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Thursday, February 15, 2007

Foreigners Take Their Money and Run!

My coworker (and bond guru) Mike Larson has just raised a red flag on the December Treasury International Capital report, which looks Liza-Minelli-in-a-thong ugly. Mike gives us the details ...

* Total foreign purchases of U.S. stocks, Treasury debt, and other bonds plunged to a net $15.6 billion in December from $84.9 billion in November. Forecasters were looking for $60 billion in net purchases.

* A broader measure of international money flows looked even worse -- it FELL by a net $11 billion, vs. expectations for a gain of $70 billion.

* Foreign private buyers were much, much less active buying our assets, while foreign official buyers (central bankers) picked up the pace from November. By country, Japanese holdings of U.S. Treasuries rose $6.9 billion, Chinese holdings rose $3.1 billion, and U.K. holdings jumped for a second straight month -- gaining $16.5 billion. There was big selling in the Caribbean region (that's a sign of hedge fund activity, since many operate via offshore banks located there). Other sellers included some smaller countries in Europe, like Switzerland, Ireland, and Italy.

As you might expect, the dollar's getting whacked on the news. Bonds didn't lose much of their earlier gains in the wake of the news, however.

My view -- if the dollar is getting whacked on this news, that should translate into great news for our gold and silver positions. It's hard to tell about this kind of fall-out though. If stocks take it on the chin, and we get a broad sell-off, mining stocks could get trampled in the stampede.

Well, the market opens in a few minutes. We'll see.


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