The churn rate for chief financial officers is continuing at the same level as last year, reports CFO.com.

That is somewhat surprising but it will be interesting to see how it pans out in the economic slowdown. One suspects that with more companies taking a chainsaw to their operations, CFOs will be on the job a lot longer.

With forecasts that the world is headed for its worst recession in 25 years, if it's lucky, the Huffington Post has run a timely piece on the ones who predicted the economic firestorm.

They include New York University economics professor Nouriel Roubini ("A 1987 style stock market crash could occur leading to further panic and severe financial and economic distress. In this meltdown scenario US and global financial markets will experience their most severe crisis in the last quarter of a century"), Warren Buffett five years ago ("Derivatives generate reported earnings that are often wildly overstated and based on estimates whose inaccuracy may not be exposed for many years ...Large amounts of risk have becomes concentrated in the hands of relatively few derivatives dealers ... which can trigger serious systematic problems"), Joseph Stiglitz ("The economy's weaknesses were concealed by the Federal Reserve, which pumped in liquidity, and by regulators that looked away as loans were handed out well beyond borrowers' ability to repay them. Meanwhile, banks and credit-rating agencies pretended that financial alchemy could convert bad mortgages into AAA assets, and the Fed looked the other way as the U.S. household-savings rate plummeted to zero. It's a bleak picture. The total loss from this economic downturn - measured by the disparity between the economy's actual output and its potential output - is likely to be the greatest since the Great Depression), and Paul Krugman back in 2005 ("How bad will that aftermath be? The U.S. economy is currently suffering from twin imbalances. On one side, domestic spending is swollen by the housing bubble, which has led both to a huge surge in construction and to high consumer spending, as people extract equity from their homes. On the other side, we have a huge trade deficit, which we cover by selling bonds to foreigners. As I like to say, these days Americans make a living by selling each other houses, paid for with money borrowed from China. One way or another, the economy will eventually eliminate both imbalances."


No one listened and now we pay the price.

Nothing concentrates a man's mind more than his execution.

No surprises then that The Wall Street Journal reports that GM is now in talks with Chrysler about a merger. If the merger goes ahead, and shrinks the Big Three auto firms to two, it might have massive ramifications for Ford. Still, it's not a done deal. All eyes will be on Cerberus, the private equity firm which last year acquired 80.1% of Chrysler from Daimler which, at the time, was all too happy to jettison the US auto firm.

Obviously, things are bad for GM at the moment and there's talk of bankruptcy, something I already covered in yesterday's blog entry. But what's disturbing is that Chrysler has been struggling in the car industry's downturn and has been losing money. That brings to mind the observation of the great Peter Drucker who said: "Too many mergers resemble the marriage of two cripples who become twice as old, twice as bureaucratic and twice as undynamic."

Tom Walsh from the Detroit Free Press sums it up well when he says it will create even bigger problems. "With two years of extremely weak sales staring the U.S. industry in the face, Chrysler - the company most dependent on the U.S. market and with the weakest lineup of oversized vehicles - is in dire straits. GM and Ford Motor Co., of course, aren't in much better shape. And maybe GM sees in Chrysler some minivans it can sell, and a Jeep brand that might still have a bit of international cachet. But the headaches? All the plants to close, all the tortuous discussions with the UAW, all of the possible litigation with dealers. It's too horrible to contemplate."

The Autoblog has a similar warning. "The merger of GM and Chrysler would put Cerberus in charge of an "unspecified equity stake" in the corporation, making the two-headed General-Chrysler (or Chrysler Motors?) the world's largest automaker, controlling over 35 percent of the U.S. vehicle market, causing rifts among brand faithful and offering more potential (vehicle) cannibalization than the Donner Party. Not to mention both automakers' labor contracts, supplier dealers and slipping market share. Shocked? Don't be. We give it a snowball's chance on the Sun."

Maybe, but these are desperate times. And when times get tough, people panic and make stupid decisions

Fear and panic have gripped the world's markets. On Friday, Wall Street continued its plunge, with losses for the year reaching an amazing $8.3 trillion.

But if you look at the data closely, you will see we are now seeing a decade of wealth destruction. The S&P500 shows 11 years of no net growth:

In London, the FTSE tells a similar story, falling to its lowest level in more than a decade.

It's a similar right around the big markets around the world. Of course, we are not talking about dividends here but that's not the point. The level of capital destruction around the world does not bode well for investors looking for some place to park their money, or what's left of it.

That General Motors and Ford are in serious trouble is no big surprise. Standard & Poor's says it might cut their rating deeper into junk and specialists have told Bloomberg their liquidity levels are so low they might have to file for bankruptcy.

GM is losing around $1 billion cash each month. There is no let up in that figure which is expected to continue well into 2009. Its cash reserves have fallen from $27.3 billion last December to $21 billion on June 30. This is not a good sign for the future.

According to Reuters, auto industry tracking firm Global Insight has warned that US auto sales will fall further in 2009 and the two are clearly now in a fight for survival. Gerald Meyers, a University of Michigan business professor and former chairman and CEO of American Motors Corp told the Detroit News: "It's like finding out that you have a terminal disease. You try to do something about it, but you know and everyone around you knows that you are in deep trouble."

Federal prosecutors, who are already prosecuting Bear Stearns hedge fund managers, have expanded their probe and there is a string of other fraud investigations under way.

No surprises then that a consultant who advises white collar criminals is now expecting many more will be going to jail. Watch this space!