Although I’m not an American I’m really happy to see that now for the first time in the history of the USA a man with Afro American roots became president. I think this decision has improved the image of the USA in the world very much. The image which has suffered under the government of George W. Bush, is now back with a new message “Change”. But what can the U.S. and the rest of the world expect from the new president and much more interesting which parts of the economy will benefit from him? First of all we shouldn’t expect too much from Mr. Obama, although he is a great speaker with fire in the eyes. The President-elect is facing some of the biggest problems the U.S ever had:
* The national debt has achieved the incredible amount of $1100.000.000.000
* The war in Iraq swallows up $5.000 per second, that’s $300.000 per minute and $432.000.000 per day
* The climate is in danger to collapse if the world and especially the U.S. won’t come to grips with their emissions we are in danger of loosing the planet as we know it
To say nothing about the financial crisis, new conflicts with Russia, the Iran or Venezuela or just the fact that we are facing a recession which consequences can’t just be estimated right now.
So above all these points it’s hard to imagine that Mr. Obama is able to spend any money for anything at all. But the promises Barack Obama made don’t have to be mutually exclusive. For example though investments and subventions of renewable energies new jobs can be created. That has the same effect like a stimulus package. Also it’s a good alternative for searching oil in far dessert countries. So I’m sure that Barack will make affords to support renewable energies, he also promised to spend $150 billion in the next 10 years in that industry. But which companies could benefit from that?
I picked out a few companies which could theoretically benefit from his plans, but before you buy these stocks now remember, just because a stock sounds interesting it doesn’t mean that it rises. If you want to buy these watch out for the right price.
The first one is First Solar [www.firstsolar.com (NASD: FSLR)], a producer of solar panels. Solar energy will have a lion’s share at the power supply of renewable energies. So First Solar will be the first address in the U.S.
The second one is Acher Daniels Midland [www.admworld.com (ADM)], a producer of food, fertilizer but also in bio fuels. Bio fuels will be very interesting for the government under Barack Obama because they can create jobs in the farming sector as well as they can make America independent of the so called pariah states.
Other interesting companies could be Repower, Solarworld, Nordex or Evergreen Solar.
The second promise senator Obama made is to make health care affordable for many of the 47 million Americans who are currently not insured. This point will be difficult because large health insurance companies like Aetna or UnitedHealthcare fear that they might suffer under lower profits. Also I don’t know if America is ready for so a social system, yet. Perhaps that’s why Obama didn’t say something concrete about this point, yet. But if a company would benefit from that it would definitely be Community Health Systems [www.chs.net (CYH)]. Community Health Systems provides hospitals and hospitals would be the direct winners of any health care plan. But you can of course disagree with me in this point.
So I hope that Barack Obama will be able to put his plans into practice. However I think many people believe in him and faith can be the beginning for “Change” also when it seems to be very difficult.
What’s your opinion? Do you know companies, that are likely to benefit from Mr. Obama’s plans? Please write a comment and let us know!
The Great Depression
In the book “The Snowball” - a wonderful biography of Warren Buffett’s life and absolutely worth reading in my opinion - Warren Buffett summed up the actual situation of the world’s economy in the last chapter “Coupons” using the words: “It’s a hard time. This is now another world, and nobody knows what will happen to the world.”
But let’s take a look on what happened in the last months. After the fall of Lehman a big shock wave spread over the financial markets inexorably. In the course of that shock wave, the Dow Jones fell from its all-time high of 14,000 Points to 8,000 Points and bank titles such as Bank of America or Citygroup have lost 85% of their former market capitalisation. The former chairman of the NASDAQ Bernard Madoff was able to dupe his investors to the tune of $50,000,000,000. Several personalities of the financial world have committed suicide, including the German investor and multibillionaire Adolf Merckle.
What will happen now? Will we really face a crisis just like the crisis in 1929? First of all, I want to say that nobody can predict the future but the similarities to the year 1929 are really frightening. The crash of 1929 for example had it’s roots in much too high stock values caused by the wide range of credit offers banks offered the people in order to achieve larger profits. Four years after the crash the U.S. government passed a sequence of central economic planning programmes called “New Deal” in order to stabilize the economy and above all regulate the completely runaway stock market. The deal worked and as banks weren’t allowed to spread credits to everyone in order to fund huge financial bubbles, governments did’t have to deal with the consequences of such enormous financial bubbles for more than 75 years - until now. But in the year 2000 bankers had a new exciting idea on how to offer credits to the masses. Instead of giving direct credits to the people like in 1929 they now gave mortgages to nearly everybody. This had the effect of raising housing prices and when the price of your home is very high you are also more creditworthy. But of course this bubble also had to burst and now we are facing a huge credit-funded pile of fragments again. The story of Bernard Madoff has also already existed, albeit in a slightly weakened form: Richard Whitney, who was the chairman of the N.Y. stock exchange in 1929 was sentenced to 5 years prison in 1938 for embezzling millions of dollars from his clients between 1929-1930.
