Sovereign wealth funds are a result of US foolishness in abandoning sensible trade, energy independence, and balanced budgets. They are the financial chickens coming home to roost and rule. The US could have its own spectacular fund if it privatized the surplus in social security, but the chosen who master us, continue ruin, and disallow it.
Sovereign funds have been outsourced to some of the more unsavory capitols of the world. In those capitols, for better or worse, financial decisions will be dictated by the commissars of oil and mercantilism. The outcome may be benign, hugely rewarding to a few, or a win-win for all. We simply do not know. Commerce Über Alles, a queasy state indeed.
Saudis plan huge sovereign wealth fund
By Henny Sender and David Wighton in New York and Sundeep Tucker in Hong Kong
Published: December 21 2007 09:23 | Last updated: December 21 2007 19:37
Saudi Arabia plans to establish a sovereign wealth fund that is expected to dwarf Abu Dhabi’s $900bn and become the largest in the world.
The new fund will be a formidable rival for other government-owned investment funds in the Middle East and Asia, which are playing an increasingly active role in channelling capital to western companies, particularly financial companies hard hit by the US mortgage meltdown.
News of the Saudi plan comes as Temasek of Singapore is in “preliminary” talks with Merrill Lynch concerning a multibillion-dollar stake in the ailing investment bank, according to a person familiar with the matter.
“Merrill and Temasek have been talking for a while about this, although there are no indications that a deal is imminent,” the person said. Temasek was also approached as a possible investor in UBS and Morgan Stanley, although the investment banks later struck deals with Government of Singapore Investment Corp and China Investment Corp respectively, the person said.
These stakes have avoided a serious political backlash but potential investments from the Saudis are likely to be subject to greater scrutiny.
The effort is likely to be spearheaded by Saudi Arabia’s Public Investment Fund, which has a mandate to invest only internally. Previously, the Saudis’ oil wealth had gone partly to the kingdom’s central bank, the Saudi Arabian Monetary Authority, and partly into the coffers of the ruling family.
While the balance sheet of SAMA is public information, bankers say the figures capture only a small percentage of the total wealth of the country. The myriad investment vehicles of the various members of the royal family have never been transparent.
Until now, SAMA’s investment policy has been conservative and largely limited to investment in bonds, especially US Treasuries, and shares. That contrasts with the mandate of its peers in the Gulf, which is increasingly geared to higher returns for when oil runs out, by investing in alternative assets such as private equity and hedge funds.
That emphasis has lately yielded to a focus on buying major stakes in troubled financial firms on both sides of the Atlantic in the wake of the subprime mortgage meltdown.
In contrast to its neighbours, Saudi Arabia has expanded its spending and next year’s budget includes ambitious infrastructure projects. King Abdullah, Saudi Arabia’s ruler, is believed to be a key sponsor of the investment initiative.
People close to the situation said Merrill’s strategy was being driven from New York, giving John Thain, who succeeded Stan O’Neal as chairman and chief executive this month, an early chance to stamp his mark on the bank.
However, Bill McDonough, a former president of the New York Federal Reserve, is also expected to play a key role in the talks. He is one of the 11 luminaries on Temasek’s international advisory panel, which also includes David Bonderman, the founder of TPG, and Ratan Tata, the Indian industrialist.
Mr McDonough is also an influential figure at Merrill Lynch, having joined the bank last year as vice-chairman and special adviser to the chairman. (
In October Merrill announced $8.4bn of writedowns on mortgage-related investments and corporate loans, and the departure of Stan O’Neal, its long-serving chief executive.
Some analysts predict that Merrill will announce an additional $8bn writedown when it unveils its fourth-quarter results in mid-January.
The US bank’s stock price has nearly halved this year, cutting its market capitalisation to about $47bn. Dealmakers believe that Merrill would be comfortable with Temasek taking a stake of around 10 per cent, should a deal materialise.
Merrill Lynch and Temasek declined to comment on Friday.
Morgan Stanley announced this week that it is to receive a $5bn capital injection from China Investment Corporation, having disclosed a total writedown in the fourth quarter of $9.4bn after a disastrous subprime bet.
