Ok folks, I'm writing today to get some input on Sovereign Wealth Funds(SWFs). I read an article the other day in Time magazine mentioning the fact that foreign countries, specifically, China, Indonesia, Saudi Arabia, Abu Dhabi, Singapore, Norway and a few others are investing large amounts of money in our financial markets.
From what I understand, these SWFs are controlled by the governments and have been aggressively purchasing shares in Citi Group, Merrill Lynch, Morgan Stanley, Barclays and Bear Stearns to name a few.
It seems the interest in these markets has skyrocketed since the sub-prime fall out in April of this year. These companies looking for capital and liquidity are more than anxious to welcome these foreign investors and their money.
Here is a little printout I found giving you an idea of the investments that have been made.
Wealth fund stakes (percentage of ownership)
* Barclays – China Development Bank 3.1%; Temasek 2.1%
* Bear Stearns – * Citic Secs (China) $1billion share-swap
* Citigroup – Abu Dhabi Investment Authority 4.9%
* Merrill Lynch* – Temasek(Singapore) 9.9%
* Morgan Stanley – China Investment Corp 9.9%
* UBS – Government of Singapore Investment Corp 9%; Saudi Royal Family just under 2%
Now folks, I may be a little slow but you'll notice that all of these countries, with the exception of Norway, are NOT democracies. They are in fact communists, autocracies and dictatorships.
I'm not talking millions of dollars here but billions of dollars! The total value of these SWFs at this time is roughly 2.1 TRILLION dollars and is expected to be as high as 10 TRILLION over the next few years. That's almost 12% of global GDP(Gross domestic product)!! That my friends is a ton of money. Money that these countries are holding as surpluses mostly from goods and oil sold to us.
We are selling our country piece by piece every time we buy a piece of crap from China. Who then turns around and invests this money into our financial markets. What do you think about that?
I'll tell you what I think. I think we are going to be in deep shit if some kind of control is not put into place. As it stands, transparency does not exist in this SWF market. Except for Norway, we have no idea where this money is coming from and who is controlling it.
What would happen, if in the near future, China owns a 25% stake in Citi Group and then just decided to unload it? Unfortunately, they can afford to do that. Could they have the power to manipulate our financial markets? I think so.
I am by no means an expert on this stuff. These are just my thoughts based on my research over the last few days.
Below is a link if you would like to do some studying and form your own opinion. I hope you do. I also hope you come back and tell me what I am missing here. Your opinions and thoughts are appreciated. Someone please tell me I am wrong. Maybe I'm reading too much into this. Or maybe I'm not. What say you?
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