As last Monday demonstrated, any increase in dealmaking activity tends to move markets higher: With the chance of windfall profits from a surprise buyout, investors tend to bid up shares of companies that might be buyout candidates. It was the explosion of M&A deals two years ago that helped propel the Dow Jones Industrial Average to its Oct. 12, 2007 record high of 14,093.08.

Last week's flurry of deals was just the beginning: It's the opening scene of a three-act financial drama that will take years to climax. For U.S. investors, however, the Second Act is the key: It's where deep-pocketed foreign suitors step in and start snapping up marquee U.S. companies, prime real estate and household brand names. It's where attentive investors can recoup some of the losses they've incurred in recent years with some windfall takeover profits.

And it's where America goes on sale.

Paying the Tab

Make no mistake. This had to happen.

With U.S. budget deficits on the upswing, the dollar poised for a protracted tailspin and overseas investors searching for ways to diversify away from increasingly risky U.S. financial assets, don't be at all surprised when foreign investors accelerate their purchases of U.S. assets.

The U.S. government has committed itself to more than $11.6 trillion in new programs, many of which will lead to increased – and choking – levels of U.S. debt.

The federal budget deficit for 2009 will reach a record $1.6 trillion, more than three times 2008's record deficit of $455 billion, the White House Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) said recently.

It will get worse. From 2010 to 2019, the CBO says the deficit will balloon to $7.14 trillion, while the White House projects a shortfall of $9 trillion picture for the same period.

The U.S. economy can cover that shortfall in one of two ways: By issuing debt or by selling assets. Those "assets" will include U.S. companies. And the willing suitors will include China, Singapore, Japan and Russia:

Four to Watch

• China: With $2.3 trillion in reserves and some of the top government-controlled investment funds on earth, China will obviously be a major suitor of U.S. companies and real estate. The country wants to diversify away from such dollar-denominated financial assets as U.S. Treasury bonds. As the U.S. dollar continues to skid, those financial assets will erode in value. Shifting into non-financial assets is one solution. And it's already happening. Government-controlled "sovereign wealth funds" (SWFs) will be major buyers. China Investment Corp., the Red Dragon's $200 billion sovereign fund, plans to apportion $2 billion across three buyout funds – including one managed by Goldman Sachs Group Inc. (NYSE: GS) and another that's operated by Oaktree Capital Management LP. All three of the CIC funds specialize in distressed-asset investing in such areas as U.S. real estate and infrastructure.
• Japan: This Asian giant is taking $100 billion from its underperforming $1.5 trillion national pension fund to create a government-controlled investment fund (sovereign wealth fund). Thirty percent will be devoted to emerging-market investment plays. But the rest will be deployed into such long-term investments as natural resources, energy and food production.