US Markets and Foreign Ownership, Portfolio Risk and Net Investment Position

Keep in mind that when they talk about the "US position" or the "China position" this can include all ownership, both official and private, unless otherwise specified.

I was a little surprised to see the relative size of the US equity market versus the debt markets, ex-Federal Reserve ownership.

Also a bit of a surprise was the size of European Direct Investment in the US compared to other regions. No wonder Benny felt compelled to bail out their banks.

Things to look for in these graphs:

 Since 2002, the increase in foreign ownership of Treasury bonds has been driven almost entirely by government buyers. Until the 2007–2009 crisis, the same was true for bonds issued by governmentsponsored enterprises (agencies). In the postcrisis recovery, foreign private holdings of agencies are rising,
while foreign government holdings continue to fall.

 From 2005 to early 2007, foreign governments’ Treasury purchases were driven by China’s purchases. However, China became less significant during the crisis as other investors crowded in. Today, China’s purchases have remained elevated while the rest of the world is purchasing less than during the crisis peak.

 The Net International Investment Position (NIIP), meaning foreigners’ holdings of U.S. assets minus U.S. holdings of foreign assets, has remained remarkably resilient, even though the large U.S. current account deficit reflects a steady flow of net foreign purchases of U.S. assets. This trend is likely to persist if the dollar depreciates, since dollar depreciation results in gains in the dollar value of U.S. holdings of foreign assets.

 The U.S. portfolio of foreign assets is relatively risky, with a significant share of holdings in equities that generate gains during a boom but suffer losses when crisis strikes. By contrast, foreign holdings of U.S. assets are less volatile because of the concentration in treasuries. Following a sharp decline in 2008, the U.S. net international investment position recovered in 2009 due to strong equity market performance.

The entire report can be found here: Foreign Ownershp of US Assets - CFR Chartbook

click on a chart to view a larger version

In Case You Were Wondering Who the Mainstream Media DOESN'T Support...

Crouching Corn Dogs, Hidden Agendas: The Coverage of the Iowa Straw Poll

Management of the news by the vested interests and status quo could not be more obvious in this case.

The problem with Ron Paul is that agree or disagree with him, he is honest, consistent, and he doesn't sell out his opinions for lobbyist money.

I don't care for some of his positions on civil rights, and the other 'intrusions of government' to protect the rights of people against majorities.

Not every crook carries a gun, and not every man and woman carries their dignity in their wallet. There is such a thing as an overly narrow interpretation of the Constitution. Paul may have moderated on these positions, but I have not yet heard it.

As with Obama, it is difficult and dangerous to assume what someone might do in particular situations and issues if they are elected. He needs to weave that into his overall philosophy to be credible. And he must say where he stands vis a vis other politicians from his wing of the party.

But on the economic front Ron Paul is better than most on several points. And his continual theme of restraining the reach and the expense of the American military involvement is powerful.

Ron Paul has 'third party' written all over him. The status quo of the powerful and their demimonde in the media fear him, and will do all that they can to stifle his message. Given the chance, they will 'Ross Perot' him. What was done to Perot, the real threats to harm his daughter, and then the media circus which painted him as 'a nut' for going public with those threats, was disgraceful.

As you may recall a credibility trap is when an organization cannot perform effective change and reform because it would require them to admit the corruption that exists, thereby placing the powerful insiders who are complicit at risk. So this sort of systemic distortion continues until there is an 'unavoidable crisis' like a war or a domestic event, and the past offenses can be swept under the rug for the sake of expediency in a swell of patriotic fervor.

Ron Paul is one of the few politicians who apparently "didn't take the money." And that makes him dangerous.

"The fight for justice against corruption is never easy. It never has been and never will be. It exacts a toll on our self, our families, our friends, and especially our children. In the end, I believe, as in my case, the price we pay is well worth holding on to our dignity...

We can holler and shout, but we also have to light the lamps that show the corruption, injustice, ineptitude and abuse of power. When we do, you will see the villains scurry into the woodwork the way roaches do when you turn on the light.”

Frank Serpico

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Gold Daily and Silver Weekly Charts, La Douleur du Monde, and The Fall of Troy

"A shudder in the loins engenders there
The broken wall, the burning roof and tower,
And Agamemnon dead."

William Butler Yeats, Leda and the Swan

No this is not a reference to birth of Greenspan, but to the grand arrangement of the allied powers after the war, the Bretton Woods Agreement, and the birth of the world's still reigning wonder, the world's reserve currency, the dollar.

The partnership of the financiers and the government in the States has taken the reserve currency hostage, turning it to its own purposes starting with the closing of the gold window by Nixon some 40 years ago today, and provoked a long, smoldering currency war.

But behind their slanted walls of mighty Wall Street by the Hudson flowing on the plains, the States have seemed implacable, almost invulnerable. And in their pride so have tempted the wrath of the gods.

Will the rest of the world find a champion to contest with the city on the hill? Many have stood so far and seemingly failed, most recently the son of Aërope.

And in his tent, brooding after a long period of unappreciation, is that legendary champion, Achilleus, armored in gold, with his wily companion, Odysseus, dressed in silver.

Is Bernanke the stalwart Hektor to stand against him, and Timmy the persuasive Paris?

And so the story goes...

SP 500 and NDX Futures Daily Charts - Options Expiration Week

As a reminder this is stock option expiration week.

Stocks were in rally mode today. The volumes were a little lighter than last week's downdrafts. Some might call this a seller's strike.

The key question for the intermediate term, is if this is a bear market rally, or a bull market correction.

The charts may provide us some information there.

The correction from the long rally proceeded as far as it possibly could before it would be called a new bear market.  We are now seeing what might be a technical bounce.

It is the continuation from here, perhaps after this option expiration, that will let us know if this is a bull market correction, or a new bear market. 

I am reasonably sure we will know by October.