There was more money available to buy shares than at any time in almost two decades. The $8.85 trillion held in cash, bank deposits and money market funds was equal to 74% of the market value of U.S. companies, the highest ratio since 1990, according to the Federal Reserve.

What happened in the past when cash reached these levels?

• In September 1974, cash on hand reached $604.5 billion, representing a record 1.21 times the U.S. stock market’s capitalization. That preceded a 31% gain in equities between October 1974 and March 1975.
• In July 1982, just as a 20-month bear market was ending, cash as a percentage of the U.S. stock market’s value rose to 95%. The S&P 500 began a six-month, 36% advance. According to Bloomberg, the eight previous times that cash peaked compared with the market’s capitalization, the S&P 500 rose an average 24% in six months.

This time, of course, it didn’t take nearly as long for the market to rally.

Still, the greatest appreciation so far has been in smaller stocks. That’s normal in an early bull market. But if the bull market continues, the big, blue-chip stocks are likely to lead the market higher for two key reasons:

• First, there is still over $8 trillion on the sidelines earning next to nothing in short-term deposits. Investors tip-toeing back into the market are likely to gravitate here since these stocks are the safest.
• And then there is the growing influence of cash-rich sovereign wealth funds…

Sovereign Wealth Funds – The Financial Assets of a Country

Sovereign wealth funds are the financial assets of a country – usually part of the national savings – that are owned and organized into a state-controlled fund and put to work to earn a higher return on investment.

(Sovereign wealth funds are not the same entities as foreign exchange reserves, which are often used for short-term currency stabilization and liquidity.)

In the past, most countries put their liquid assets to work in foreign currency deposits, government bonds or gold. (The hard-working Japanese and Chinese, for example, have kept our interest rates low by maintaining a steady appetite for U.S. Treasury obligations.)

But with the dollar relatively weak and interest rates on Treasuries near record lows, U.S. government bonds are not generating the kind of returns you write home about.

So world governments are slowly moving money into global equity markets. And the sums involved are fairly staggering.

Sovereign Wealth Funds Control More Than $7 Trillion…

According to The Economist, sovereign wealth funds already control more than $7 trillion today. The exact amount is impossible to ascertain due to lack of transparency.

But China, Saudi Arabia, Singapore and the United Arab Emirates alone are known to control more than $2 trillion. And more money is being allocated to these funds all the time.

What does this mean for you as an investor?

Expect to see cash coming off the sidelines to accumulate shares of the largest, most liquid firms around the globe. Quite frankly, they are the only companies that can easily absorb buying on this scale.

For example, take a look at the Dow Jones Global Titans Fund (NYSE: DGT). It holds the world’s 50 largest publicly traded companies.

World-Class Diversification in a Blue-Chip Portfolio

When you buy this cheaply valued blue-chip portfolio, you’re getting world-class diversification.

Companies like:

• Exxon Mobile (NYSE:XOM),
• IBM,
• Proctor & Gamble (NYSE:PG),
• Wal-Mart (NYSE:WMT),
• Coca-Cola (NYSE:KO),
• Nestlé,
• Toyota Motor (NYSE:TM),
• Roche Holdings,
• Samsung Electronics

… Are just a few of the names that are major holdings of the DGT fund.

These firms will almost certainly be an early stop for U.S. investors who get frustrated with low yields and start venturing back into the game.

These same companies are a natural home for sovereign wealth funds – and the growing trillions they control.

History shows that cash on the sidelines always grows itchy with time. The Dow Jones Global Titans (NYSE: DGT) is a good way to take advantage of it – ahead of the crowd.

Good investing,

Alexander Green

Source: Sovereign Wealth Funds: $7 Trillion Reasons to Stay Invested

What happened in the past when cash reached these levels?

• In September 1974, cash on hand reached $604.5 billion, representing a record 1.21 times the U.S. stock market’s capitalization. That preceded a 31% gain in equities between October 1974 and March 1975.
• In July 1982, just as a 20-month bear market was ending, cash as a percentage of the U.S. stock market’s value rose to 95%. The S&P 500 began a six-month, 36% advance. According to Bloomberg, the eight previous times that cash peaked compared with the market’s capitalization, the S&P 500 rose an average 24% in six months.

This time, of course, it didn’t take nearly as long for the market to rally.

