The return of GM as a public company

We all remember the day when the world's leading manufacturer in the automobile industry filed for chapter 11 (reorganization). Many thousands of workers will remember June 1, 2009 as the date when they had to return home and tell their families the horrible truth about their job loss... 

Source: ft.com

Today, General Motors (GM), the second world's largest carmaker after the Japanese Toyota returned to the stock exchange through IPO, which promises to be a record in world history. After the bankruptcy of the automobile giant its common shares once again started to be traded on the New York Stock Exchange (NYSE) and on the Toronto Stock Exchange under the ticker symbols "GM" and "GMM". The first transaction was at a price of $35 per share after the starting point of $33 IPO price.

I don't think that the return of GM back on the stock exchange can be called a debut but this is truly something that the company can be proud of. However, investors were unable to sell their shares of this carmaker in the last half year, which until recently were considered "blue chip" and were part of the Dow Jones index.

Dan Akerson, GM’s chief executive, said that “going public is an important milestone on the way to becoming a new and better and different GM”.

On Wednesday the General Motors Company announced the successful placement of 478 million common shares at the upper boundary of the earlier announced price range (32-33 dollars per share), as well as 87 million of convertible preferred shares at $50 per share. The sellers of common shares are current shareholders of GM, including U.S. Treasury to whom belonged about 61% of the company before the IPO and now - 37%. Total income from the placement accounted to 20.1 billion dollars, making it the largest IPO in U.S. history. Very impressive for the company once being the bankrupt, isn't it? 

Many analysts unanimously say that the return of General Motors on the stock exchange, which took place much faster than it was anticipated, plays a huge positive role for both the company and the U.S. government. GM leadership has repeatedly complained that the label "Government Motors", which got stuck to the company after its bankruptcy, damages its image and has a negative impact on their sales. In the mean time Barack Obama's Administration should be quite satisfied as the demand for shares of GM has been very high, and the government will manage to return to the treasury about $14 billion of those $50 billion that were allocated under the bail-out to the "symbol" of American national industry.

It is seems like a "happy end of the happy beginning" or vise versa! Well at least for this moment this IPO did not only start generating big bucks for the investors but also providing job places which is so important during the current "no jobs" situation.

K.S.

Posted on: Wednesday, 17 November 2010

Sources:

www.ft.com

www.bbc.co.uk

www.rbc.ru

R. Zoellick initiates the return of the global monetary system to an improved form of gold standard

Robert Zoellick, the president of the World Bank, has called on bickering G20 nations to bring gold back into the global monetary system as an anchor to guide currency movements.

Source: telegraph.co.uk/finance

The new system "is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi (Chinese yuan) that moves towards internationalisation and then an open capital account. The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values," Mr Zoellick said in a commentary piece for the Financial Times.

Robert Zoellick's plan involves five steps. As a first step the United States and China must come to an agreement on economic policy, which would include a process of increasing the yuan's exchange rate. After that, the world leading economies need to develop an agreement on the refusal of their central banks from foreign exchange intervention. The first two steps should remove the most painful problems of international monetary relations and prevent currency wars.

Subsequently the "Big Twenty" begins to create a new financial and economic system in the world. The third step, should become the education of the coordination system of exchange rates in developing countries. In the next stage the "Big Twenty" must develop a program to maintain stable growth in the global economy. Based on progress achieved during the first four stages of the reform, the fifth step would be the formation of a new monetary system, which will be based on a basket of five major currencies and gold. "Creating a new monetary architecture will take time, but this work should begin now," - said Mr. Zoellick.

Restoration of the gold standard in the global monetary system is called a new Bretton Woods system, which can replace the current one - Jamaica. The original version of the Bretton Woods system was established in 1944 as a result of agreements of the world leading powers aimed at ensuring financial stability after the Second World War. The main currency in international payments was set to be U.S. dollar and its exchange rate was fixed to gold ($35 per ounce). In addition, fixed exchange rates were established for the currencies of participating countries.

Economists started talking more seriously about the need for a new "gold standard" in the global financial crisis which began in 2007. This idea was particularly popular among the critics of neo-Keynesian model of economic regulation, embodied in the current economic policy of the US Federal Reserve System, which allows virtually unlimited issue of money to stimulate the growth of GDP. However, despite the fact that many well-known economists speak out from time to time in favor of the introduction of the gold standard, many believe that this will lead to excessively tight monetary policy, which will slow down the economic growth and increase unemployment.

