Investing Blog

Barclay’s must really be feeling the pinch. Even though the company was able to avoid bailout money from the UK, its still not out of the toilet just yet. Bloomberg.com just reported that the company would be soliciting offers for Barclay’s Global Investors, arguably its most successful arm which maintains more than $1.5 trillion of investor capital.

Good money chasing bad?

It seems to be a common theme now that companies and governments alike are selling their profit producing assets for a quick cash infusion. Barclay’s which is holding billions of unprofitable loans, is now looking for a new owner of iShares and its various Barclay’s branded ETFs and other funds.

But why?

Why would you sell out of the exchange-traded fund game this early? Why would you sell your assets under management that produce billiions in revenue annually, on time, every time?

Barclay’s Global Investors is a literal cash machine. Each year it brings in billions of dollars in revenue that can be relied on. Its not like anyone ever writes a check to Barclay’s Global, no, instead the money is simply deducted from their investment accounts.

Barclay’s Global Investors made $903 million in PROFIT in 2008, that’s pretax, but its still amazing. And at a price of just $12 Billion as reported by the WSJ, that’s a bargain. No doubt about it a true growth business. Its inflation proof, its stable, and its getting even better now that the markets are turning over.

Selling iShares will prove to be the worst business move ever made in history. Its like selling Yahoo in 1997, you’d be dumb to do it. Exchange-traded funds are in their infancy, not on their death bed. And where will the money go? Subsidizing home loans that will never be repaid. Ugh, the audacity of the world’s biggest firms.

I’m staying on top of this, any company that buys BGI right now is getting an absolute bargain.

Investing