The Gulf Investor in 2008

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Asset base: Experts point out that the GCC states will continue hunting for global company acquisitions in the years to come.

Dan Denning, author of The Bull Hunter: Tracking Today's Hottest Investments, and editor in chief of The Australian Daily Reckoning, agrees. Denning predicts further weakening of the greenback will spur continued buyout activity in the year to come.

"The recent SWF deals illustrate what an awkward position it is to own hundreds of billions of US dollars these days," Denning told Arabian Business. "You're hard-pressed to get rid of that much money, even if you're trying to. You have to take bigger and bigger risks.

According to McKinsey Global Institute, petrodollar reserves, of which SWF's constitute about 60% of total net worth, will grow from just over US$3 trillion to almost US$6 trillion by the year 2012. And here's the real kicker... that estimate is computed by factoring in oil at just US$50 a barrel, or about half what it costs right now.

With a wave of adjustable rate mortgage resets set to hit financial institutions in the US and the UK throughout 2008, a fresh round of defaulting borrowers look set to compound pressure on already cash-strapped lending outfits. As these companies look for quick, easy liquidity injections they may well turn to the deep pockets of Middle East funds.

Acquisitions of distraught foreign companies - think banks and other beleaguered financial institutions - will continue to pile up on the asset side of the Gulf's ledger in the months to come. As debt carries financial distress toward the upper echelon of the west's blue chip fraternity, the SWF's with the deepest pockets will stand to benefit from discount buys at the top level.

Seasoned traders looking to garner some quick profits will note that these injections often lead to sharp price spikes for distressed companies and, indeed, for whole sectors. In the hours following the Abu Dhabi-Citigroup announcement, shares of the bank shot up, dragging the entire financial sector with it.

But bad debt is, of course, still bad debt, regardless of who owns it. It wasn't long before tempered prudence replaced irrational optimism and the market returned to more modest levels. The trick here is studying where the money is likely to be pumped in... and, more importantly, when you need to get out.

Infrastructure Boom

You don't have to be the world's largest sovereign wealth fund, or a seasoned trader with an appetite for risk, to take part in a wave of Middle East investment trends in 2008.

The GCC is also spending its petrodollars on infrastructure capacity in its own backyard. Astute investors who track the companies likely to take the biggest tender will take the biggest profits.

"Infrastructure is the big investment theme in the Middle East," explains Mayer. "Simply put, many Middle Eastern countries have so many needs - and are growing so rapidly - that increased spending looks inevitable. So, finding companies that profit from this growth could garner substantial returns for forward-thinking investors.

"Dubai, for example," Mayer told Arabian Business, "needs lots of water and power infrastructure. Its needs look even more desperate given an ambitious development pipeline, ­ some US$300bn in real estate projects over the next 10 years. Getting water and power to those projects will be a challenge.

Mayer first highlighted the "water-themed" investment curve with a 2006 Blue Gold Water Report, a report that identified companies like Lindsey Corporation, which his readers had the opportunity to sell for a 100% profit.

"Already, there are strains," Mayer continues. "An inability to connect with power and water supplies has led to the delay of a number of projects. It's a bottleneck that isn't going to get any easier to pass through.

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