No Big Deal
By INVESTOR’S BUSINESS DAILY | Posted Wednesday, June 11, 2008 4:20 PM PT
Trade: Some big deals caught our eye Wednesday. First, Arab investors bought the Chrysler Building. Then, Italians grabbed the Flatiron Building. Finally, a Belgian firm bid for a brewer. So what are we to do? Nothing.
The cash-heavy Abu Dhabi Investment Council, a sovereign wealth fund (the government-directed foreign investment funds that have grown in prominence in recent years), is offering $800 million for a 75% stake in the Chrysler Building.
Meanwhile, Italy’s Sorgente Group snagged a majority share in New York’s Flatiron Building, another trophy property. As Real Estate Alert Newsletter noted, four of the top 13 U.S. commercial real estate deals last year involved foreign buyers. It’s a growing trend.
And late in the day, Belgium’s InBev offered $48 billion for control of U.S. brewing giant Anheuser-Busch, which controls 49% of the U.S. beer market.
To some, all this foreign buying is a sad sign of U.S. decline, a result of a weak dollar and a faltering economy. In fact, it’s not a bad thing at all — it’s all part of the natural ebb and flow of economies.
You see, the U.S. has run large trade deficits in recent years. Last year’s gap was well north of $700 billion. All those trade dollars don’t disappear overseas; they come back to America, either as purchases of goods and services, or investments in our assets. Often, foreigners prefer the latter because U.S. investment returns on average are much higher than those overseas, several studies show.
The fact is, foreign investors have an enormous stake in America today. From 2000 to 2007, foreigners bought some $6.3 trillion in U.S. securities, including stocks and bonds. That’s more than three times what they bought in the go-go 1990s. America’s still a great place to invest — especially if you’re a foreigner.
Does it matter who owns assets? Maybe sometimes, but usually not. It’s a vote of confidence in the U.S., and helps support U.S. jobs and incomes. The investments also boost our productivity and make up for our lack of savings.
By the way, the last time this happened, in the late 1980s, the Japanese were the buyers. Many Americans feared Japan would “buy up” the U.S., and put us all out of work. Indeed, Japan owned huge swaths of popular U.S. real estate — from Rockefeller Center to the Pebble Beach golf resort. A popular novel about Japan’s investments, “Rising Sun,” was even made into a movie. But since then, Japan has retrenched, while the U.S. has grown strongly.
So don’t worry. As Italy’s Valter Mainetti, who heads Sorgente, explained to Time.com: “This current crisis will pass and the dollar will reestablish itself. We are confident.”
Sad, but it seems sometimes foreigners have more confidence in America than we do