The Influence of Health Policies and the Future of Health Care in the Essay

The Influence of Health Policies and the Future of Health Care in the U.S - Essay Example This research will begin with the statement that disparities among the American community continue to reflect within the healthcare system despite establishment and engagement of various care systems to foster the improvement of the health systems. Consequently, the population continues to suffer the inherent problems as they arise within the structural organization of the state healthcare systems. Notably, several inherent issues reflect the procedures of administering and acquiring successful and effective care process to the citizens. Firstly, there arises the issue of poverty and income versus the cost of the health systems. Most of the American population consists of citizens whose income levels cannot sustain their health needs. Thus, even as they seek the coverage of the various health policies as initiated by the government to facilitate affordable care to all people, they fail to achieve the required care. Thus, the continually increasing costs of the health care system are a leading factor in contention with respect to the healthcare systems of the USA. Secondly, there is the issue of the insurance cover. The insurance systems in the country continue to charge the citizens accordingly for their health coverage. However, the insurance companies do a disservice to the citizens despite their commitment to the insurance contribution. Most of the insurance provides coverage to limited levels, meaning that certain conditions such as asthma or cancer, which require high costs for treatment, may not receive adequate financial support from the insurance companies. Thus, the health insurance policies need to reflect accordingly to support the citizens of the USA in guarding their rights within these insurance coverage systems. Further, there is a disparity in acquiring healthcare due to the establishment of factors relating to the blacks versus the whites. These aspects of discrimination within the care system result from the multi-ethnic differences and perspe ctives, leading to insufficient and unhealthy care system procedures. Thus, as an issue of concern, the health care system needs to address this section f the arising matters. Lastly, professional perspective is also an inherent issue within the provision of health care in the USA.

The Internal Morality of Chinese Legalism Essay Example for Free

The Internal Morality of Chinese Legalism Essay Abstract It is widely held that there are no indigenous roots in China for the rule of law; it is an import from the West. The Chinese legal tradition, rather, is rule by law, as elaborated in ancient Legalist texts such as the Han Feizi. According to the conventional reading of these texts, law is amoral and an instrument in the hands of a central ruler who uses law to consolidate and maintain power. The ruler is the source of all law and stands above the law, so that law, in the final analysis, is whatever pleases the ruler. This essay argues, to the contrary, that the instrumentalism of the Han Feizi is more sophisticated and more principled than the conventional reading acknowledges. It suggests that, by examining the text of the Han Feizi through the lens provided by American legal theorist Lon Fuller, we can detect an explicit articulation of what Fuller called the internal morality of law. The principles of this morality are elaborated and their importance explained. In this way, the Han Feizi is retrieved as a significant reference point for thinking about legal reform in China today. I am indebted to Liang Zhiping and David B. Wong for comments on an earlier draft, and to William P. Alford, as ever, for his guidance in thinking about law and legal institutions in China. Introduction The rule of law is now commonly regarded as an obligatory step to establishing China’s rightful place in the global community. Yet it is widely believed that there are no indigenous roots for the rule of law ideal; it is an import from the West. The Chinese legal tradition, rather, is rule by law, as elaborated most fully in ancient Legalist texts such as the Han Feizi. The distinction between rule by law and rule of law has many dimensions. Of central importance is the relationship of law and morality. Although no canonical formula exists for the rule of law, a moral ideal lies at the core, however it is specified. In rule by law, in contrast, at least according to the conventional understanding, law is amoral and an instrument of power. A typical statement is offered by Burton Watson, the respected translator of Han Fei’s work in English: Legalism, Watson says, â€Å"professed to have no use for morality whatsoever† (and similarly for religion and ceremony). It focused on a single problem: strengthening and preserving the state.1 In this regard, Watson follows Arthur Waley, who said that members of the â€Å"school of law† (fajia) â€Å"held that law should replace morality.† Instead of the term â€Å"school of law,† which he regarded as too narrow, Waley referred to members of the fajia as â€Å"the Amoralitsts .†2 It is because of this alleged amoralism that Randall Peerenboom can write a 670page book on â€Å"China’s long march toward [the] rule of law† and barely mention Han Fei. Peerenboom expresses the conventional view: for Han Fei, law is one instrument in the ruler’s toolbox for sustaining strong centralized control. Since the ruler is the source of all law, and stands above the law, there are no limits or effective checks on the ruler’s arbitrary power. â€Å"In the final analysis, law was what pleased the ruler.†3 This view of Legalism is reinforced by a particular reading of Chinese legal history during the period of the Three Dynasties, China’s bronze age. Liang Zhiping, the eminent legal scholar, claims that the predilection for rule by law, in Han Fei and other Legalists, has its roots in the way law emerged initially in China, namely, as an instrument by which a single clan exercised control over rival clans. â€Å"[W]ithin a system tha t was inherently unstable †¦ [l]aw was seen as the will of the rulers and an instrument of suppression; its primary manifestation was in punishment.† Hence, the choice of rule by law was the product of an extended and unique cultural development. â€Å"[T]he legalists merely developed to its extreme the ancient legal model, ‘[y]ou who obey my orders shall be rewarded before my ancestors; and you who disobey my orders shall be put to death before the spirits of the land.’