Last week UBS took nearly $10bn from the Government of Singapore Investment Corp, a sister sovereign wealth fund of Temasek, while Citigroup received $7.5bn last month from the Abu Dhabi Investment Authority.
The deals have underlined the growing importance of sovereign wealth funds in the Middle East and Asia, and their increasingly bold moves to take advantage of the need for capital among western institutions.
The three deals have yet to be endorsed or scrutinised by shareholders of the investment banks. The Financial Times reported on Friday that UBS is facing a shareholder revolt over its planned re-capitalisation deal with GIC and a mystery investor based in Saudi Arabia.
Marx can be excused for living in a different age,ReplyDelete
"they will sell us the rope we hang them with"
doesn't even come close to describing the present situation.
These sorts of stories remind me of global warming ones. I can go back to the late 80s and dig up Newsweek cover stories about how the wily Japanese are buying up America. I have to go back that far because for the entire decade of the 1990s Japan's economy was flat or shrinking. And the future don't look too bright for them either. Saudi Arabia gets slammed for socking their oil money away into a giant national 401-K, and Hugo Chavez gets slammed for wasting his oil money on bribes and weapons. Go figure.ReplyDelete
For the first time in 35 years, the U.S. fertility rate has climbed high enough to sustain a stable population, solidifying the nation's unique status among industrialized countries.ReplyDelete
The overall fertility rate increased 2 percent between 2005 and 2006, nudging the average number of babies being born to each woman to 2.1, according to the latest federal statistics. That marks the first time since 1971 that the rate has reached a crucial benchmark of population growth: the ability of each generation to replace itself.
While the rising fertility rate was unwelcome news to some environmentalists, the "replacement rate" is generally considered desirable by demographers and sociologists because it means a country is producing enough young people to replace and support aging workers without population growth being so high it taxes national resources.
For years I've been reading, and just last night from mat, "just wait until their oil runs out".ReplyDelete
Well their money is not going to "run out". The Sauds and other oil magnates are reinvesting their oil wealth.
In the US. And lucky we are for it.
These new Arab members of the global elite. Trained and schooled in the "west". The Bankers and money lenders of the 21st Century.
Poor Shylock, he's been outclassed.
In "Charlie Wilson's War", at his first meeting with Pakistan President Zia-ul Huq, the Pakistani Army LTC, Oxford educated.
Prince Bandar of Saudi Arabia another example of a "westernized" Arab. The Arab money, as well as the Chinese, is going to be integrated into the Global economy, not segregated from it. That has always been part of globalism and world trade doctrine.
The idea theat the US will become "independent" from this Globalism, just so much nationalistic fantasy.
The smaller the nation, the greater the fantasy of independece. Beer muscles my dad would call it. These economic independence fantasies are much the same, fueled by thoughts of ethanol.
But even that, as these Soverign Funds indicate, closing the barn door, after the horse is gone.
As the Stratfor man said, but for a short period of time, after WWII, the US has always been a debtor, not a creditor, nation.
That period after WWII the anomoly, not the norm of US economic behaviour.
Growth, fueled by foreign investment and debt has always been a US hallmark, historicly.
Alexander Hamiltion, gaining his fame as a Founder by establishing US credit worthiness in the world markets of his day.
The US Standard and method of operation from the get go.
When the Saudi oil dries up, their influence will not, we've already seen to that.
China, with it's greater population and diversity could follow the Japanese arc, but on a grander scale.
Bring that money back on over here, boys. We'll find a use for it. We've got a few ethanol plants to build, after all.ReplyDelete
If greater levels of independence from global interaction is the Goal, then a greater Americas must be achieved.ReplyDelete
But that scares folk, too.
People that would like to see the era of US expansionism and exceptionalism come to an end, though they do not see it that way. Believing that a "Fortress of 50" would sustain those attributes.
Perspectives and perceptions of what both the Uniteed States and America really is. Trying to limit the States of the Union to the status que.
Not an American trait, at all, historicly. Though there were some that thought Seward a fool, Alaska a folly.
Better to have left Alaska in Russian hands. Those Eskimos could never acclimate, the landscape there a wasteland of ice, mountains and frozen tundra.
