The USA is back!

Posted April 1, 2012 by Strategystar Vesa A. Vihavainen
Categories: US Economy

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There we are- the USA is back! That’s exactly what I have been estimating and proclaiming on this blog for  quite a long time already. Here are the facts: the US manufacturing index is slightly up, the foreign exchange rate of US Dollar is favorable for the exports (index at 15 points below year 2000 and thereby lower than EU, China and Japan), that are growing nicely (160 points over year 2000), and the consumers are spending again – the retail sales are growing (158 points over year 2000 and 8 points over year 2008). On top of this the unit costs in production are 15 points below year 2000 – only Finland is better here. Based on decreasing unemployment (down to 8,3%), strong profits at US companies ( over 7% of GDP), and decreasing interest rates (down to 3%) the prospects look very promising. The world’s largest motor starts to hum again. That brings stability and hope for continuation of free world trade. Happy Easter!

The World Economic Forum rated US to the rank 5 after Switzerland, Singapore, Sweden, and Finland.

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A way out

Posted November 2, 2011 by Strategystar Vesa A. Vihavainen
Categories: US Economy

Tags: , ,

When looking at all the reports about economic troubles around the world there are some very important ones that haven’t gained enough weight in my opinion. Boston Consulting Group reports that increasing cost level in many places – especially China – pushes US corporations to move back to the USA with their manufacturing. This is by the way a wish of President Obama and something GE’s Jeff Immelt has proclaimed in his favorite speech a couple of years back. Not to mention how I have predicted and demanded this as the only true source of recovery for the US economy. We talk about millions of new jobs in the USA but also about billions of dollars to be invested in facilities and capital goods! This would be welcome then the recovery now is slow with growth rate at around 1-2% on quarterly basis, which keeps people (with 9-10% unemployment versus 140 million people employed) at home and not consuming and therefore also not buying homes etc. So, the mid-term future looks bright and can be rated as a green light!

The energy question has turned into USA’s favor as well then besides finding new oil wells in the USA there are now the largest natural gas reserves in the whole world! When we look at the US oil, gas, wind, water, and wave energy sources and reserves we can easily see that the nation can be self-sustained for hundreds of years to come. When improving the energy efficiency in all industries and residential area those reserves will last even longer! This turns also the green light on!

Then there is this Occupy Wall Street – I regard this just a normal phenomenon then when comparing the US system with the Nordic ones in Sweden, Norway, Denmark and Finland, it is pretty much easy to come to conclusion that some changes are needed in the USA. That would not mean any socialism or communism but just a very common social market economy with the basic idea that every human being is valuable and need to have the same opportunity to prosper in life. That means also that higher tax rates will come. It is obvious that it cannot be good or even right, if there is a 1% minority having 90% of nations wealth. I regard this discussion necessary and normal and hope for a positive outcome. Therefore I rate this as a yellow light.

Then there is my hopes and dreams section. If the US, Mexico and Canada (NAFTA) and the EU would work more towards a free and open, and even “common” transatlantic trade zone, what could beat that? Nothing! Low cost labor is available in the East-European countries and Mexico as well as in Southern US States (minimum wage only 10 USD per hour). The highest technology and leading companies are located in these areas. The best schools and universities are also located in this zone. The EU has already a free trade agreement with Mexico and I expect it to get it soon with Canada, but when is the free trade reality between the EU and the USA? That is why I rate this also as a yellow light. For example Mr. Simo Karetie from Central Association of Finnish Industry is favoring this in Prima magazines issue nr. 5 page 10.

The financial crises in some European countries shows only the need for a stronger common fiscal policy and integration. That is not good for all European nations, and therefore each nation should consider whether to be just an economic ally (European Trade Zone) or integrated political wheel in the whole (Member state). I rate this also as a yellow light, and don’t see a real danger here for the world economy.

My last hope is that the growth will be put back into economic policy targets in everywhere, but under the consideration of well-being of citizens and nature.

The balance is now 2 greens and three yellows and no reds. It looks promising!

Even – Up or Down with the economies?

