Wednesday, 24 November 2010

Company Focus – GM – IPO: Re-Creating the Mighty Economic Cog.

Last week saw the long-awaited return of 'New GM' to the capital markets. As previously mentioned, the timing of its return and that of the drip-fed $600bn stimulus announcement appear - on the surface at least - to demonstrate the US government's willingness to partially stage-manage events to ensure that GM was – and will be implicitly well buoyed.

The post-Chapter 11 process of renewal has seemingly gone 'swimmingly': the speedy restructuring effort witnessing an (incredible $27bn) abolition of creditor rights, a re-alignment of UAW expectations to 'real-world' levels, capacity reduction to suit the peak to trough loss of 6m TIV units (thus profitable at 10.5m production), the shrinkage of the supplier roster to gain volume efficiencies, 4 legendary but poor performing brands/divisions either sold or moth-balled, inventory slashed, dealership numbers cut to promote local profitability, etc etc.

In short, the necessary formulaic strategic and operational business revision required across the board in North America, aspects of which should have taken place in an ordered controlled manner over the preceding years to provide an over-bloated inefficient company with the ability to right-size itself as macro-economic headwinds demanded.

The argument that it was purely the unexpected dramatic loss of sales and loss of access to wholesale credit that felled old GM is far too simplistic. [NB General Dynamic noted the need for US industrial change back in the early 1990s, and though the profitability of the 'SUV era' obviously post-poned the necessary re-structuring shock, the very basic premises of “Who Says Elephants Can't Dance” was always a very basic set-play template for old GM. One it chose to ignore].

However, “the past is another country” as they say – a phrase that is all too prosaic to the average American – and so GM has been re-born into what seems a very different place to that of 3, 5 or 10 years ago, where the US's ability to set the industrial global agenda has been diminished. Yet as a global company, GM obviously operates across all continents and nigh on all nations. Whilst it light-heatedly reports its dominant 85% market share of Kazakhstan's small market it does so to try and highlight its acceptance in EM, EM+ and developing nations; even though such individual successes maybe more accordant to US foreign-policy efforts.

This historical military-backed and capital-markets assisted 'soft-power' that helped GM's rise in the 20th century for nigh on 80 years. However the US is unarguably loosing its dominant grasp across the world as EM(+)(+) economic growth garners independent confidence and such nations use their own political positioning between the US and China for their own ends. Hence without that level of 'direct' previous politically aided dominance, GM will have to fight for its share of mind and market increasingly by its own efforts.

But perhaps not quite yet!

Since the renewed GM gains from additional political leverage in the short and mid-term. A combination of the recent $600bn US QE2 stimulus measure announced will continue to erode the US Dollar – even in the face of momentary reversals caused by volatility in other currencies; as seen with the Euro recently and possibly the S. Korean Won if cross-border hostilities continue.

This in turn of course buoys both US exports and continues the US$'s role as a carry-trade currency (given its near zero percent interest rate) which when 'recycled' in turn provides speculative uplift to the multi-material commodity trading market. Recent days have seen this uplift falter as 'risk-off' activity is swayed by Chinese slowdown concerns, and so provide an excuse for profit taking; but the fact that so many commodity types are both physically and derivatively traded in US$ (given regional $-pegs etc) suggests that the 'risk-on' mode will return.

The drip feed stimulus of course assists all US 'home-players' as they benefit from the $600bn powered expansion of wholesale credit markets for corporate use, and its feed-through into the retail credit market via both captive finance houses (ie Ford and Chrysler) and those 'associated' (ie GM with Ally).

This also provides the Detroit 3 (and GM especially) with global commodity purchasing power, able to counter-act the last few year's trend for primary and secondary sector players (typically miners and processors) to call the pricing shots based on then short-supply materials.

Thus the new Obama package allows the US domestics renewed credit vigour relative to their home market and a type of 'pincer movement' at both ends of the supply chain on the global stage. The aforementioned 'commodities grab', plus critically either the ability to enact a 'pricing-power' fight in ROW regions given the devalued US$, or maintain localised pricing and benefit from an tailwind of FX improved repatriated income from its ROW operations.

Thus GM (and Ford & Chrysler) have in reality little to complain about, whilst their international competitors (and international politicians) very probably see the implicit Washington interventionism for what it explicitly is!

