Not again..

Well, its now 2.59 and Im off to bed.. Im tired, but im looking forward to the holidays - they are soon coming up.. im tired.

Let's go to Holland

Well, it is now 2.35 on sunday evening and Im now shutting down my shop for the day. I have spent the last .. what is it.. 6 hours with writing an econ paper on Chile's economy. My findings so far:

• Debt/GDP=4%!!! (insanely low, the same ratio for the US is 70%)
• Chile currently produces more than 1/3 of the world total output of copper
• Chile currently has a Sovereign Wealth Fund, disconnected to the political governance, with a total net worth of 12% of national GDP

My conclusion: Could we see some dutch disease? Im not sure, but it's always a risk with countries rich of natural resources. Now, Im off to bed. It also looks like Rick Wagoner is being forced away from GM, not one minute too soon.

Hectic days..

Unfortunately, I have not really had time to sit down and ponder on my blog for the last couple of days. It has simply been to much in school, where the average sleep per day reaches somewhere around 4-5 hours. I guess this has something to do with the fact that I did take some actual time off when I was in Sweden two weeks ago, but.. well, you have to be free from school/work sometimes. What else, in Sweden, a large debate about remuneration levels might cause on the main political figures in Sweden to leave her position and in the "real" world Obama released his budget.

I think that there is some kind of hidden agenda here from "Big Ben" (a nick name i dont really like) and that is to position the US where they will see increased inflation. This is of course a scenario that the main lenders do NOT want, what would happen if China suddenly realized that their (huge) US assets suddenly started shrinking by 10-15% per cen per annum due to inflation? Then you might say that the investments that they made, the boosting of the US currency to keep up Chinese exports, was a bad bad bet. To me, it seems as though the Chinese are going to pay for their "mistake" or tampering with the market... It seems as though this is something that everyone knows, but do not want to talk about. Inlfation in USD is - to me - the remedy here, whether we like it or not. The Euro-zone? Well, deflation here we come!

Paul Krugman has written a piece about the US banks which is an interesting read. He also talks about the Swedish rescue plan in the beginning of the 1990's which I experiences first hand - even though I was a child. I like that Krugman supposes that the level of analytical brain power is somewhat limited in the US banks. On one hand, can someone who is the root of the problem, fix it? I think it has more to about culture than actual possibility to see the problem.. and from my limited experience, I find that a much harder issue to deal with than competence. (Related article: Obama on economic recovery)

Soon 30 individual hits from the US

Since I installed the "Flag-meter" on my page, it seems as if I have received nearly 30 individual hits from the US. I think this is absolutely amazing. I have not really had a clue about the amount of hits that I have received, but I could never imagine that it was this many! (and I am of course very very happy that people find my blog)

Well, since this seems to be case, I wonder what the US readers think of my "analysis" of the US election. See the posting here (Blog Retrospective: The American Election). It would be excellent to hear what some natives think about the perception that you can get through electronic channels.

Tonight Im at home working on a hand-in with Filipe and the other group members on Skype. Im pretty sure it will be a long long night.

Our demand for financial news.

One thing that I find very interesting with the ongoing financial crisis is the seemingly constant, and increaseing, demand for news concerning the financial "melt down". Every day we are bombarded with the "newest updates" on what has happened, and certainly so here in the Scandi-area. What I get frustrated about is the lack of actual analysis that comes from different Scandi newspapers, such as Swedish DN and SvD.

Let me give you a very concrete example of irrational exuberance that strikes news desks at this hour: Nothing is happening, market forces develop over time - the only thing we can do is wait and hope that large governmental offices do what they must to salvage the financial system (so we can pay our bills and transfer money in a safe and sound way). Suddenly, the financial crisis seems uninteresting and highly complicated. It is just too much "noise" in the engine to actully understand - hence; we write about bonuses and the system about variable pay. Our demand for news - in any direction - causes the suppliers (journalists and traditional media) to write about fund managers and managers who have received substantial bonuses, and that this is horrible, wrong and nearly punishable by death. Well, lets tie someone to the cross and call an angry mob. I am not so sure that we are doing a good thing by denying good people a variable pay. If payment systems are developed in a good way, that are tied to a sound strategy and you manage to control your employees in a good manner (through a balanced scorecard of some sort), then where is the corporate risk of excessive risk taking? and value damaging behavior?

The root of this problem has to be somewhere else. If Lehman Brother's was a fantastic and sound franchise, then why did it tank? Didn't they have a quant department themselves that could look at the probable risk? or was there a culture of greed and lust for excessive risk - that no one wanted to talk about - that was the cause of failure? If this was a bet, I would place mine on the latter. And this, analyzing data, going back and forth and talking to people, and analyzing variable pay agreement is hard, difficult to get ahold of and tiresome. And in my opinion, it does not make good news.

Hank Greenberg was the CEO of AIG for almost 40 years and built AIG into one of the most impressive insurance franchises in the world. Now, after some clumsy management - the corporation is dead (See the clip on the top of this post). Interesting to see that the financial stimulus plan for the EU is going absolutely nowhere and it is quite a sight to look at Lehman's homepage.. talk about meltdown with big "M". (My classmate Anja sent me this article about AIG - interesting read).