Posted July 15, 2011 by Strategystar Vesa A. Vihavainen
Categories: GDP

Let’s start with some numbers: the population in China 1,3 billions – India 1,2 bn – EU 0,5 bn – USA 0,3 bn – Brazil 0,19 bn – Russia 0,14 bn; GDP in China $ 10,1 trillions – India 4,1 trn – EU 14,8 trn – USA 14,7 trn – Brazil 2,2 trn – Russia 2,2 trn; Current Account Balance in China $ 272 billions – India neg. 27 bn – EU neg. 5 bn – USA neg. 561 bn – Brazil neg. 53 bn – Russia 69 bn. The trade (export+import) between the USA & EU is at $ 364 billions, USA & China $ 231 bn, and EU & China $ 263 bn. These figures tell us the fact we all know already, but it is good to see again, that the world trade with China is not in balance. Furthermore the business over the Atlantic is still very large – the USA and the EU should keep that in mind and try to keep it that way. Interestingly enough Brazil is exporting more to EU than to  the USA, and Mexico has a free trade agreement with EU.

The public debt is a huge issue in the USA (58,9% of GDP), but in very many other countries as well like Greece (144 % of GDP), Iceland (123,8% of GDP), Italy (118,1 % of GDP), and Belgium (98,6% of GDP) and many more. Who would think that Germany’s public debt is 78,8% of GDP?! Then there is the issue with the external debt and that looks also bad in Germany and France both with $ 4,7 trillions; Japan $ 2,4 trn; Italy and Ireland both with $ 2,2 trn, and Belgium $ 1,2 trn. The USA and EU have both around $ 13,9 trillions of external debt! This debt issue is huge and must get solved, too. There is lots of money in the world and more is getting printed every day, but are these nations ever going to pay their debt? I doubt that strongly. There will be the catch 22 issue with this – lenders have given too much credit and borrowers have taken too much on debt. Now the sums are so large that I think following will happen: the world trade must get stabilized and therefore exchange rates must get fixed (that would mean also revaluation of Chinese Yuan), countries in a deep debt must get an agreement to pay less interests and reduce the balances over a longer period of time. Otherwise there would be huge write offs on creditors’ side which would lead to a complete halt of world trade and  most likely into unfunctioning of the world’s financial system. Some will see that to be inevitable anyhow, but I strongly believe in the leadership in the political, economical, and the financial arena that steady healing masures in a cooperation are better than a huge crisis and a complete rebuilding of the systems we have in place today. I don’t like the way how rating companies would see reduction of interest rates or longer payment terms as defaults of any kind – certainly the capablity to pay is reduced, but not nullified. If financial institutions are not forced to write off their receivables then the default is only theoretical. I firmly want to build rather than destroy.

There are also other issues many countries must solve despite of the financial issues like agening population (30% of work force will retire over next 15 years in Europe, Russia’s populationis decreasing by 1 million per year, and there is a real estate and stock market bubble (my estimate 30% overvalued) in China. On top of this the inflation and higher interest rates have showed up. All this and other things like environmental issues keep the world busy in finding solutions for the future. Now is the time to think and then act! Will the world economy stay even, grow or fall into a new recession or even into a economic disaster is the question. I believe in a slow growth globally.

 

 

The growth in the USA

Posted April 3, 2011 by Strategystar Vesa A. Vihavainen
Categories: Growth, Jobs

There are many positive news from the USA and elsewhere: the Merger and Acquisition activity has increased 26% during the Q1 in 2011 against 2010, in Europe M&A growth reached 27%, the Business Roundtable (US executives) and NFIB survey on small businesses expect investing and hiring activity to pick-up as well, and the global fundraising has increased by 12% according to Financial Times. However M&A activity in emerging markets shows to have declined by 14% – the focus is shifting towards Europe!

Very interesting is the development in the labor market. According to the US Department of Labor (on April 1st 2011) the non-farm payroll employment increased by 216.000 in March and the unemployment rate was 8,8% (drop of 1 % point). There were more jobs in professional and business services, health care, leisure and hospitality, and mining. It was also a good news that the manufacturing jobs have started to show growing figures (according to ADP around 37.000). The claims for unemployment have fallen below the 400.000 mark that is regarded historically as a sign for a recovery. The most(around 50%) of the new jobs were created in companies employing less that 50 people.

Despite the oil price hike, earth quake and tsunami in Japan, and unrest in Arabic region the world economy is on the growth path and the US economy is finally helping with. It looks really promising now!


