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Disturbing Trend: Average Foreign Purchases Of US Securities Take Out Lehman Bottom, Hit All Time Low | Zero Hedge
As we reported earlier today, for whatever reason China sold the second biggest amount of US Treasurys in December. However, that was only part of the story. In fact, as we also noted, while the two largest US foreign creditors were net sellers, total foreign bond holdings actually rose in the last month of 2013 and as the chart below confirms, when it comes to Long-Term Treasury paper, foreigners were actually buyers of some $18 billion in Treasurys. It is everything else that they sold in the month when the S&P hit its all time high: specifically, foreigners were net sellers of Agency securities ($15.4 billion), Corporate Bonds ($7.5 billion) and Corporate Equities ($13.7 billion) something which hardly fits with the narrative of the record stock market high generating confidence in even more buying down the line.
In the chart above it is the black line – gross purchases of US long-term securities – that is the most troubling, as its trend is hardly anyone’s friend.
So what happens when one smooths out the line to normalize for monthly fluctuations? This:
The chart is very disturbing: it shows that as the S&P rises higher and higher (on ever declining volumes), foreigners are buying fewer and fewer US securities. In fact, on a 12 Month Moving Average basis, foreigners bought less long-term US securities than they did when Lehman crashed!
Luckily we live in a New Normal when price is no longer determined by simple supply and demand (and certainly not from retail investors who have long since given up on the fraudulent, broken US capital “markets”) but Fed jawboning of a record $2.5 trillion in bank excess reserves, corporate buybacks and HFT algos spurring momentum ignition and buying because others are buying.
And so we have come full circle, because while, understandably, nobody had any appetite for US securities around the Lehman crash when until the Fed stepped in and singlehandedly took over the US capital markets it was unclear if there even would be a US capital markets, now that five years later the S&P has risen to a level nearly three times the March 2009 lows thanks entirely to the Fed’s $4.1 trillion balance sheet backstop, the interest in US securities is… lower than it was in the days just after Lehman!
A few short months after Putin cornered the US state department into a disastrous foreign relations dead end with the false flag Syrian escalation which achieved none of the predetermined nat-gas-to-Europe pipeline ambitions, instead alieanting the US from both staunch allies Saudi Arabia and Israel, the Russian president has just managed to inflict yet more pain on US foreign policy this time by infuriating (even more) a core US ally in Europe – Angela Merkel. Just two days after the phone recording of Victoria Nuland emerged in which she not only made it explicitly clear it was the US who was the puppetmaster behind the Ukranian opposition with the traditional CIA tractics as was expected all along, but also explained just how the US freels toward the EU with the now infamous “Fuck the EU” comment, Angela Merkel called the obscene remark “absolutely unacceptable.”
And then, Nuland not knowing when to stop, proceeded to insert foot in mouth just a little deeper: “”I am not going to comment on private diplomatic conversations. But it was pretty impressive tradecraft. The audio was extremely clear,” she told reporters during a visit to Kiev.”
At least she indirectly complemented Putin on being smart enough to not only intercept what appears to have been an unencrypted phone call, but to release it at just the right time as the entire world’s attention turns to Russia and by extension, the Ukraine.
Because in retrospect Putin does deserve praise: having won the Ukraine over Europe’s cries of horror, he has also managed, in the past year, to alienate the US from Israel, Saudi Arabia and now, Germany. And all this without saying a single word, let along firing a shot.
So now that we know the apriori winner, the loser has no choice but to engage major damage control, which is borderline delusional. From Reuters:
[Nuland] said she did not foresee damage to relations with opposition leaders, saying they “know exactly where we stand in respect of a non-violent solution to the problem.”
Of relations with Russia, she said Washington and Moscow had “very deep, very broad and complex” discussions on a range of international issues including Iran and “frank and comradely discussions” on Ukraine.
U.S. officials did not deny the authenticity of the recording and said Nuland apologized to EU colleagues for the comment.
Angela Merkel, already furious with Washington for several months over reports that U.S. officials bugged her own phone, found Nuland’s remarks “totally unacceptable”, a spokeswoman for the German chancellor said.
Yet, it’s one thing to delude oneself that the US is still the undisputed world’s superpower, it is far worse to express the kind of hubris that Nuland did, when she communicated and discussedconfidential US geopolitical strategy on an unencrypted phone line – traditionally a fireable offense, if not worse.