†4 These two conceptions of law and legal institutions—rule by law and the rule of law—are familiar in the West, although rule by law now has few, if any, advocates. But one needs to go back only to John Austin, the influential 19th century English legal theorist, for systematic elaboration of rule by law. Western theorists, indeed, might be tempted to look at Chinese Legalists through the lens of Austin, since his work enables us to see a systematic body of thought in the Han Feizi. However, this lens, I shall argue, brings some elements of the Han Feizi into sharp focus only at the cost of distorting others. Western theorists need a corrective lens, which is provided by Lon Fuller. In assessing Austin’s account, Fuller’s approach is most helpful because it offers an internal critique, showing that denial of a compelling connection between law and morality is inaccurate to the theory itself. Fuller’s account does not rest on a semantic analysis of â€Å"law† but on a pragmatic appreciation of legal order as a form of governance. Out of this appreciation, the practical connection—the interaction and mutual dependence of law and morality in the everyday work of lawmakers and other collaborative participants in the creation of legal order—emerges even in rule by law properly understood. Thus, Fuller shows how the moral core of the rule of law is present in the generic use of law in society. The moral core of the rule of law—the thin theory, as it is often called— encompasses two key ideas: (1) While law is an instrument of political power, law also constrains power. Hence, law and power are, to some degree, opposed. (2) While law channels political power, law also enables power to be rightly exercised. Hence, law is a source of legitimation for the exercise of power. How is political power constrained and yet also rightly exercised? The rule of law ideal is that these conditions are met if it is truly the law that governs legal subjects, not the wishes of specific individuals or groups. The ideal is a government of laws, not persons, so the moral core (in a word) is impersonal governance. My thesis is that Han Fei’s text, the Han Feizi, displays this moral core and thus connects law and morality. I shall argue, indeed, that the Han Feizi advocates a purer form of the rule of law than is offered by many Western theorists. Chinese Legalism did not be gin with the Han Feizi, but it is generally regarded as the most sophisticated exposition of the theory. I believe it is more nuanced than generations of commentators have acknowledged. It is important to emphasize that my interest is with the rule of law as a legislative, rather than judicial, ideal. This focus is appropriate for the Han Feizi, since it contains no explicit judicial theory (although it has definite implications, as we shall see, for the work of judges). That means that the vision of law in the Han Feizi is incomplete. On the other hand, most Western theorists neglect the legislative ideal, and many mistakenly believe that judicial independence (or the separation of powers) is sufficient for establishing the rule of law. I shall suggest that, at least for the legislative ideal, worthy indigenous Chinese sources for the rule of law exist. Contrary to Watson and Peerenboom, I argue that the Han Feizi intends to link law and morality. But I should say from the beginning that this essay is not an attempt to recapture Han Fei’s conscious motives or point of view. It is an attempt to retrieve a text for contemporary understanding and use. Admittedly, this effort runs the risk of literary misprision—willful, not to say creative, misreading. But recovering the rich history of Chinese legal thought seems to me worth that risk. It is often said, with good reason, that successive Chinese emperors followed the Legalist template set out by the Han Feizi. If it turns out that the Han Feizi carries a different message from the one it is usually taken to convey, the imperial history may have to be re-examined to determine when it followed the template and when it did not.5 [I] Rule by law: Han Fei and John Austin The conventional reading of the Han Feizi pictures law as an instrument in the hands of the ruler. This could mean different things. Instrumentalism is sometimes construed to mean that rulers use law only if and when it suits their purposes; it is employed (or not) at the ruler’s discretion to achieve the ruler’s own desires or ends. In this construction, law does not have any special pride of place, and certainly nothing beyond a fortuitous connection to moral value. On any particular occasion, if a ruler fails to realize his or her will by the use of law, an alternative instrument of governance could be deployed. Let’s call this ad hoc or strategic instrumentalism. This is not rule by law, as I understand it. Rule by law meets at least one and possibly two conditions missing from ad hoc instrumentalism. Most importantly, the commitment to rules—fixed standards of general applicability—is not ad hoc; they are the ruler’s chosen mechanism of governance. Thus, the commitment to rules is deliberate and firm, and the instrumentalism is consistent and principled. This commitment, we shall see, introduces a variety of self-imposed constraints on lawmaking and secures the connection between law and morality. Second, the rules promulgated are not necessarily intended to serve the lawmaker’s personal desires or ends. They may serve common ends, or they may permit (or enable) subjects to pursue ends of their own. In that event, we move from a minimal to a morally robust instrumentalism. If the rules facilitate the pursuit of ends other than those of the lawgiver, principled instrumentalism transitions into the rule of law. Although the Han Feizi is conventionally read as committed (at worst) to ad hoc instrumentalism or (at best) to a consistent but minimal instrumentalism, I shall argue in section III that many of the essays that make up the Han Feizi advocate a robust principled instrumentalism. For this reason, it will be helpful to examine first a systematic statement of the minimally instrumentalist view. John Austin is more clearly committed to minimal instrumentalism, because his aims were more academic—to elaborate a systematic theory—whereas Han Fei wished to provide practical advice to rulers. A consideration of Austin enables us to grasp what coherence the minimally instrumentalist view has. Like Han Fei, Austin aimed to be a realist about law, to examine actual facts in the world. That led him to trace the existence of law to the exercise of power. Accordingly, the proper understanding of law is genetic. In the strict sense, law is a command—a wish expressed by a determinate person or body possessing supreme power in an organized and independent society, backed by the credible threat of a sanction (i.e., pain) in the event of noncompliance. Why does the credible threat of a sanction make a law binding? Austin was a voluntarist about law as he was in theology. The duty to obey a command rests not on its conformity to an independent moral standard but simply on its emanating from a preponderant power. To have a duty to act is to be compelled to act. â€Å"[I]t is only by the chance of incurring evil, that I am bound or obliged.†7 Thus, whether divine or human, law makes its appearance within a relationship of domination—a superior (in power) issuing orders to an inferior (in power), where the former has the capacity to compel the latter to act by means of a threatened evil, i.e., pain. The duty is legal if it is issued by a political sovereign, moral if issued by God. Hobbes observed that the conditions for a social contract obtain if persons are of roughly equal ability, for then they acquire an equality of hope in having their respective claims satisfied. But in circumstances where a clear supremacy of power lies in one individual or body, no question as to the proper distribution of duties and rights arises. The distribution of duties and rights naturally parallels the distribution of power.8 That, obviously, is Austin’s view as well. The foundation of law is force or the threat of its use. To have a duty, therefore, in Austin’s quaint phrase, is to be obnoxious to the superior’s threat. Obnoxiousness is determined by one of two empirical facts: either the extent to which the inferior party is motivated by fear of the sanction, or the likelihood that the superior party will carry out its threat. While the pursuit of pleasure is as much an ultimate spring of human action as the avoidance of pain, the latter is more to be relied on than the former. The certainty and severity of threatened pain, in the event of noncompliance to the superior’s commands, are defining features of legal (as of moral) order. Since the definition of law stipulates nothing about the content of the superior’s wish, law may have any content whatever and still be binding. The separation of law and morality is secured: might makes right. Thus, law is imperative, preemptory, morally arbitrary, coercive, and an instrument of domination. It also, as we shall see more fully in a moment, aims above all at stability and order. By definition, Austin’s sovereign is not subject to a superior power and hence does not have any legal duties. (By the same token, the sovereign does not have any legal rights, either.) Austin formulates this point most sharply by observing that â€Å"every government is legally despotic.