4history of the kbw bank indexthe index began its life at the philadelphia stock exchange which was later purchased by nasdaq since the index originated as part of the philadelphia stock exchange some vendors still refer to it as the phlx kbw bank index 5 the index was set to an initial index value of 250 on october 21 1991 1 options began trading on september 21 1992 calculation and dissemination of the index s value happen once per second throughout the regular trading day under the symbol bkx for many years the kbw bank index was the standard benchmark index for the banking sector in the stock market it was also the only way to trade the broad banking sector thanks to the options market before the advent and proliferation of exchange traded funds etfs with so many other choices available to represent the sector the index is now no longer the only representative for banks there are now etf versions of the index available including the invesco kbw bank etf with the trading symbol kbwb these etfs attempt to track the underlying index by owning the same mix of component stocks however no etf can achieve perfect correlation because of the fund s need to accommodate any redemption of shares according to nasdaq the index committee attempts to keep turnover at a minimum the committee evaluates the composition of the index on a quarterly basis in march june september and december interim evaluations may take place after extraordinary circumstances these circumstances include stock splits and certain spin offs and rights issuances and significant legal issues or a company s bankruptcy 6large banks vs regional banksinvestors should understand that while the kbw bank index is a good representation of the banking sector it only focuses on large capitalization stocks it does not include regional banks which are typically somewhat smaller therefore investors should analyze both the kbw bank index and a representative of the next tier in the banking sector there is an etf that tracks the regional index the invesco kbw regional bank index under the ticker kbwr | |
what is keep and pay | keep and pay refers to a type of bankruptcy exemption it allows an individual to retain an asset such as a house or car that would ve otherwise been liquidated to repay their debt keep and pay agreements require the borrower to make payments on the retained asset to their creditor understanding keep and paya bankruptcy exemption refers to any assets that the filer is permitted to retain all nonexempt property can be liquidated by the court to help settle the borrower s outstanding debts the keep and pay strategy safeguards a particular asset from being repossessed and possibly liquidated however it sometimes requires them to file an official statement with the bankruptcy court that shows they have a plan to pay for the asset going forward typically this plan must also get the approval of the affected creditor | |
how keep and pay works | generally creditors are open to keep and pay plans if it appears likely that they will be able to collect on the entirety of the debt still owed rather than possibly settling for something less based on a court order in addition it can often eliminate hassles on the part of the creditor for example say an individual files for bankruptcy and owes a substantial amount on their home the bank can eventually sell the property to recoup the remaining amount owed on the mortgage but it could take time and considerable effort and thus added cost if that seems likely it could be more advantageous for the bank to take the chance of potentially getting fully repaid under a keep and pay agreement for each asset in a chapter 7 bankruptcy the filer is typically asked what they want to do with each valuable piece of property including whether they wish to surrender it retain and redeem it keep it and pay what is owed over time or do something else with it 1for this reason the person filing can request to keep and pay for particular items the court won t always agree to such a request but some courts will try to follow the filer s wishes if they are made in good faith other courts have guidelines on what to do with assets based on the type of asset its value and the remaining amount owed as an example one court s guidelines could address whether or not an asset is illiquid and cannot easily be sold to cover a person s debts or whether an asset is pertinent to the debtor s livelihood such as a car that may be necessary for them to get to and from work keep and pay rulesrules regarding keep and pay vary by state most filers must use the rules set forth by the state in which they live however a few states like california have two sets of exemption rules one under state law and the other a federal list of rules 2 bankruptcy filers need to choose one set of rules or the other and use them consistently throughout the bankruptcy proceedings with property for instance some states set an exemption value you can keep and pay if the property value is worth less than a threshold set by the exemption rules say a person filing for bankruptcy has a home worth 160 000 with an outstanding mortgage balance of 140 000 and 20 000 in equity their state of residence allows an exemption amount of up to 175 000 which is greater than the value of the home in this instance the filer would be able to keep the home conversely if the home was worth 200 000 with the same mortgage balance leaving 60 000 in equity it would exceed the exemption threshold this would require a court appointed trustee to liquidate the property pay the mortgage holder 140 000 from the proceeds and distribute the remaining funds to any additional creditors before the filer can receive any of the equity although a keep and pay agreement can ensure