A.I.M. Users Bulletin Board

[ls7550]

How did you find that out about Sovereign Wealth Funds?

It was news during 2015 when in July the protracted Volcker compliance was pushed out for yet another two years (to July 2017). Was supposed to have been in from July 2010 !!!

Periodically there are 'news-worthy' articles about the possible adverse impact upon this and that.

As the US printed (QE) so others had to print more of their own currency to maintain value/worth rather than having US inflation exported upon them (Swiss were slow to react), and many have deployed those new amounts into SWF's (UK hasn't) - the amounts in SWF's has ballooned and as such has a greater potential influence on the markets.

Chinese have been buying up loads of foreign assets, but have more recently had limits imposed of something like no more than $30K/year each.

Just one of many macro factors that may have some bearing.

The concern as I see it is with so much funny money deployed and asset prices ballooning, there could be a knock on effect if one SWF decides to pull out of its investments, leading to a domino effect - and there's something like $7T in SWF's. Banks bail out companies, state bails out banks .... who bails out states? The hope is that after the QE take-off, it comes in for a slow/gentle landing. The UK sold debt (gilts/treasuries) as far out as 50+ years so its resilience is good. Other states don't/didn't have the luxury of the same duration, much shorter, and will have to deal with rolling or repaying larger amounts sooner. $1B of debt sold at (paying) 5% in older days, transformed to $5B sold at 1% is more of a concern when that comes up to maturity. If rates are 5% at that time ideally you'd repay rather than roll, but repaying much larger amounts is a stress on the economy.