Macro global dynamics demonstrate that the RoW EM regions are on a one-way upward trajectory and have been for a decade, so GM's task is to hold and ideally grow its individual nation market-shares in EM regions as their economies give a rising tide to all credible automotive manufacturers.

Thus, the IPO floatation was almost designed around the fact that all boats will be lifted by continued though slowed EM market growth. Its timing aligned to the stimulus announcement and drip-feed to provide a 'kick off the starting blocks'. This will be readily recognised by leading institutional & SWF investors, and investment-auto-motives believes, was a major reason as to why the natural demand-base of GM stock-buyers switched from being foreign 'long-range' funds and SWFs to primary demand stemming from domestic US institutionals.

[NB Saudi Arabia's 'Kingdom Holding' run by Prince Alwaleed bin Talal well recognising the impetus of Dollar mutuality between its own national resource base and GM's 'kick-start'; hence its $500m holding of GM, representing 1% of the new subscription].

Yet, ultimately important investors will want to see GM master is the ability to not just match, but beat the EM region TIV rise. Done so with competitive new product, hard-line UAW re-negotiations in 2011 (to which it should hopefully continueto accord), new levels of customer service provision etc; so that when combined with a new 'trim' business mentality it can offer rebuoyed global presence, good unit margins and so ideally leading mainstream producer ROIs. Thus an ability to not just out-muscle Detroit's Ford & Chrysler (as it has always done) but critically against the Japanese powerhouses suffering from Yen strength, and the South Korean brands still globally-bound by their high exportation levels. And importantly to try and be seen as a true competitor to Volkswagen given its pre-eminent position in China and South & Central America.

[NB as of 24.11.2010 VW PfD sits at around E119.00, whilst GM Co sits at $33.48. VW benefited from a rocketing ride over the last 12 months, up 108% in a sector that on average saw only a 27% rise. GM Co is up just 48c from its debut price last week, and as stated in previous posts is set to trade flat until the stimulus monies work through the capital markets and starts the GM price lift].

GM has to yet prove it's renewed 'global' ambition is not simply a 'rising all boats' default of inherited regional presence in China, Latin America, SE Asia and the Middle East. Efforts such as the new Cadillac city-car concept seen at the LA show (the Cadillac Urban Luxury Concept) typify the GM 'show-boating' that it has always under-taken on the PR front to present itself as a contemporary brand, but the reality is that presently in its home market it is not even represented in the top 5 of most popular models sold – coming in at number 6 with Malibu: destined to slide as it ages.

With so much expectation abound from the expanded range of stakeholders, new GM cannot let itself simply 'drift' on the back of: 1) the multi-aspect stimulus 'piggy-back' that exploits the supply chain and international markets, and 2) the fat of the EM+ lands.

Presented at $33.00 to the markets, GM Co must prove that it is worth its relative (pricing-metrics) 'super-valuation' to its obvious counter-part Ford and the myriad of other auto-sector players, old and new.

Almost poetically, the GM Co IPO was preceded by, an NYSE listing of a Chinese-based on-line car dealer-price comparison site, and was followed by Aeroflex Holding Corp which deals in high-value micro-electronics systems. By virtue of their appearance, these two 'neighbours' serendipitously illustrate the importance of GM's own future ability for self-control: to both be master of its higher integral-value product design process, and its handle on what is still a very transparent and price malleable vehicle market-place.

GM has had its enforced 'weight-reduction' regime, and has had its 'push-off-the-blocks'; now it must show its corporate 'muscle-building' potential to all, but especially so those US and foreign entities who have financially backed the General, and by virtue assisted re-couperation of the US economy. The heart of the GM wealth-creation engine is seen throbbing, and the cogs of the financial transmission mechanism meshing, now it needs to prove its previous 'market torque' to show it has a truly bounce-back corporate rubber soul, since many heads of industry, finance and government are looking on after providing record assistance.

Wednesday, 17 November 2010

Macro Level Trends – UK plc – The Royal Reflection in a Marriage of Culture and Commerce.

Sometimes a close juxtaposition of events can be telling sign of the times.

The London announcement of the engagement between HRH Prince William and Katherine Middleton is followed a day later by the New York/Toronto listing of General Motors.