In Washington, U.S. officials said Nuland and Pyatt apparently used unencrypted cellphones, which are easy to monitor. The officials said smart phones issued to State Department officials had data encryption but not voice encryption.
In Nuland’s call, apparently recorded about 12 days ago when Ukrainian opposition leaders were considering an offer from Yanukovich to join his cabinet, she suggested that one of three leading figures might accept a post but two others should stay out. In the end, all three rejected the offer.
The biggest loser here, however, continues to be the Ukraine, whose people are facing a cold winter without assurances they will have Russian nat gas, and a government that is a chess piece in an ongoing power play between Europe and Russia, now that the CIA has taken a back seat. Incidentally, Russia made it quite clear that it demands Ukraine’s full allegiance and as Russian finance minister Anton Siluanov told reporters overnight, Russia would withold its second loan payment to the troubled nation unless the Ukraine, which owes a “not insignificant” sum for natgas, makes the payment.
In other words, just like Greece has become a money “tolling” intermediary for the ECB and German banks, in which Europe pretends to bail out the crushed country when in reality it is just funding debt payments to its own banks, so the Ukraine has now become an intermediary, in which loan payments from Russia go to pay… Russia’s Gazprom. And in the process Russia pulls the Ukraine from the European sphere of influence and back into that of the New Normal USSR.
Game, set, match Putin. Again.
But wait, there’s more. Because Putin, unsatisfied with simple making a mockery of the US State Department, decided to rub it in some more. The Hill reports:
Rising animosity between the former Cold War powers was on full display Friday when Russia chose a former figure skater who tweeted out a racially charged picture of President Obama for the symbolic lighting of the Olympic cauldron.
Russian President Vladimir Putin hoped hosting the first Games since the 1980 Moscow Olympics, which the U.S. boycotted, would showcase a “new Russia” emerging from the ashes of the Soviet Union as he enters his 15th year in power.
Instead the U.S. and its western allies have consistently painted the picture of a corrupt autocracy.
The media’s focus on the persecution of gays in Russia, terrorism and Russia’s lackluster infrastructure – many hotels don’t have potable water even though the Games are estimated to have cost more than $50 billion, the most ever – have further infuriated the Kremlin.
“I understand how the press here works. They need hot issues in order to be read, to have high circulation,” Sergey Kislyak, Putin’s envoy to Washington, told The Washington Diplomat last month.
That’s ok – as long as the US population can keep itself distracted from the sheer implosion of US standing internationally by looking at tweeted images of decrepit toilets and busted Sochi plumbing from a self-indulgent US press corps, and continue feeling good about itself, then all is well. After all, that’s just what Putin wants.
While everyone obsesses over the monthly payrolls report, which on a trailing 12 month basis is once indicating the creation of roughly 2 million jobs each year, or roughly where it was before the crisis (red line chart below), one aspect that is largely ignored is the amount of hiring.
Why is hiring important?
Because that is the actual process by which those without a job end up with a job. And as we just learned today after the latest JOLTS release, which showed that there were over 4 million job openings (4,001 to be precisely) for the first time since 2008, a far more important number is the update on Hires which at 4.5 million barely changed from last month, but more importantly, is barely a fraction of where it should be based on the number of job gains reported by the BLS monthly. The chart below confirms this stunning discrepancy: a surge in jobs with barely half the pre-recession hiring?
How does one explain this discrepancy in which the US economy supposedly is growing at its historic peak pace while hiring is at half the peak pace? Simple: the gains in nonfarm payrolls are due a decline in layoffs and other separations, not an increase in hirings: i.e., normal labor demand driven growth.
Which means that anyone hoping for a brisk increase in wages, i.e. worker leverage, is in for a prolonged shock.
The chart above simply shows that the leverage is and continues to be with the employers – instead of letting people go (or workers quitting at their volition) at anything close to a traditional pace, employers have a huge bargaining chip – a job. Because if a worker does not want to perform a job, tough: there are about 3 people willing to fight for every job opening. It also means that those who lose their job will find it doubly more difficult time to reenter the workforce as there simply is not enough hiring.
Which means that wage deflation, at least among prevailing jobs, will continue leading to declining real disposable income, a declining in personal savings and the continued use of “student loans” (since credit card deleveraging continues) to fund everyday lifestyles, at least until such time as the hiring trend has normalized.
The really bad news: while such a normalization will eventually happen, according to our back of the envelope calculations, it will take place some time in… 2020.