Timing is Everything for Economic Resurgence

So everyone is aware of the DEFCON 4 status of the current U. S. economy.  We have a mortgage crisis, gas crunch, layoffs – you name it.  In today’s Boston Globe, a fresh serving of bad news for breakfast; the Nikkei 225 Stock Average fell 156.09 to its lowest point since July 13th.  Fortis earnings fell 50% in the 2nd quarter, and GM is in a hospice bed on oxygen.  I get it, things are bad.

In spite of this bad news, a few rays of sunshine also peaked through the Globe’s pages.  It seems that Oracle is developing 150,000 of new space in Burlington to expand their Massachusetts operations.  On top of that, there was word recently that Burlington is to be the site of a giant life sciences compound.  This is surely in response to the new Massachusetts Biotech initiative, in which one billion dollars is to be invested in new life sciences ventures in the state.  I have always been an optimist, so this is all I need for positive outlook supplement.  The Oracle development should mean more jobs and should have a positive effect on the state’s IT sector.  The life sciences compound in Burlington will definitely add jobs and provide positive resonance throughout the area.  And well, one billion is one billion, so we can assume that jobs and the overall advancement of new biotechnology will start to pump life into the Massachusetts economy. 

Of course, my usual disclaimer is that I am in fact only an insurance broker, so what could I possibly know?  What I do know is that if you look down when you’re hanging from a cliff, you will freak out and you might fall.  But if you look up and focus on getting over the edge, you will start to inch upward.  The power of positive thinking notion makes some people nauseous and they just simply don’t want to hear it.  That’s OK, as I am also a believer in freedom of opinion which falls under “Andy’s Theory of Subjectivity”.  But as Billy Joel once sang, I’d rather laugh with the sinners that cry with the saints.

So maybe, just maybe, as the monster of economic woes is closing in on us, the IT and life sciences sectors will open the door just in time for us to slip in and escape.  After all, timing is everything.

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You Can’t Have Your Petroleum and Eat It Too.

OK folks, exhale and relax knowing that I’m not going to talk about insurance today.  I heard the news yesterday that Exxon recorded record profits for the second quarter, something like 20 billion dollars.  That’s like your brother charging you $200 for a 8 oz. glass of water when you are in the desert and he has all the water.  But I’ll stop there on that line of thought, as there are plenty of other people out there today squirming in their appal that will talk about it.  

The Exxon news got me thinking about human nature and how we consume something when it appears that we have an endless supply.  Back in the sixties, we had giant automobiles with thirsty V8 engines that got 8 miles per gallon.  No worries, we just went to the gas station and filled ‘er up again.  Why would we have worried back then?  Historically, we have hunted tigers, shot exotic birds, and consumed natural resources as if it were going out of style.  We all know the results of these actions.  But if we knew that the supply of water on Earth was being used up quickly and was disappearing forever, would we stop watering our lawns or washing our cars?  I would think so.

My point is that that we insatiably consume when we perceive no threat of supply, but when then the supply is threatened, we get conservative.   But do we not have the ability to look forward?  Back in the 60’s, did we not consider the notion that the earth was only so big and the possibility that petroleum was a finite fuel?  I’m sure there were those that did see this, and they probably tried very hard to warn us.  But when there’s a bum rush on wedding dresses at Filene’s Basement, the brides to be are going to stiff arm you to get by when you try to tell them that 50% of them will be divorced within 5 years.  To me, the word conservative used to have such a boring, goody-two-shoes air to it.  But I now I view it as smart, forward thinking, and strategic, all words that are invigorating to me.

I don’t get the cliche’ that says “You Can’t Eat Your Cake and Have It To.”  Why not?  Is flour a finite food that is in jeopardy of depletion?  No, you just bake another cake, and bury your face in it, and then bake another.  Ah but petroleum, that’s different.  Jam your foot into the floor of your V6 Honda Accord and you’ll be helping to boost Exxon’s stock again.  The cliche’ should really be “You can’t Eat Your Petroleum and Have it To”.

Red Sox Contingency Plan for the Manny Exodus.

