Skip to main content

America on Sale

The big foreign-money purchases of stakes in Citigroup, Merrill Lynch, and Morgan Stanley are merely a hint of what's ahead in 2008. Foreign buyers, such as sovereign wealth funds from countries like Kuwait and Singapore, will continue to make headlines by grabbing major U.S. assets this year, and the trend is much broader than investments in Wall Street firms that need a capital infusion.

http://www.economyincrisis.org/acquisitions/index#sold

Budweiser bought out by a Belgian company

 

What's important to understand is why this is happening - the reasons go beyond what most people realize - and why it may be even more worrisome than it seems.

AT THE DEPTHS of the 1973-74 bear market — the worst of the post-war period — when the Dow Jones industrial average was approaching its low of 577, Warren Buffett told Forbes magazine that he felt like "an oversexed guy in a whorehouse. This is the time to start investing."

Buffett's words may have been indelicate — Forbes ended up changing the world "whorehouse" to "harem" when the interview ran — but the CEO of Berkshire Hathaway (BRKA) was on the mark because that era produced some of the best bargains of the past 50 years.

Such deals were hot even before the bank bailouts. Foreign buyers set a record last year by purchasing $414 billion of U.S. assets - even more than they bought in the wonder year of 2000.

Last May, a Saudi Arabian conglomerate bought a Massachusetts plastics maker. In November, a French company established a new factory in Adrian, Michigan, adding 189 automotive jobs to an area accustomed to layoffs. In December, a British company bought a New Jersey maker of cough syrup

The usual explanation is that the dollar was cheap, which was certainly an important factor. But more had to be going on. Many of the biggest deals were done by Asian or Middle Eastern buyers who already hold much of their wealth in dollars. Those investors didn't get a discount because of the dollar's declining value. In addition, U.S. stocks were hitting record highs through much of last year, so it's hard to say that American businesses in general were bargains. Why, then, were foreign buyers so busy?

The overlooked part of the answer goes back a decade to when Americans started buying a whole lot more from other countries than they were buying from us. We'd been running a trade deficit since the 1970s, but it took off in the late 1990s and has been galloping ever since. All those dollars we send into the world come back to us - some as purchases of our goods and services, and the rest, equal to the trade deficit, as investments.

Foreign giants like Toyota Motor and Sony have been sinking capital into American plants. Investment in the American subsidiaries of foreign companies grew to $43.3 billion last year from $39.2 billion the previous year, according to the research and consulting firm OCO Monitor.

This is an interesting topic. As of lately, American businesses are being bought out left and right by foreign multinationals. Now, this certainly would not look favourable to those who put a lot of emphasis on national pride and "Made in the USA" because it gives the impression of "first-rate" quality. At the same time, foreign investment may actually turn out to be a blessing in disguise.
One would think that with so many MBAs being churned out from American universities that the US would always remain top-dog in the world of business.

http://www.economyincrisis.org/

Foreign Ownership of U.S. Industries

Sound recording industries
97%

Commodity contracts dealing
79%

Motion picture and sound recording industries
75%

Metal ore mining
65%

Motion picture and video industries
64%

Wineries and distilleries
64%

Database, directory, and other publishers
63%

Book publishers
63%

View Full List of Industries

However, it is apparent that with so many failures of American businesses (notably in the financial services sector and major airlines) that, simply put, foreigners are beating us at our game (capitalism). Some of the reasons for this include American companies relying upon outdated and ineffective business models, resisting any real change to appeal to different consumer preferences (They TELL us what we "want" rather than listen.) and no longer remaining at the forefront of innovation. (The classic example being the auto industry, where GM & Ford are in a downward spiral while Toyota is ever-so-close to being #1.)
Of course, corporate greed also plays a role. Most shareholders have invested over the years (especially during the early years of the boomtime 1990s)

simply to cash in right after the company becomes very profitable. Now, with the downturn in the economy, many investors are selling out to the "nouve-rich" of foreign companies partly for the reasons stated above. The foreigners are willing to fork over more money, take bigger risks, and stick around for the long-haul.
OF course, there are also more American-owned companies that simply have (or possibly will) relocated overseas (predominately, to the 3rd world where tax & environmental laws are more favourable to them).

Popular posts from this blog

Best Australian stock forums online ( finance forums)

Many traders and investors use forums to share ideas, learn from the more experienced, or simply to stave off boredom during long hours at the computer. Here we list the known universe of forums, complete with costs, member numbers, extra benefits and popular forum topics. Please post a message on Your 2 Cents if your favourite forum isn't listed here, or if you feel that there's more to add about the day-to-day goings on in your online community.Forum
Cost
Stock comps
Forum areas
Comments
AussieStockForums.comFreeASX by share code, General, Beginners, Derivatives, Commodities, International, Strategies/SystemsEasy to use, independent forum. Aussie Stock Forums has a group of very active and knowledgeable traders. Private messaging available. Australian forum.
Chimes in ExileFreeASX stocks, fundamental analysis, technical analysis, commodities, economics, investment tools The forum has a small group of regular contributors that form a genuine community of investor…

The diggers and dealers forum meet 2011

The diggers and dealers forum has just begun August 1. Its a three day annual event happening every year  at the WA country town of kalgoorlie.2011 Diggers & Dealers forumBig name brokers  keenly watching the event will be MacquarieDeutsche BankBell PotterGoldman SachsRBS MorgansEvans & PartnersHartleysBlack Swan Euroz.Well most other websites will give you the  finer details of the annual meet and greet that happens at kalgoorlie , so we will just stick with the bare minimum of details  and focus on the more enjoyable bits  of information that the dealers require to strike a good deal while in town.Bare detailsWebsite : Diggers & DealersEvents : Program and scheduleWatering holes and entertainment at Diggers and dealers forumPubs , clubs  and skimpy (barmaids) culture in kalgoorlie . There are about 25 pubs in Kalgoorlie-Boulder area and for a city that stretches just 67sq km the number of pubs makes for  a good choice on drinking holesand entertainmentExchange Hotel ( Pa…

List of Australian blue chip stocks

Australian shares gained 0.6 percent on Wednesday led by blue chip miners and financials on strong resource price


The biggest Blur chip stocks traded on the ASX, in terms of their market capitalisation, include:
BHP BillitonCommonwealth Bank of AustraliaTelstra CorporationRio TintoNational Australia BankAustralia and New Zealand Banking GroupRio tintoWestpac
The only stock to do worse than the S&P/ASX 200 is Harvey Norman Holdings Ltd [ASX: HVN]. Even so, it’s a better-than-the-bank 8.3% gain. The others have done much better: Qantas [ASX: QAN] up 36.1%; JB Hi-Fi [ASX: JBH] up 20.5%; Toll Holdings [ASX: TOL] up 25.3%; and Myer Holdings [ASX: MYR] up 37.1%. The benchmark S&P/ASX 200 index rose 27.1 points to trade at 4,977.3 by 2310 GMT. It fell 0.8 percent on Tuesday, its lowest close since February 7.