Following is a chart depicting the reported holdings of US Treasury debt by some of the largest creditor nations.
Each month the Treasury reports this data and each month we plot it to attempt to gain some insight into who is financing the continued profligacy of the US. Last month the numbers reported out showed the Chinese selling $34.2 billion worth of Treasury debt in December 2009. That was enough to drop them into second place behind Japan as the largest holder of US Treasuries. That obviously caused quite a stir at the time.
This month, Treasury revised the holdings data and while they show China still selling that same $34.2 billion from November to December 2009, they made an upward adjustment to the overall holdings number, increasing it by a substantial $139.4 billion. That was more than enough to kick them back up into first place once again as the largest holder of US Treasury debt ($894.8 billion).
The Treasury reported that China did sell another $5.8 billion worth of US debt from December through January 2010, dropping them down to $889 billion as of the most current data.
It appears that a large chunk of those Treasuries that were moved over into the China column came off of the reported holdings of the UK. Their number was adjusted downwardly by $124.4 billion. Also, the Caribbean Banking Centers were downwardly revised $56.5 billion. It is not unusual to see a significant adjustment to the UK with most of that moving over to China. It just tells us that some Chinese are buying through London money centers.
The last chart shows the relation of the US Trade deficit in relation to both long term and short term money flows.
Following are a few charts detailing the release of this month’s Treasury International Flows data for the month of January 2010.
A few salient points –
Every asset category saw a drop in purchases from the previous month whether it was debt or equities. What strikes me however is the continued sell off of US Agency Debt (think Fannie and Freddie) as well as US Corporate debt. While the rate of sales of US Agency debt has declined (although there continues to be net divesture of US Agency debt which no doubt is related to the woes in the housing sector), the rate of selling of US Corporate Debt seems to be accelerating.
While this data is dated by two months, and a lot can happen during such a time interval, it is evident from this data that foreign investors are losing their appetite for US corporate debt. If that is indeed the case, then it is difficult to see how talk of a “jobless” recovery is going to continue with emphasis on the word “recovery” this time around. I fail to see how one can paint the picture of a healthy recovery when foreign investors want no part of providing capital for US corporations. Maybe they are not as prone to being manipulated by the Spin and BS that comes out of Wall Street as US based investors apparently are. Who knows? But either way, this is something that bears continued monitoring. If US Corporate debt is not finding a home outside of the US, it could be that these foreign lenders want a higher rate of return on their capital before they are willing to part with it. That comes right off the bottom line of US corporations.
Investors are still buying US equities but at a reduced rate. Purchases were at an eight month low. Apparently, Treasury Debt is still being taken although purchases were the lowest in three months. They are still at respectable levels however. It seems as if the only US securities that have much interest from abroad are this Treasury debt. That is telling.
I will get some info on the trade balance and the country ownership of Treasuries up a bit later.
I would like you to take a quiz. I am sure 90% of you will be shocked by the results.
Call the servicer of your mortgage and ask them to identify who owns it. You will be stone walled like you have never been in your life.
Continue up the line of supervisors directly to the office of the president, then think securitization.
Jim Sinclair’s Commentary
The bailout of Greece:
It is on. It is off. It is on. It is a maybe.
It is amazing how we got to the "It is a maybe" right at the euro breakout from a downtrend line.
That is not TA. That is painting TA. You are facing investment banking houses who behave like rogue nations in markets trading today.
Jim Sinclair’s Commentary
I believe that when it is all said and done, the unfunded massive guarantee of the US government being accumulated daily will be the undoing of the US dollar.
Jim Sinclair’s Commentary
This is what makes for a bull market in lobbyists. Wall Street will not like this at all.
Right now and due to FASB capitulation to political pressure, all financial instruments are marked to whatever the hell the bank wants them to be marked to.
To carry a loan today at full value is the essence of a capital crime. This initiative will more than likely fail.
Mark-to-market back in the spotlight. The Financial Accounting Standards Board is likely to propose an expansion of mark-to-market to include assets such as loans. At present, banks hold loans at their original costs and create reserves based on their own view of potential losses. If the proposal moves forward, it will mean major changes for banks’ balance sheets; looking at JPMorgan (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC), the proposal could affect $2.8T of loans, or around 40% of their total assets. Smaller banks would see an even bigger impact.
Jim Sinclair’s Commentary
Playing hardball with China over the Yuan and trade is a very dangerous exercise in economic diplomacy.
Note the standard procedure MOPE in this article.
China trims holdings of Treasury securities China trims holdings of US Treasury securities for third month as US federal deficit soars Martin Crutsinger, AP Economics Writer, On Monday March 15, 2010, 9:05 am
WASHINGTON (AP) — China retained its spot as the biggest foreign holder of U.S. Treasury debt in January although it trimmed its holdings for a third straight month. The string of declines are likely to underscore worries that the U.S. government could face much higher interest rates to finance soaring budget deficits.
The Treasury Department said that China’s holdings dipped by $5.8 billion to $889 billion in January compared to December. Japan, the second largest foreign holder of U.S. government debt, also trimmed its holdings but by a much smaller $300 million to $765.4 billion.
