Niall Ferguson on the "Global Foreclosure"
- Heather Scoffield: Abu Dhabi has just bought Nova Chemical because the company couldn't get credit. Is this the way of the future?
- Niall Ferguson: “There are some fantastic investment opportunities that pretty soon are going to start attracting buyers. The returns on the super-safe, highly-liquid U.S. Treasury portfolios are next to nothing. The potential returns from buying distressed assets or from buying companies that can't roll over their debt, are double digit. So any individual institution liquid enough and not leveraged can start playing this game, and will play this game. This is going to be the beginning of a whole new investment strategy in which companies that can't roll their debt over end up being sold at bargain basement prices, or broken up and their assets sold at bargain-basement prices, in very, very large numbers. And it doesn't take a lot of imagination to see that the buyers will be sovereign wealth funds or other entities in surplus countries. The world divides in two, the debtors and the creditors. The debtors … (U.S., Europe) ... are going to have to sell of their assets. Call it the global foreclosure. They're going to be selling their assets cheaply to those who have the surpluses. This is not going to be like the Chinese buying Blackstone at the top of the market. “It's revenge of the sovereign wealth funds. They got burned. And this time, no more Mr. Nice Guy.”
Source: The Globe and Mail
