Friday, November 05, 2004

The stock market is way way up and yet the dollar is falling precipitously. I guess we can be assured that there are no foreign capitalists rushing into US equities.

Foreign private capital fled US stocks in August. It also fled US treasuries that month, too. Since July 30 the dollar is -6.7% against all other major currencies -- indication that private capital didn't turn in favor of US stocks or treasuries in September or October, either, and has probably had enough of dollar denominated assets. This, of course, puts increasing pressure on central banks to pick up not only the slack but the larger and larger debt demands of the US federal government.

We will learn a lot next week when the Treasury Department offers $51bn in debt. Who will turn out to buy it? The fun begins Monday.

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