your most important assets won t be seized you ll be able to save more if you can avoid bankruptcy altogether if you re struggling with your debt payments one of the best debt relief companies or credit counseling agencies may be able to help example of keep and paysam has been fired from their job and is unable to make timely mortgage payments sam s mortgage lender refuses to renegotiate the terms of the loan payment and has insinuated that it will seek to seize the property via foreclosure meanwhile as other debts and expenses climb sam enters bankruptcy right after filing for bankruptcy sam finds a new job that will provide enough income to make the mortgage payments but it will require several cutbacks regarding their previous lifestyle and amenities in effect sam will have to live a more frugal life sam submits a plan to the bankruptcy court detailing a breakdown of the proposed new mortgage payments and expenses the court approves this plan and sam gets to keep their house can i apply keep and pay to all of my large assets keep and pay may be feasible for some large assets such as a home but most of your assets will be liquidated to repay your debt a creditor is more likely to agree to a keep and pay agreement if they see you ve changed your financial lifestyle to accommodate payments or if they might have trouble recouping their investment | |
is there a dollar limit to keep and pay | every state has its own regulations for what falls within its exemption range some states such as california use both state and federal guidelines 2 be sure to check what kind of guidelines your state has if you re planning to file for bankruptcy and wish to retain assets that would otherwise be nonexempt | |
do you still have to pay debt after bankruptcies | outside of keep and pay agreements some types of debt can t be discharged through bankruptcy nineteen kinds of debt are excepted from discharge under chapters 7 11 and 12 while a more limited list applies to chapter 13 cases 3the bottom linedeclaring bankruptcy doesn t have to mean selling all of your assets in some cases you may be able to use a keep and pay agreement to retain your home or car if you re facing bankruptcy and wish to retain certain assets be sure to check your state s rules regarding bankruptcy exemptions | |
what is a keepwell agreement | a keepwell agreement is a contract between a parent company and its subsidiary to maintain solvency and financial backing throughout the term set in the agreement keepwell agreements are also known as comfort letters | |
when a subsidiary finds itself in a cash crunch and has trouble accessing financing to continue its operations it can sign a keepwell agreement with its parent company for a set period of time | keepwell agreements not only help the subsidiary and its parent company but they also boost confidence in shareholders and bondholders that the subsidiary will be able to meet its financial obligations and run smoothly suppliers that provide raw materials are also more likely to look at a troubled subsidiary more favorably if it has a keepwell agreement keepwell agreements give confidence not just to lenders but also to a subsidiary s shareholders bondholders and suppliers | |
how a keepwell agreement works | subsidiary companies enter into keepwell agreements to increase the creditworthiness of debt instruments and corporate borrowing a keepwell agreement is a contract between a parent company and its subsidiary in which the parent company provides a written guarantee to keep the subsidiary solvent and in good financial health by maintaining certain financial ratios or equity levels in effect the parent company commits to providing all the subsidiary s financing needs for a specified period of time the predetermined guarantee period depends on what both parties agree upon when the contract is drawn up as long as the keepwell contract period is still active the parent company will guarantee any interest payments and or principal repayment obligations of the subsidiary if the subsidiary runs into solvency issues its bondholders and lenders have sufficient recourse to the parent firm keepwell agreements and creditworthinesscredit enhancement is a risk reduction method whereby a company attempts to increase its creditworthiness to attract investors to its security offerings credit enhancement reduces the credit or default risk of a debt thereby increasing the overall credit rating of an entity and lowering interest rates for example an issuer may use credit enhancement to improve the credit rating on its bonds a keepwell agreement is one way to enhance a company s credit is by obtaining third party credit support since a keepwell agreement enhances the subsidiary s creditworthiness lenders are more likely to approve loans for a subsidiary than for companies without them suppliers are also more willing to offer more favorable terms to companies with keepwell agreements due to the financial obligation placed on the parent company by a keepwell agreement the subsidiary company may enjoy a better credit rating than it would without a signed keepwell agreement enforcing keepwell agreementsalthough a keepwell agreement indicates a parent s willingness to provide support for its subsidiary these agreements are not guarantees the promise of enforcing these agreements is not a guarantee and cannot be legally invoked however a keepwell agreement can be enforced by the bond trustees acting on behalf of bondholders if the subsidiary defaults on its bond payments example of keepwell agreementlet s say computer parts inc is a subsidiary of laptop international the company is going through a financial crunch and supplies are short in order to continue production for its new line hard drives computer parts inc needs to take out a loan of 2 million this may be difficult because it has a lower credit rating in order to help keep production on track and keep the loan s interest rate as low as possible computer parts inc can go into a keepwell agreement with its parent laptop international to guarantee its financial solvency for the term of the loan | |