†9 This is a provocative way of saying that its power is legally unlimited; it stands above the law and can make, or unmake, any law whatever. It is not misleading to say the sovereign is self-legitimating, as long as we keep in mind that legitimation comes not from satisfying a standard of legitimacy but from the successful exercise of supreme power. Yet one of the virtues of Austin’s writing is that it is richer than the genetic definition of law would lead one to expect. (Failure in the legal literature to appreciate the richer analysis is the same kind of failure one finds regarding the Han Feizi.) Exploring some of this richness will help us develop a critique that illuminates the Han Feizi. Austin actually formulates three distinct definitions of law—in addition to the genetic there are formal and purposive definitions—each of which meshes imperfectly with the others. The formal definition appears when Austin stipulates that a command is a law only if it has the attribute of generality, that is, it must refer to a class of acts to be done or avoided, not a single action. Particular or occasional commands are not laws in the strict sense.11 This stipulation is sensible, since modern law typically consists of a body of standing rules, not extemporaneous orders. It shows that Austin thought of legal order as a system, or at least a set, of rules. But in relation to the genetic definition, it is completely unmotivated; nothing in the meaning of command requires it. At the same time, the implications are profound. The addition of generality represents a significant departure from personal command and toward impersonal governance. It commits the lawmaker to acting in certain ways in as yet unknown cases. And, by grouping actions into classes, it produces a degree of uniformity of treatment across persons. So, with generality, the picture of a compliant inferior following the wishes of a superior recedes to a significant degree. These implications—uniformity across persons and prior commitment in unknown cases—indicate that certain formal features of laws may have moral import, and I shall say more about them in a moment. With law understood as a self-conscious instrument of domination expressing the wishes of a (human) sovereign, it is only to be expected that Austin would stress the potential divorce between the content of promulgated laws and the requirements of morality. â€Å"The existence of law is one thing; its merit or demerit is another.†12 But if law itself, simply as a body of general rules, has moral import regardless of its content, we have taken an important step toward a robust instrumentalist account of law. The richness of Austin’s analysis is even more evident in his purposive definition. In its most general and comprehensive sense, he says, a law is â€Å"a rule laid down for the guidance of an intelligent being by an intelligent being having power over him.†13 Asymmetry in power is central for Austin, as we have seen, but intelligent guidance introduces a different dimension. Austin followed Locke in thinking of law as a human contrivance, establishing relations between rational beings. But the idea of intelligent guidance has implications Austin was hesitant to pursue. He recognized, for example, that the concept of command precludes ex post facto rules, since an utterance cannot constitute a command if the action required cannot be performed. Yet to acknowledge this conceptual point would be tantamount to placing a limit on sovereign power; an ex post facto pronouncement would not be a law, even though it possessed all the other features of the genetic definition. 14 Further, such acknowledgement would be the first step on a slippery slope. It would allow one to say that other pronouncements of the sovereign are also not laws, for instance, ones that are not clear in meaning. How could an obscure or incoherent utterance provide intelligent guidance to human conduct? Or an utterance that was not made public? Or that kept changing? These implications are precisely the ones pursued by Fuller in developing what he called the internal morality of law. Before turning to Fuller, however, we should pause to ask why Austin recoiled from the implications of his purposive definition and instead adhered to the idea of law as an instrument in the hands of a supreme person or body exercising power over others. My hypothesis is that rule by law in its minimalist variant was important to Austin for two related reasons: the fear of disorder and the uncertainty of morality. Both of these were reflected in Austin’s ambivalence about the expansion of democracy in England in the early 19th century. He saw little possibility, at least in the foreseeable future, of achieving the educational and mental improvement of the general population that he regarded as a prerequisite of democratic government. As a result, according to John Stuart Mill’s account, Austin developed an â€Å"indifference, bordering on contempt, for the progress of popular [i.e., democratic] institutions.†15 In addition, Austin believed that common moral opinion was so fractured, so full of partiality and prejudice, that ordinary people cannot be trusted to act decently. What makes government by a powerful ruler necessary and expedient is the â€Å"uncertainty, scantiness, and imperfection† of the mora l beliefs people espouse. â€Å"Hence the necessity for a common governing (or common guiding) head to whom the community may in concert defer.†16 The resonance of these passages with much of the Han Feizi, or at least the conventional reading of it, should be apparent. Lack of confidence in the capacity of human beings to govern themselves makes it necessary to have a sovereign whose will provides common directives that are easily discernible and effective. If people are allowed to follow their natural propensities, they will engage in all manner of disorderly behavior. Social order requires stable external direction by means of the threat of force. Thus, the solution to the problem of social order—Hobbes’s problem—is managerial direction (to use Fuller’s term). Without top-down control, matters are likely to get badly out of hand. The exercise of control in Austin’s case, of course, is thought of as benign. The goods of order and unity are taken for granted. The power of the superior is canvassed, not in terms of personal wishes or even class interests, but its efficacy in producing the â€Å"steadiness, constancy, or uniformity† that every society needs. Thus, Austin—like Han Fei, as I shall argue—makes sense of law in practice as an instrument in the hands of a single individual or mandarin elite with the competence and requisite disinterestedness to attend to the public need. To that extent, Austin’s theory is a pure expression of rule by law.

