Sovereign Wealth Funds. Who's your "daddy".

By
Real Estate Broker/Owner with Tutas Towne Realty, Inc and Garden Views Realty, LLC BK607690

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?

SOVEREIGN WEALTH FUNDS

Copyright © 2007 Broker Bryant Real Estate Ramblings | All Rights Reserved

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Ambassador
1,509,132
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer
This post definitely generated some interesting comments!  I think this is the reason no higher ups propose boycotting China (like I do!)  It's time to cut em off, look at the labels where we buy stuff and start walking into boutiques over Wally world!
Dec 27, 2007 03:19 PM #42
Rainmaker
122,704
Eliese Pivarnik
Colorado Group Realty, LLC - Steamboat Springs, CO
CRS, GRI, ABR, RSPS, Colorado Group Realt
Learn Chinese.  You're gonna need it.
Dec 27, 2007 03:58 PM #43
Rainmaker
125,300
Mary Ann Daniell Realtor
Coldwell Banker United, Realtors - Subsidiary of NRT LLC - Killeen, TX
Delivering Successful Results Since 1999

It's a sorry situation, plain and simple.   We are in trouble, and no one at the higher levels seems to care, or it's so out of control they can't do anything about it.  

Dec 27, 2007 11:02 PM #44
Ambassador
2,676,904
Katerina Gasset
Get It Done For Me Virtual Services - Wellington, FL
Get It Done For Me Virtual Services
Bryant- I love Lenn! Lenn- You are not paranoid! You are a realist! You are dead on right, correcto mundo! Since most people in the US did not grow up during the cold war, they really do not have a grasp on what is really at stake. Remember that movie, Red Dawn? Well, maybe it will be another way, from the inside out. We need to be aware of what is happening in our own backyard! Katerina
Dec 28, 2007 12:25 AM #45
Rainmaker
1,142,060
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time
Scary times we are in, I agree. I really don't pay much attention to this stuff but it certainly sounds like I should.
Dec 28, 2007 03:27 AM #46
Rainmaker
105,533
Josette Skilling
Keller Williams Capital Properties - Bethesda, MD
I'm just parked for the learning power.  Interesting reads from all over...
Dec 28, 2007 04:24 AM #47
Rainmaker
340,012
Ann Cummings
RE/MAX Shoreline - NH and Maine - Portsmouth, NH
Portsmouth NH Real Estate Preferrable Agent

BB - this post and all these comments have been an enormous lesson for me in things I don't usually follow very much.  But today, I've certainly learned a few things here.  And like Renee wrote, i'll be watching what I buy from now on.

Thanks for posting this, and a well-deserved feature.
Ann

Dec 28, 2007 04:39 AM #48
Rainmaker
188,958
Susan Milner
Florida Future Realty, Inc. - Cape Coral, FL
Cape Coral Real Estate Broker, FloridaFutureAgents

It is scary & honestly since I've been alive globalization has been huge. Why not outsource to foreign counties & pay weekly wages equal to an hour's wage here? Why not import all of our consumer items to save a buck? Why care that we are literally 'owned' by these other countries?

It is all about making a buck right? NOT for me. It is really scary what is going on right now & what will happen in the future. We are tooo dependent upon other's countries & what happens when one of them backs out or sells off? WHO KNOWS.

I am not a big political follower so I don't know who is to blame but we are all living in the US so we should do something. I thought that was a democracy.

Dec 28, 2007 05:14 AM #49
Rainmaker
98,810
Mark Eibner
Metro Brokers Realty Oasis - Littleton, CO
CRS, ePro,GRI

Hey- You guys are 90 years late to the party!  I have wrote a number of posts over this and other issues. If you don't think that there are people that have been trying to sell us down the River since our INCEPTION, you are living in a Corporate Media Induced Brain Wash.   From the Civil War,  WWI,  WWII and up to today with the sub prime distraction...we sheep have been SHEARED.  I hope you all have international Funds ;>)  

Here's a great Post worth watching and then get informed! 

http://www.realestatezealot.com/blog/2007/09/current-credit-.html 

Dec 28, 2007 06:35 AM #50
Rainmaker
456,269
Michael Eisenberg
eXp Realty - Bellingham, WA
Bellingham Real Estate Guy

Thanks to Ronald Regan for eliminating tariffs, when he took office we were #1 in exporting finished goods and importing raw materials, today it is exactly the opposite, we hardly manufacture anything in this country anymore.