what is keiretsu | keiretsu is a japanese term referring to a business network made up of different companies including manufacturers supply chain partners distributors and occasionally financiers they work together have close relationships and sometimes take small equity stakes in each other all the while remaining operationally independent translated literally keiretsu means headless combine understanding keiretsupowerful families known as zaibatsus once ran the majority of japan s major industries that all changed after world war ii when the united states came in and busted up these structures zaibatsus were seen as monopolistic and undemocratic reportedly buying politicians in exchange for contracts and using pricing mechanisms that exploited the poor faced with economic hardships after the war japanese companies responded by reorganizing themselves as keiretsus japanese corporations value having close ties with one another working together rather than keeping others at arm s length is believed to be mutually beneficial for all parties in fact decades after its formation keiretsus still represent major parts of the country s economy keiretsu has even gone on to influence business practices in other countries albeit in a looser form in japan where companies are expected to cooperate keiretsus are regulated by specific laws outside the country the term generally refers to informal alliances between more than two organizations in 1996 academic jeffrey dyer wrote in harvard business review that chrysler s teaming up with suppliers to cut the cost of manufacturing cars meant it had created an american keiretsu many other companies in the united states and europe are viewed to have borrowed something from keiretsus too 1types of keiretsuthe keiretsu system is traditionally structured along a horizontal or vertical integration model a horizontal keiretsu is characterized by an alliance of different companies from various sectors including a bank the bank is the centerpiece of the network and is responsible for providing the other companies with financial services the purpose of horizontal keiretsus is to distribute goods around the world keiretsus seek new markets for keiretsu companies help establish keiretsu companies in other countries and sign contracts with other international companies that supply commodities used in japanese industry in contrast a vertical keiretsu refers to manufacturers suppliers and distributors partnering up with a common goal they work together to cut costs and become more efficient vertical keiretsus are a group of companies within the horizontal keiretsu the automobile company toyota is an example of a vertical keiretsu toyota relies on suppliers and manufacturers for parts employees for production real estate for dealerships steel plastics and electronics suppliers for cars and wholesalers while these ancillary companies operate within the vertical keiretsu of toyota they are members of the larger horizontal keiretsu although much lower on the organizational chart research has suggested that toyota has benefitted from the trust collaboration and educational support that are hallmarks of the keiretsu system its supplier relationships are more open international and cost efficient than ever before 2advantages and disadvantages of keiretsuworking closely together can bring many benefits companies in the keiretsu can leverage each other s expertise to become stronger and better information shared among customers suppliers and employees within the keiretsu can lead to increased efficiency as a result of this information sharing investment decisions can be made faster and suppliers employees and customers know the purposes and goals of those investments the key to successful keiretsu like partnerships is support cooperation trust and goodwill while it may not be intuitive in a hypercompetitive cost obsessed environment these relational elements are critical because they cut down on some of the hidden costs of arm s length supplier relationships that are characteristic of the western business model forming an alliance also limits the threat of competition and makes it more difficult for its members to be subject to takeover attempts by outsiders in addition the reduction of costs due to dealing with intra keiretsu firms can increase efficiency within the supply chain however there are also several drawbacks critics point out that their large size makes it difficult for keiretsus to adjust quickly to market changes and that limited competition leads to inefficient practices another potential issue is easy access to capital close relationships with a bank might encourage a company to embark on risky debt fueled strategies that an outside institution would probably never help to finance working together can bring benefitsleverage other company s expertiselimits threat of competitionincreased efficiency within the supply chaincannot adjust quickly to market conditionslimited competition leads to inefficient practiceseasy access to capital can encourage risky behavior | |