The Uses And Misuses Of Derivatives Finance Essay

The Uses And Misuses Of Derivatives Finance Essay Hedge funds are pools of investment that invest in almost any opportunity in any market where they foresee impressive gains at reduced risk. Hedging refers to implementing strategies that manage or protect against an identified risk exposure. They take leveraged positions in publically traded equity, debt, foreign exchange and derivatives. The primary aim of most hedge funds is to reduce volatility and risk while attempting to preserve capital and deliver positive returns under all market conditions (Friedland., 2008). Derivatives provide institutions the opportunity to break financial risks into smaller components and then to buy or sell those components to manage risk. Hedge funds hold a number of assets; they use derivatives to protect against the adverse price movement of these assets. Hedge funds play more of the role of speculators than of hedgers. They use derivatives when buying and selling assets and by putting long-short positions, they seek to hedge themselves against broad market moves while profiting from changes in the relative value of the instruments they go long or short. Hedge funds offer a variety of unique strategies to utilize when investing in hedge funds, these are called hedging techniques. These include Market Neutral Strategies, Event Drive / Special Situations Strategies, Long Short, Global Macro, Sector and Country, Dynamic Strategies, Funds of Funds, Funds of Funds of Funds etc. (http://www.global-derivatives.com) Market Neutral Strategies are used in Market Neutral Funds. They tend to take positions which offset each other through both a long and short position simultaneously to reduce their risk exposure. These strategies include Long Short and Convertible Arbitrage. Long-Short methodology attempts to reduce market risk by taking both long and short positions in the market. This can be done by taking a long position in undervalued assed and a short position in overvalued ones. In these funds, it is anticipated that the undervalued assets will increase in value than any losses incurred from the overvalued assets, or vice versa. Convertible arbitrage is a relatively more complex strategy. In this convertible securities such as convertible bonds which can be converted into normal shares or bonds are bought, to take advantage of any price discrepancies between the convertible security and that of the exchangeable underlying. A position can be taken for buying convertible security or selling the underlying asset to realise any difference in prices. (http://www.global-derivatives.com) Event Driven / Special Situations Strategies intend to make profit from events related to particular companies. Event Driven funds take a bet that something in the future will happen which will affect the company and its assets in a particular way. These funds include Distressed Securities and Merger/ Risk Arbitrage; these securities include debt and equity of companies undergoing reorganization or bankruptcy, it is hoped that companies will recover and increase in value. These securities have very low value and can be given to the management of a company during the restructuring process. Merger/Risk Arbitrage funds tend to analyze companies which are potential takeover or merger targets by taking two positions. An example of it would be to buy the stocks of a company that is being acquired with hope that its prices will rise and to sell stocks of the company that is acquiring, in anticipation that its value might fall. (http://www.global-derivatives.com) Long Short is another strategy which includes buying and selling a security based on the sentiments in the market or of a company. It includes short selling, long, and growth fund. Short selling occurs when a person anticipates that the price will fall in future and sells a stock which it does not possess, through borrowing. If the price really falls in future, they buy the lot from the market at a lower price and return it to the one they borrowed from earlier at lower price, thus making a profit. Long is another strategy in hedge funds, it is a fixed income instrument that benefits from the rise in the price of the held asset. They often utilize leveraged positions to maximize returns. Global Macro is an economics based strategy which intends to benefit from shifts in global economic conditions such as inflation, interest rates and other macro-economic factors; a common example of it is the use of interest rate derivatives for speculative purposes, they give profit from economic movements within particular countries. Sector and Country strategies include sector funds and emerging markets. Sector funds are hedge funds that specialize within a particular industry for example technology, textile etc. these investments consist of long or short positions in stock, debt, or even derivatives on the stocks. Emerging markets include funds that emphasize on emerging markets with less-developed economies and aim to profit from market growth which influence the securities positively. Securities in these hedge funds include sovereign debt or corporate securities with the anticipation that their prices will rise with economic growth. Dynamic strategies include elements such as market timings and opportunistic. Strategy of market timing involves the right timing of the market. It includes making profit based on the correct timing of investments across markets by moving between various asset classes depending upon the view of the manager regarding the market environment. Opportunistic strategy involves switching across asset classes, they use a number of strategies mentioned above depending upon the managers discretion, and the reason for switching strategies is to make the most profit. (http://www.global-derivatives.com) Funds of funds is the strategy of hedge funds to invest in other hedge funds in order to diversify the risk and exposure. The success of these funds depends upon the managers way of handling the funds rather than the performance of the actual investments. Funds of funds of funds or F3s is a new concept to hedge the risk exposure in terms of investments by reducing the volatility of the funds itself. They are good for high risk-averse investors willing to invest in the hedge funds industry. (http://www.global-derivatives.com) Amaranth Advisors LLC (Amaranth) Formation and Background Amaranth comprises of Amaranth LLC and Amaranth Advisors LLC. It was founded by Nick Maounis (Maounis) in 2000 as a multi-strategy hedge fund with a special focus on convertible arbitrage (selling (short) equity stocks and at the same time buying (long) convertibles of the same company creating a delta neutral portfolio), with its headquarter in Greenwich, Connecticut and with approximately $600 million in capital. Maounis experience was in managing a number of various arbitrage accounts in the US, Japan, Europe and Canada. The aim was to make profits from the small discrepancies in prices of stocks and bonds, through its structure of three principal funds Amaranth Partners LLC, Amaranth Capital Partners LLC, and Amaranth International Limited and the 27 investment professionals. It sought to employ a group of arbitrage trading strategies particularly featuring convertible bonds, stocks of merging companies and utilities. However, Over the years, the trading activity of Amaranth ex panded into merger arbitrage (making a riskless profit by purchasing individual stocks of two merging companies and selling them together), leveraged loans (loans given/extended to individuals or companies that already have large debts on their books), blank-check companies (developing companies) ,volatility trading arbitrage (buying or selling an option on an underlying instrument and selling or buying a varying percentage of the underlying instrument this to gain from the difference between the implied volatility of an option and forecasted future probable volatility of the corresponding underlying instrument), long/short equity, and energy trading. (ICMR, 2010) Strategy As noted above, at the time of formations and throughout its term, the firm emphasized that it was a multi-strategy hedge fund, but as it could be noted in the aftermaths that most of the firms investments and losses were in natural gas derivatives. Amaranths basic strategy comprised of trading in the Natural Gas market; the firm took a long position in winters, with hope that the prices will rise, especially when the demand for natural gas exceeds the supply and storage