How quickly did the financial crisis destroy wealth?
Storms, devastation, these words are too emotional, people have no clear sense of the destructive power of the financial crisis.
#200亿美金, it was smoothed out in 5 days
Or Yale University Professor Andrew Metrick, who told his own story of the subprime mortgage crisis.
Professor Metrick's father, an executive at Pearlstearns, an investment bank, called his father one week in 2008 to ask about the company, which was Monday.
Father said: Don't be afraid, we still have $20 billion worth of liquidity, everything will be fine.
On Thursday of the same week, Professor Metrick continued to call his father. Father said: Tomorrow morning, we are going to fill out bankruptcy filings.
Professor Metrick said he was shocked that in just a few days, a large investment bank with plenty of cash was so quickly smoothed out, which is the speed of the financial crisis.
#五大投行倒闭三家
Another story has a bit of a black humor effect, the well-known computer expert and Silicon Valley investor Wu Jun, his book "Top of the Wave", there is a special chapter on investment banks.
However, a lot of things have happened in the past six months, and it can even be said that it has changed dramatically, which has forced me to revise my manuscripts again and again.
When I was brewing this series a year ago, there were five major investment banks in the U.S., Morgan Stanley, Goldman Sachs, Merrill Lynch, Lehman Brothers and Bearstone. At the beginning of this year (2008), bear stearns, which has a history of nearly a century, first went out of business. The investment firm has been profitable for 97 percent of its nearly century-long history, including several of its toughest periods, the Great Depression of 1929-1933 worldwide, World War II, the 9/11 terrorist attacks of 2001 and the collapse of the dot-com bubble. But now, a single greedy mistake has bankrupted the fifth-largest investment bank in the United States. In this way, my chapter becomes a little simpler.
Finally, a detail in the movie "Too Big to Fail," Buffett's evaluation of investment banks, can serve as a commentary on their style.
When the crisis came, insurance companies were seen as a safe haven
Compared with the fall of investment banks in the past century, insurance companies with the same century history have calmed down much in the financial crisis of 2008.
1# The investment goal of insurance companies is prudent and robust
Limited by the nature of their business and regulatory regulations, most insurance companies still follow a very cautious and conservative investment strategy, mainly distributing investment assets on high-grade bonds and strictly controlling the proportion of investments in high-risk securities. In 2006, the average 53% of the assets of U.S. life insurers were invested in the highest-grade bonds, 19% in the second-grade bonds, and equities accounted for only 4.6% of the net recognized assets; non-life insurers invested in the highest and second-high-grade bonds and stocks at 67%, 4% and 16%, respectively.
As the vice president of the Insurance Information Association (ISO) commented: "Most U.S. insurers have been minimally affected by this crisis... This is due to the conservative portfolio management strategies of insurance companies and the strict regulation of state insurance regulations. ”
The impact of the subprime mortgage crisis on the US insurance industry - Tian Hui
2# Backed by the national credit of the "big but not down"
Of course, insurance companies are not all on their own. If you're too aggressive strategically, you trigger the "too big to fail" puzzle — presumably, it dies to show you and you have to save.
In early 2008, AIG announced a $11.1 billion reduction in subprime mortgage-backed bond-related derivatives, resulting in a loss of $5.29 billion in the fourth quarter of 2007, the largest quarterly loss since its inception in 1919.
Also in the movie Big Enough to Fall, Paulson and Bernanke sit at their table for breakfast, worried. Investment banks can not be saved, but AIG, behind which is the pension of tens of millions of ordinary people, seriously threatens social stability. Eventually, they had to come to the rescue of AIG.
In order to stop allowing financial institutions to coerce the state to rescue, after 2008, governments have attached importance to "too big to fail", mainly doing the following things
1) List of "big and not down" list, who is on the list is facing stricter regulatory review requirements to prevent problems, the companies on the list are very painful, no one wants to be managed.
2) The reform of the insurance accounting system twice in the past 10 years, since I am not an expert, I can only say that insurance companies face more complex and stricter requirements.
The government does not want the insurance company to have an accident, and if something really happens, I am afraid it will have to be saved.
3# Smoothing Mechanism - Casting Revenue Dam
Metrick's father's company, $20 billion was wiped out in a few days, proving that in the midst of the financial crisis, a strong family foundation is very important. Buffett in the past few days in Delta Air Lines bottom reading, the real loss of nearly 3 billion, but the old Ba is not moved, continue to bottom out bank stocks, it is really as stable as Taishan.
Another stable person in the financial world is actually an insurance company.
We all understand that market returns are volatile, so how can insurance companies create long-term stable revenues for customers, and that's how to do that is by casting dams – smoothing mechanisms.
It is also simple to say, when the harvest is good, give the customer the promised part, other benefits can be temporarily "stored", and when the dry period is dry, you can release water to supplement the deficit.
It is easy to know and difficult to do, investment banks can not manage themselves in this way, of course, insurance companies are not born "highly conscious", it is also under strong supervision, forced to obediently obey.
From this point of view, insurance companies that have been tested for a long time and have accumulated rich "reservoirs" are always able to provide long-term stable returns. Like the Berkshire company behind Buffett, it gives him the confidence to read the bottom.
Remarks: My above arguments are only aimed at foreign insurance companies with a certain historical background.