Is this the start of the $ fall? Disturbing numbers on foreign sale of treasuries!

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cnbbaldwin's picture
cnbbaldwin
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Is this the start of the $ fall? Disturbing numbers on foreign sale of treasuries!
Foreign purchases of long-term U.S. Treasurys, Fannie Mae and Freddie Mac, bonds, corporate debt and stocks -- netted for acquisitions of foreign debt from U.S. residents -- dropped to negative $43 billion in January from positive $34.7 billion in December, said the Treasury Department Monday.
Here is the link:

 

 

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Erik T.
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Re: Is this the start of the $ fall? Disturbing numbers on ...

I don't get it... I thought Friday's comments from China were HUGE NEWS, and I expected the long bond and the ten year to sell off dramatically in response. There was a little sell-off early in the day today, but it's mostly recovered!

I feel like I'm in a game of "who's the real idiot" here. It seems to be that long treasuries should be COLLAPSING, but the rest of the market is just yawning at the news. Either the market is incredibly slow to pick up on what seems obvious to me (and has for months), else I'm slow to pick up on something obvious that everyone else is seeing but I'm not.

Erik

 

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Doug
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Re: Is this the start of the $ fall? Disturbing numbers on ...

Erik,

I too have been expecting an economic collapse for a while now, and the China news last week would seem to be the kind of catalyst that could start the ball rolling.

I don't think you're missing anything, because I don't think I am.  I do, however, marvel at the resilience of the American people, many of whom recognize the quagmire we're heading into, but still go about their lives in a fairly normal fashion.  The single fact that tells me they recognize the problem is that they've stopped borrowing and spending, and started saving.  That may well save our bacon in the long run.  They are probably deleveraging more debt than the gov't is with all its bail outs.

As CM pointed out in his most recent report, we should keep our eyes peeled for the first sign of the dollar dropping precipitously and yields on gov't securities heading up steeply.  Until then, all I'm doing is preparing the best way I can, and hoping my daughter can start college next fall as scheduled.

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Farmer Brown
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Re: Is this the start of the $ fall? Disturbing numbers on ...

Erik,

I just don't understand what the Chinese or anyone else is going to dump their dollars for.  I too see all the risks and eventual collapse of the dollar, but where does one go for now?

They can try to put it in commodities, but that takes time, and they could only buy commodities that can last a long time, or invest in illiquid commodity extracting and transportation infrastructure (mines, railroads, transocean cargo ships).  I think the problem isn't so much that there is no money, but that there is no demand for it.  Everyone seems to be wanting "some place to put their money", but stocks are a joke, real estate is too illiquid for large quantities, and while the dollar is bad, everything else is worse. 

I'm as mystified as anyone else as to when and how this will unwind, but I do strongly believe that when it does, it will be like a giant compressed spring finally popping and you will not want to be in the way. Hopefully I figure what the right place to be is before then, but I doubt it.

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Erik T.
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Re: Is this the start of the $ fall? Disturbing numbers on ...

Patrick,

In general, I think you hit the nail on the head: The reason so many foreigners hold treasuries is that there is no other money system in the world big enough to absorb that much capital.

But in the case of the Chinese, I think the answer is they may sell dollars and spend the money on their own domestic stimulus programs.

Erik

 

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CB
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Re: Is this the start of the $ fall? Disturbing numbers on ...

Have a read here:

http://www.atimes.com/atimes/China_Business/KC17Cb02.html

An interesting discussion of "the dollar and China conundrum". Its part 2 of a 3 part series, 3 not being out yet. There is no clear exit for anyone and the pressure is building. I become more convinced every day that it will all end badly with some party or another trying to gain atvantage at the expense of the rest, or just some accident or poorly thought out decision that will set the whole thing off...

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Nichoman
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Re: Is this the start of the $ fall? Disturbing numbers on ...

Okay...been chewing on this since today/s closing.  Still leads me to the observation were picking up steam and closer than ever to a dollar collapse (possibly highly non-linear or rapid?).   Would not be surprised this happens in next week or two.

In a broad sense...numbers are numbers...how can this increasing imbalance of decreasing demand and increasing supply lead to anything else after past several months.

Nichoman 

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chris_m
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Re: Is this the start of the $ fall? Disturbing numbers on ...

Just my theory...somebody correct me please... 

I think what some of us (quite frankly) are having a hard time wrapping our head around is that other countries are far worse off than the US....higher leveraged & quite dependant on the American machine working.  So... as it has been said before... there is nowhere else to go besides the USD right now.  Hence no collapse.

   How do I justify that with the first post?...all I can say is that (in my edumacated GUESS) ...it's like a bit of 'profit taking' from the money market because the US $ is so strong compared to other 'local' currencies.  I think this net negative (in Treasuries)  may be because of a need for cash not a lack of 'faith' in the currency by countries  (.....YET...)

On the 'faith' question....China is buying from savings (as discussed by Hilary I'm sure) but given their governments plans to expand 8% next year they know they have no chance of that with a weakend greenback.  Talk about potential uprising......Somehow the Chinese have been convinced to take a big 'bet' on the US economy & Obama's "plans".  What that incentive was...that will only get flushed out at the end of this decade.  (Energy tech? Market access?)  China's comments were more for show I think. ( for now)

People in the US should take some of their stimulus $$ & head to Chinatown to spend a bit of it...if you want to prevent a total devaluation.

 Am I completely out of lunch...?

 

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