	

The economy is steadily growing

Posted March 19, 2011 by Strategystar Vesa A. Vihavainen
Categories: Growth

The CEO confidence index in the USA shows an upward trend. Revenues and profits are expected to grow strongly over the next 12 months. Capital spending and hiring new employees are expected to grow, too, but with a slower pace. We have seen also strength in some European countries like Germany, Poland, and the Nordic region. China and India as well as Russia are growing. It sounds not too bad. There are certainly many elements which influence the development and can cause counter effects as well like higher oil price makes logistics and manufacturing more expensive, but helps oil producing countries to grow, and fuels western economies to develop alternative energy sources more eagerly. I’m very confident that 2011 and especially 2012 are going to be good business years. I will make a prediction that employment figures and the number of new jobs generated will increase more and more rapidly towards 2012. In Germany there is already a shortage on labor.

When looking at business cycles I remember the graph developed by George Tritch in 1910. He has been right most of the time – only WWII was an exception. A projection of his graph predicts an economic peak around 2019. If he is right at this time, we might see a longer period of steady growth in global economy. There are certainly going to be some hick-ups and short downs down the road, but I’m confident on this, too.

What causes question marks are political uncertainties in various countries like North Africa, situations caused by nature (Iceland, Japan), or countries not controlling their spending and falling into a debt which they cannot handle by themselves. Then there are currency issues which I have discussed earlier. Despite of these I’m now a firm believer of a positive economic development worldwide.

Super Bowl economy

Posted January 28, 2011 by Strategystar Vesa A. Vihavainen
Categories: GDP

Super Bowl XLV is the biggest single sporting event and will take place on February 6, 2011,  at Cowboys Stadium in Arlington, Texas, between Pittsburgh Steelers and Green Bay Packers. It will be a tough game with highs and lows. The better one shall win!

In the world economy it is getting to a super bowl of its own kind between the existing champion, the USA, and the rising rival China. The population in the US is around  302 million and in China  1,3 billon. The GDP in US runs at $ 13,800 billion and in China 2,700 billion USD. Divided by population we see that the GDP/person is at $ 45,9 thousand in the US and $ 3,1 thousand USD in China.

What should open the eyes, however, is the fact that the neighbors of the USA – Canada and Mexico have together 140 million inhabitants, GDP at $ 2,450 billion, and GDP/person at  $ 52,8 thousand USD. So, it makes sense for the USA to put these neighbors first. Also Brazil has $ 190 million inhabitants, GDP at $ 1,650 billion and $ 8,6 thousand per person. The Super Bowl in economy might get much more interesting when the USA put these countries to the top of the list.

Now I would like to serve a surprise: the old man Europe has as EU 500 million inhabitants, GDP at $ 17,900 billion USD and $ 36,9 thousands per person. The EU is a larger economy than the US! Even with some weak countries like Grece, Ireland and Portugal, this old Europe is still a good one. As a reminder – there are many states in the USA, which are having huge deficits!

As a final note and prediction to the Super Bowl – one will be the winner this year, but there will be a new game next year. This is valid in the business and world economy as well. I go for Pittsburgh Steelers.

Executive Search Firm Tactics revealed

Posted January 16, 2011 by Strategystar Vesa A. Vihavainen
Categories: Career

The Academy of Management Perspectives has published in November 2010 in volume 24 number 4 an article on a study made by Monika Hamori about “Who Gets Headhunted – and Who Gets Ahead”.  She interviewed 2000 executives in over 800 multinational companies. The main outcome is that “THE EXECUTIVE SEARCH FIRM TARGETS LARGE, REPUTABLE, HIGH-PERFORMING COMPANIES TO RECRUIT FROM, AND IDENTIFIES INDIVIDUAL  TARGET EXECUTIVES ON THE BASIS OF THEIR JOB TITLE rather than their accomplishments.” She furthermore notes that 50% of  US managers stay six years with an employer, and about 2/3 of open positions are filled by outsiders.

This gives a lot to think about for executives planning their career, but also for hiring managers, and especially for the executive search firms.  There are talented people with accomplishments in SME to be hired, but they should consider to get into larger companies in order to make their career. So, actually executive search firms should  reconsider their tactics and hit two flies at once.