But let’s sum up the facts: The advantage this time around is that our governments know how to deal with recession much better than they did in 1929. Sir John Maynard Keynes developed his theories on fiscal policy and instead of making things more worse our governments know that they have to invest in order to get the economy going again. The disadvantage of this policy is that national debts have to be paid back one day, or governments have to abandon their currency. But the economical supremacy of the U.S.A. can’t be defeated when the government will start to pay back their 14 trillion dollar debt. On the other hand, the disadvantage is that this crisis is a different type of crisis: This crisis has hit the economy at its weakest spot: its banks. The cash flow between banks and companies has been nearly zero for a long time. Many banks have securities which nobody knows how much they are worth - or better said if they are worth anything. Now the U.S. government finally created a “Badbank” worth $2,000,000,000,000 which should release the credit markets from their state of shock. Nevertheless it has to be said that the consequences of this “Badbank” on the international bank sector can’t be predicted yet. Another problem is that people often forget the past in times of crises. The “Buy American clause” for example would in my opinion be the first step into a catastrophe. Because when the first country starts to protect their markets, others will follow and that would have unpredictable consequences in our fully globalized world.
In conclusion it can be said that we are definitely facing a deep deep recession which will either hit quick and painful or slow and painful. Unemployment rates will be very high for a long time and the average rate of return for securities won’t be over 4% for many years. But if the crisis really turns into a depression like in the years 1929-1935 can’t be said, yet. In my opinion that depends on our governments now.
But let’s take a look on what happened in the last months. After the fall of Lehman a big shock wave spread over the financial markets inexorably. In the course of that shock wave, the Dow Jones fell from its all-time high of 14,000 Points to 8,000 Points and bank titles such as Bank of America or Citygroup have lost 85% of their former market capitalisation. The former chairman of the NASDAQ Bernard Madoff was able to dupe his investors to the tune of $50,000,000,000. Several personalities of the financial world have committed suicide, including the German investor and multibillionaire Adolf Merckle.
What will happen now? Will we really face a crisis just like the crisis in 1929? First of all, I want to say that nobody can predict the future but the similarities to the year 1929 are really frightening. The crash of 1929 for example had it’s roots in much too high stock values caused by the wide range of credit offers banks offered the people in order to achieve larger profits. Four years after the crash the U.S. government passed a sequence of central economic planning programmes called “New Deal” in order to stabilize the economy and above all regulate the completely runaway stock market. The deal worked and as banks weren’t allowed to spread credits to everyone in order to fund huge financial bubbles, governments did’t have to deal with the consequences of such enormous financial bubbles for more than 75 years - until now. But in the year 2000 bankers had a new exciting idea on how to offer credits to the masses. Instead of giving direct credits to the people like in 1929 they now gave mortgages to nearly everybody. This had the effect of raising housing prices and when the price of your home is very high you are also more creditworthy. But of course this bubble also had to burst and now we are facing a huge credit-funded pile of fragments again. The story of Bernard Madoff has also already existed, albeit in a slightly weakened form: Richard Whitney, who was the chairman of the N.Y. stock exchange in 1929 was sentenced to 5 years prison in 1938 for embezzling millions of dollars from his clients between 1929-1930.
But let’s sum up the facts: The advantage this time around is that our governments know how to deal with recession much better than they did in 1929. Sir John Maynard Keynes developed his theories on fiscal policy and instead of making things more worse our governments know that they have to invest in order to get the economy going again. The disadvantage of this policy is that national debts have to be paid back one day, or governments have to abandon their currency. But the economical supremacy of the U.S.A. can’t be defeated when the government will start to pay back their 14 trillion dollar debt. On the other hand, the disadvantage is that this crisis is a different type of crisis: This crisis has hit the economy at its weakest spot: its banks. The cash flow between banks and companies has been nearly zero for a long time. Many banks have securities which nobody knows how much they are worth - or better said if they are worth anything. Now the U.S. government finally created a “Badbank” worth $2,000,000,000,000 which should release the credit markets from their state of shock. Nevertheless it has to be said that the consequences of this “Badbank” on the international bank sector can’t be predicted yet. Another problem is that people often forget the past in times of crises. The “Buy American clause” for example would in my opinion be the first step into a catastrophe. Because when the first country starts to protect their markets, others will follow and that would have unpredictable consequences in our fully globalized world.
In conclusion it can be said that we are definitely facing a deep deep recession which will either hit quick and painful or slow and painful. Unemployment rates will be very high for a long time and the average rate of return for securities won’t be over 4% for many years. But if the crisis really turns into a depression like in the years 1929-1935 can’t be said, yet. In my opinion that depends on our governments now.
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