capacity due to the cold season. Its winter months were November, December, January, February and March. Amaranth used to take a short position in summers when it anticipated that the prices will fall. Part of its strategy also included taking short position in April and long position in March. Moreover, another strategy was to purchase call options on winter months and put options on non-winter months. Amaranth used to bet that natural gas prices will rise, and the spreads in March and April prices will rise as well. Nature of Natural Gas Market By nature, the natural gas market is very risky and volatile. Majorly because there is a commercial need for the commodity. This situation creates a need for an institution to control its supply and storage. In America, there has been inadequate storage capacity of natural gas for peak the winter season demand. Therefore the price of natural gas is higher in winters; firstly due high demand and secondly due to increase the incentives to store natural gas. These factors raise the prices of winter natural gas contracts to an all time high level. Apart from that, the market of natural gas is also volatile because the natural gas production in America is lower than the rise in the demand for natural gas. U.S. Natural Gas markets are shielded from the global energy factors because a very small amount of US natural gas need are met by imports of Liquid Natural Gas (LNG). Commodities trades require less margin money (collateral) than other markets. On the main exchanges, trades post 10 percent of their positions value, whereas in the stock market, 50 percent is common. (Davis, Sender, Zuckerman, 2006). After gaining credit from banks, it is very easy for commodity hedge funds to get highly leveraged quickly. Traders of natural gas have a number of options. The largest exchange for trading natural gas is the NYMEX (New York Mercantile Exchange) which has standardized futures contracts up to few delivery months up to 5 years that are traded on the exchange. Traders can also use ICE (Intercontinental Exchange) which is an over-the-counter market for trading natural gas futures contracts. There has been a lot of debate if hedge funds have an impact on energy trading. According to Gary Gensler (a former Goldman Sachs banker and treasury department official and chairman of the Commodity Futures and Trading Commission (CFTC) the chief regulator for energy futures energy trading said I believe that excessive speculation in commodity futures can cause sudden or unreasonable fluctuations or unwarranted changes in commodity prices,. He also expressed his opinion that the rapid growth of commodity index funds and increased hedge fund allocation to commodity assets contributed to the bubble in commodity prices. (Delamaide, Jan 11, 2010) Performance The founders original expertise was in convertible bonds (Till, 2006). The firm later specialized in leveraged loans, blank-check companies and in energy trading. Till June 30th 2006, energy trades accounted for about half of the funds capital and generated about 75% of their profits. (Till, 2006) In 2002 Amaranth started trading with JP Morgan Chase, in energy commodity trading. The winters of 2003 were exceptionally cold and lasted till February, this raised the prices of natural gas manifolds, and this in turn gave huge profits to Amaranth due to its long position in winters. By 2004-5 Amaranth shifted most of its investments into energy trading. The company used to make huge profits from placing spread trades and placing bullish bets on energy in 2005. In the same year America was severely hit by Hurricane Katrina, which adversely impacted it natural gas and oil production and refining capacity. This raised the price of natural gas and Amaranth reaped huge profits out of it. The accounts of Amaranth LLC showed robust performance by the company since its inception. The compound annual return for the period September 2000-November 2005 according to media reports was 14.72 net of all costs. (Gupta Kazemi) The chart below shows Amaranths returns till May 2005. The chart compares the Amaranths returns against CISDM Equal Weighted Hedge Fund Index and CISDM Convertible Arbitrage Index. Amaranth had gained a noteworthy position in May 2005, in CISDM Equal Weighted Hedge Fund Index. The chart show the volatility Amaranth was facing in May 2005, this volatility had brought high returns in the past but things then started taking the turn towards the wrong side. Amaranths returns; source: (Gupta Kazemi) NYMEX (New York Mercantile Exchange) noticed Amaranths considerable open interest of 51% in Aug 2006 in September natural gas futures contract, which would expire at the end of the month. NYMEX (New York Mercantile Exchange) brought its concerns into notice to Amaranth. Amaranth not only reduced their September but also Octobers positions, as per the directions of NYMEX (New York Mercantile Exchange). Alongside Amaranth increased their positions in October and September positions under ICE contracts, thus escalating their overall positions in natural gas. (Gupta Kazemi) According to US Securities and Exchange Commission filings, investors in Amaranths funds included a number of Wall Street banks including Morgan Stanley, Credit Suisse Group and Deutsche Bank AG. (Burton Leising, 2006) Amaranth was marketing energy and commodities fund to open in December 2006 of about $5 billion. The fund was to be managed by Hunter and Jeff Baired, co-head of Amaranths Global energy and commodities business. But unfortunately the events that followed didnt allow it to happen. (Burton Leising, 2006) Collapse and Beyond Amaranth used to bet that natural gas prices will rise, and the spreads in March and April prices will rise as well. However in 2006, so did not happen and gas prices began to decline due to rising inventories leaving Amaranth on the wrong side of the market trend and consequently reducing its portfolio value of $9.2 billion by less than half. Headed by Brian Hunter, it seemed that Amaranth had not anticipated the rise in the natural gas storage capacity, and the weather pattern bringing a warmer winter. It was in a weeks time that Amaranth lost 65% of its $9.2 billion assets. On September 14 alone, the fund lost $681 million from its natural gas exposure. On September 20th 2006, Amaranth sold its entire energy trading portfolio in a flurry to J.P. Morgan Chase and Citadel Investment Group. It did so at significant discounts to the portfolios then mark-to-market value. (Till, 2006) At the time of liquidation of Amaranth, the spread on gas future declined. The spread on positions held by Amaranth were $2.85 in late August, but after the liquidation had reached below $0.75. (MORGENSON ANDERSON, September 20, 2006). This indicates the lower price expectations in both the bid and ask price for every $1 invested in Amaranths holdings. When Amaranth Advisors LLC announced that it had suffered losses just as big as LTCMs, markets did not respond for Amaranth the way as they did for LTCM (Long Term Capital Management). New York Fed did not hold summit meeting for a bailout plan; but JP. Morgan Co. and Merrill Lynch Co started selling off Amaranths portfolio of natural gas futures. The co-founder of Energy Hedge Fund Centre (which tracks 520 energy funds) said, There is not systematic risk. The market can absorb this. (Mufson, 2006). The reasons for such a reaction were that, firstly Amaranth (although was doing rash trading) but borrowed less heavily and had less leverage than LTCM (Long Term Capital Management); secondly its positions were smaller and focused in natural gas futures. LTCM s failure threatened the stability of banks, whereas Amaranths failure only hurt imprudent investors in the natural gas market who hadnt done any research before investing. Amaranths co-founder and chief executive, Nicholas Maounis, said in his letter to investors that the fund was aggressively reducing our natural gas exposure to meet payments to creditors. The said that there was large scale fluctuations in the value of the fund, which was up sharply in August, would be down 35 percent for the year after the sell-off. Later Maounis said that the conditions in the natural gas market deteriorated and market liquidity dried up so quickly that the fund was unable to unwind its energy positions. He said it became clear that we couldnt trade out of it. Amaranth had no choice but to sell its positions at a huge loss because the fund was faced with margin calls and couldnt borrow anymore because of the liquidity problem that emerged