Readings: Forgive & forget, Wipro buying CapGemini, Sovereign Funds
- The New Yorker: Forgive & Forget
During the 1980s, Mexico, Brazil, Argentina, and Peru all defaulted on their debts, leading to a regional crisis that was resolved only when the U.S. stepped in with the “Brady bond” debt-relief plan. Yet, within a few years, investors were again snapping up emerging-market bonds and lending to the very Latin-American countries that had started all the trouble . . . In other words, even when a country has a track record of bad behavior, investors are often surprisingly willing to keep giving it money.
Why? The most obvious reason is that lenders are in the business of lending, and, while punishing borrowers by refusing to lend may keep you from losing money, it also limits how much you can make . . . The point isn’t that lenders don’t care about history; rather, there’s no sure way of knowing how to learn from it.
Wipro Ltd., the second-worst technology stock on India’s benchmark Sensitive Index this year, gained the most since May 2004 on a report it may bid for Europe’s largest computer services company Cap Gemini SA.
Wipro and rival Infosys Technologies Ltd. were also helped by news that U.S. consumer spending increased last month, easing worries about a slowdown in the computer services providers’ biggest market.
Today, the funds manage an estimated $2 trillion to $3 trillion. To offer some perspective, that’s significantly more than all the world’s hedge funds combined. Some financial analysts estimate that the total quantity of assets managed might grow to $12 trillion during the next 8 years.
If the risk of foreign-government involvement is that the government might pursue a strategy that’s not in the interest of profit- maximizing for shareholders, then one need only limit the influence of the government shareholders. There’s an easy way to do that: simply pass a law that prohibits governments from exercising the voting rights of shares they purchase.
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