Better to have left Louisiana to the French, Mr Jefferson was told by political opponents, those Federalists of his day.
Texas, California and that's in between, better left to Mexico
The trends are set, there is no countervailing effort, those that even discuss it, an anomoly to be ridiculed as "unserious", like Mr Paul or Kucenich, at oppsite ends of the "approved dialoge" spectrum.
But not to be taken "seriously"
So, they send their poor people to assimilate Europe, and send their money over here. I can live with that.ReplyDelete
Did you ever think that that might be why we're not in Recession, yet. 18 months of an inverted yield curve should have put us there; but, maybe, the foreign investment is rendering the Fed, and it's FF Rate, superfluous.ReplyDelete
In any event, a country that's throwing One Billion Dollars/Day in oil purchases out one window had Better have some money coming in through another.ReplyDelete
All that figgerin's made me sleepy. G'nite.ReplyDelete
RUFUS: In any event, a country that's throwing One Billion Dollars/Day in oil purchases out one window had Better have some money coming in through another.ReplyDelete
We do. The people who trade us oil and other goods for those little green pieces of paper turn around and trade us those little green pieces of paper for jet airplanes and copies of MS Vista and Starbucks coffee and crap from Amazon.com. For a long time there was more green pieces of paper going out than flowing in, but now the dollar is a bargain (supply and demand you know), so the tide has turned.
You miss the essence of the story, Ms T.ReplyDelete
They are trading those petro-dollars for other pieces of paper, that represent yet other pieces of paper that promise to pay them more dollars.
Like rufus said, they'll be funding and owning, at a distance, those ethanol distilleries that will provide an image of "independence".
Amongst other things, like auto factories and service companies. Exemplified by port management and privatized toll roads across Texas.
Looks and tastes like a recession, here, rufus.ReplyDelete
Almost empty stores, cannot be blamed upon ice storms, here in the Valley of the Sun.
Buddy of mine and our wives were discussing that, just the other night. How many people there are not, in the stores, this Christmass season.
DR: They are trading those petro-dollars for other pieces of paper, that represent yet other pieces of paper that promise to pay them more dollars.ReplyDelete
Okay, but unless there is a fundamental ability to pay those extra dollars (ie a sound economy), they've made a bad investment, sort of like the sub-prime No Income No Job or Assets (NINJA) loans that have gotten the banks into trouble lately.
Congress has passed a bill that cuts funding for the controversial Mexican truck program, but lawmakers expect the Bush administration to keep the foreign vehicles rolling on American roads amid safety and security concerns.ReplyDelete
That was the Japanese experience, Ms T, when they were going to end up "owning America", back in the 1980s. "Good" investments gone bad.ReplyDelete
Buying up office buildings and hotels, like we weren't building them any more.
Some of their basic underlying assumptions, based upon their life experiences, were perspectives that were just plain wrong.
Other Japanese, those that built factories in the US, ended up doing very well. Even my father bought a US assembled Toyota LandCruiser. He told me at least a half dozen times it was US assembled, convincing himself it was not a repudiation of his life long hate of the Japanese to have bought Toyota.
He still remembers Nanking and the propaganda resulting from that episode of mass murder, let alone Bataan.
He was supporting US workers with the purchase of the best vehicle on the market that suited his needs.
Clearly there can be some serendipitous outcomes. A smart politician could point out the advantage of using surplus social security taxes to purchase equities. He could cite the sovereign funds as examples.ReplyDelete
The purchase of private equities, using surplus social security taxes would stop the present scam of throwing them into the general fund. Lock Box II.
Any increase in demand for US equities will generally raise the prices of most equities , adding to US wealth. For example, if the present US market capitalization were $20 trillion, a one percent increase in market capitalization would transfer $200 billion to US equity holders. 5% would be a $1 trillion transfer.
Nina Hachigian, a director for California at the Center for American Progress and Mona Sutphen is a managing director at the business consulting firm Stonebridge International address the economic impact China is having in the LATimes.ReplyDelete
... we are going to hear a lot about China in the coming year. In our nation's capital, and on the campaign trail, policymakers and politicians tend to paint China as a threat, suggesting that its economic growth means the U.S. is falling behind or that its strength is inherently dangerous.