how to engineer your own keiretsu | the keiretsu system can be a useful model for a company that wants to deepen its relationships with its suppliers in order to gain long term benefits in the west companies typically have relationships with suppliers that are distinct from the keiretsu system in that they take an arm s length approach however a few manufacturers in the west have engineered their own unique hybrid sourcing programs that borrow certain elements from the keiretsu system for example scania the swedish bus and truck maker has tried to deepen its loyalties to its manufacturers in order to improve the company s supply chains it has accomplished this by holding workshops for its suppliers on the scania production system which emphasizes continuous improvement and lean production scania has incorporated an additional element of keiretsu into its purchasing system suppliers identify with the hub company and the hub company works with them to improve their processes and make them more competitive although it doesn t hold shares in them ikea s approach to supplier relationships also resembles the structure of keiretsu the company works to build committed partnerships with its suppliers based on mutual advantage trusts its vendors with significant tasks and collaborates with its vendors in order to maximize efficiency companies interested in engineering their own form of a keiretsu should keep these general principles in mind 2 if you want to develop long term relationships with suppliers it s important that they are competitive today you can work together with them to help them achieve this and demonstrate your commitment to forming a lasting relationship by showing them that the benefits of cost reduction strategies will be shared 2there s no way you can improve a supplier s processes without first understanding them you should visit suppliers workplaces and instead of outsourcing all components establish joint ventures with your suppliers on key parts 2 you can build trust with your suppliers by communicating that the relationship is mutually beneficial the relationship will help them improve their operations and become more competitive 2 if you only emphasize explicit communication it can lead to mistrust if you only emphasize implicit communication it can result in misunderstanding 2 once you ve identified your portfolio of suppliers decide which ones are worth improving you might ask which ones have the greatest potential to be globally competitive and assign performance scores according to quality cost delivery people and development it s important to keep in mind that suppliers that demonstrate a willingness to learn and understand the root causes of mistakes are the most likely to improve 2 cultivate personal relationships between your company and the management and the employees at your suppliers meet your suppliers and find ways to collaborate with them perhaps this means shadowing your suppliers on the shop floor this kind of relationship can cultivate a willingness on the part of your vendors to make suggestions for problem solving 2 rather than switching suppliers if a supplier is underperforming give them opportunities to show how they could improve 2 your suppliers engineers should be involved in your development teams in addition to implementing process improvement activities in their factories in order to increase your competitiveness across the supply chain 2 example of keiretsumitsubishi is the driving force behind perhaps the largest and best known japanese horizontal keiretsu the bank of tokyo mitsubishi sits at the top of the keiretsu mitsubishi motors and mitsubishi trust and banking are also part of the core group followed by meiji yasuda life insurance company which provides insurance to all members together they aim to help each other distribute goods all over the world they may seek new markets for keiretsu companies help incorporate keiretsu companies in other nations and sign contracts with other companies around the globe to supply commodities used for the japanese industry as you might have already noticed many companies within this keiretsu have mitsubishi as part of their name | |
what is the kelley school of business at indiana university | the kelley school of business is the business college of indiana university the school offers both undergraduate and graduate programs in many fields including finance accounting marketing and management kelley school of business also offers master of business administration mba programs along with courses for working executives it is constantly ranked among the top 25 business schools by u s news world report overviewthe kelley school of business at indiana university is a high ranking business school with campuses in bloomington indiana and indianapolis indiana the school was established in 1920 out of the school of commerce and finance which offered students business courses since 1916 the school aims to uphold and pass on its values to its students these include ethics professionalism innovation collaboration diversity and inclusiveness its mission statement is to the kelley school of business offers undergraduate graduate and doctorate programs along with part and full time mba and certificate programs and executive education for working professionals students have the option to take classes on campus or online there are more than 14 000 students enrolled in programs at both campuses the school boasts more than 130 000 alumni across the globe the kelley school of business at indiana university is headed by dean ash soni notable alumnithe business school has several notable alumni members who achieved success in the corporate world several distinguished public servants also graduated from the kelley school of business they include programs offeredthe kelley school of business offers students 30 different programs on its bloomington and indianapolis campuses as well as online at the undergraduate graduate and doctorate levels mba and certificate programs are also offered including those for working executives and professionals