Got U.S. Cash? Buy Banks & Brokerages

Just about one one hour after we wrote about the awful state of the U.S. banks and brokers yesterday, and only a few days after their CEO stated "we have plenty of cash", Merrill Lynch announced that it was getting another transfusion of $5 billion from Singapore’s state investment company, Temasek.

I've got to ask Mr. Thain, Merrill's CEO, when was he lying, now or before? This is a bit more important since, in it's press release, Merrill craftily omitted that under it's previous cash injection arrangement with Temasek, it has to pay Temasek $2.5 billion to get the $5 billion. (In the perspective of a home mortgage, that would be like having to pay 50 points as an upfront origination fee!)

Merrill now joins a number of its Wall Street friends, including Morgan Stanley, who this week received an infusion from China’s sovereign fund, in getting fresh capital from deep-pocketed state investors in Asia and the Middle East.

Capital flows from Asia and the Middle East are a growing trend as nations seek to recycle surplus U.S. dollars into U.S. assets. Looking at it from a different perspective, we pay to much for their oil and stuff, and they take their excess profits and buy our few remaining industries so they can gain an even tighter control over our future.

One foreign investment manager quipped, "Now that various companies and countries are in trouble, this is a great time to go swooping in and picking some of those things up."

Earlier in December the city-state's sovereign wealth fund Government of Singapore Investment Corporation invested nearly $10 billion to help recapitalize UBS along with additional funds from an unidentified investor.

The Financial Times reported Friday the unidentified Middle Eastern investor channeling $1.73 billion into Swiss bank UBS is from Saudi Arabia. The report citing an unidentified figure with knowledge of the negotiations said investors could include the Saudi royal family, with Price Sultan, the nation's defense minister, involved in the deal.

In the past week, Morgan Stanley announced it would sell about $5 billion in equity units convertible into common stocks, equivalent to a 9.9% stake, to China's sovereign wealth fund China Investment Corp. The investment was the second foray by China's sovereign wealth fund into the U.S. since paying $3 billion for a 9.3% stake in the initial public offering of Blackstone In November Citigroup received a $7.5 billion investment from the Abu Dhabi Investment Authority.

Also that month China's second-largest life insurer, Ping An Insurance paid $2.7 billion for a 4.2% stake in Belgo-Dutch banking and insurance group Fortis, a move that made it the largest single shareholder.

China's largest listed brokerage Citic Securities stuck a cross investment alliance with Bear Stearns that saw the Chinese firm take a 6% stake in the Wall Street firm with an option to increase that stake to 9.9%. Under the deal, Bear Stearns received a 2% stake in the Chinese firm and has the option to lift its stake by a further three percentage points.

In July U.K banking group Barclays agreed to sell a stake to Temasek and China's state-controlled China Development Bank.

The transfer of U.S. wealth goes on and on and, just like the old Sonny and Cher song, we can kiss our assets goodbye.

The Best Money Guy.

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