Americans don't necessarily see it that way. A recent Zogby poll revealed that 52% of the American public holds a favorable impression of China. But only 35% of congressional staffers do. And 86% of those staffers think, wrongly, that Americans have a negative view of China.
John Q. Public has it more right than the politicos. America's relationship with China is not zero-sum. Like other world powers -- India, Russia, Japan and the European Union -- China is more partner than threat. Many of our security interests overlap.
As it gains influence, China no doubt will continue to give solace to America's detractors, such as Hugo Chavez, and to derail U.S. plans that do not further its interests, as in the case of U.N. sanctions against Iran. But China is not a direct military threat, nor could it be for decades to come. Moreover, because China and the U.S. posses nuclear weapons, mutual deterrence will discourage a clash, as it did during the Cold War. Even with the status of Taiwan, which remains the most dangerous flash point, there is ample room for peaceful outcomes. Direct confrontation between the U.S. and China could certainly occur -- it would not be the first time a war made no sense -- but what a disaster that would be for the world economy and global stability.
Even on the economic front, where the news is full of reports of how China manipulates its currency, buys our companies and takes our jobs, the big picture is positive. Overall, its economic growth buoys our own. Trade with China has been responsible for measurable if modest growth in our GDP. Morgan Stanley estimates that China's cheap exports have extended the paychecks of low-income Americans to the tune of $600 billion over 10 years.
Many of the criticisms don't really hold up. All of foreign outsourcing is only responsible for about 2% of the jobs lost in the U.S. If the U.S. is to avert recession, it will be in part because of the dynamism of economies like China's -- and because the Chinese are willing to invest in American companies.
Finally, China is not an ideological competitor. It doesn't have a coherent ideology to export even if it wanted to, beyond, perhaps, "Show me the money."
The difference between China and Japan is that we got Japan to invest in Jobs here:ReplyDelete
Toyota is the No. 1 Employer in the USA.
China, receiving more bucks than Japan EVER Did, doesn't invest Jack Squat in jobs, just Spies, since we are now Dhimmis to the World with W and his Consort, as Rat describes the Piano Player, calling the tune.
Bend over George, I call him.
"Many of the criticisms don't really hold up. All of foreign outsourcing is only responsible for about 2% of the jobs lost in the U.S. If the U.S. is to avert recession, it will be in part because of the dynamism of economies like China's -- and because the Chinese are willing to invest in American companies.ReplyDelete
I'm convinced thats pure BS:
1 sixth of our manufacturing jobs have disappeared on W's watch.
Do we really want John Murtha and his associates to control the companies those equities represent?ReplyDelete
Seats on the Boards?
The overall tax rates and revenues, FICA and Income combined do not cover current Federal expeditures.
The Federal Government should borrow more from the Chinese to fund operations while it purchases US or foreign equities?
Looks like an accounting gimmick prime for exploitation.
Basicly an unsound concept, seems to me. Though the sound of "Lock Box II" has a ring saving for the future to it.
Duncan Hunter introduced a bill to have at least 60% of War Material produced in the USA.ReplyDelete
The Pentagon came back with figures showing we can't fight a war that way NOW.
Service jobs, doug, have made up that decline, in quanity if not quality.ReplyDelete
Taco Bell is hiring.
We should require the Chicoms to act (responsibly) like the Japanese, like Toyota:ReplyDelete
But of course they won't, being dependent on Slave Wages to maintain their phenomenal growth.
Yeah, China makes engineers to buy Boeings plans and make Airliners,ReplyDelete
We hire wetbacks to assemble Tacos!
The Foreigners have positive cash flows that they are investing, the US Government does not.ReplyDelete
To create a US Soveriegn fund would require greater revenues dedicated to the Federal portion of the economy.
In W's Admin, Taco Assembly isReplyDelete
"The Foreigners have positive cash flows that they are investing, the US Government does not."ReplyDelete
Toyota is the No 1 emplyoyer:
Toyota Tanks for WW 5!
