Barack Obama will be inaugurated as the 44th U.S. president today, inheriting the most severe economic crisis since Franklin D. Roosevelt was sworn in 76 years ago. The turmoil has dragged the world’s largest economies into a deep recession, caused more than $1 trillion of losses at financial institutions, corresponding recapitalization and privatization and prompting a sell off in global stock markets.

Positive sentiment from hopes an Obama administration would act aggressively to bolster the faltering American economy (by spending trillions of dollars) faded amid an onslaught of bad news overnight as U.S. stock markets were closed yesterday for Martin Luther King Jr. Day holiday. Canadian sold down a little led by banks.

This morning European and Asian shares (and U.S. futures) are down a little as “fresh” jitters about the health of major banks surface. Royal Bank of Scotland forecast a 28 billion pound (US$41.3 billion) loss for 2008, the British government announced plans for a second banking bailout, and the European Commission said the euro-zone economy will shrink 1.9% this year.

Investors are now bracing for a 2nd wave of banking crises, fearing that many ailing banks have grown “too big” for governments to effectively handle. The results by Citigroup, Bank of America and RBS send a wake-up call to the treasury secretaries of the world that nothing really worked and that their previously announced measures to prop up lenders failed to turn things around (since they are back for more handouts). The British government has increased its stake in the Royal Bank of Scotland (RBS) to nearly 70%. The British government’s moves are designed to insure banks against further losses and are similar to steps the U.S. government has made to protect Citigroup and Bank of America.

Italian auto maker Fiat is in discussions about a possible partnership with struggling U.S. auto maker Chrysler. Reports indicate Fiat could take an initial stake of 35% in Chrysler, with a later option to increase its ownership to a majority stake (on the basis that Fiat would share its small car technology with Chrysler).

Spot oil prices are also down this morning as ‘storage’ is hitting capacity and refineries and ‘speculators’ are trying to sell off their positions (since they can’t store oil/gas).

Things are shaping up to be a little too typical for a very historic day!

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
SVP & Partner