Of course, on the surface, the worlds of Royalty and Commerce are polar opposites, in days gone by the aristocracy – let alone royalty - wouldn't allow their family names to be 'sullied' by the notion of being directly linked to 'trade'. Instead, in the historical tradition of leadership a military career was followed, balanced by cultural learning and pursuits to help provide a rounded character.

Yet the 19th, 20th and early 21st centuries all saw fundamental change in the very foundations of the western social structure were, a re-setting exemplified by the decline of European aristocracy, the rise of American, European and latterly Asian industrial families, with an inter-linking of 'blue-blood' with 'new money'. A minute step-by-step change social ways. That integration of changed social attitudes perhaps best reflected by the abdication of the throne by Edward VIII for Mrs Simpson, and the end of the Debutant's London Ball in the 1950s . That decade also witnessed an emergence for strong post WW2 US-Euro political ties, and was thus bolstered by the coupling of the Prince of Monaco and (Hollywood's) Grace Kelly; almost as scripted to buoy public perception.

This level of convergence between different worlds is of course not quite the case for William and Katherine given their mutual roots from St Andrews University. This somewhat to the chagrin of the popular press who hope to portray the marriage as an archetypical modern-day princess fairytale. Thus, akin to the stories told about the Prince of Denmark and Princess of Sweden marrying non-titled partners.

Instead, the real story seems to be a meeting of personal minds and outlook, yet also representing the proto-social context which recognised the need for social evolution of the monarchy. An evolution which demands (to be candid) 'solid stock breeding' with the right attributes as well as national popularism to re-spark the very meaning of monarchy as the new generation matures. In short, a story of adaption to the increasingly speedily evolving modern world, one in which at this time of austerity, core British values are seen to overtake the traditional halo of 'pomp and circumstance'. Hence, the beginning of the 21st century sees a dwindling of overtly brandished heraldry and 'distance' – though necessarily maintained for formal occasions.

Instead, recognising that the very nature of militarily derived pageantry and formality has been 'counter-foiled' to a great degree by the 'cut and thrust' domination of global commerce in an ever expanding 'globalised' world.

Thus, a long and ongoing re-orientation from the obvious yesteryear 'show of might' to recognising the importance of soft-power within commerce is of course common to all royal families. This greatly assisted by a past knowledge of shared interests and values that underpin trustworthy working relationships amongst European and international royals and their representatives.

This is well illustrated by the most recent commercial deal between the Crown Estate and the Norwegian SWF via a 25% leased sale of its Regent Street property base.

Most monarchies were built upon land interests given the greater importance of that resource in the past. That accrued wealth still very much evident today, yet the modern commercial world is a far cry from from a feudal agrarian world, or that of new-land exploration, or indeed that of industrialised manufacture. Today specific agricultural and specific manufacture activity occupy only a small portion of any advanced, globally traded, capital market:whether that be the FTSE500, S&P500, TSX index, the CAC30, HKSE's Hang Seng index or similar elsewhere.

This is part and parcel of the modern commercial world, one build over the last century and one in which investment banks increasingly took charge of the commercial reigns from those royal and aristocratic families who historically had reigned the local and international econonomies.

However, relative to the modern-day royal remit, the significance of a willful yet fair character is still key - this assisted by formal military training via Sandhurst or elsewhere – and so must not be relegated or dismissed. Such character-forming generating in the past an ability to obtain land, build empire and rule over it. Yet it and more is still core today; a timeless capability stemming from a convergence of both self-discipline and ambitious attitude. Character formation, and in particular the slant of educational learning in an ever expanding and complex world, remains key.

And it is here, regards the traditional nature of royal education, that an argument could be set forward that purports greater acclimatisation - indeed submersion - within the commercial arenas by which a country and the world turns.

Short active military careers followed by symbolic leadership obviously remain necessary, as does the need to cultivate a sensibility to the arts/humanities, yet more important that ever is the need to nurture an understanding of the commercial world that lies between these 2 realms, a world in which competition and creativity are central tenants to national (and sovereign) success.

Industry, commerce and trade are typically built upon a merging of the sciences and arts, brought together by a plethora of strategic, operational and managerial methods.

Any aspirational prime minister or chancellor will have undoubtedly formally and/or informally studied PPE (Politics, Philosophy & Economics) yet whilst historically also the domain of a well-educated royal, the set learning path may be inadvertently restricted to 'the norm' of military and the arts, whilst giving less regard to the central elements of the modern industrial and commercial machine.

