A momentous weekend of elections left the future of austerity in Europe in doubt. Voters in France and Greece revolted against their current leaders, replacing President Nicolas Sarkozy in France with the anti-austerity Francois Hollande and electing enough anti-bailout leaders in Greece to prevent pro-bailout parties from forming a majority. The U.S. markets had a rocky morning at first as investors digested the news, but the major indexes pulled out of the slump by the end of the session to close up or recover some ground.
The Dow fell 29 points, well off session lows, with 17 of its 30 components lower; the S&P 500 rose less than a point; and the Nasdaq was higher by 1. Advancers led decliners by about six to five on the NYSE and the Nasdaq. The prices of Treasuries strengthened. Gold futures fell $6.10 to close at $1,639.10 an ounce, and the price of crude oil dropped 55 cents to settle at $97.94 a barrel.
In Other Business News:
- In France’s presidential election on Sunday, President Nicolas Sarkozy was defeated by Francois Hollande of the Socialist party. Hollande campaigned on an anti-austerity program, arguing that public spending shouldn’t have been slashed in a downturn. The election will set up a confrontation with German Chancellor Angela Merkel, who today said that the austerity measures contained in a fiscal pact last year are “non-negotiable.” President-elect Hollande will meet with Chancellor Merkel shortly after his inauguration next Tuesday.
- Elections in Greece over the weekend resulted in the pro-bailout parties, the center-right New Democracy party and the center-left Pasok party, failing to receive a majority, while an anti-bailout Syriza party won 52 seats in the 300-seat parliament. The elections mean that the New Democracy party, which holds the most seats, will have three days to form a coalition government, and if it fails, the Syriza party will be next in the attempt. For more on elections in Europe and how June is shaping up to be a politically important month, see Dr. Brian Jacobsen’s analysis of the French and Greek results.
- Abbott Laboratories will pay a total of $1.5 billion in criminal fines and civil settlements after pleading guilty to promoting Depakote, an anti-seizure drug, for uses that weren’t approved by the Food and Drug Administration. The drug is approved for treating bipolar disorder, but Abbott allegedly also marketed it for treatment of schizophrenia and autism. Abbott’s shares (ABT) gained 0.16%.
- The U.S. Government Accountability Office reported today that the U.S. government stands to make a $15 billion profit on its bailout of AIG in 2008. Yesterday, the Treasury Department announced it would sell $5 billion of AIG’s stock, which would bring down the amount of AIG stock still owned by the Treasury to $30.7 billion. AIG’s shares (AIG) fell 3%.
The online fundraising company Kickstarter has come of age since we first wrote about the company back in September 2010. The idea was simple. Someone who wants to create something (a novel, a play, a business, a product) launches a fundraising campaign on Kickstarter, promising investors certain rewards for a given level of funding. So, if you’re putting out an album, those who give $1 could get a digital copy of the subsequent album; $10 gets them a physical copy; $25 an autographed copy; and, as singer Amanda Palmer has recently offered, for $5,000 she’ll crash your next house party and put on an impromptu show. She’s raised nearly $600,000 to self-release her next album, so obviously it’s working.
Kickstarter functions like a sort of mini-version of venture capital for people who have a project in mind but not the means to fund it. The funding levels typically range from a few hundred dollars to several thousand. But, as Jenna Wortham of The New York Times reports, Kickstarter might be approaching actual venture-capital levels as well. Eric Migicovsky, for example, wanted to manufacture a watch that synced with a person’s iPhone or Android smartphone. After getting turned down by traditional venture capitalists—who no doubt didn’t understand why you couldn’t just pull your phone out of your pocket, completely missing the point about how cool this watch is—Migicovsky turned to Kickstarter, pledging working watches, called the Pebble, in exchange for funding.
In a few weeks, he and his team have received almost $9 million. As Wortham notes, that’s about what a start-up would get in a second round of venture capital funding. And it’s more than enough for them to begin production.
But before you get any ideas about using Kickstarter to publish that dusty notebook full of poems you wrote in high school, remember this: They weren’t any good, at least if mine were anything to go by. And second, major successes like Palmer’s and Migicovsky’s are rare and backed by a lot of hard work. Palmer has been on major labels and had built up a huge following prior to the Kickstarter campaign. And Migicovsky had a development team that designed the phone’s software and hardware on working prototypes before they launched the Kickstarter appeal.
Like with most areas of life, no one will fund you unless you show them you’re up to the task. What’s great about Kickstarter is that there are so many people who can do things for which, up until now, the market hasn’t been big enough to attract major funders. But Kickstarter shows you don’t need a major market. You just need your own market of like-minded people. Maybe, just maybe, there’s even a market for that book of high school poems (but probably not).