This is the 3rd or fourth go around I’ve had with “I’m sick of Manny Ramirez…  they should get rid of him and bring in some fresh talent”.  Of course, that’s not so easy, considering that Manny has to approve any trade deal. And you’ve got to think that if the trade doesn’t provide for a new multi-year contract, that he won’t approve it.  This scenario is so familiar, even in the business world.  Think of the super salesperson, the coding whiz, or any other person that provides almost unreplaceable talent and resources.  Many times, these individuals are incredibly difficult to manage, and quite possibly are downright disruptive to an organization.  Sound familiar?  The Manny discussion could go on forever between the Red Sox Management point of view and Manny’s view from high atop the jungle gym.

So now the contingency plan; what do they do?  Did they know this might be coming and plan out some strategy to mitigate it?  It might be possible, but MLB is a moving target and what might seem possible today is completely remote tomorrow.  Does corporate America determine what their risks are and plan out what they would do in the event of an adversely impacting occurence? (And you though that I wouldn’t talk about insurance!)  The answer is that most large companies with risk managers and/or risk saavy financial executives do have some kind of contingency or disaster recovery plan in place.  Unfortunately, many small to midsize companies do not.  Taking a few minutes to explore the what-if’s and the what-would-we-do’s in the event of an adverse occurrence, many business executives would more than likely identify the pitfalls and the resulting revenue flow that would be gasping for air.  I think that the Red Sox will have a replacement left fielder quite a bit faster than a business that has to replace operations should neither have a contingency plan.  And don’t mind me, it’s just Andy being Andy.

New Developments Are Sounding Old.

I got in the office early today and perused through my usual news, RSS feeds, and blogs.  Among others, it seems that SAP and Oracle continue to battle it out; Oracle is alleging that SAP, through the acquisition of another company, gained copyrighted materials from Oracle’s website.  Is it just me, or is the corporate espionage game festering a little faster these days?  Naive my comment may be, but I’m getting to the point where nothing surprises me anymore.  It just seems like another day in Kansas when one company is acccused of stealing some kind of IP from a competitor.  I should have been an IP attorney.

So, the lay of the land in insurance these days is laden with quicksand and you never really know where the bottom is until you hear the singing and the clean up crews are sweeping up the mess.  Premiums are down, terms and conditions are loose and comfy, and insurance companies are looking to try anything to retain their existing business and write new business.  Overall, it appears that many insurers are dealing with shrinking profits due to losses and premiums that are on diets.  Add to this the current “slowdown” in the economy (I call it that because it makes me feel better) and the volatile stock market, and it doesn’t make for a pretty picture.  So what will happen now?  If I knew I’d be an actuarial savant.  But it does appear that based on the natural disaster claims over the last couple of years, and the California fires, and if we have a bad hurricane season, and if the Siemens Director’s & Officer’s claim in Germany is as bad as the predict, and the mortgage crisis, (insert your own disaster here)…  I think that you get the picture.  I would have to guess that at the minimum, the bottom is either here or close, and the possibility of some hardening is not out of the question.  I really do love to speculate!

Now, we begin.

So here is the first post of my long anticipated insurance blog.  Of course I’m the only one who anticipated it, but you have to start somewhere.  I’m an insurance broker specializing in the technology and life sciences sectors, as well as any operation that has a professional liability exposure.  From the outside looking in, the insurance industry has somewhat of a dry look to it.  Stodgy, boring, and something that you don’t really want to talk about.  In the 80’s movie “Weird Science”,  Anthony Michael Hall talks about another character in the movie who is the life of the party, proclaiming that “she could have fun at an insurance seminar”.  I assume that’s a common viewpoint of the insurance business,  but it really is an exciting industry, considering the changing business world of technology, life sciences, and the overall revolution of how we conduct business.  This revolution presents challenges on how to appropriately design an insurance program for a business.  It’s kind of like a game of chess, but the rules keep changing and if you don’t keep up with the changes, it’s checkmate.  Yeah, I love it and I consider myself an enthusiastic student of the industry.  In my next post I will give you the current lay of the land in the insurance industry and spread some insurance enthusiasm…