We need a giant shift in our ecomomic policies.

Bringing back tariffs would be a good start.

Dec 28, 2007 06:43 AM #51
Rainer
62,831
Allen C. Wright
RealtyU - Aliso Viejo, CA
NS, AHS, REPS

If i remember back to the days as a Investment Executive there are two key numbers that come up

1) 5% or more purchase must be disclosed to the SEC

2) 10% or more and an SEC filing must be made regarding the intension of the investor (hostile buyout etc.)

That is why you will notice all the purchases are under 10%

Dec 28, 2007 07:33 AM #52
Ambassador
890,780
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

I am split...

On one hand (the hand you'd seem to play in this game), if China decided to really dump the 25% stake in Citi, there could be a repercussion that would go all over the place.  The financial segment would see a stock collapse.  The Street would panic, and a bunch of other holders of Citi... and all sorts of other sector stocks would start to unload.  It could even lead to a broad based sell-off, causing a dramatic drop in the Dow, NASDAQ and S&P...

But.........

If there wasn't an accompanying change in the underlying business, do you think that investors like Buffet and Kerkorian (or whatever his name is) would see the words "Fire Sale" on their way into the office...  And buy like no tomorrow?  Of course, Gates, Buffet, Kerkorian and the like would NOT have anywhere near the capability to pick up trillions in stocks, but they could show that the most successful investors in the world are buying... which might turn the street into a buying frenzy. 

Frankly, I can see the opportunities for both collapse and turn-about. 

Just my $.05... 

Dec 28, 2007 08:42 AM #53
Rainer
111,655
Carole Cohen
Howard Hanna Cleveland City Office - Cleveland, OH
Realtor, ePRO
I find Allen's comments very interesting..going to have to read more about the percentages.  And I also agree with Lane. And really investment for us abroad should be as useful and other countries investing in our economy. Just sayin'
Dec 28, 2007 11:00 AM #54
Rainer
111,655
Carole Cohen
Howard Hanna Cleveland City Office - Cleveland, OH
Realtor, ePRO
Wash Post article on Warren Buffet becoming a bond insurer and it helping to lower costs and stablize. Any of you investment peeps have an opinion?
Dec 28, 2007 06:06 PM #55
Rainmaker
1,142,060
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Great add onm commnets Lane and Allen.

Mark I will check out that link, Thanks

This has been a very eye opening comment thread. Thanks everyone for participating.

Carole I'm heading over to read that Buffet article.

Dec 28, 2007 11:46 PM #56
Ambassador
628,186
Jeanean Gendron
The Address Realty - Redding, CA
Specializing in Selling Unique Properties

Bryant, I read this post when you first wrote it and decided to wait and see what I could learn from the comments. I am asking David, my partner in life and business to co-author this. He is the knower of economics (MBA) in our family. Most of the time, I won't let him tell what he knows....because I am such an optimist and it makes me cry at the sadness of the world and how bad things are. However, I asked David to read this post with me and together we would write a comment.

I learned a lot from the post. I don't feel the need to restate things. I appreciate all the comments and I feel I came to some understanding of the question that was asked. 

Our strongest tool and action remains in posting issues like this so that we can have self-organizing knowledge come forth through the comment stream. As we do this, it raises our awareness to a higher level and we become more capable of affecting our world.  As we come to a better understanding of what is happening we become empowered to act upon this new knowledge. I am here in Active Rain to become better informed and to understand how I can be a better citizen. If my only tool is to write and blogg, then I will do it. We must to take action. The written word is powerful. Discussion and dialog are our best hope for the future. 

David would make the point that our problems do not only lie with foreign investment. It also lies with the global control of money and power. It is an ever growing global crisis.

It can only be addressed as individuals taking action to inform and to get the word out. It has become so much bigger than any one person can affect. It goes beyond politics and beyond governments. It comes down to the goodness of man and the choice that is made to balance our world.