This may or may not be the case, but if so begs attention.

In a metaphorical sense, just as perhaps Prince Charles will know by heart the key historic schools/themes of architecture and their intrinsic elements & methods (most obviously Palladian) so the architecture of the industrial and service based commercial world – in both its vertical depth and horizontal stretch – should be an engrossing subject of study for all young royals; thus able to provide tangibility to the normal absorption of PPE.

This has been the case for the aristocracy who since the late Victorian age – and especially post WW1 – became greater participants in 'the City', mimicking the sons (and latterly daughters) of the American 'nouveau -riche' industrialists. The path into stock and bond brokerage and latterly all-important corporate financial analysis became a well trodden one for many, firstly in the 'new world' then in the 'old-world' and now amongst the increasingly powerful of the 'emergent-world'.

Prince William is an RAF flight-officer within a 'Search and Rescue Force', which itself is a prescient commercial case-study of the cost-benefit analysis under which all of the UK's Armed Forces are being scrutinised.

As non-core to national defence, the 'SARF' division/wing is in future to be run with a far more analytical bearing to ensure economy and efficiency whilst also providing a more than adequate rescue cover for the coastline, seaboard and inland areas.

This transition of the activity from being state run to privately run is perhaps a prime learning opportunity for Prince William, and his fellow officers who themselves will act as industry facing representatives. After all, the very nature of the UK's military forces are changing, and so affecting their scope, shape and function, to both better fit inherent demands and the new-era economic climate.

[ NB. The contract has been awarded to Soteria, a consortium of Thales, CHC helicopter operator and the Royal Bank of Scotland – to use the Sikorsky S92 model]

investment-auto-motives suspects this is very well the case already, indeed the rational for his placement in SARF; which by its changed name denotes its changed standing. Yet perhaps beyond any purely 'conceptual' exposure to this 'real-time' subject, a deep and possibly expanded 'business studies' investigation could be undertaken by HRH and others, to fully appreciate the commercial challenges, ramifications and opportunities, such a service re-alignment makes for the companies involved and the nation itself. A kind of case-study where the likes of 'Sandhurst meets the LSE meets MIT meets Harvard/INSEAD'. Where SARF can be evaluated in-the-round from national interest, economic, technical and strategic viewpoints.

[Obviously investment-auto-motives views the re-birth of GM as a parallel exercise given the involvement of Canadian 'bail-out' monies which appear to have required agreement from The Queen and/or her council. This would also provide appreciation of the expansiveness and international reach of the global auto-industry ].

Such a task (or tasks) could be onerous depending upon its scale, especially for a full-time serving officer, but if it is not already the case that young royals are exposed to such multi-dimensional perspectives, this could be a golden opportunity. For both themselves as educational insight, and to possibly co-create a learning template that could be ascribed to latter-day officers who, in a new era, cannot afford to be unexposed to the realities and impact of commercial issues on the armed forces.

It seems that historically, it has been the case that those individuals ranked Major or above have been the ones tasked to be industry facing as part of their own expanded responsibilities. This late exposure to the commercial imperative may in the past have been seen to be problematic as the cultural chasm between the 2 worlds has caused communication, expectation and over-run/over-cost problems. (The fault equally shared between 2 distinctly different worlds). So the second decade of the 21st century could mark a turning-point where-by lower-ranked and typically younger officers are given a much better commercial grounding and exposure.

Again, this may well be all in hand, and if so 'all to the good'. Yet as this transition moves forward so the royal family itself could be seen to be active in bringing together these 2 worlds. And equally so, perhaps use that learning – and broadened exposure - to perhaps become a greater force in helping to steer the inherent interests of the royal family, across the spectrum, from the 'invisible' operations of the Crown Estate all the way through to the 'highly visible' aspects such as Palace & Castle tours and souvenir goods, through to the expanding business-lines and broadened retail channels of 'Duchy Originals'. Plus perhaps yet more.

Today's commercial world is under-going a massive period of re-formation, one in which professionalism, courtesy and trust are needed as never before to regenerate the economic machine. Yet also at this time TV series such as 'The Apprentice' have done a true dis-service to the business world by seemingly condoning and promoting a self-serving, Machiavellian mindset; something noted time and time again by commentators in the financial press.