once news of its losses hit the market. Maounis apologized to the institutional investors, pension funds and wealthy individuals who lost money as a result of the bad trades. He said We feel bad about losing our money. We feel even worse about losing your money. (CBC-News, 2006) Officially at Amaranth desperately tried to sell the fund to Citigroup. But despite the extensive talks and negotiations, Citigroup decided to walk away from making any deal. (Taulli, Sep 29th 2006 ) On July 25, 2007, the Commodity Futures Trading Commission (CFTC) charged Amaranth and head energy trader Brian Hunter with Attempted Manipulation of the Price of Natural Gas Futures including making false statements to the New York Mercantile Exchange (NYMEX). The Federal Energy Regulatory Commission has also charged Amaranth and its traders with market manipulation. Amaranth filed a lawsuit against JP Morgan claiming US$ 1 billion in damages, on the grounds that the bank interfered in the companys work to make a deal with Goldman Sachs and Citadel Investments. The Federal Energy Regulatory Commission (FERC) later announced a settlement with Amaranths defendants. However Commodity Futures Trading Commission (CFTC) did not withdraw its charges on Amaranth and on August 12, 2009, the federal court ordered Amaranth to pay a $7.5 million civil monetary penalty. The court also enjoins Amaranth from violating the anti-manipulation provisions of the Commodity Exchange Act. (Release, 2009) Amaranth then sued Touradji and his employees (Touradji Capital Management LP), by filing a complaint on September 18, 2006 in New York Supreme court in Manhattan, seeking at least $350 million for claims including breach of contract and misappropriation of trade secrets. Amaranth says that Touradji Capital Management LP breached two contracts agreed to in September 2006 regarding the transfer and purchase of Amaranths base-metals portfolio. According to the official documents, Touradji Capital Management LP used the information to recover profits obtained by defendants through improper trading practices and misuse of plaintiffs propriety and confidential information. Maounis, through a spokesman, refused to comment on the Touradji Capital Management LP suit (Chanjaroen, 2006). However in September 2009, Amaranth withdrew the summon it filed against Touradji Capital Management. Neither of the parties made a payment of any kind due to the withdrawal of notice. After the fall of Amaranth, Goldman Sachs was quick to come into action, and struck a deal to take over hedge fund manager of Amaranth Advisor LLCs lease at Greenwich America. Goldman occupied about 124,000 square feet at the property, which had served at Amaranths headquarters before the company was wound up in September. Amaranths lease was to expire in at the end of 2015 and had a rate of about $35 per square foot. (Ambroz, April 10, 2007) Internal control or Management of Amaranth Maouniss original expertise was in convertible bonds. In mid 2004 Maounis hired Brian Hunter (Hunter) an energy trader who was working for Deutshe Bank energy trading desk. Calgary-based Hunter was Amaranths head energy trader, who was given a free hand to trade the commodity market, due to his past experience of taking huge positions and making huge profits in the natural gas market. Maounis was impressed that Hunters made hundreds of millions of dollars (around 1 billion) for the firm in 2005 after Hurricane Katrina sent natural gas prices soaring, made the 32-year-old Canadian a co-head of commodities trading. Maounis let Hunter increase the size of his natural gas positions so that they became more than half of the entire firms exposure. This was against Amaranths claim of maintaining a multi-strategy fund. Before Hunters arrival, all commodities positions made up about 20 percent of Amaranths portfolio with natural gas having roughly 7 percent share. Amaranths partners had a confidence built on past success and they thought that they had a fool-proof strategy (taking long position in winters and short in summers); the company had reaped huge profits in 2002-2005 from this strategy. Amaranths website said moving nimbly and effectively within an ever-changing investment landscape and said that its employees possess fearlessness with respect to complexity, learning, as well as invention, and continuously strive for perfection. Maounis, said he had chosen the companys name, which means unfading in Greek. According to the wall street journal, Brian Hunters had so much success in trading natural gas futures, or bets, on the future prices of the commodity, that Amaranth allowed him to work from his home in Calgary, where he drove a Ferrari in summer and a Bentley in winters. (Hedge fund: a gamble too far, 2006, September 20). Analysts estimate that in order to fund his positions, Hunter was borrowing $8 for every $1 of Amaranths own funds. When the bet went in his favour, he could pay back the debt and keep the rest of the profit for Amaranth. As the bets started to go against him September 2006, his borrowing amplified his losses. (Hedge fund: a gamble too far, 2006, September 20). It is commonly believed that hedge funds improve the efficiency of the financial markets by introducing liquidity and innovation (Hedge fund: a gamble too far, 2006, September 20). However Amaranths collapse shows that the hedge fund managers earn for their lavish salaries only and not for the investors who have put up their earnings and savings in their funds. Operational risk is the risk associated with the internal management of the company and the probability of making wrong decisions that might harm the performance of the firm. Amaranth seemed to be suffering highly from operational risk. Hunters had a target of making $2 billion for the year at the end of August 2006. Analysts comment of such a target that Hunters must have had an unconsciously large position for this market, One of the biggest players in the energy markets, such as Goldman Sachs Group, would take up positions less than a tenth as big as Hunters, traders said. Hunter was involved in rash trading in the market as his positions were often twice as big as the next biggest. It is also said that in Amaranth, there was an exclusive risk manager for every trading book, who sat with the risk takers on the trading desk. (http://www.icmrindia.org/casestudies/catalogue/Finance/Collapse-Amaranth%20Advisors-Case%20Studies.htm#Risk_Management)The risk managers were well qualified and had advance degrees. Paul Touradji, founder and managing partner of Touradji Capital Management, said was obvious about risk control and not about commodities. Touradji admitted that he exited the natural gas market for a year because Amaranth had entered the market, comparing its presence with that of well-financed poker player sitting down with poorer players and making big bets. I cant think of a right counterstrategy other than to say, I am going to be at the bar until youre done, Touradji said. (http://www.hedgefundintelligence.com/Event.aspx?ProductID=7035ElementID=4983, 2006) Problems Diversification is the key element of all investment portfolios. It reduces the unsystematic risk of instability in any part of the economy. Amaranth specialized in the natural gas industry so much that it failed to realise that if it took any incorrect venture at any point in time, it would not have to face severe consequences. This is counted as a factor of poor risk management. One of the biggest issues with hedge funds is that there is lack of transparency for investors and they have no idea as to what the fund is doing with their money. Most hedge funds make money with the performance fees that are generated when the fund achieves larger gains; the bigger the gains the larger the fees for the hedge funds. If the funds stays still or falls, the performance fee is exactly the same. This type of fee structure can force hedge fund traders to implement exceedingly risky strategies. Much of the blame for what happened to Amaranth is being put on Brian Hunters, although he had a strategy, experience and understanding in the natural gas market; which worked well with various weather shocks, but the fund manager failed to take into account the rise in storage capacity of natural gas. The arrival of a relatively warm winter did not raise the demand of natural gas as much as in the previous years. These factors did not increase the price of natural gas as much, thus creating problems for Amaranth which has a long position. Amaranth was operating on a high leverage. As told