US Residents Dispose Of $29 Billion In Foreign Securities In July
An interesting money flow observation dervied from yesterday's TIC report is that as US residents were pumping money into domestic capital markets, they were aggressively pulling capital out of foreign stocks and bonds. In fact, in July, foreign equity purchases declined by $14.5 billion, while foreign bond purchases dropped by $14.2 billion, or a $28.7 billion combined. What is more notable is that on a TTM basis, the decline was much more pronounced, and from a combined $63 billion in June, the number has dropped to basically flat, at only $1.6 billion. As the chart below demonstrates, there is potentially up to another $200 billion of foreign capital repatriation by domestic investors. Ironically, with the US capital markets behaving more like an Emerging Market, courtesy of the domestically-funded dollar carry trade it is likely that much more capital reallocation will continue to come into US securities.
Which begs the question how are foreign markets so well bid even as American capital is fleeing in droves? And the answer, of course, is in every country's central bank response in attempting to mimic the Chairman's QE program. The entire world market is now one big Ponzi.
Another relevant question is, what are the benefits to the US economy as the dollar collapses further? At least Japan was a net exporter of a whole variety of products and had a trade surplus. As the US has not been a net exporter in decades, there is absolutely no benefit from a cheap dollar, and the long-term impact on GDP will only be negative. However, at least banks will benefit as excess toxic debt will be debased, while more and more of the domestic economy crumbles and profit margins shrink with ever more expensive foreign made products flooding the nation.