Sunday, October 16, 2005

Buying productive assets

The number of US companies being acquired by foreign buyers is definitely getting some attention now. 3 of my most recent hits have been of US/Canadian companies being bought by European/Japanese buyers. I am not complaining, as in most cases these are cash takeovers at significant premiums.

This surge seems to have raised some concerns in that useless body called the congress! Plans are afoot to give more teeth to the committee that reviews such purchases of US assets by foreign buyers. The committee so far has been very easy going, except in cases where national security seemed to be a concern. But the new plans to look at all purchases more thorougly, with the aim of discouraging the buyers, is definitely not welcome. Is this the case of "we love free market economics when it works in our favor" ? If implemented, the US won't be able to preach to or force others to "open up" their economies.

One point mostly overlooked is the fact that these buys actually result in capital moving back to the US. Ofcourse, with the current craze of investing in what is essentially a non-productive asset, real estate!, this capital may not end up in the right place.


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