Net foreign purchases of long-term securities, a category that includes both government and corporate debt, totaled $19.1 billion in January, as net purchases of private corporate bonds fell by $24.8 billion, the biggest drop on record.
A month ago, Treasury initially reported that China had cut its holdings so sharply that it had lost its top spot as America’s largest foreign creditor, a position it had held since it’s holdings overtook Japan in September 2008.
However, 10 days later, Treasury released its annual update of the figures. The revised data showed that China, while reducing its holdings, still retained the top spot.
As reasonable as it seems, pushing China on Iran does carry extreme risks.
China has now sold US Treasury instruments for 3 months.
Newly powerful China defies Western nations Analyst: ‘This is a fundamental shift … It’s a change in national attitude’ By John Pomfret
BEIJING – China’s government has embraced an increasingly anti-Western tone in recent months and is adopting policies across a wide spectrum that reflect a heightened fear of foreign influence.
The shift has accelerated as China has emerged stronger from the global financial meltdown, with a world-beating economic expansion rate and a growing nationalist movement. China has long felt bullied by the West, and its stronger stance is challenging the long-held assumption shared among Western and Chinese businessmen, academics and government officials that a more powerful and prosperous China would be more positively inclined toward Western values and systems.
China’s shift is occurring throughout society, and is reflected in government policy and in a new attitude toward the West. Over the past year, the government of President Hu Jintao has rolled back market-oriented reforms by encouraging China’s state-owned enterprises to forcibly buy private firms. In the past weeks, China announced plans to force Western companies to turn over their most sensitive technology and patents to Chinese competitors in exchange for access to the country’s markets.
Internally, it has carried out more arrests and indictments for endangering state security over the past two years than in the five-year period from 2003 to 2007, according to a report released Friday by the Dui Hua Foundation, a San Francisco-based human rights organization.
China has also reined in the news media and attempted to control the Internet more vigorously than in the past. This month, it announced regulations designed to make it harder for China’s fledgling community of nongovernmental organizations to get financial support from overseas. In foreign affairs, after years of playing down differences, it has reverted to a tone not heard in more than a decade, condemning recent U.S. decisions to sell weapons to Taiwan and to have President Obama meet the exiled Tibetan leader, the Dalai Lama.
U.S., U.K. Move Closer to Losing Rating, Moody’s Says (Update1) By Matthew Brown
March 15 (Bloomberg) — The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service.
The governments of the two economies must balance bringing down their debt burdens without damaging growth by removing fiscal stimulus too quickly, Pierre Cailleteau, managing director of sovereign risk at Moody’s in London, said in a telephone interview.
Under the ratings company’s so-called baseline scenario, the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K., and will be the biggest spender from 2011 to 2013, Moody’s said today in a report.
“We expect the situation to further deteriorate in terms of the key ratings metrics before they start stabilizing,” Cailleteau said. “This story is not going to stop at the end of the year. There is inertia in the deterioration of credit metrics.”
The pound fell against the dollar and the euro for the first time in three days, depreciating 0.8 percent to $1.5090, while the dollar index snapped a four-day drop, adding 0.3 percent to 90.075.
This is but a start. Now the snowball meets gravity.
This is a creative way to cull the gene poll.
Still no money for Prichard pensioners City given two months to figure out payments Updated: Thursday, 11 Mar 2010, 3:12 PM CST Published : Tuesday, 09 Mar 2010, 9:38 PM CST
PRICHARD, Ala. (WALA) – A bankruptcy court judge has given the City of Prichard two more months to figure out how they will pay retired city workers. Prichard pensioners have gone six months without a pension check.
Prichard is operating under the protection of Title IX Bankruptcy, and for many people, that means no promised pension payments.
After six months with no pay, Prichard pensioners put their faith into the courts. They hoped a judge would force the city to pay some, if not all, of the pension money it owes. However, the bankruptcy court judge said the city is not obligated to pay the retired workers just yet. The judge gave the city two more months to restructure the budget and present it to the courts.
The city got more time, but unfortunately reality has already set in for Bobby Holifield and his family.
"You can’t begin to know the stress of this. My daughter is in college right now, my son just graduated from high school, he wanted to go to college. My daughter had to miss last semester in college and she will have to miss this semester. I can’t afford to pay it. My son wants to go to technical school; I can’t afford to pay for it. It makes me feel like a failure more than anything, when I did my part. I worked 32 years to get my pension. They owe it to me, it’s not something I’m asking them to give me," Holifield said.
It appears that we are back to the old familiar pattern of strength in the Dollar bringing in algorithm selling of commodities and by connection, gold. Friday was a bit of a break from that norm as it now appears that we had a bout of pre-weekend short covering in the European related currencies during which gold was sold lower on ostensibly easing fears concerning Greece. I say “ostensibly’, because it was evident that the take down in gold was a bear raid.
Today, copper is getting knocked down as is crude oil, which has seen its gains from last week completely erased. As said many times here ad infinitum, ad nauseam, these markets are not really trading fundamentals all that much on any given day but rather fund order flow. If the funds buy, locals buy. If the funds sell, locals sell. That is all that these markets have become.
