Oct 08 2008
Black Holes and Death Stars
Major markets around the world are being sucked into the black hole that is the U.S. economic crisis.
There are those that say we need to share the blame, and yes, there are banks in the UK and in Germany, and other Western economies, that have wandered down the same path and ended up in the same bramble bush… But the U.S. financial system has really become the black hole of the global economic universe.
Just look at all the cash that was thrown into the system: $12.5 billion injected into Citigroup by the government of Singapore and the Kuwait Investment Authority; China Investment Corp. paided $5 billion for a 9.9% stake in Morgan Stanley; Merrill Lynch got $6.6 billion from Korea…
And that doesn’t include the investments in other institutions across the pond, like the investments in Barclays by Singapore’s Temasek and the Qatar Investment Authority, or the Credit Suisse, Standard Charter, and UBS investments from SWFs around the world.
As you can imagine, these folks aren’t happy that their investments have all but disappeared. They’re not likely to make any similar investments in the near future, either.
And that leaves a gigantic wound in the financial machine… A black hole that continues to suck investor’s cash down a never-ending drain.
Thought the Dow would hold at 10,000? It didn’t.
Think the $700 billion “Death Star” bailout will contain the problem to just the U.S.? It won’t.
In fact, my colleagues here at Taipan think that this could be the end of the European Union - and the euro - as we know it. Right now, we’re putting together a special package to deal with this unprecedented situation. You’ll want to keep an eye out in our free newsletter, Taipan Daily, for more information on how to handle this crisis.
In the mean time, I’m looking farther afield for alternative investments… Like small infrastructure plays in Singapore that still have the backing of Temasek, the $300 billion sovereign wealth fund that doubled its annual return for the year ending March 31.
You might be surprised to hear that this was one of its busiest years, and it has been actively investing in projects around the world.
That’s not something you’ll hear from folks in these times.
I’ve just finished a full report on some of Temasek’s key holdings, and it’s headed to our publishing department as I write.
But one of the new areas Temasek is focusing on this year is Latin America… And that’s where I’ll be headed in late November. It’s an interesting region with some countries resorting to nationalizing resources and sectors in order to capture profits.
My goal is to find a few companies that are still in the private sector and still providing great returns for investors.
In these times, we might need to take on a little more risk, but the reward will be that much sweeter in the end.