Here are some other very interesting movie-clips with Hank Greenberg (Clip 1, Clip 2)

Saturday night - 02:21

I am now off to bed after sitting with a nice hand-in in corporate finance about leasing. I have never - ever - worked with leasing at my old jobs.. I remember in school that it was one of my least favourite things to do calculations about.. Anyway, it has been a not so memorable evening. I am still very surprised by the amount of people coming to my blog from outside Scandinavia, six hits from the US in two days. Really cool.

Lost in the financial supermarket

It seems as if we have seen an interesting turn of events this week, Bernanke has green-lighted that the FED will buy bonds for USD 300 million, thereby increasing the amount of money in the US economy. Im sure that this will mean inflation, and with inflation .. lower debt in terms of purhcasing power (since salaries will increase).. and slowly erode the Debt/Equity ratio that many corporations and households see.

In Europe, we cannot see this quick response since we have to coordinate everything.. hope we can see some response, since some reports say that the Euro-zone is showing signs of Deflation, a horrible scenario that possibly could toss the EU into a zombie-like Japanesque state - Who would want that?

So, what does this stimulus package mean.. even though I actually am a trained economist, in some sense, i believe that the stimulus is good in the short term. Why you may ask? Well, the current economic system in both the EU and the US is in absolute shambles, it was on a brink of collapse. By this is I mean that we were inches away from seeing our ordinary debit cards malfunctioning, unable to pay bills through information systems and of course not being able to fund anything without 100% cash. This scenario is now, slowly being averted by taking out new loans (debt) and printing more money (a.k.a. Quantitaive measures). Of course, we are having huge debt/equity ratios, that is we are curing the pain with more future pain, but at the same time bringing out the old inflation monster from the closet and letting it eat up pensions, salaries and debt. The debt will also be a future problem or pain to cure, once markets start functioning again.. (hopefully soon). What do I mean when I say functioning? A slow recovery toward real positive GDP growth in what used to known as the "developed" world.

I therefore highlight some of the issues that I find most interesting when comparing the EU and the US:
US: Excellent education system - the best in the world, homogenous market - same language, willingness to move
EU: Larger than the US market, culturally diverse - could pose as both a threat and a possible gold mine for coming up with new ideas, becoming more integrated.

I am becoming more and more positive towards the possible signs of a slow and painful recovery, but... well, I would want to see some more hard evidence. The auto manufacturers problems are not over (Even though German VW managed to get a profit for 2008).

In school, we have started a new course that is called "Management Control System" with a professor named Norman Sheehan. So far, it looks absolutely excellent... In the class, we had some lecturing together with a couple of shorter cases that we "solved" in class. Very rewarding style of teaching.

More great material from Frontline

A new program from Frontline is coming up which seems to be great. It is called "Ten trillion and counting" and will revolve around what the US economy needs to do in order to change the amount of debt that they have. It premiers 2009.03.24 and I will definetly watch.

For those who are interested, I found this great explanation of what a CDO is on the Portfolio website. I have long thought about doing a graphical-layman-explanation of what a C.D.O is, but I have not just had the time.. Anyway.. here it is, and its much prettier than anything that I would have been able to do in Powerpoint. (Portfolio Website, C.D.O explanation)

Bernanke @ CBS 60 minutes

Here are three links to the interview with Ben Bernanke, that aired on CBS 2009.03.15.

Part 1/3, Part 2/3, Part 3/3

Variable is not variable

I have had a wonderful week in Stockholm, but tomorrow evening in going back to Oslo for the fourth leg of the MBA. A couple of my friends have also gotten back from Mannheim which will be very interesting to hear about. Well, what have happened over the last week? Well, the Nikkei index in Japan hit a 26 year low. What is going to happen with the Japanese economy? their two-tier work force seems to be very split, where the "low-class-easy-to-get-rid-off" part seems to be hit big by a negative trade balance and struggling auto-manufacturers.

In Sweden, the international bank SEB raised the fixed portion of the salary of the top management and lowered their variable part (and then reversed the salary again!). Well, to me this signals one thing: The variable part was not variable - and seen as given and absolute. Variable payment, such as stock options, is not bad - when its used in the correct way: as an incentive for management to take actions and responsibility so that the corporation grows in a manner that is best suited for their owners. This could be done in loads of ways, such as weighing the stock towards an index and look at the perfomance vis-a-vis other bank stocks in Northern Europe... for example and see if SEB manages to beat the competition. There could be loads of ways to see this through, but.. well, all that their current actions signals seems to be a corporation out of touch and with incredibly stupid media advisors. Horrible.

First spring vacation..

I am currently in Stockholm and I am definitely enjoying myself. It feels absolutely fantastic to get some time off. Traveling back sunday!

03:11

... and Im off to bed.

02:56

... and I am still awake, working..

02:21

Well, its in the middle of the night. Tomorrow we finish up our third leg of the MBA.. Im so grateful cause im so tired.

Very busy

We have been very very busy over the last couple of days and two weeks. I have, together with the group, handed in several papers over the last couple of days.. I don't really know how I feel, it feels like im back to last autumn where we sat until very late and reviewed papers on strategy and IT. Im currently listening to a Pet Shop Boys version of Dusty Springfield's "In Private" - its good, and Im tired - oh so tired. (At the same time, rumours on Volvo Cars say that Chinese Geely might buy them, and AIG made it to Guniess Book of World Records witht highest loss ever recorded in mankind - now thats quality management)