We now have cases in which there is so much managed money coming into certain commodity markets at times, that it is chasing out commercial hedging interest. The result is large air pockets above the market which causes markets to shoot sharply higher on up days. There are simply no sellers on those days. The flip side occurs when these same funds are not buying or actively selling – the market then falls into a void as there are no bids to be found. The commentary usually calls this “volatility” but what it really is in my opinion is a sign that these funds are far too large for the markets and that we need to see the CFTC rein them in.
The commodity markets came into existence to provide a risk management tool for bona fide Producers or Users. When they are unable to use the markets for that purpose, then it has become evident that something is seriously out of whack. I read far too many reports of commercial hedgers incurring damaging margin calls because these huge hedge funds are driving prices to extremes unwarranted by the fundamentals. Eventually the market will correct such an occurrence but in the interim, underwater hedges can wreak havoc with risk management programs. The problem is not so much with the mega commercial firms which are well capitalized as a general rule or can at least secure financing enabling them to meet margin calls and ride out their hedge until it is time to lift it. It is the smaller or mid-sized commercial entities which do not have such access or the financial wherewithal to deal with a short hedge that goes deeply underwater due to a barrage of algorithm buying, that get the short end of the stick. More of these guys are trying to move their business to private contracts off the exchange but apparently the exchanges do not care as they love the increased volume of trading and fees associated with the business of the big boys. Besides, the exchanges have also figured out a way to make lots of money renting computer server space to high frequency traders. Some call this “progress”. It looks to me more like a case of short-term sightedness versus long term health of the markets. Enough of my soap box pontificating for one day however.
Even though the Dollar is fairly strong this AM, gold is managing to hold above unchanged, not too bad of an accomplishment considering the extent of the selling hit the broad equity markets. That is no doubt related to the strong showing of gold when priced in terms of the various European related currencies. It is going to be insightful to see if gold can maintain a foothold above the €800 Euro level and the €730 level in British Pound terms.
Gold is continuing to attract buying above the $1,100 level which is becoming more significant from a technical perspective. It’s range trade continues with the bears having the short term advantage. Bulls need to push it back over $1,120 to force a bit of minor short covering. The 10 day moving average has turned lower which is near term bearish but I want to add that markets in ranging or consolidation patterns do not generally pay much attention to moving averages but more so to those particular technical indicators such as the Stochastics which are designed for that pattern.
As far as the Dollar goes, it continues its ranging trade with the bears simply unable to take out the support level under the market and force a bout of long liquidation which would feed on itself as the froth in the market just keeps foaming. The problem for the bears is that Europe just will not cease occupying the minds of currency traders and that keeps sellers coming into the Euro, the Pound and Swissie which then begets more buying in the USDX. This is going to be resolved one way or the other fairly soon but for now, the 6 week long trading range continues.
The mining shares as evidence by the HUI are succumbing to the broad equity market weakness. So far they have been able to hold last week’s low but they are dangerously flirting with that level. A breach of that would allow sellers to take the index down towards 405, which is the 40 day moving average. They will need to hold that level or run the risk of a move towards 390. From what I can see of the HUI, it too looks like it is stuck in a trading range like so many of these other markets.
The long bond is also stuck in its range bouncing off the low end of the band that has contained it for the last 2 months.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini
Please do not confuse my Gold Wave Analysis with Elliot Wave analysis. It is completely different.
Cycles, energy of the trend, and movement of the leveraged money flows.
ABCD is merely a designation of the natural cycles within the gold trend. It also considers the energy within the tape to forecast both duration and magnitude. In other words, it produces a time based forecast that is consistent with the energy of the previous cycles and direction of the leveraged money flows.
The Gold Wave Analysis suggests a mean, average window, bottom around May (plus or minus a few months). Cycles influence the money flows, and the money flows can slightly modify the cycle timing. This feedback loop is important, so they must be watched together.
Gold’s cross-currency strength signals its evolution CIGA Eric
Gold’s rally to record highs in euro and sterling terms and the resilience of spot prices in the face of a rising dollar is sign-posting the metal’s broadening insurance appeal, as sovereign debt fears shift to the fore.
Absolutely nothing new here. Jim, Dan, and I, as well as others have recognized rising global gold prices for years. What’s interesting is that Reuters, a conduit, is recognizing it. Always watch for subtle changes.
Gold to Silver Ratio (GSR) represents on of the oldest measures of risk aversion to risk.
The GRS is illustrating the depressionary chop. Liquidity trade on, F-TV scream bull market, liquidity trade off, and the wheels fall off with everyone milling around in disbelief.
I characterize this chop with stocks trading within a depressionary box. Lots of drama, arm waving, but overall its nothing more than directionless chop.
Did a new down trend, liquidity trade on, start in 2009? Time and leverage flow support that conclusion. Most likely we’ve enter a consolidation range shaded green. A break of the orange up trend line would provide more clarity.
Gold to Silver Ratio (GSR) And Gold to Silver Ratio:
![[Most Recent USD from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_usd_en_2.gif)
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