Thursday, April 2, 2015

Why Do Investors Around the World Keep Buying Our $#@%?

Investors around the world continue to purchase our $#@% despite the warnings that our $#@% is overpriced, and must therefore fall.

Just look at all the $#@% they buy. Our bonds? Our stocks? Our real estate? Our crops? It makes no sense. Why do they keep buying all that $#@%? There must be some rational explanation, especially after all the warnings we've given them.

Out of curiosity, are we running a massive trade deficit? I mean, I suppose if we just kept shipping dollars overseas then some of those dollars might come back to us. You know, to buy our $#@%. Never mind. That's just a crazy theory. This is America. As manufacturer to the world, we don't run massive trade deficits.

April 2, 2015
Treasury yields fall below 2 percent

Investors around the world continue to purchase safe haven Treasurys despite the warnings of rising rates.

Disclosure: Buyer and holder of US long-term government bond $#@% since 2000, and proud of it. Love that Made in USA label.

In all seriousness, nearly my entire nest egg sits in government bond $#@%. No joke. No regrets. Not a believer in future prosperity theories I guess, nor do I believe making money off of money will be getting any easier as time goes on. Put another way, I believe our country is on a $%@%ty long-term path.

5 comments:

Troy said...

speak of the devil . . .

"The U.S. net international investment position at the end of the fourth quarter of 2014 was -$6,915.3 billion (preliminary)"

http://www.bea.gov/newsreleases/international/intinv/intinvnewsrelease.htm

new NIIP press release.

Looking at the internet archive, I see:

"The U.S. net international investment position at the end of the third quarter of 2014 was -$6,157.9 billion (preliminary)"

https://web.archive.org/web/20150322182531/http://www.bea.gov/newsreleases/international/intinv/intinvnewsrelease.htm

~$6T in the hole 3Q14, ~$7T 4Q14, what's the difference at this point.

Of all the things going on, our NIIP is what I understand the least and what I am afraid of the most.

Negative NIIP is simply not something brought up in polite company apparently.

http://en.wikipedia.org/wiki/List_of_creditor_nations_by_net_international_investment_position_per_capita

shows the healthy economies of the world, those able to pay their own way, at least historically.

It's not totally unrelated that my second language happens to be the #1 creditor nation's I guess. Japan was one a helluva roll in the 1980s and I figured it'd be a good thing to get into (twenty years before "Gross National Cool" thesis was first proffered, that's what I felt about Japan).

Japan's trade deficit declined to ¥425 Billion in February of 2015, from ¥806 Billion a year earlier as exports rose by 2.4 percent and imports dropped by 3.6 percent.

"424B yen" sounds like a lot, but it's under $30 per capita for the month.

US's was $100 per capita for February, partially thanks to the port shutdown.

Troy said...

Damn by that NIIP chart, Norway is takin' it to the bank.

But:

"Riding a wave of strong economic growth fuelled by the country's sizeable oil revenues and low interest rates, Norwegian household debt has soared to a new record at 2.3 times annual disposable income.

"House prices have more than doubled in the country since 2003 and rose by 8.7 percent in the last 12 months, while household debt grew by 6.2 percent."

Alas, The Bank is taking it to them, too!

http://news.yahoo.com/norway-seeks-curb-household-debt-slow-housing-boom-182714330.html

Per

http://www.rbnz.govt.nz/research_and_publications/reserve_bank_bulletin/2014/2014oct77_4.pdf

US household debt to disposable income is ~100%

Stagflationary Mark said...

I'll never understand why so many people want to owe so many people so much. Sigh.

Troy said...

I suspect we live in a system that is too complex to understand.

But I'd like to think if I just bought enough EC2 time I could create a sufficiently accurate simulation of us 7 billion economic operators.

What we produce and consume can't be all that of a mystery in the aggregate.

Since 1985, a lot has changed, and a lot hasn't.

The good news maybe is that our trade imbalance is now in the same ballpark as it was then.

http://research.stlouisfed.org/fred2/graph/?g=16mU

Stagflationary Mark said...

Troy,

On the one hand, payday loan stores sure aren't that difficult to understand. Sigh.

On the other hand, every borrower thinks debt's a good deal and so does every lender. It's possible that both can be right at the same time but all too often at least one didn't understand the risks.

Things get real complicated when an investor borrows money on margin to buy bonds. That's got way too much casino action for my tastes.