Saturday, November 28, 2009

Sovereign Funds are NOT immune….

Sooner or later it was bound to happen – there is nothing flash and probably quite a few things dim about Sovereign Funds…. especially where the business model is an entirely “top line” one – just pour in revenue and forget the rest.

Dubai is telling us a bit more is needed. As usual, size, even on the Viagra of oil is not enough – maybe not even relevant.

S&P tell us one problem is that there is no transparency – and they are already smarting over not marking down shaky debt fast enough so being opaque is red rag to a bull there. Not clever. 

If you want the world to bank you, some disclosure is essential – what is the security, what do the financials look like, who are the management, are they there by dint of family ties or experience or skills? Where are the independent views? What stops introversion?

In short – no Sovereign Funds are not special…. they do take massive risks and no amount of shuffling disclosure or veiled politics will make risk go away. Banks lending into the black hole will feel the full force of the implosion collapsing black holes generate.

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