Power and money are currently the force that moves beyond all politics, governments, and countries. It is greed that will destroy.

I as an individual, can do little. When I join hands with like minds and the power of synergy does a handshake with consciousness, a silent strength comes forth. Change is possible without a fight!

I hope I have not jacked this comment stream. I am grateful for this work and the post. Thanks Bryant. You are always bringing us the provocative and good stuff! We come away and change has occurred. That is very powerful and I thank you! Good work!

Dec 29, 2007 03:48 AM #57
Rainmaker
1,142,060
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time
Jeanean and David, Great comment and insight. As I stated in my post I know NOTHING about this stuff. That's why I wrote the post. topics like this are very very important and the dialogue that is created is how I learn. Thanks for sharing your perspective. Knowledge is power!!
Dec 29, 2007 04:05 AM #58
Rainer
70,478
Jan Wood
None - Gallatin, TN
Bryant:  Good post... however, I tend to disagree with some of your comments.  Their investment, in my mind, is a good thing since financially our country is troubled and I don't think we have to be overly concerned about foreign investment.  
Dec 29, 2007 04:29 AM #59
Rainmaker
1,142,060
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Hi Jan, Do you truly believe this?

"Their investment, in my mind, is a good thing since financially our country is troubled and I don't think we have to be overly concerned about foreign investment."  

I sincerely hope you are right. Thanks for stopping by. ALL opinions are appreciated. This is the "free to voice your opinion" zone:)

Dec 29, 2007 04:39 AM #60
Rainer
2,483
Thomas Kirk
CenterState Home Loans - Kissimmee, FL

Wow, some great comments and some of them are very well thought out. But now it's my turn. Here's some information to chew on about how the US is doing in the world. We are #1 in:

#1 investor in foreign counties. We own more foreign company stock than any other country in the world.  But remember, we do it through privately owned companies, individual stocks, not like the other counties that use their country's banks and dictator owned companies.

#1 Manufacturer of goods in the world, yes, we still out produce the world.

#1 in currency used, the green back, despite its slide is still the currency of commerce in the world today.

#1 place for other countries to invest in. I remember the scare that Japan was going to own all of down town NY city by the end of the 80's. They bought a few big name buildings and everyone went in to a frenzy, but like everything in business, that cycle went bust and Japan is still recovering from their real estate bubble going "POP".

and the big one....ta,tata,daaa... # 1 economy in the World. All I hear is China is going to buy us all up, or the Arabs will use all their "petrol dollars" and buy us up in our going out of business sale. People please, every year our county produces a GDP of $13 Trillion. Some estimates are upwards over $25 Trillion. Compare that to China with a GDP of 2.5 Trillion.

And if you want to know who owns more of what country, consider this. The value of the publicly traded stock in China is (2006) 2.426 Trillion and 27+% of that is owned by foreigners. compare that to the US where our stocks are worth $17 Trillion and only 10% are owned by foreigners.

We own more of the world than any other country in the world. So let them invest, let them use the money we spend over there to build our stock market, create more wealth here and improve our standard of living. It's the least they could do for us, since we let them use our money for a while.

Here's one more thought, I shop at Pulbix all the time, it seems I live there. When they ever go public I'm in, big time. But I must have a huge trade deficit with them, but yet it doesn't bother me....know why? Because I receive a value I believe is worth the money I hand over, the food and service I receive is the balance in the trade. I have a cash deficit with them and they have a food deficit with me. I call it even. This is the same with China, we buy things from them, all be it crap, and we see a value in it, we give them cash and they give us stuff (with lead in it) and we're in balance. Everyone seems to forget that just like me, I'll make more money to spend and so will the US. We're really good at making money. (and no, I don't mean just printing it, but we're good at that too)

By the way, I have a Bachelor's Degree in Economics from FSU and a minor in Communications. So I can talk about a dry subject like trade deficits and hopefully not put people to sleep. Now I have to go to sleep, did you see the time of the posting, talk about a Blog Junkie!

Dec 29, 2007 06:00 PM #61
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