Thus, about time that a better face to business be painted, to both inspire and encourage tomorrow's entrepreneurs, board-members and middle-managers. This impetus could feasibly be symbolically led by the younger members of the royal lineage, who are set to build upon the efforts of their forebears, and can espouse a much needed 'honourable face' and 'intelligent mindset' for UK's 20 & 30-somethings aswell as within the realms of national and international commerce.

Wednesday, 10 November 2010

Macro Level Trends - Globalisation – 11.11.11: Poignant Remembrance in 2010

In a very different character to the usual commentary and essays, the following words are an unashamed re-generation and modification of the comments made in this blog at this important time 2 years ago.

At that time investment-auto-motives recognised that the severe fracture of the western economic model from the consequences of the financial crisis would put severe strain on international relations between west and east hemispheres and those north and south, but potentially the greatest stemming from US – Chinese relations. The current subtle currency wars were predicted as a latter-day result, and unfortunately this has come to be as regions seek to both protect themselves and best place themselves in this new and fragile era

Recent days have witnessed western premieres seek to both placate eastern concerns about future political movements and the desire to be seen to strengthen trade relations; most prominently in the guise of the UK's Prime Minister Cameron visiting China and the US's President Obama in India and environs.

These visits are of course symbolic by their timeliness with remembrance of historic disputes that have manifested beyond purely financial wars into the atrocity of physical warfare.

It is at this juncture in the calendar that the UK remembers both its own fallen and those of allies and indeed foes. 11am on 11th day of the 11th month marks Remembrance with accompanying day and weekend church services eulogising the 92nd anniversary since the end of WW1.

Of course, many nations across the face of the globe hold similar services both now and at varying times throughout the year. Here in the UK, from the humble village church to the gravitas of the Cenotaph in Whitehall. In Germany prayers will be said for the re-burial of those lost during WW2 in Minsk, now located in Belarus, and symbolising a pertinent element of Germany's efforts to build an expanding and re-stablised EU to avoid regional conflict. And some months ago on 6th August Japan physically and spiritually gathered in Hiroshima's Peace Memorial Park

Yet, perhaps not for half a century have such sentiments had such a meaningful voice, given the level of political friction that exist both regionally and internationally.

The end of WW1 was not “the great war to end all wars”, indeed the very meaning of 'armistice' indicates 'truce' not finale, a sad fact highlighted only a generation later by WW2. It was that conflict that in turn led to the major super-powers of the day to create the Bretton Woods agreement that would stabilise the fundamentals of global trade. A major landmark, given that it was the perception of unfair inter-regional trade practices that has been the perennial problem behind a long history of international conflict. Similar efforts exist today with talk of moving beyond Basel 3 toward something that offers a greater substance-based rational for currency value identification. This being much of the nation-buying led consideration for gold, yet with additional exploration of expansion of ADRs (or similar) or IMF enabled SDRs (or similar) as new internationally-prescribed stabalisation instruments.

Ninety-two years on from that philosophical and literal spark in the Balkans that set the first of a billion bullets flying, the leaders of the G20 nations undoubtedly made initial progress in 'saving the world' back in 2008 with use of multi-lateral stimulus action. But the S.Korean summit this weekend will illustrate - beneath the surface - the new dis-chord. One that has emerged largely between a still spendthrift US and much more conservative tendencies consistently led by Germany's Merkel (much to her credit) and now ajoined by the policy-decisions of the UK, South Africa and elsewhere.

Thus it is seen that the creation of what was originally seen to be a long-term, far-reaching and transformative multi-lateral accord of the so-called 'Spirit of Bretton Woods 2' is seen at this juncture to be viewed as over-zealous. The level of rebound in many G20 member economies demonstrate the myriad of differences each region and nation faces: giving real demarkations of 'strong' versus 'weak'. Thus G20 international health discrepancies obviously split opinion, both between the lead EU countries and the US, but also within a fractured EU; demonstrating that local and regional issues in the relative 'micro' vein take precedence over a now past fear of global melt-down that previously held in the 'macro' vein.

Undeniably, different regions have suffered at different rates and therefore will be far less inclined to a radical re-alignment of trade policy-making set against an increasingly out-moded global policy mandate.

