We have seen absoultely catastrophic losses at the world’s Sovereign Wealth funds in the Middle East, Singapore, Norway, you name it. Add China to this list. China’s State Administration of Foreign Exchange diversified its money out of Treasuries and agency debt at absolutely the worst time, running into a buzz saw as equity markets tanked. Now they are sitting on huge losses.

Sovereign Wealth Funds (SWFs) are losing money hand over fist, which should leave one wondering whether their appetite for Western assets will continue to bolster those markets. Funds in Asia and the Middle East have been hit by a double-whammy of losses on existing foreign asset portfolios and weak domestic markets due to the fall in oil prices in the Mideast and an absence of de-coupling in Asia.

UPDATE: Given the recent news on AIG and HSBC plus the dividend cuts at KKR and PNC, I am re-posting this article.

Back in June before real panic struck, I outlined my thinking on the financial services sector in a post called “Financials: catching a falling knife.” My basic point at the time was that investors – especially sovereign wealth funds (SWFs) and hedge funds – were seriously underestimating future losses in the financial services. I suggested that buying financials was like catching a falling knife and that things would only improve when these investors gave up and went home.

Since that time, those investors have indeed given up after sustaining hundreds of billions in losses. Yet, their money is now being replaced by government money, which is propping up failing and bankrupt institutions. I see this as a problem, not a solution. However, it is unclear whether the new U.S. administration, the U.K. government, the German government, and the Irish government will continue this ill-fated policy response. If they do, you can expect things to get much worse.

In my book, losing a gargantuan $125 billion qualifies you as the dumb money. This appears to be what has happened at Abu Dhabi’s leading Sovereign Wealth Fund.

I had been warning all throughout 2008 that the Sovereign Wealth Funds were making a big mistake in buying stake in western financial services companies. Now, they are paying the price.

ShareLehman Brothers is obviously desperate to avoid Bear Stearns’ fate. The FT is reporting that Lehman held secret talks with foreign investors to sell up to 50% of the company. Previously, I thought one investor might be the Korea Investment Corporation, but it turns out the investors are the Korean Development Bank and [...]

ShareWith sovereign wealth funds (SWFs) trolling the world for decent places to park their overflowing coffers of cash, the Germans have decided to stop them before they start.

The German government has approved legislation that would enable it to prevent foreign buyers from taking big stakes in key domestic companies.
The measure applies [...]

ShareApparently, Lehman Brothers was looking to strike a deal with a Korean Sovereign Wealth Fund (SWF) for a whopping $5 billion, but the deal fell through — this according to the NY Post.
Lehman Brothers’ embattled Chief Executive Dick Fuld nearly struck a deal to raise almost $5 billion from South Korean wealth funds and institutions [...]

ShareSovereign Wealth Funds (SWFs), which played such a vital role in the recapitalization of U.S. financial institutions during the first go around, are looking to cut their U.S. exposure.
Basically, the U.S. is running an extremely inflationary monetary policy with Fed Funds at 2% and inflation at 5%. The Dollar has therefore lost value relative [...]

ShareIf you haven’t heard yet, you will soon. The Chrysler Building was snapped up by the Abu Dhabi Investment Council (otherwise known as the government of a foreign country). With the U.S. still sporting a current account deficit over 5% of GDP, foreign countries around the world are piling up dollar bills in [...]

ShareThe Financial Times’ blog Alphaville is reporting today that those investors who ponied up for shares in financial institutions after the financials wrote down billions and needed additional capital – those investors – lost $10 billion! Basically, its like throwing good money after bad. Investments in many of these institutions is dead [...]