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Deutsche Bank's auto analyst raises concern that the $24 billion that GM has now may not be enough to weather the coming downturn in the economy and spending. Some additional losses are expected in GMAC's mortgage unit Rescap. And the American Axle and Delphi situation need watching for som additional GM money needed there. A big factor in all this is the declining market. For a long time GM has considered 17 million vehicles a year as how the industry would do in N. America, but sales may be less than 15 million. And if much lower that GM may face more losses and its not clear for how long markets in emerging markets like Brazil and China will continue to show strong gains as the US weakening may spread to emerging markets and also to Europe.

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An exceptional account by Melissa Eddy of how Germans are reacting to the German government's underinvestment in childcare centers. Germany's cabinet approved a bill that provides $190 monthly child care allowance for mothers who opt not to use day care centers provided by the government. This is supported by the Bavarian party, Christian Social Union, on the grounds that it gives an alternative to mothers to use private day care or nanny care. In practice many of the mothers using the allowance are expected to be lower paid workers who may decide not to work. The government has budgeted $500 million for the allowance for 2013. This is opposed by all opposition parties , and in a rare show of unity by business employer associations and unions, both say it "creates a false incentive to quit work." Axel Plunnecke of the Cologne Institute for Economic Research, says studies show low income families are among those who benefit most from early childhood education. About 100,000 lower qualified and lower paid workers could see this as attractive and quit working. The western part of Germany lacks enough child day care slots, so this is seen as not investing enough where its most needed, and Germany lags behind other countries like France in day care centers. The government is investing $15 million over five years to expand the number of child care centers. The goal is to have 750,000 child care slots by 2013, according to Ms. Kristina Schroeder, the family minister, herself a mother giving birth while in office. The measure was vigorously debated and controversial from the beginning because most many Germans see the $15 million years over 5 years as underinvestment in vital educational infrastructure. The $500 million is better invested in building modern day care facilities, they believe, especially because the children from lower income mothers not benefitting from daycare facilities will still need educational help, and German industry needs more women in the labor force to be competitive. Five years ago under reforms of parental support the 3 years of help to mothers was reduced to 1 year, resulting in an increase in the numbers of women working from 32% in 2002 to 40% by 2011, according to the Ministry of Family Affairs, Senior Citizens, Women and Youth....

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A four month extension till the end of June was agreed to in negotiations between the EU, IMF, ECB, and the government of Greece. Under the agreement Greece will have to present a list of budget cuts and economic changes to the EU, ECB and IMF on Feb. 23, 2015. This will be reviewed by EU finance ministers on Feb 24. The economic measures will have to be implemented for Greece to get its 7.2 billion euro instalment pot pf a 240 billion euro bailout.

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Jerome Powell, the new head of the U.S. Federal Reserve values continuity in policy, suggesting that the U.S. central bank will gradually raise interest rates in 2018. A raise is expected at the March 2018 Fed meeting. Powell said at his swearing in ceremony- "While the challenges we face are always evolving, the Fed's approach will remain the same. We are in the process of gradually normalizing both interest rate policy and our balance sheet with a view to extending the recovery."  Five interest rate increases since December 2015 have taken the short term benchmark rate to a range between 1.25% and 1.5%. During 2018 3-4 rate increases are expected.

Powell is seen as a consensus oriented leader with a focus on careful evaluation and rigorous study. Powell is pushing for a continuation of the Fed's policy to improve transparency, and responsiveness. 

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The view of regional Fed presidents indicates that the Fed may take a pause from any further intervention in financial markets. QE 2 was launched at a time when the government was at a deadlock for any further stimulus, and a deflationary trend was setting in. In August of 2010 inflation was on a downward trajectory, from 2.8% to less than 2.2% in a few months. A New York Times article by Paul Krugman pointed out the dangers of deflation. Alan Blinder argued for the need for Fed action with the deadlock in government over further stimulus in another op-ed in the Wall Street Journal at the time. The political deadlock continues with pressure to cut federal spending to reduce the deficit, reducing the chances of government support, and leaving the Fed as the sole source of support. The Fed initiated QE 2 in Novemeber 2010 when consumer prices were up 1.1% from a year earlier, and far below the Fed's 2% goal. In April 2011 consumer prices were up 3.1% over the prior year. Current TIPS prices suggest investor expectations of inflation of 2.8% over 5 years. Another deflationary trend could lead the Fed to take some sort of action in the presence of a political deadlock for government action....

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Spencer Jakab provides this balanced perspective on Buffett's performance as an investor. Breaking the past 25 years into five periods gives a sense of how Buffett has fared in recent years compared to his performance in the early years. In the latest period since 2010 Berkshire stock has outperformed the market by a mere 0.9% annually. In the period 1995-1999 Berkshire performance trailed the S&P 500 significantly, making up for this in the next 5 years. As Berkshire became larger it was harder to generate results of the period around 1975. In that year returns were 129.3%. In 2015 Berkshire had to take big stakes in large companies such as Kraft. Gains for 2009 were 2.7%, 2010 21.4%, and 2011 minus 4.7%. Showing that Buffett's principles and approach remained intact- invest in what you know and be careful to respect what you don't know, invest in companies and their prospects for the long run (an option not easily available to mutual fund managers who are judged yearly), invest in companies generating large cash flows. Yet as Jakab points out performance has gradually declined over the years....

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Anupreeta Das looks at the groundwork being done at Berkshire Holdings to prepare for a future without Mr. Buffett. Investors are concerned about Berkshire's prospects after Buffett, because of his large imprint on the firm's strategy and operations.

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The American consumer is becoming frugal since the crisis hit in 2008. But it will take along time to reduce the debt piled up over the years. By 2008 end American households had $13.8 trillion in debt, which is close to the $14.3 trillion output of the entire US economy, not adjsted for inflation in 2008. American households started 2008 with debt at 133% of disposable income. At the end of 2008 this had only dropped 3 percentage points to 130% of disposable income. With unemployment higher, companies reducing hours, and local governments having a certain number of days of furlough, and wage growth slow or nonexistent, the debt will take longer to reduce. WIth this debt overhang, and the lack of easy credit even though the credit markets are working again, its going to be harder to see a consumer driven V shaped recovery. In the 2001 recession consumers took on more debt to provide aconsumer driven V shaped recovery. At that time the debt to disposable income ratio went above 100%. See graph. And its gone up steadily since, with super low interest rates encouraging borrowing, and then as the Fed raised rates consumers went heavily into mortgages and housing in a speculative bubble. This time not only is the credit not there to finance such a recovery, but a number of conditions such as permanent loss of a large number of manufacturing jobs, rising unemployment and use of parttime workers, the need to payoff debt, create definite constraints to consumer spending....