Gordon Brown, the currently embattled Prime minister of the UK, has just been dealt another crushing blow that has very serious and profound consequences. Because of the UK’s current economic plight, mainly stemming from banking bailout, his country’s AAA debt has been downgraded by S&P from a stable to a negative outlook. This is a direct result of the current debt to GDP (Gross Domestic Product) load which is now at 53%, and at the current rate will be at 100% by 2013. The UK is an industrialized world power that could see its debt priced at that of emerging economies. Is the US soon to follow is not so distant cousin?
In other news, GMAC is receiving another $7 billion infusion. Why haven’t they provided any plan of reorganization or how they plan to stem the shortfall? The “corporate welfare system” is in full force by the current administration. I believe our administration does not know how to fix it but they believe throwing additional capital at the problem will solve it temporarily, which is the path of least resistance. Remember people, this is your money and your future debt. Where is the accountability?
A little hope is coming from a few IPO candidates that are garnering interest from Wall Street and the institutional markets. Solar Winds and Opentable are bright spots in an otherwise dearth market for IPO capital. Does this mark a return of IPO’s? Probably not, but it is encouraging that an appetite is starting to emerge. Depending on how these IPO’s fare in the open market they could be the oil that primes the pump. We will have to wait and see.
Yes, two positive notes in a row! John Paulson (not Henry,) the hedge fund manager that not only called the top and the ensuing melt down, but also put billions of dollars on those convictions, is now coming out and saying that it is time to set up a real estate fund. It will be opportunistic and look at both residential and commercial investments. So far this guy has played the market just right. Is he the new oracle?
We all know the Obama political machine will soon run out of steam and we, the loyal taxpaying citizenry, will enviably hear these words. “We, as a nation, need to come together and all do our part and tighten the belt to get us through this crisis. We will all emerge stronger and a better country for this sacrifice.” Oh believe you me, these words are coming. To my readers, when this occurs please tell the worldwide web that you heard it here first.
We go into this Memorial Day weekend trying to forget all the bad news and just relax and enjoy what is left of the American dream. If this crisis has done one thing, it has certainly put a spotlight on the glaring inconsistencies of government and how they regulate. It is either lassaiz faire or it is socialistic. Can’t there be a happy medium? I believe the country should actually hire a head hunter similar to the way top tier Fortune 50 companies do it and bring a CEO, not a politician. Oh, and did I mention a flat or Vat tax so that the most inefficient tax collecting system/agency on the planet can be nullified? Plus I believe it would save at least 20% of the rain forests over the next 10 years (there has to be a green angle.)
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