So whilst there was initial 2008 agreement for international fiscal co-ordination of stimulus packages so that each nation or region can assist themselves - ranging from the US's $700bn TARP to talk of an EU Fund to Japan's $51bn effort to China's $589bn by the CCP – the idea of an all-pervasive, completely global agreement has unsurprisingly now looks less appealing; even if re-tabled by America's new drip-fed $600bn QE2 programme, set for mid-2011.

The rest of the world sees it as a slippery-slope given their own – perhaps more manageable – circumstances, and so don't agree with its use. Moreover, other countries probably see it as a pre-curser to what would could inevitably be a global currency de-valuation war in which nobody ultimately wins. It would be one which goes far beyond today's 'fair-game' internal efforts of industry generated cost-base re-alignment (ie structural reform) to improve national global competitiveness.

Historical case studies show that such heavy actions only drive international ill-will and give local support to importation tariff-setting which in turn damages relations and the economically rational global-flow of capability-led free-trade

As stated 2 years ago, there is no singularly similar action plan that each individual national economy can or should undertake, each effort although globally co-ordinated through increasingly aligned open-gates trade-policies must be appropriate to domestic and foreign trade needs and growth plans. This basic premis is obvious given the 'differing states of differing states'. But exactly how this is achieved efficiently and permanently will be a major headache as both the US and China experience such differing internal growth patterns – even if that gap is slowly and only nominally closing

Given the size of the global financial fall-out there have been calls for increased regional and international regulation, and the push to align US accounting standards from GAAP to IFRS will undoubtedly be used as an argument co-coalesce the 21 or so central bank models currently in existence.

However, utilising the GAAP to IFRS vehicle to successfully promote global fiscal policy alignment has thus far been a problem given the negative effect it previously had on US standard results. However, multi-national blue-chips are increasingly moving to offer both accounting standards as an increasing level of income is derived from the rest of the world. Thus with its income stream centre-of-gravity moving eastwards, so its accounting principles should rightly be re-orientated around the standards of the income sources.

Such practices undoubtedly help calm investor waters by demonstrating a more level manner by which to compare the US against Europe, the Middle-East, Asia and South America.

This does create short to medium-term pain for the US economy – and should be undertaken whilst Wall St stays buoyed - but ultimately could strengthen its foothold against the ever more internationally accepted Euro (and possible petro-Euro), and even the broached idea of a Yuan accepted counterpart (and indeed the idea of petro-Yuan denomination if Ems saw it in their favour as was the historical case with the US petro-Dollar). But an accounting alignment especially useful regards creating an extended period for attracting foreign direct investment (FDI) into the US.

At this poignant and prescient time, having seen the well-founded G20 differences at the Korean summit, all nations must continue to remember the lessons drawn from the first half of the 20th century, and act responsibly.

As the spectre of terrorism hopefully wanes (even if the odd blip appears as seen recently) and the topic of climate change becomes the ethereal yet powerful new enemy for all, we will hopefully witness a new age of agreement in both the global fiscal framework of currency valuation aswell as better founded domestic government policy that provides for a global mutuality, Something that does not constrain the independence that the newly powerful 'emerged' BRIC+ nations demand.

To not achieve this will dangerously put the world back 96 years or more, to revisit a time of sullied, anemic economies that creates insularity and engenders nationalism, xenophobia and possibly neo-fascist international moves motivated by a sense of economic loss that was previously seen as 'rightfully' theirs.

To conclude, whilst we remember the past and those who suffered, we should not and cannot sleep-walk back toward the dark-past if the world's peoples are to win as a whole.

We must see the individual and national Chinaman, American, Arabian, European, African and Asian as worthy capability-led trading partners, not economic threats. And arguably for the most part regards an arguably over-indulged west – to be psychologically re-generated by the dynamicism of the east giving a new competitive force for international good.

Thursday, 4 November 2010

Micro Level Trends – American QE2 – How the Federal Reserve's 'Printing Presses' Appears to Underpin GM's Factory Presses

The effect of a continued fragile US economy on public sentiment were well demonstrated this week as the results of the mid-term elections lived-up to forecast expectation. The House and the Senate saw a large swing away from the Democrats toward Republicans on the back of public disillusionment and the outcome of prolific 'Tea Party' campaigning that has managed to give the Republicans a new lease of life.

To the overseas observer these US mid-terms will probably be remembered for the message-delivery method and manner which questioned the innate workings of the American political machine, albeit at a high level so as to convey core themes.