earlier, Amaranth was operating on an 8:1 of debt to equity ratio. This amplified the credit problems for Amaranth because once it started facing liquidity problems; it ran out of cash to maintain its cash flows. After its collapse but before liquidating, Amaranth placed restrictions on its investors to withdraw holdings of cash. That is, they were allowed to withdraw for certain number of days but were required to submit the amount before the end of the term because inability to do so resulted in a penalty. Investors were not allowed their savings beyond 7.5% of their savings. (MORGENSON ANDERSON, September 20, 2006). The bankruptcy of funds causes damage to a number of individuals and companies that have their stake with them. In the Case of Amaranth, Morgan Stanley, invested $126 million, or about 5 percent, of its $2.3 billion funds of hedge funds in Amaranth. Even New York Fed Governor Timothy F. Geithner warned that hedge fund failures could hurt market participants other than those investors and lenders who have chosen to do business directly with those funds. (Mufson, 2006). This is because the instability created in the market (because of the bankruptcy of the company and the loss of a lot of people) can result in a systemic risk, which influences other sectors as well. It is commonly said that Amaranths systems did not measure risks correctly and did not take steps that would reduce the risk. The risk models that were employed by hedge funds use historic data, but the natural gas markets in 2006 were more volatile than any other year since 2001, making models less useful. A managing director of Lyster Watson Co, an advisory firm that invests in hedge funds for clients but not with Amaranth said, It was a total failure of risk control to put your entire business at risk and not seem to know it. They were more leveraged than they realised. (Davis, Sender, Zuckerman, 2006). Lessons to be learnt Derivatives as we know are risky sources of investments, and there a number of lessons that one can learn from the incident of Amaranth. Before making an investment (esp. in sector fund) it is important to analyze the performance of the sector relating to the profits and losses, during the past few years. A monthly sector analysis reveals that a -24% monthly loss is normal and the monthly volatility of the energy strategies was around 12% (Till, 2006), therefore due consideration should be made by investors before investing in such an industry. The second factor that fund managers should consider is of marketability or liquidity, which is the ease with which the contracts can be sold into the market again. The exchange traded futures market of natural gas contracts is way smaller than the over-the-counter natural gas positions. This should put the question in investors minds that in case the market of natural gas declines so how will they sell their contracts and liquidate their position. The strategy of Amaranth did not include an exit strategy. The following case of MotherRock also proves this point. Before the fall of Amaranth, on August 2, 2006 MotherRock, a natural-gas-oriented hedge fund had announced that it was shutting down, its losses had reached up to $300 million; it had made a wrong short position and was therefore forced to liquidate due to mounting losses. This should have sent alarming bell to the investors in Amaranth to secure their position in the market and they make sure that the dont face liquidity risk in near future (liquidity risk explained later). All successful investors have an exit strategy as part of their main strategy; liquidity is one of the four core factors to consider when investing in the market, these factors are risk, return, liquidity and maturity. Liquidity risk includes the risk that liabilities cannot be met when they fall due and can only be met at an uneconomic price. This risk can be accounted for by widening the bid/offer spread. An institution might lose liquidity if its credit ratings fall, it experiences sudden unexpected cash outflows or some other event that causes the counterparties to avoid trading with or lending to the institution. A firm can also be exposed to liquidity risk if markets on which it depends are subject to loss of liquidity. Liquidity risk tends to compound other risks. If a trading organization has a position in an illiquid asset, its limited ability to liquidate that position at short notice will compound its market risk. Suppose a firm has offsetting cash flows with two different parties on a given day. If the counterparty that owes it a payment defaults, the firm will have to raise cash from other sources to make its payment. Should it be unable to make its payment, it will default too. Here liquidity risk is compounding credit risk. A position can be hedged against market risk, through diversification of the portfolio by including assets with different unsystemic risks, but still has liquidity risk. Amaranths investments were high-risk funds that lacked liquidity due to the nature of the natural gas futures market. They did not have any counter party to take their position under a week, when they needed it most. One reason that can explain this liquidity problem is that the counter parties had already locked their position in the forward contracts relating to production or storage. It seemed that due to their past experience, of success in assuming long position in winters and short position in summers, Amaranth failed to anticipate the liquidity risk they were getting into by being unable to find a counter party. (Till, 2006). This was the job of the funds risks managers to employ scenario analysis based on this past events. Taking all the factors mentioned above proves that Amaranth was taking immense risk with respect to liquidity. Amaranth was giving the natural gas comodity market a service by providing liquidity to the participants who cou

Literary Devices in Carvers Cathedral Essay -- Raymond Carver, irony

Upon reading Raymond Carver's short story of the Cathedral one will notice the literary devices used in the short story. When analyzing the story completely, one then understands the themes, motifs, metaphors, and the overall point of the piece. This leaves the reader with an appreciation of the story and a feeling of complete satisfaction. Carver tells the story in first person of a narrator married to his wife. Problems occur when she wants a friend of hers, an old blind man, to visit for a while because his wife has died. The narrator's wife used to work for the blind man in Seattle when the couple was financial insecure and needed extra money. The setting here is important, because Seattle is associated with rain, and rain symbolically represents a cleansing or change. This alludes to the drastic change in the narrator in the end of the story. The wife and blind man kept in touch over the years by sending each other tape recordings of their voices which the narrator refers it to being his wife's "chief means or recreation" (pg 581). The narrator does not move chronologically, contrarily, but uses small flashbacks to tell his point, leading up to the actual visit of the blind man where he then tells the story in a present tense. This lets the author seem like he is actually telling the story in person, reflecting on past occurrences of his life when necessary. His tone however, is a cynical, crude, humorous tone that carries throughout the story. The word choice and sentences are constructed with simple, lifelike words, which makes the reader sense the author is really telling the story to them. The narrator is biased against the blind from the beginning. For instance, he stereotypes all blind people thinking they ... ...irst time for everything." However, because of the way her "inhaled" and "held in the smoke", the narrator believes he has been "doing it since he was nine years old" (pg. 506). This alludes to Robert's childhood, another thing the narrator and him share. Hence, upon analyzing the story, one can conclude the certain themes that parallel through the pages. Firstly, a theme of unity and trust is present at the end of the play. This is supported by the image of the cathedral, which is a place of unity. Most importantly, the notion of equality among people is the main theme within this story. The narrator starts as a biased, idiot, who dislikes all people that are not like himself. He even at times is rude to his wife. Ironically, it takes a blind man to change the man that can literally see, to rule out the prejudices and to teach him that all men are created equal.

