"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Thursday, July 17, 2014

US Treasury Releases International Capital Flows Data for May 2014

This data, which is released once a month from the US Treasury Department, gives a fairly good sense of the appetite for Dollar denominated assets among Foreign investors and Foreign Central Banks.

It is dated however and one must remember that. Today's data is for the month of May so you can see it is not especially timely. However, it still has value in my opinion.

I am still eagerly waiting for the June data during which Treasury usually makes the adjustment from the country in which the Treasury transaction was completed to the country of origin.

In looking over the Major Foreign Holders of Treasuries data ( broken down by country), a couple of things stand out. First, China and Japan, the two largest holders of our debt, both INCREASED their holdings during the month of May.

China bought $7.7 billion worth while Japan bought $10.4 billion. Chinese holdings are down $26.4 billion from the same month last year. Japanese holdings on the other hand are up a staggering $116.4 billion from May 2013.

Belgium, the center of the so-called "conspiracy" ( among the gold perma bulls ) for surreptitious buying of US Treasuries unloaded $4 billion of the things. I guess someone forgot to tell them this month that they are supposed to be buying the Treasuries that the US Federal Reserve has stopped buying for its QE program. Remember, the theory is that the tapering has not actually stopped even though the Fed has announced that it has begun tapering and is slowing its purchases of US Treasuries. You see, the Treasury buying is really still going on. It is just being done through back channels using Belgium as the epicenter.

Sigh! It never does end does it with some of those folks.

Overall, there was a pretty healthy increase among all of the buyers for May. They increased their holdings of Treasuries to $5.976 trillion, up from $5.960 trillion in April. That is a $15.1 billion increase.

Compared to the same period last year ( May 2013), Treasury holdings are up $318 billion ( $5.976 to $5.658).  So much for the demise of the US Dollar.

Keep in mind that this particular data set is the "Holdings" data.

As far as the NET PURCHASES DATA goes, Total NET Foreign Purchases for May increased by $25 billion. That is a big improvement from the previous month ( April) when the number was a negative $13.589 billion. A negative number means foreign investors, official institutions, etc. were selling ( there was a net OUTFLOW of capital instead of a NET INFLOW).

NET PURCHASES of US equities showed another increase for May ( $10.78 billion). That comes on the heels of a net increase for April of nearly the same amount ( $10.19 billion). Foreign appetite for US stocks remains strong.

NET PURCHASES of US government agency debt jumped to $4.169 billion after falling the previous month by $2.082 billion.

The loser this month, among foreign investors, was US corporate debt. There were NET OUTFLOWS of $5.385 billion for May. That follows net outflows of $8.509 billion in April. This category is especially volatile however.

All in all, demand for US dollar denominated assets among foreign investors/institutions/official sector was strong in May.

One last thing for this set of comments - gold is moving higher today on news that the US has introduced a new set of sanctions against Russia over the Ukraine situation. Russia is not happy about it. Also, the escalation in tensions and the conflict over in Israel and the Gaza region with Hamas has fueled nervousness in stock markets and is bringing selling into equities, buying into bonds, and buying into gold. Gold is being driven of late by headlines.

It looks as if it might want to run up into the former resistance zone ( $1330- $1340). Geopolitical tensions have put a "13" handle in front of it and is offering psychological support.

You can look at the ADX and see the muddled mess on the chart. There is no clearly defined trend at the moment.

As I have been writing this, news has come out that a passenger plane has been downed over the Ukraine. That is really fueling the safe haven bids...We'll have to get the details on this as they come out.


  1. Something has got to give soon. The numerous black swans are circling and preparing to strike at any time.

  2. kudos to ya Dan. I note the DX rallied through May, so they tie in nicely

  3. Talking heads will have a field day with latest Ukraine development. They can spin it any which way and anything will sound plausible. Take care all, and be careful in these treacherous mkts.

  4. Oh come on now...we all know that the DOW will just "shrug off" all this news.
    The American consumer trumps all...right?

  5. Putin says crash. NBC news cant stop saying 'taken down'. hmm

  6. In light of 2 earlier incidents this week, you just gotta ask yourself what in the world is a commercial airliner doing taking this route?

  7. The shot down plane represents a huge change in the dynamics of of the current situation over there and other hotspots abroad, notably Syria/Iraq and maybe Iran in some way.

    If what we're starting to see is an ongoing, slow tit-for-tat escalation between Russia and the US then expect something significant out of the blue elsewhere in the not so distant future.

    A serious game of Stratego/RISK is well underway.

  8. Intense military radar and satellite surveillance of the region virtually guarantees that someone on either side undoubtedly has proof where the AA missile came from.

    RT News is now reporting that Putins plane was in the region and was the intended target!

    The propaganda and framing of this event is picking up steam quickly.
    There'll be no shortage of twists and turns in this as the party that ends up looking like the bad guy in this.

    Putins reaction to this will speak volumes. If he did it he'll remain confident and smug and more aggressive.

    If he thinks he was a target or he feels he's being framed he'll lash out verbally or otherwise to defend himself to dispel the notion he's become a rogue leader.
    His reaction will tell the tale

    The location and retrieval of the black box is critical. I'm guessing it's been found or will soon be.

  9. Dan
    This data pretty much kills the conspiracy theory but we need one more month to be sure.

    The Ukraine situation could be disastrous no matter who did it. Surely radar data exists but we will never get an honest assessment.

    Today's spike in gold will be given back quickly unless the situation boils up even more.

  10. Oil bouncing...wonder why...

  11. Dan - look at the GDXJ chart for a purer picture of the outlook for gold (the Fed's boyz can't manipulate that one as easily as Comex). Nice, completed, reverse head and shoulders and powering up. Stocks are again showing us the way for this market.

    1. Yeah yeah. Nothing like a pennystock gambler telling how it is.

  12. http://www.amny.com/news/hershey-hikes-candy-prices-due-to-rising-costs-of-cocoa-1.8817198

    Chocolate anyone?

  13. Whoever is responsible for the Ukraine crash will apologize, more sanctions will be announced, Obama will issue some warnings and the DOW will rally back.
    Not because central banks are back stopping equities..because we are in a raging worldwide economic boom...right?


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