From Discourse to Conversation

I was doing research for my English report on McDonald's and I found something very interesting in the investor relation part of the corporate's website. We all know McDonald's, I know that for a fact, so I won't bother present the company.

So as I said, in the investor relation section, you can find a blog where investors, employees and everybody else can comment. Not on all the strategy but only on the Corporate Social Responsablity - i.e. CSR. This blog apart from the fact that it is really badly presented, is very interesting because we can see a personnal insight of the firm.

However, the blog is made by McDonald's Vice-President and the employees working on CSR policy. Therefore, we can ask ourselves if it is really an open conversation. The second point I will make is that comments are non-existent. Sometimes on one article you can find one or two comments but not much. We can ask ourselves if the comments are not moderated by the company. On a blog, you can erase comments. So do McDonald's want to give an impression of discussing but is not in fact ? I do not have the answer to this question.

I think also that the blog is not really important and deals only with CSR policy. The next step should be a blog on the policy and the strategy of the company. But is McDonald's ready to go a step further ? Is any company ready to leave investors discussing the strategy with the firm freely ? It will probably end the public quoted company like we know them because ownership and control would be brought together. However, it is a idea to solve the agency problem always existing in those company.

Sarkozy, Master of Europe ?

On the 21st of October, Nicolas Sarkozy has amorced an offensive in front of the European Parliament. In fact he want to keep the presidence of the European Union till Spain in 2010. He is saying that a member of the Eurozone must be in charge of European Union in this time of crisis. In end of the year, the presidence will be taken by the Czech, in government crisis and then by the Swedish not member of the Euroland.

He believes that Europe needs a strong presidence in front of the financial crisis. The rejected lisboa treaty could have given this strong presidence. So as it had been rejected, Sarkozy wants to defend this idea in front of the European Parliament invoking the Belgium example which had happened.

Two solutions could be considered :
One could be an election. This idea is very ambitious and also takes time because happening inall countries in Euroland.
The second could be that France keep the presidence till Spain, member of Eurozone, takes the presidence. Sarkozy is saying that in times of crisis he wants Europe to be active.

So he will be at the same time president of France, President of the EU and President of the Mediterrannean union. Will it be capable to achieve all the objectives ? Isn't it a bit ambitious for only one man ? Will other European countries agreed because Germany is not really fond of the idea ? I do not know the answers but what he had done with France is not really successful because it is lots of announce and not really results.

All these questions must be asked when you talk about an ambitious plan like that. So a question for you bloggers : Sarkozy as the new Napoleon ?

To dragonbleu69719 and Maya

After facing disagreement on my blog, I was feeling that I should explain myself about the starting point of the crisis which, in my opinion, was the collapse of Lehman Brothers.

We can compare the actual crisis to the Great Depression in 1929. Banks had collapsed because the governments were believing in the perfection of the markets. The market collapsed closely after the banks. The crisis existed for twelve long years impacting hardly the world and probably leading to World War II (but that's another debate).

However, currently, the governments did not make the same mistake of letting down the banks. They understood that letting down a bank is leading indoubtedly to the crisis. One collapse impact the financial markets and the real economy because the banks are the basis of all investments with loans.

Therefore, banks in the United States were saved by the governments. Only one collapsed : Lehman Brothers. This bank collapsed on the 14th of September and we can see that for example the FTSE 100 started to decrease on the 15th of September after a relative stable period in July and August. So that's why I tend to say that Lehman Brothers' collapse is the starting point of the crisis. Because the investors remind the Great Depression and so the confidence in future was not existing anymore.

I do not say that the collapse of this bank is the only factor of the crisis. For example, the lack of liquidity is one of course. But why does the bank not lend to eachother anymore ? Because the banks are not sure that the other bank will repay back, and why ? Because the US government did not saved Lehman. If the US had saved Lehman, the interbank market could have been much more confident and not have this impact on the real growth economy.

Could it be true ?

We all know the famous bail out plan which is going to be executed by the United States. 700 billion dollars are going to be poured in the markets because banks want liquidity and be rid of all the toxic assets. The man who has launched this idea was Henry Paulson. Henry Paulson is the 74th Secretary of the Treasury of the United States. I found out something about him very interesting in his official biography on the White House website.

