The Obama-effect

America’s new president Barack Obama is appointing the rest of his staff this week, however, the finance minister was chosen last week; Tim Gaithner from the Federal Reserve’s headquarters in New York, a favorite by many Americans. Furthermore, Obama promise billions of Dollars in support, and jobs to the American people, he even promises to handle this finance crisis and recession.

The Dow Jones Index rose last week, and continues to do so for several days in a row. In Stockholm, the OMX Index rose 9.1% in only one day – the biggest raise for a day in 10 years. This is what I call an Obama- effect. However, if it will turn the stock market around is doubtful.

Possible Auto-merger?

Yesterday was a black day for the three CEO’s of the auto industry in Detroit; Ford’s Alan Mulally, GM’s Rick Wagoner and Chrysler’s Robert Nardelli met with the Senate in Washington DC to ask for help from the politicians. After a four hour long debate, where the three CEO tried to sell the idea of a crisis loan to the auto industry of 25 billion USD, the negotiations were postpone to continue tomorrow. “This is about so much more then only Detroit, it’s about saving the economy of the US from a possible catastrophic collapse”, was one of the things Rick Wagoner said in order to gain sympathy from the Senate. However, the three CEO’s did not receive much sympathy from the Senate; at one point during the questionings the Senate asked the Detroit CEO’s to raise their hand if they would sacrifice each of their private jets that they flew to the meeting with, none of them raised their hands. So are the three Automakers really so broke? Or do they only see an opportunity to get some money to invest in their companies? Maybe they have to reconsider their priorites a bit, soon they might not even have a private jet anymore.

Furthermore, there has been a rumor going around, whether there would be a merger between the big Automakers. What would the Senate think of that? And how would it effect the States? In my opinion I don’t think a merger would be the ultimate solution; it will just make their problems bigger, the logic goes that if they merged the combined company would control 36 percent of the US auto market which would prevent it from failing. Since when does combining two large companies, that are both incompetently managed, guarantee success?

The Auto industry seems to have been caught with their fingers in the cookie jar, just like the banks with the bad loans. They do not have a plan B for the future, just cars waiting to be sold.

Just a little thought that hit me. Look at this diagram, showing the yield for 10years American government bond; It is right now the lowest ever, meaning investors still are trying to escape investments involving any risk, such as stocks, to safer treasury notes. Many people say the bond investors are the world’s most competent investors, and to follow their investment strategies is wise.

We need to see a change in these investment strategy-patterns, in order to achieve a sustainable upturn in the stock market. The confidence does not exist in the more risky stock market as long as the investors choose government bonds. So when is it time to start investing in the stock market again? It will need a boost of capital in order to gain volume. So what will it take to persuade investors to change investment strategy? An upturn in this financial crisis would probably be the answer to that question, however when will that be? That’s a question with an answer we can only speculate about.

Time of growth for fashion chains

The stock market today is extremely volatile and not very reliable; several days with shortfall, some days a slow upturn. So who are the real winners that can make money in today’s financial crisis? I would say the people with a lot of capital, the ones that are able to influence the movements of the market, especially where they have big holdings of shares. Take two wealthy Swedes as a good example; H&M’s Stefan Person; the Swedish fashion chain’s sales rose 9% in October and Stefan Person’s fortune is growing bigger and bigger. The company has big plans for expansion towards the west in both US and Canada. Some analysts believe that H&M could eventually grow to have 1000 stores in the US. The company opened its first store in the US in 2000, and since then the US has become one of its fastest growing markets.

It seems that a time of recession is a time of growth for fashion chains; another example is the British billionaire Sir Philip Green, the owner of BHS and Top Shop. He negotiated to take over a debt estimated at one billion pounds from Iceland’s investment group Baugur, after they went bankrupt in October.
Green said for The Sunday Telegraph that he met with Cabinet officials and boards. He also said they were very constructive because they had the ability to react fast and avoid the financial failure of the financial crisis.