the table below highlights some of the key disciplines offered to students executives can earn certificates and degrees in business analytics business management and cyber security management among others rankingsas noted above the kelley school of business at indiana university consistently ranks among the top business schools in the united states according to u s news world report the school comes in the 22nd spot of best business schools in the united states it ties with unc kenan flagler business school in chapel hill north carolina the school ties with fisher college of business at ohio state university for 15th place in the part time mba category it also ranks among the top 10 schools for accounting business analytics entrepreneurship and information systems statistics and starting salarieseach year the business school also releases statistics for select programs as of january 2024 the most recent information available was the graduating class between july 2022 and june 2023 out of 2 391 kelley seniors enrolled during this period 1 750 actively sought employment three months after graduating 98 of those students who were actively seeking students reported securing a full time job or gaining acceptance into graduate school the school gives detailed salary information by major including average starting salary median starting salary salary range and median signing bonus by business function these functions include the positions below the average starting salary for all majors combined is 76 705 with a median starting salary of 74 000 the salary range varies from 30 000 to 180 000 and the median signing bonus across majors is 6 000 | |
how many students are enrolled at kelley school of business | as of the 2022 2023 school year there are 14 000 students enrolled at indiana university s kelley school of business through 30 programs in bloomington indianapolis and online around the world | |
how old is the kelley school of business at indiana university | indiana university s business school is more than 100 years old it was established in 1920 as the school of commerce and finance but later grew to become the kelley school of business | |
what is the acceptance rate at the kelley school of business | the kelley school of business at indiana university doesn t publish its acceptance rate according to u s news world report the acceptance rate is believed to be around 35 the bottom lineindiana university s kelley school of business has been around for more than a century and has produced ceos of major companies federal reserve governors and a u s senator it is one of the highest ranked business schools in the country coming in the 22nd spot on u s news world report s list of the best business schools its online counterpart kelley direct is tied for first place with unc s program in chapel hill on u s news s list of the best online mba programs | |
what is the kellogg school of management | the kellogg school of management is the graduate business school of northwestern university the institution was founded in 1908 and is located in evanston illinois the school is known for its focus on interdisciplinary learning and international exchange opportunities 1the school s master of business administration mba is very well respected and is commonly included among the 10 best programs in the united states by leading publications such as the economist forbes and u s news overview of the kellogg school of managementthe kellogg school of management was founded in 1908 as the school of commerce it was renamed the j l kellogg graduate school of management in 1979 after it received a significant donation from the john l and helen kellogg foundation 1kellogg is known for its global footprint with campuses in germany canada israel and china the school also has campuses in chicago and miami as one of the united states most well respected business schools competition for attendance is typically fierce with the mba program typically rejecting around 70 of applicants 2the school offers a range of mba and postgraduate programs undergraduate certificates and a graduate degree in management studies 3 in addition to the full time mba program which takes two years to complete the school also offers a variety of mba programs designed for working professionals who wish to study on a part time basis as they continue to work this includes their evening and weekend mba programs and their executive mba program notable graduates of kellogg are ted phillips former ceo and president of the chicago bears roslyn brock chair of the national association for the advancement of colored people and cindy axne senior advisor at the u s department of agriculture 456many business schools have created programs that prepare students for careers in the artificial intelligence ai industry kellogg is one of these schools and has called its degree mbai 7the full time mba class size for the 2023 2024 school year was 503 students composed of 38 international students the average gpa for the class was 3 7 and the average gmat score was 729 the school also accepts the gre with average scores of 162 for the verbal section and 163 for the quantitative section 8according to u s news and world report kellogg received 4 187 applications for the 2023 2024 school year 228 of which were for the part time program there were 1 316 full time 31 4 and no part time applicants accepted 2kellogg school s reputation and standingkellogg graduates found employment principally in the management consulting technology and financial services sectors some of the top employers included mckinsey company the boston consulting group amazon and bain company 9 kellogg school of management mba grads saw an average starting salary of 164 000 in 2023 10in 2023 the kellogg school of management s full time mba program was rated the second best program in the united states by u s news and world report 11costs to attend kelloggas of 2023 the costs for a one year mba at kellogg include 12the costs for the two year mba are per year 12 | |
