Wednesday, September 26, 2007

Crescendo crisis

Today's Daily Reckoning UK directs us to this article on FT.com, which says that sovereign wealth funds will support (if not boost) share prices in a "crescendo of investing".

Bully for the fund managers. But I say again, consider the implications for the West, which is losing control of its debt and now looks set to start losing control of its assets.

6 comments:

Nick Drew said...

Sackers, I posted on one aspect of this a little while ago on CU. Several of the better-connected Private Equity firms saw this development coming a year or more ago, and started buying assets with a strategic arb in mind: they understand value, and know the mechanics of purchasing (which for listed companies isn't always trivial).

Much of the sovereign wealth knows little of value or how to purchase - frankly, it's dumb money. And it's burning holes in pockets - big pockets.

So it won't always be the ordinary shareholder who benefits from this - unless they've already sold to PE at a price they found nice at the time.

Lord Higham- Murray said...

In the coming times, I don't call dumb money dumb. I agree with Sackerson on this.

I'll be over this evening for a longer read of it all.

SACKERSON said...

High, Nick: it's not the shareholder value that concerns me, though as you say smart money will find a way to ride the trend.

Dumb or not, the trade surplus economies have so much money (and more every month) that given unrestricted access, they could eventually buy all the major businesses of the West. Or buy enough shares in each company to influence board decisions in their own national favour.

Note that China doesn't float its currency freely, or allow foreigners to buy whatever they like of Chinese concerns. I'm sure they're aware of the potential dangers of laisser-faire.

But I fear that some of our own politicians and business leaders are capable of selling us out with open eyes.

Nick Drew said...

Believe me, some of it is dumb.

But the Chinese are 100% exempted from this remark !

Wolfie said...

Take a look at the roll-call of eminent financial experts who tell us this is an advantageous strategy for just one moment.

SACKERSON said...

Wolfie: I assume you're being ironic, but if not, do please name them!