Still, the greatest appreciation so far has been in smaller stocks. That’s normal in an early bull market. But if the bull market continues, the big, blue-chip stocks are likely to lead the market higher for two key reasons:

• First, there is still over $8 trillion on the sidelines earning next to nothing in short-term deposits. Investors tip-toeing back into the market are likely to gravitate here since these stocks are the safest.
• And then there is the growing influence of cash-rich sovereign wealth funds…

Sovereign Wealth Funds – The Financial Assets of a Country

Sovereign wealth funds are the financial assets of a country – usually part of the national savings – that are owned and organized into a state-controlled fund and put to work to earn a higher return on investment.

(Sovereign wealth funds are not the same entities as foreign exchange reserves, which are often used for short-term currency stabilization and liquidity.)

In the past, most countries put their liquid assets to work in foreign currency deposits, government bonds or gold. (The hard-working Japanese and Chinese, for example, have kept our interest rates low by maintaining a steady appetite for U.S. Treasury obligations.)

But with the dollar relatively weak and interest rates on Treasuries near record lows, U.S. government bonds are not generating the kind of returns you write home about.

So world governments are slowly moving money into global equity markets. And the sums involved are fairly staggering.

Sovereign Wealth Funds Control More Than $7 Trillion…

According to The Economist, sovereign wealth funds already control more than $7 trillion today. The exact amount is impossible to ascertain due to lack of transparency.

But China, Saudi Arabia, Singapore and the United Arab Emirates alone are known to control more than $2 trillion. And more money is being allocated to these funds all the time.

What does this mean for you as an investor?

Expect to see cash coming off the sidelines to accumulate shares of the largest, most liquid firms around the globe. Quite frankly, they are the only companies that can easily absorb buying on this scale.

For example, take a look at the Dow Jones Global Titans Fund (NYSE: DGT). It holds the world’s 50 largest publicly traded companies.

World-Class Diversification in a Blue-Chip Portfolio

When you buy this cheaply valued blue-chip portfolio, you’re getting world-class diversification.

Companies like:

• Exxon Mobile,
• IBM,
• Proctor & Gamble,
• Wal-Mart,
• Coca-Cola,
• Nestlé,
• Toyota Motor,
• Roche Holdings,
• Samsung Electronics

… Are just a few of the names that are major holdings of the DGT fund.

These firms will almost certainly be an early stop for U.S. investors who get frustrated with low yields and start venturing back into the game.

These same companies are a natural home for sovereign wealth funds – and the growing trillions they control.

History shows that cash on the sidelines always grows itchy with time. The Dow Jones Global Titans (NYSE: DGT) is a good way to take advantage of it – ahead of the crowd.

Source: Sovereign Wealth Funds: $7 Trillion Reasons to Stay Invested

According to the report, member nations pocketed a staggering $645 billion in the first six months of 2008, just under the record $671 billion they earned last year. This puts OPEC nations on track to earn a record $1,245 billion this year, despite the recent 20 percent drop in oil prices, as any price drop will be offset by an increase in demand.

Profit Hunter’s Manraaj Singh calls it the “biggest transfer in history.”

Think about it this way: At $100 a barrel, the oil exporting countries are sitting on total proven reserves of about $104,000 billion. This means they are worth $104,000,000,000,000. Manraaj says:

The six Gulf Co-operation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) have the lion’s share with about $48,000 billion in reserves.

The other members of the OPEC oil cartel own another $44,000 billion.

That leaves the non-OPEC oil producers like Canada, Norway, Mexico and Russia with a relatively measly $12,000 billion worth of oil reserves.

You can already see that the big winners from the great petrodollar migration are going to be the OPEC oil cartel members.

But that doesn’t really capture the scale of the wealth that these countries have got. Because that $104 trillion figure is just the proven reserves that these countries have — what has already been discovered. It doesn’t take into account the potential value of further probable reserves that they might have.

And of course oil isn’t trading at $100 per barrel anymore either.

Where the big money is

Let’s just zoom in on the Gulf countries. Right now they’re raking-in a billion dollars every single day from oil exports. And with oil at $130 per barrel, these countries alone are actually sitting on about $65,000 billion worth of oil.

That’s three times the total value of all the shares on all the stock markets in the world.

How do investors take advantage of the situation? According to Manraaj, we are witnessing nothing less than a global re-alignment of financial power… and the profit opportunities for those positioned to benefit from it are going to be huge.

