Kuwaitis falling into a value trap?
Maybe it's time we face up to the fact that these sovereign wealth funds aren't as savvy as they're cracked up to be. Check out the latest news from the Global Gathering of Important and Serious People, otherwise known as the World Economic Forum in Davos, Switzerland:
Kuwait's investment
authority sees the current credit crisis as an investment
opportunity and is eyeing the U.S. financial and real estate
sectors, the body's managing director said on Thursday."This is a pure investment opportunity," Bader Al Sa'ad told
reporters on the sidelines of the World Economic Forum in Davos.Asked what areas the Kuwait Investment Authority was
interested in, he replied: "In the financial sector and real
estate sector."He said the investment authority had not diversified out of
the United States because "this opportunity doesn't come every
day".
Of course, it's not just the Kuwaitis. It's the United Arab Emirates, Singapore, you name it… they're all piling onto the FIRE (finance, insurance and real estate) sector of the U.S. economy because it "looks cheap." It looks more like a classic value trap to me.
For the better part of a year now, many smart people, including my Agora Financial colleagues, have been giving you a heads-up about the rise of sovereign wealth funds. But maybe we gave SWFs more credit than they deserve. A lot of us figured they'd snap up honest-to-god tangible wealth — oil, gas, metals, timber. Maybe that day will yet come. But for the moment they're grasping at some of the most intangible ephemera of modern finance.
It's a good time to remember that sovereign wealth funds are, first and foremost, government entities. And we all know how wisely and efficiently government entities function.
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