is a kellogg mba worth it | kellogg s mba is recognized globally and is in demand by many large or notable corporations and businesses if you want to work for one of these companies the program might be worth the cost as you can recover the expenses within a few years however you can get a good business education at many other schools but if you want one of the best educations around the kellogg mba is worth it | |
what gpa do you need to get into kellogg | there is no set gpa required by the school but the higher your gpa the better your chances the average gpa for the class of 2024 is 3 7 so you ll need to be close to or above that | |
is kellogg better than harvard | whether one school is better than the other is subjective each school has its own teaching method so it s best to compare the curriculums and costs to learn more about them the bottom linethe kellogg school of management at northwestern university is one of the top rated graduate business schools in the u s it is expensive to attend but the education connections and employment opportunities make it an attractive option for professionals wanting a reputable mba | |
what is kelly criterion | the kelly criterion is a mathematical formula relating to the long term growth of capital developed by john l kelly jr while working at at t s bell laboratories it is used to determine how much to invest in a given asset in order to maximize wealth growth over time understanding kelly criterionthe kelly criterion is currently used by gamblers and investors for risk and money management purposes to determine what percentage of their bankroll capital should be used in each bet trade to maximize long term growth after being published in 1956 the kelly criterion was picked up quickly by gamblers who were able to apply the formula to horse racing it was not until later that the formula was applied to investing more recently the strategy has seen a renaissance in response to claims that legendary investors warren buffett and bill gross use a variant of the kelly criterion the formula is used by investors who want to trade with the objective of growing capital and it assumes that the investor will reinvest profits and put them at risk for future trades the goal of the formula is to determine the optimal amount to put into any one trade there are two key components to the formula for the kelly criterion the result of the formula will tell investors what percentage of their total capital they should apply to each investment the term is often also called the kelly strategy kelly formula or kelly bet and the formula is as follows while the kelly criterion is useful for some investors it is important to consider the interests of diversification as well many investors would be wary about putting their savings into a single asset even if the formula suggests a high probability of success kelly criterion limitationsthe kelly criterion formula is not without its share of skeptics although the strategy s promise of outperforming all others in the long run looks compelling some economists have argued against it primarily because an individual s specific investing constraints may override the desire for optimal growth rate in reality an investor s constraints whether self imposed or not are a significant factor in decision making capability the conventional alternative includes expected utility theory which asserts that bets should be sized to maximize the expected utility of outcomes | |
what is the kelly criterion | the kelly criterion is a formula used to determine the optimal size of a bet when the expected returns are known according to the formula the optimal bet is determined by the formulak w 1 w r where k is a percentage of the bettor s bankroll w is the probability of a favorable return and r is the ratio of average wins to average losses who created the kelly criteria the kelly criteria was originally created by john kelly while working at at t s bell laboratories it was first adopted by gamblers to determine how much to bet on horse races and later adapted by some investors | |
how do i find my win probability with the kelly criterion | unlike gambling there is no truly objective way to calculate the probability that an investment will have a positive return most investors using the kelly criterion try to estimate this value based on their historical trades simply check a spreadsheet of your last 50 or 60 trades available through your broker and count how many of them had positive returns | |
how do you input odds into the kelly criterion | in order to enter odds into the kelly criterion one first needs to determine w the probability of a favorable return and r the size of the average win divided by the size of the average loss for investing purposes the easiest way to estimate these percentages is from the investor s recent investment returns these figures are then entered into the formulak w 1 w r where k represents the percentage of the investor s bankroll that they should invest | |
what is better than the kelly criterion | while there are many investors who integrate the kelly criterion into successful moneymaking strategies it is not foolproof and can lead to unexpected losses many investors have specific investment goals such as saving for retirement that are not well served by seeking optimal returns some economists have argued that these constraints make the formula less suitable for many investors |
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