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# OFTEN WRONG, BUT NEVER IN DOUBT

In summary, people who are worrying about U.S. importing too much are fighting the last war....Those that think that as soon as if we curb our imports of toys from China and T-shirts from Pakistan, the U.S. industrial base will be reinvigorated. Perhaps then, the world will buy shoes made in New England, textiles made in South Carolina, and autos made in Michigan....Unfortunately, this is highly unlikely to happen. For example, Japanese cars cost more than comparable U.S. cars, and have for years.....but the Japanese sell more cars in much of the U.S. because they are perceived to be of better quality. The same is true with Japanese consumer electronics and Korean ships, etc.
While it may be hard to admit, it looks like the best solution may be for U.S. and European consumers to learn to live within their means, consume less and import less of what they probably do not need.
MANY COUNTRIES HAVE SOVEREIGN WEALTH FUNDS....THESE ARE PROVIDING A SOURCE OF CAPITAL FOR GLOBAL MARKETS
These funds will provide a huge demand for stocks, bonds and commodities worldwide. They total about $1.9 trillion currently and are expected to grow at $1.2 trillion per year, rising to almost $8 trillion by 2011.
Sovereign wealth funds exist so countries like those in the Middle East, Singapore, Russia, China and others can diversify their assets out of their home country and benefit from investing abroad to try and capture some global growth for their national funds.
Obviously, those countries with economic growth and positive current account balances and balance of payments are more likely to have larger and growing sovereign wealth funds. It is believed that China will have half a trillion per year to add to their fund.
A few additional points on SWFa??s:
These are generally not good for the U.S. dollar as the money will be exiting the dollar to be invested abroad. It is positive for foreign currencies and gold.
The funds will go for growth assets, not just conservative assets. They will invest in commodities and stocks as well as more conservative bonds.
Most of the money will be managed by outside managers, as most countries do not have the large investment management skill set to manage the funds internally. So we look for the global investment management industry to get an additional several billion dollars of revenue per year.

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