Why Is Foreign M&A Down in U.S.?

Chairman Luis Gutierrez (D-Il) opened a House Financial Services Subcommittee hearing yesterday on sovereign wealth funds (SWFs) by referencing Stephen Grocer's elegant observation in the Wall Street Journal that foreign direct investment via M&A had dropped 50% in the first two months of 2008.  Gutierrez and Grocer both commented that it seems odd with the dollar at historic lows that strategic buyers are not taking out their U.S. acquisitions wish lists and buying.  Grocer's data shows it isn't happening, with a mere $11.1 billion in deals announced in January, the lowest month for foreign deals since May 2006.   What's going on?  I am afraid it may be what I call the "Davos Water Cooler Effect," in which global CEOs get a common idea about a country, strategy or technology.  Between the Hillary-Obama race to tear up NAFTA, drama over SWF investment in the U.S. financial sector, protectionist panic over the Northrup-Gruman/EADS Air Force Tanker deal and uncertainty about the U.S. economy - some global CEOs may see the U.S. as hostile to foreign deals or worse that the U.S. is not a good place to invest.   This early data bears watching.  As does nativist and xenophobic political rhetoric...we have always welcomed foreign investment because it is good for our economy and we want to invest abroad ourselves.  The U.S. remains a very good place to invest, with one of the most hard-working, innovative and flexible workforces in the world.  Instead of looking inward, we should be talking up our attributes.