Yet the workings of the nation's political machine and the workings of the nation's economic machine are undoubtedly interwoven, the efforts of the Keynesian 'pump-prime' having saved the country from financial collapse in 2008, now seen to be lack-lustre in its mid-term potency, thereby questioning its impact on the longer-term outlook. The 'bail-out' of the US via QE1 came at a very hefty price, especially so in terms of (inter)national, federal and state debt levels. The incurred indebtedness now weighing very heavy on efforts to properly resuscitate the economic well-being.

Of course at its heart is economic philosophy, and attitude toward the fewer, and less powerful, fiscal and monetary tools left in the Fed's & Treasury's shared tool-box. The primary question for capital markets and the public at large as to whether yet another round of well warned prime-pumping via QE2 will actually provide enough effective benefit that feeds through beyond Wall St to Main St. This round of QE is of a different character, its size of $600bn, $100bn larger than previously expected, but drip-fed from mid 2011 in lots of approximately $75bn per month, depending upon conditions.

As a presentation of a QE approach this then looks sensible, but the broader question is whether in effect the new round of fiscal stimulus actually assists a proper re-orientation of the US economy or whether it maintains what could be argued as an over-valued 'false-floor' to the national economy; from QE1's frenzied liquidity feed to capital markets; especially toward those US corporations that are well exposed to Asian and South American income streams.

investment-auto-motives concurs with the Wall St Journal's 'Heard on the Street' column (2nd Nov), stating that much of the heavy lifting was done by QE1, so to what end QE2 if both equities and bond markets have already strengthened? The real concern is that QE2 has little ultimate trickle-down effect and inadvertently maintains the divide between Wall St and Main St, as the labour-force content of the country's cost-base grinds painfully through its necessary shrinkage, whilst the low cost of capital available makes for a bonanza period in corporate stock buy-backs and M&A activities; something investment-auto-motives expected to naturally occur even before QE2.

No critically observant markets follower has believed the “strong dollar” rhetoric, even after recent gains against the Euro and Pound, with the reality of a long-weakened US$ key to America's need to export its way out of the mire. As ASEAN and Mercosaur regions grew apace over the last year, so US exports ranging from agricultural equipment to specialist factory plant to pharma also benefited, but as the RoW slightly cooled so it seems the US authorities saw a need to re-involve themselves. Thus the Dollar's mid-week tumble immediately after the Fed's QE2 announcement only accords to expectation by both government, the markets and critically foreign investors who will either spy FX value-driven buys at stock and company level for the fundamentally strong, or seek to withdraw from what they view as an increasingly destabalised region, with preference going to still strong BRIC+ countries, safe-havens such as the Hong Kong exchange and expected rebound markets such as the UK.

Even given this apparent negativity, the intrinsic role and remit of QE2 may be far more than the broad exercise in re-assisting the economy presented. It may in effect have been designed to be a type of implicit buoyancy-aid specifically for those domestic and Canadian institutional investors who to date may have had little confidence in the mid-term traction of the re-born General Motors.

GM's general performance both at IPO launch and its critical short & mid-term stock trading dynamic is critical not only for the company itself, but the nation at large. Although a re-invented 'smoke-stack', given its broad up-stream and down-stream value-chain reaches across a myriad of spheres, GM will be seen as a bell-weather for the US economy

Thus for investment-auto-motives, the announcement of QE2 here and now, coming only a few weeks before the price-setting and availability of New GM stock – in its various guises of: new common stock, 3-for-1 exchanges and convertible preferred shares – is very telling indeed.

Perhaps it was well recognised that political and financial collateral damage could well be incurred from previously potentially higher IPO 'investment losses' to the Treasury, Canadian and Ontario Governments, the UAW and to Motors Liquidation Co holders/investors.

Instead the path ordained appears to see GM listed at the higher end of its $26-29 range with the almost implicit assumption that the month on month dispersion of latter-day liquidity will either prop-up any 6-month interim flailing, or otherwise help boost what have been 'flat' or slow-growth GM shares.

At a time when GM should be seen to fully let-go of its mother's apron strings, after 2 quarters of impressive results and the confidence to talk about the very real macro-headwinds it still faces, it seems that the 'Government Motors' nick-name - whilst slowly fading - may take another year or so to fully disappear.