It is expected that the currency wars to become one of the main topics at the G20 Summit in South Korea. Earlier, a meeting of "Big Twenty" finance ministers, which was held in late October, was not able to prevent the beginning of currency wars. There is no surprise that Robert Zoellick proposed his initiative shortly before the summit of the "Big Twenty" in Seoul, which, as expected, conflicts and discussions about the exchange rates of major world currencies will receive a new continuation...

Google breaks privacy laws?

Probably many of you have noticed those weird looking cars with huge cameras installed on their roofs! Well they belong to Google a world known leader in providing live street views and photographs which you can find on google maps. So today's post will be written about Google and whether they are doing a right thing by taking pictures of public even though not intentionally.

According to the UK regulator Google broke data protection laws when cars that they use for taking photographs of residential streets not intentionally collected additional personal data.

The Information Commissioner’s Office said that it had concluded that there had been “a significant breach of the Data Protection Act” when Street View cars collected payload data as part of a WiFi mapping service (FT.com)

According to the commission , they decided not to impose a financial penalty on Google but said the US giant would have to sign a document to ensure a similar breach would not happen again. Pitiful for the company but they will have to go through a number of audits.

A similar incident happened with Google one month before in Canada and Spain last month when regulators ruled that Google had broken local laws after finding evidence that the US group had collected fragments of personal data including e-mails, URLs and passwords.

Google said that it was “profoundly sorry” for mistakenly collecting payload data in the UK from unencrypted wireless networks.

Google: “Since we announced our mistake in May we have co-operated closely with the ICO and worked to improve our internal controls,” said Peter Fleischer, Google’s global privacy counsel. “As we have said before, we did not want this data, have never used any of it in our products or services, and have sought to delete it as quickly as possible.”

The final decision was made when the IOC said it would delete the payload data collected in the UK as soon as it was legally cleared to do so.

Now the final question stands in front of us general public: "Do we really need this Street View which interferes in our daily life and collects the data that we might not want to share?"

K.S.

When will the Gold Bubble burst?

Source: Gold Stocks Daily

Since the beginning of Fall 2010 gold prices have achieved record prices 33 times, settling at around $1380 per ounce. This result was achieved on October 14. Since the last record date, the price of gold fell slightly. 

The main factor, which kept pushing gold prices up in recent months, was the fear of investors for the future of the US dollar. Markets are expecting that the U.S. Federal Reserve will make a decision to continue creating incentives for the American economy and soften the credit policy by new money injections into the economy. Without a doubt this will further weaken the dollar. Against these expectations, the demand for gold has risen significantly, this is due to the common known fact that investments in precious metals are traditional means of protection against inflation. 

In so doing, all investment gurus keep claiming in one voice that the next gold bubble “inflates” in the gold market. For example, George Soros said at the beginning of this year that because of the oversupply of money in the market the gold bubble emerged. However, this information did not prevent this clever investor from increasing his investments in gold at the end of 2009, by nearly $500 million. As I observed from the dynamics of metal prices, even though it kept rising by 20% from the beginning of the year, Mr. Soros made a very smart decision!

“Gold is rising with bad news” (Boris Davidenko, financial analyst at the RBC).

I think the most intriguing question that draws attention of investors at the moment: how far and big will this gold bubble go? Most economists agree that the gold market will cool down when the economy as a whole, foremost the U.S. economy, will begin showing signs of recovery and the Federal Reserve will begin raising interest rates. However, experts’ opinions differ on when it will actually happen. There are some optimistic views that we should be expecting some positive results in 2012 and there are pessimists too who believe that the “number one” economy still has to do a lot of work until 2015. 

The only thing that most forecasters agree with is that gold will remain in favour with investors in the next 6-12 months and accordingly its price will continue to grow. From current $1400s to $2200s. 

However, not everyone is so optimistic about gold prices, for example, people in ABN Amro believe that after the growth next year up to $1,425 per ounce the price of the metal will fall by more than 18% - down to $1,165 per troy ounce in 2011.

I think many people can make many right decisions if this information will be analysed properly!

K.S.


Sources:
www.ft.com
www.rbc.ru
www.goldstocksdaily.com
www.forbes.com
www.zerohedge.com