(robotic, of course)
Read about John Ashbrooks run in '72, after Nixon had screwed the Pooch on China, EPA, and big Govt.ReplyDelete
Cause of death undisclosed.
Did Liddy attend the funeral?
Nixon: The Quaker Boner Wannabe.ReplyDelete
Quaker, a unit of pepsico Beverages & Foods,ReplyDelete
Manufacturer of Tacos and Burritos.
Doug: China, receiving more bucks than Japan EVER Did, doesn't invest Jack Squat in jobs, just Spies, since we are now Dhimmis to the World with W and his Consort, as Rat describes the Piano Player, calling the tune.ReplyDelete
Bend over George, I call him.
Doug you're real funny. Money doesn't want to sit idle, because inflation eats cash like a termite. People who make their money work for them rather than working for their money invest it in whatever is optimal for them. It could be the safety of government debt, it could be the promise of high returns with venture capital, or anything in between. Wherever China decides to stick their cash, that's their call, and praise God for free markets.
W is a Boner knock off of a Quaker Wannabe, being born again to Celestial Parents.ReplyDelete
I was young and GULLIBLE once too!
Now, according to Trish, I'm a paranoid schizo.ReplyDelete
At least I'm not a JEW, or a stinking pile of vomit, like Rufus.
John Ashbrook, his sloganReplyDelete
"No Left Turns"
speaking of Mr Nixon
That man won the New Hampshire Republican primary and the national election - and deserved to.
I stand today where that man stood then; but where does he stand today?
He has led the drive to admit Red China into the United Nations, and watched the cynical expulsion of the Republic of China from that body - though the government on Taiwan is one of America's oldest and closest allies, and despite the fact that he had pledged less than a year ago that we would never desert it.
He has permitted our defenses to sink from a status of clear superiority to one of bare "sufficiency", and then still further to a level at which stark, irretrievable inferiority is less than two years away.
He has allowed a deficit of 30 billion dollars in the current fiscal year, with all that implies for the overheating of the economy and the inevitable accompanying inflation - and has then sought to mask the inflationary effect by imposing an absurd tangle of wage and price controls that are already being widely ignored, in large part because nobody can possibly understand them.
He has allowed still bigger deficits in the years ahead, and still more vicious cycles of inflation and regimentation, by calling for the early enactment of a Family Assistance Plan that will easily double the already swollen cost of welfare to the taxpaying citizens of this country.
Perhaps this is what the American people want. Perhaps, even, he is reflecting the wishes and expressing the judgment of the Republican voters throughout the nation. But I for one do not believe it, and I propose to put the matter to the test in the good old-fashioned democratic way.
He competed in the New Hampshire (9.8% of the vote), Florida (9%), and California (10%) primaries.
"in whatever is optimal for them."ReplyDelete
We required Japan to consider US.
Where'd that come from, 'Rat?ReplyDelete
That's better than what I read.
Seems that Mr Ashbrook did prove, by democratic test, what voters in the United States wanted.ReplyDelete
Mr Nixon won in a landslide, both the nomination and the election.
"Perhaps this is what the American people want. "ReplyDelete
WASN'T True then.
Probly is today.
Here you go, dougReplyDelete
A little google goes a long way.
Sometimes, though, you'll get hooked into the Magick Man.
That really annoys whit.
I missed the whole Magick Man thing.ReplyDelete
Critical stuff before 'Rat's Quote:ReplyDelete
"In making this race, I need no finer example to inspire me than the man* whom the Republican voters of New Hampshire favored, on the basis of his record and his platform, in the primary of 1968, and whom the American people as a whole elected to the Presidency that November.
That man believed and declared that Communism was the deadly enemy of freedom, and that America must never betray the allies who stood with her in opposition to its advance.
That man warned that America's defenses were the absolutely indispensable basis, not only of her own freedom, but of all mankind's - and that those defenses were in jeopardy.
That man cried out against the huge federal deficits that underlay our galloping inflation, and called for a freer, less regimented economy and a substantial reduction in federal spending.
That man won the New Hampshire Republican primary and the national election - and deserved to.
I stand today where that man stood then; but where does he stand today?"