As a firm grows the lines of communication are often stretched Essay

As a firm grows the lines of communication are often stretched. To overcome this meetings could be set up to keep people informed. The company’s span of control could be re-emphasised so that workers know whom to report to and who to inform of their orders. A clear structure and hierarchical pyramid will reduce arguments in the short term. Team building exercises are a modern way of improving morale, team spirit and efficiency. They are a long-term measure to keep all managers striving for the same aims and goals for the company as a team. I have been assigned by the company Koka Kola to sort out the problem they have where a new base 50 miles outside of there London head quarters has been built. The problem is the communication between the two bases; I need to find the best way to communicate between the two bases. Business Objectives The Business has objectives it must achieve; the businesses main objective is to set up a new communications system between the London Head Office and the newly built Production Site. The problem with this is that it may clash with another objective, Profit. If the company is to spend money on a new communications system it must make sure that the money spent on the system, staff, marketing etc, does not overshadow the money made by sales and other sources of profit. This, although a big problem could have benefits in the long term. If the money spent on setting up the Communications System is more than the profit made that month. In the months after when the System is set up, the benefits in profit as a result of the it being set up could be far greater than that in past months before it was made and so in the future could eventually be bigger than the amount paid on the Communications System and maybe even the Production Site. This concludes that although the short-term objectives maybe conflicted, the long term must be waited upon in order to reap the benefits. Communication: Communication is the process of passing information from one person to another. Once the target receives the information it is acted upon and feedback is sent to the original sender. An example of communication in business might be a company producing cars. The message might be an advertisement on television telling customers about a new car. The target will be the segment of the market interested in buying a car. The feedback will be the level of sales when the magazine first goes on sale. Communications are important in a business because it keeps the company working on the right track. For example if a marketing director who never asked the customers what they wanted in a product made a set up an advertising scheme on television, the advertisement would be based on the directors interests rather than the views of the customers. The customers wouldn’t be interested and would turn a blind eye. The problem with the business I have been appointed to is that the business is splitting into two bases amongst which people will work who would normally communicate with each other. I have organised an interview with a worker from a local business to find out what methods of communication they use: 1) How many methods of communication do you use in your business?

Prison and Finn

Book Review on: Incarceron Author: Catherine Fisher Number of pages: 442 Publisher/Year: Dial Books 2010 Imagine a living prison so vast that it contains forests, towns, and even seas. This is Incarceron. It is a self- sustaining prison like no other. Incarceron’s prisoners live in cities, not cells, and they live normal lives. The prison has been sealed for centuries and only one man, in legend, has ever escaped. The story starts with Finn, a seventeen year old, who is convinced he doesn’t belong in Incarceron.This is because he has dreams where he sees stars, and there are no stars in Incarceron. He thinks he came from the outside and got stuck there somehow. The story tells that Finn is part of a tribe with his oath brother, Keiro. They just caught a prisoner who turns out to be a Maestra, or leader, of another tribe so they trade her back to them for her weight in goods like coins and treasures. Finn finds a strange key in the treasures and decides to keep it. The o ther â€Å"key† part of this book is a character named Claudia who is the warden of Incarceron’s daughter.She sneaks into her father’s study and finds a key in one of the drawers of his desk. She quickly takes it and goes to her teacher, Jared. He says that he has never anything like it and that he will have to do research to see what it does. That is when the story really takes off because Finn decides he has to find a way out of Incarceron and Keiro, Attia, a prison girl who lives on the street and a prophet who always wanted to see stars and the outside named Gildas follow him. Finn then began to fiddle with the key and it started to glow. Claudia pops up out of nowhere as a holographic image because she also had a key.She tells them that she wants to help them escape and their journey soon comes to an end near the edge of Incarceron, the wall. Claudia goes back to her father’s study to search for clues. She sits down in the chair in the middle of the room and is instantly transported to Incarceron. She had no idea what was going on but she soon found Finn and the others. Her father couldn’t stand that she was in there so he told them how to get outside. He said that the keys are actually transporters so that when you press the eye of the eagle on the keys you teleported out.The dilemma was that there were only two keys and five of them. After a lot of fighting Finn and Claudia promise to return for the rest of them and they left. We later find out that the prison is actually inside the watch that the warden carries around with him. All in all, I truly believe that this is an awesome book. The way that the author melds two story lines into one plot amazes me and I had a great time reading this story I would recommend Incarceron to anyone that likes fantasy books with twists. I can’t wait to start reading the second one. Reviewed by: Andrew Caldwell ***** English IV Period 4