The key, says Manraaj, is to follow the money. Oil exporters are now using their enormous wealth to snap-up foreign assets…

At the end of 2007, the oil exporters collectively owned $4.6 trillion in foreign financial assets. Almost half of that — $2.25 trillion — was owned by the Gulf Cooperation Council (GCC) states.

And this is just the beginning of a colossal shift in economic and financial power away from the old “core” Western countries towards the oil producers.

Because if oil prices remain at $100 per barrel over the next five years, the value foreign assets purchased with petrodollars will grow to $12.2 trillion by 2013.

That money is now going in ever-larger proportions to Asia…

Traditionally, the oil exporters re-invested the bulk of their petrodollars in Western securities and assets. That’s changing fast though. A lot more of that money is now being invested at home and in the fast-growing Asian economies.

In 2002, nearly 85% of the Gulf’s wealth was invested abroad in financial instruments mostly linked to the U.S. Dollar. By 2007, though, that was down to 75% as they increasingly focussed on the Gulf itself, Asia and Africa. You can bet that that is only going to keep on rising because growth in those regions far outstrips what we’re seeing in the US and Europe.

So that’s where you’ve got to position your investments if you want to take advantage of this petrodollar bonanza.

Meanwhile, The Oxford Club’s Alexander Green has been recommending the Dow Jones Global Titans Fund (AMEX:DGT) as a way of tapping into the petrodollar tide.

Alex says this fund is holding exactly the mega-cap global companies that Sovereign Wealth Funds (many of them run by oil-rich nations) are likely to plow money into for many years to come.

But our other big national deficit is creating a different problem, as well as the potential for one low-risk, high-return investment opportunity. Here’s the bottom line…

Because the United States has run such a large and persistent trade deficit for so many years, other countries – like China – have been able to run up large current account surpluses. These surpluses, in turn, have enabled them to accumulate substantial foreign exchange reserves.

For years, this money was invested in the world’s safest securities: U.S. Treasuries. But the returns from these securities haven’t been so hot lately. Especially when you’re a foreign investor watching the greenback wilt like last week’s roses.

Many world governments are now putting their money to work elsewhere. (Can you blame them?) Sovereign Wealth Funds are their vehicle.

Sovereign Wealth Funds are the financial assets of a country – usually part of the national savings – that are owned and organized into a state-controlled fund. These funds are increasingly moving money into global equity markets. And the sums involved are fairly staggering.

Current assets controlled by Sovereign Wealth Funds are estimated to be $3 trillion. They are expected to reach at least three times this amount over the next five years.

This is a bit scary to some investors, because these funds are entirely secretive. There is no world body to which they have to disclose what they are buying or when.

But here’s a common sense insight. They aren’t buying small or mid-cap companies. There isn’t enough liquidity in these to allow them to enter or exit their positions efficiently.

No, these funds must invest in the world’s biggest companies. As an individual investor, you might benefit from picking up giant companies like General Electric or British Petroleum or HSBC.

Or you can do it the easy way, by plunking for a few shares of the Dow Jones Global Titans Fund (AMEX: DGT).

This exchange-traded fund (ETF) holds 30 of the world’s largest publicly traded companies. It also pays a 2.5% dividend, 25% more than the average money market is paying right now.

Its major holdings include the companies I mentioned above, plus other market bellwethers like AT&T, Johnson & Johnson, Nestle, Microsoft and Proctor & Gamble.

The Global Titans Fund has several advantages. It is well diversified, liquid, and gives you instant foreign currency diversification. (60% of the holdings are in the United States, the rest are in international markets.)

It also uses a passive indexing approach, so it is both cost-effective and highly tax-efficient. Annual expenses are only one half of one percent.

This fund was originally brought to my attention by Eric Roseman, the Sovereign Society’s savvy Investment Director. (To read Eric’s views and learn more about international money flows, global investing and financial privacy, I suggest you check out the Sovereign Society’s Off Shore A-Letter. It’s quite good – and it’s free.)

In sum, the Dow Jones Global Titans Fund is holding exactly the mega-cap global companies that Sovereign Wealth Funds are likely to plow money into for many years to come.

My suggestion? Pick up a few shares now. And let the world’s most powerful creditors push your shares higher in the weeks and months ahead.

Good investing,

Alex

Source: How to Turn Sovereign Wealth Into Personal Wealth