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How Singapore pissed away $40 billion
Monday, June 01, 2009
By Porter Stansberry in the S&A Digest:
You might recall our skepticism a few years ago about the importance of so-called sovereign-wealth funds. The media was apoplectic that foreign governments would end up owning the crowning achievements of western capitalism: Citigroup, Merrill Lynch, and Bear Stearns. We said there are no worse investors than governments...
These kinds of deals are admittedly wonderful for sovereign wealth funds, which are now seen as paragons of investing. But... we wonder... how would you like to be the largest investor in a bank that's made such woeful capital allocation decisions and stands ready to dilute its shareholders at any moment? We suspect, much like a man who promises to marry his mistress, UBS may find itself unable to be any more faithful to its new shareholders than it has been to its last.
And while we have no doubt that sovereign wealth funds will be great for Wall Street, we wonder how well they will do for their ultimate owners - the citizens of Singapore. It has long been our experience that the farther a dollar travels from the pocket of the man who earned it, the more likely that dollar will be lost, stolen, or bled dry by fees. The idea of a sovereign wealth fund is an investment banker's dream: These are dollars won through trade, deposited into central banks (in exchange for local currency), and left for the government to manage. This isn't merely "other people's money." This is money that never belonged to anyone in the first place. This is money that ought to disappear into the endless hole of human perfidy. We bet it does... and faster than most people expect. - The Digest, December 10, 2007
Singapore reported today [May 29] its sovereign-wealth fund lost US$40 billion in the last six months, led by losses in Bank of America.
Monday, June 01, 2009
By Porter Stansberry in the S&A Digest:
You might recall our skepticism a few years ago about the importance of so-called sovereign-wealth funds. The media was apoplectic that foreign governments would end up owning the crowning achievements of western capitalism: Citigroup, Merrill Lynch, and Bear Stearns. We said there are no worse investors than governments...
These kinds of deals are admittedly wonderful for sovereign wealth funds, which are now seen as paragons of investing. But... we wonder... how would you like to be the largest investor in a bank that's made such woeful capital allocation decisions and stands ready to dilute its shareholders at any moment? We suspect, much like a man who promises to marry his mistress, UBS may find itself unable to be any more faithful to its new shareholders than it has been to its last.
And while we have no doubt that sovereign wealth funds will be great for Wall Street, we wonder how well they will do for their ultimate owners - the citizens of Singapore. It has long been our experience that the farther a dollar travels from the pocket of the man who earned it, the more likely that dollar will be lost, stolen, or bled dry by fees. The idea of a sovereign wealth fund is an investment banker's dream: These are dollars won through trade, deposited into central banks (in exchange for local currency), and left for the government to manage. This isn't merely "other people's money." This is money that never belonged to anyone in the first place. This is money that ought to disappear into the endless hole of human perfidy. We bet it does... and faster than most people expect. - The Digest, December 10, 2007
Singapore reported today [May 29] its sovereign-wealth fund lost US$40 billion in the last six months, led by losses in Bank of America.