We all know that Lehman Brothers collapsed and had been the only bank which had gone bankrupt. The official reason was that Lehman had to pay for all the banks and that the fourth investment bank in the world had to be an example for the market. We also know that Lehman Brothers and Goldman Sachs are very strong competitors and that each employee of one or another bank hated the other. This information is interesting when you know that Henry Paulson and all Secretaries of the Treasury of the United States before him were former chairmen and Chief Executive Officers at Goldman Sachs.

So I do not know if this is a coincidence that the only bank that had collapsed is Lehman Brothers when you know that the only man who could have saved this bank is a former chairman of Goldman Sachs, the avowed enemy. But it is a huge coincidence, isn't it ?

I feel that if Paulson had taken his definite revenge on Lehman Brothers, he had made a really big mistake because the bankruptcy of Lehman had been the starting point of this crisis. Therefore, if Paulson had saved Lehman Brothers, I think that the financial crisis could have been less hard than it is nowadays because it could have made the markets a bit more confident.

So do you feel that Paulson had made an example or do you find that coincidence is to big to be false ?

When a blog threats the markets

I have found an interesting article by Sophie Freeman this morning on Metro, the free newspaper distributed in the underground stations. The title of this article is : "BBC blog that cost our banks £17 billion".

The story started when Robert Preston, a BBC business editor, made a comment on his blog that banks in England were in talks with chancellor Alistair Darling. He stated an hour before the markets opened that banks needed a £15 billion bail-out. Those banks were Lloyds, Barclays and RBS.

The blog of Robert Preston launched a rumour of an imminent taxpayer-funded plan to rescue English banks. This information had been denied by the concerned banks but they had been a drop in their price share between the announcement of that rumour and the reaction of the different banks. Barclays saw its share dropped of 29p to 285p and Lloyds also suffered of a decrease of 33.5p to 225.5p.

I think that the market by this story is really in trouble and lacks clearly of confidence. This information was published on a blog and was not an official one, although it comes from a business editor of the BBC. This threat on the market emphazises the fact that the financial markets are really attentive to the blogosphere in a period of crisis. It shows also the awareness of the markets about all the rumours which are circulating. But this is really threatening when you think about the information flows because the financial markets is probably aware of all the rumours and stories on line, though the most importants ones.

So to all my friend bloggers and commentators, be careful of what you say !!!

Buffett making his market

As in a supermarket, Warren Buffett is doing shopping with his liquidity and assets. One of the richest man of the world has a lot of cash and he want to make more money. His theory is quite simple, he invest in what he understands, so in what people needs like food, basic products... Every broker in Wall Street should do the same, shouldn't they ?

He started to buy Constellation just before the French firm EDF which focused on its operation in Great Britain. Constellation is an energy company based in the USA. Warren Buffett known for his clever investments has taken Constelletion at a bargain price before the French energy champion. Buffett asked at a lower price than EDF but still get the bargain because the board of directors had seen the stock price collapsed in the past few days and wanted to give confidence to the investors as soon as possible. The successful investor was that white knight who could be trusted by the market not EDF. That's interesting because a company prefered a lower price just for the image of the investor whereas it could have be more profitable if they had chosen EDF.

Then, Warren Buffett who has a lot of liquidity with his firm Berkshire Hathaway invested 5 billion dollars in Goldman Sachs which is one of the most successful bank in the world. He had obtained a deal in which he is already making money at the time I am writing. This investment is even more interesting than the first one. Goldman Sachs has risen 10 billion dollars of fresh capital. Warren Buffett has obtained for those 5 billion dollars prefered shares. Goldman can call these in at any time but the bank has to pay 10% to Buffett.

However, this deal between Buffett and Goldman Sachs is a sign of emergency on the market. The Wall Street invesment bank has raised funds to confort her position on the market and to be stronger against competition. But we can ask ourselves if this sudden raise of capital is not a way to obtain liquidity which are missing ? Why pay such a price to Mr Buffett for 5 billion dollars when you are one of the most successful bank in Wall Street. I think that we do not know everything about this raise of capital but I can also be wrong.

10 billion of fresh cash!!! I hope that investments will follow this operation on the market. If not, we can predict that the crisis will make more damages in the bank sector. Because if Goldman Sachs is hurt and bites the dust, the investors will not trust the financial market for a long time.