WUFC Issue 17 - Final
WUFC Issue 17 - Final
WUFC Issue 17 - Final
FEBRUARY 2014
two editions of the basel accords were basel i and basel ii,
passed in 1998 and 2004 respectively. though largely surpassed and effectively superseded by basel iii, their approach,
or framework, for addressing banking stability is still promiemerging markets
turmoil
brendan Tsai
Page 2
proFiting From
obamaCare
Kevin Lai
Page 5
february 2014
benchmark lending rate as an effort to compensate investors for the perceived additional risk of emerging market economies. turkey increased its one-week lending
rate from 4.5% to 10%, while south africa increased its
own from 5% to 5.5%, the first rate increase in almost six
years, according to the Wall street Journal. the fullblown effects of these changes have yet to be seen, and
economists around the world will be sure to take note of
the potential effects these interest-rate hikes have on the
growth of emerging market economies. While the imF
continues to hold the belief that emerging market
economies are better able to withstand tighter financial
conditions, it looks as though this belief will be put to the
test, especially as the u.s. and other countries continue
their steady drawbacks in monetary stimulus.
your one-stop shop for finance
february 2014
Basel, story continued from p.1
serves and is perceived as being a banks most steadfast store
of value. tier 2 Capital is supplementary capital and is generally a catch all for capital that is disqualified from tier 1.
risk-Weighted assets represent a weighted sum by risk-tovalue of all the assets that a bank owns. assets that are considered riskier, such as residential mortgage backed securities
(rmbs), are assigned a larger haircut in the risk-weighting
calculation than assets that are comparatively safe, such as
municipal bonds. under basel iii, this ratio has been made
more rigorous in three ways. First, the actual ratio has been increased from 2% to at least 7%. second, the definition of regulatory capital has been narrowed, making the ratio more
difficult to fulfill. third, risk-weightings have been reassigned
to generally increase the value of rWa by an average of 23%,
thus increasing the required capital that a bank must hold.
aside from the solvency ratio, basel iii introduced
other important ratios. among them are the leverage ratio
(lr), liquidity Coverage ratio (lCr), and net stable Funding ratio (nsFr). the leverage ratio is a simple ratio of assets and commitments to regulatory capital. under basel iii,
february 2014
uproar in DenmarK
is a significant amount of anger remaining towards the investment bank. before the Dong energy fallout, helle thorningschmidt led a minority coalition in Denmark that consisted of
three parties. amidst resentment over the goldman sachs investment deal, however, one of the three parties left her coalition.
this left her with only 61 out of 179 seats in the Danish parliament.
goldman is also concerned over potential fallout in its
other investment vehicles. although goldman never committed
any ethical or legal violations in the Dong energy deal, it was
surprised by how intensely the Danish people protested the deal.
goldman is now contemplating how it should continue with
other investments it has in Denmark. this includes its investment in an outsourcing company iss.
Currently, the deal between Dong energy and goldman
is on track to be finalized in mid-February. the recent uproar,
however, has left both thorning-schmidt and goldman with a
fair amount of negative publicity to deal with.
your one-stop shop for finance
february 2014
the real incentive paradox manifests during postacute care for over a third of patients who receive surgery or other treatments after they are discharged. While
the best option is often home health care, where patients
recover in a comfortable environment away from the risk
of hospital-acquired infections (hais), this is an inconvenient option for healthcare providers. providers instead
often approach post-acute care with expensive rehabilitation facilities and standardized 21-day timeframes, which
is a large overestimate of what the patient actually needs.
While providers benefit, insurers end up footing increased bills. With an increasing number of patients covered, companies like navihealth have been able to profit
by providing post-acute home health care and splitting
savings with insurers.
among the best ways to profit on obamacare is to
investigate the following:
hospital stocks: utilization rates increase and uncollected receivables go down as a result of an increase in
the pool of paying patients. since hospitals are required
by law to serve both insured and uninsured patients who
show up at the er, many hospitals formerly were not
able to collect as much as 30% of their billings.
testing laboratories: obamacare is positive for testing companies such as Quest Diagnostics (nYse:DgX)
and laboratory Corp. of america (nYse:lh) as more
insured patients are able to pay for diagnostic tests.
medical Device manufacturers: Companies such as
medtronic (nYse:mDt), stryker (nYse:sYk), and st.
Jude medical (nYse:stJ) may be hurt as obamacare
levies increased taxes on sales of these devices. as companies are projected to increasingly compete on price, investors expect consolidation and increased price
competition in this space, giving rise to potential short
plays.
insurance Firms: mega-insurers such as unitedhealth group inc.s shares were up by more than 22%
over the past year after the rollout of obamacare. similarly, Wellpoint inc., which operates under blue Cross
blue shield in 14 states, has risen over 37% this past
year.
as healthcare becomes more capitalistic under the
affordable Care act, firms that can leverage the changing incentive structures to their favor will become leaders
in this new landscape.
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