This week we are seeing the largest turnover in the ownership of American corporations since the Great Depression.
We know who the people (and institutions) that are selling undervalued stocks are. They are people who are panicking, and people who have no choice because the stocks they are selling are their only source of cash to pay their debts on losses in mortgage-related securities.
But who is buying? Every sale requires a buyer. I don't have the best vantage point, but it sure looks to me like it is mainly petroleum cash coming into the market. I don't mean commodities investors fleeing the popping oil bubble (which I first wrote about back in Oil Bubble to Burst, on March 11, 2008). I mean the actual oil producers, mainly Arab nations, that have accumulated vast amounts of dollars (and Euros) that had not yet been invested.
Back in the 1980's we worried that the Japanese would end up owning the United States. They bought into U.S corporations, but mainly they bought land and buildings. In the short run they created a mini-bubble and got hurt, but those that kept their American real estate did well long-term.
Do I care that Arabs are going to own substantial portions of America's economy? No, it is part of the global economy. Only a few decades ago U.S. corporations owned much of Arabian oil production. The Arabs are not just lucky to have a lot of oil. They have worked hard, for decades, to develop their production capacity and their financial knowledge. They know the oil will run out eventually, so they are investing much of their returns, rather than spending them (not that they don't have plenty to spend, too).
Americans, as a whole, have been way too busy spending money and way too careless about making it. I think most Americans work reasonably hard, they just don't worry about the future enough to be bothered to save or invest. Some of us save, but we are more than balanced by the spendthrifts.
Today it looks like the future belongs to the Arabs, and maybe the Indians and Chinese. These United States of America are probably good for a comeback, but only if we create an economy that is not dependent on giving credit to spendthrifts to keep going.