Are the U.S. Markets
In Serious Trouble? Probably Not.
The U.S. is for sale and it’s for
sale cheap to anyone with the cash on hand
to bail us out.
Our constitution makes this country a safe
haven and while our debt is staggering other
sovereign countries, not engaging in expensive
wars are accumulating cold hard cash. The
world’s sovereign wealth funds (cash
held by sovereign countries and city states)
are valued at roughly $2.5 trillion today
from as little as $500 billion in the 1990s,
and there are estimates they will grow over
the next five years up to $10 trillion or
even $15 trillion.
Norway's oil rich investment arm tops the
list of sovereign wealth funds at nearly
$400 billion. China and the city-states
of the Persian Gulf control trillions of
dollars in either wealth funds or foreign
reserves.
What are they buying?
Citibank received $7.5 billion from Abu
Dhabi's sovereign wealth fund when it took
$49B in SIVs onto its balance sheet. No
one is out there to buy short term interests
in its asset backed securities. The U.S.
Congress ignored the need for the bailout
but Abu Dhabi was glad to step in.
Industrial manufacturing left the U.S. and
Western Europe. Now we may be witnessing
a shift in global finance from the United
States to cash rich countries.
The dollar has weakened. Oil is holding
strong at $90.00 a barrel. Chinese exports
are strong.
When credit is tight, cash is king and sovereign
wealth funds are flush with cash. They have
arrived ready to shop at the U.S. firesale.
Sovereign wealth funds want a long-term
return and the U.S. is a very attractive
and cheap market.
In the past three months:
• Dubai International Capital purchased
a minority stake in Sony
• Abu Dhabi took an 8% stake in
the semiconductor company Advanced Micro
Devices
• Abu Dhabi took an 7.5% stake in
the private-equity group Carlyle
• A Chinese state bank took a stake
in Bear Stearns
• Dubai's stock exchange purchased
a major share of both the Nasdaq and the
London Stock Exchange
• The Chinese government took a
stake in the Blackstone group
• Dubai government bought the New
York fashion emporium Barney's
Twenty years ago the U.S. was the primary
source of global capital. The U.S. is now
a debtor and cannot reject foreign buyers
as a result of the tremendous expense of the
Iraqi war, the subprime loan crisis and U.S.
shrinking liquidity based on the weak dollar.
The dollar has weakened in part because the
U.S. is both a huge debtor and a large consumer
of global goods, and that weakness is yet
one more reason why our assets are so attractive
at current prices.
While credit becomes tight in the U.S. those
with cash are ready to buy. Clearly, it is
a good time to be a buyer in the U.S. markets.
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