Americans Dump The World, As The World Dumps America

It is only appropriate that in the days after Valentine's day, the theme of dumping is revisited. Specifically that of securities. As was pointed out yesterday following the latest TIC data, there was a lot of dumping of US Treasurys by foreign official authorities, with both China and Russia (but not only) proceeding to sell a demonstrative amount of US paper. However, that is not all. As the first chart below from today's Bloomberg Brief shows, foreign purchases of US corporate bonds has once again rolled over and remains quite week. As Bloomberg notes: "Foreign investors appear to have little faith in the U.S. economic recovery. They sold $20.7 billion of corporate bonds in December, leaving the one-year mean at minus $3.6 billion. That compares with a 12-month average of $47.3 billion in May 2007. Acquisitions of U.S. stocks were also weak. They totaled minus $11 billion versus a 12-month average of $2.1 billion." And in a stunning display of reciprocity, US residents, not content with selling of US stocks as retail outflows soared in December, also proceeded to dump the rest of the world en mass, as the net sale of foreign securities by US Residents soared to an all time high. US Residents "sold $38.9 billion of [foreign securities] on a net basis in December. That compares with average monthly purchases of $9.8 billion over the last year. The breakdown revealed that the headline number consisted of sales of $28.1 billion of foreign bonds and of $10.8 billion of foreign equities." Which makes sense - if decoupling is (transitorily and erroneously) present in the economy, it should also be present in securities flow. As it was in December. Which means that as globalization returns, the reversal in securities flows will have a dramatic impact on target economies, and doubly accentuate the regression to the mean.

World does not like America...

...As Americans do not like the world.