Toyota not part of a Japanese Soveriegn fund, but a corporate entity that operates independently of the Japanese Government, within the framework their societal and cultural standards.ReplyDelete
That relationship managed differently than ours, in the US.
Business and Government cooperating more than they conflict, in Japan.
"Tell THAT to the Nationalist Chinese!"ReplyDelete
Yeah, but we pressured Japan.ReplyDelete
Bend over for China.
Good for Business,
Just like the Slave Trade,
and ME Oil, and the Wars it rides in on.
(how's that, Ash?)
So what's with theReplyDelete
"Magick Man" thing and Whit?
Now we got Chicom Slavemasters,ReplyDelete
And Spanish Slavemasters,
Life is good!
...unless you're a poor Chinese Slave, or an Hispanic/Indian pesant.
...or a free American giving away our legacy for our offspring to wallow in the the remains.
This comment has been removed by the author.ReplyDelete
I found some Founders' background quotes on Religion and the Republic, on a site that was "Black Magick" or something like that.ReplyDelete
The discussion had to do with whether the US was founded as a Christian or Deist nation. The Magick site had the supporting references to the Deist perspective.
The quotes were what I believed to be historicly accurate. whit seemed to be annoyed by the site itself, as well as what was quoted there.
I hadn't even mentally registered the site's name, as they supported my basic premise. Those quotes could have been part of an Urban Myth, though.
I just don't think they are, still.
We were founded on all that is pure and good.ReplyDelete
All else is Magick.
Wait 'til Trish reads my Slave riff.ReplyDelete
She that denies Muslim Demographics in Eurabia!
(and asserts that the Hesbos are an NGO)ReplyDelete
...for whatever that's worth.
We still need that FreeMason expert:ReplyDelete
I can never remember that stuff.
The FreeMasons, not the experts.
The Canuck has gone black.
Miller told a story about a 'Nam vet that had his face blown off and the Govt wouldn't pay.ReplyDelete
Scared the kids when he went out, so he stayed in and the downward spiral ensued.
Life Mag covered it, and he then received a 50k check from Sinatra, saying "just don't tell where this came from."
I've read lesser, but similar stories about Frank.
Sovereign Funds are interesting. Primarily they seem to hold the profits of Nationally held corporations - i.e. the oil profits of a nationalized industry. This doesn't really exist in the U.S. other then the possibility of taking Social Security funds and using those. Any investment, though, carries a risk. Do we really want to assume speculative risk and the parasites (investment manager fees) that come with it?ReplyDelete
Watching China deploy its captial is interesting. They seem to be taking a long view of investment instead of focusing on quarterly returns - they seem to be buying resource based companies. Buy up the parts of the earth a nation needs to grow - hang the current cost 'cause they'll need that stuff for a long way to come.
Another interesting thing about Sovereign funds is they are politically directed. I find the recent investments in the banking sectors to be interesting. Are these savvy investments buying at firesale prices or are arms being twisted forcing a bailout? I don't see too many savvy US money folk ponying up to buy Citigroup. They have some serious problems stemming from the credit problems yet 8 billion magically gets infused from abroad (not to mention the billions and billions being injected into the system by the worlds central banks to keep the system functioning). Nickel, coal, ore, and Oil lying under the ground seem more...substantial investements then the paper of Citi.
It's out of my league, all this talk of macro-economics. It's all the work of the devil.ReplyDelete
signed, 'el campesino'ReplyDelete
Business Daily talks to two men controlling hundreds of billions of dollars.ReplyDelete
How should Norway and the Gulf States invest so they thrive once the oil runs out. The men with the cash will tell you. Can the Gulf States re-invent their economies?
Plus, recession in Florida?
On a broad philosophical level the US has primarily taken the approach that government is a poor investor and that all investment should be left to the private sector dominated by quarterly driven public corporations. Long term strategic investing is just not considered much (usually just impairs the quarterly results).ReplyDelete
'...the surge certainly hasn't hurt. It's helped. I recognize that' --- Sen. Harry ReidReplyDelete
It must have hurt Harry to recogize that.
"A stinking pile of vomit?"ReplyDelete
That's pretty tough.
You worked for the epithet, Rufus, you've eared it! :)ReplyDelete