Following the announcement of TD Bank's purchase of Commerce Bank (CBH), many eyebrows were raised question why this situation arose. A Canadian Bank buying Commerce? For the first time since 1976, the Canadian dollar has reached parity with the US dollar. This comes on the heels of Dubai buying into a large stake in NASDAQ. There has been a steady increase in acquisitive activity in the US from foreign firms.

What is happening here?

In colloquial terms, cutting taxes without reducing spending leads to deficits which leads to a weak dollar. The economy has benefited in many ways, especially multinational companies that reap a significant portion of their revenues from overseas. When converting to US dollars, their profits are inflated, hence driving shareholders' returns, etc. However, regarding the ability to US firms to remain as such, it is becoming increasingly difficult. The value of purchases of companies by foreign buyers year to date totals $257 billion, which is more than in any full year since 2000, according to Thompson Financial.

US Companies Up for Fire Sale?

Basically, the perfect storm is brewing right now. Based on the recent credit crunch and liquidity problems in the credit markets, private equity deals have dried up, at least temporarily since the cost of cash has increased. Meantime, with the US dollar declining, US companies become increasingly attractive to foreigners.



Before long, will we see xenophobia on par with the Japanese-bashing of the 1980s? As a kid, I recall routinely hearing adults quipping that someday we'll all be speaking Japanese, that they were taking over the country. Meantime, it wasn't widely covered in the press that the Dutch had owned and were still buying substantially more assets than the Japanese were. I felt like the Dubai ports ruckus was reminiscent. They couldn't buy into our ports (which would still be manned by Americans and subject to the same regulatory requirements), but now they can buy into our exchanges (not to mention that they're one of our few remaining allies in the East). Is the tide of public opinion turning?

What do you think?