TICS Data

Last month I reported on the "TICS" data, otherwise known as net foreign purchases (of domestic assets). So just quickly, because of the trade deficit (averaging about $57 billion per month) it is necessary that there are net positive cash inflows to make up the differences. Essentially, we need foreigners to buy stocks, property, t-bills, and the like in roughly the same amount as our trade deficit. Anything that Americans take out of the country of course counts against that total (which is why we say NET foreign purchases). If not, the currency suffers.

So as an FX enthusiast, I watch this data. I don't know why it is largely ignored, because it is a crucial bit of information. I suspect that if this trend continues, we will be hearing more about it.

Two months ago, July's data revealed a shortfall. Only $17 billion net. Analysts expected a rebound as this data is usually pretty volatile (I've seen months well over $100 billion) but instead the Treasury reported -$69.3 billion. Since it had been just about level going into that month, we were looking at about $100 billion shortfall, and the dollar has been suffering in part due to that.

Today, September's report was released. Analysts expected $66 billion, which would cover September's trade deficit, but not much more. Want to guess what the real number is? -$26.4 billion.

The dollar is down sharply on the news. No one on CNBC has even mentioned it.

I remember last year when I was obsessed with the looming mortgage crisis and my conservative friends called me chicken little. Well, I think we will be hearing about this in the coming months.

People seem to be saying, "if Bernanke wants to debase the dollar, fine, but not with my money!"

Trade Defict

My Uncle believes that the media is biased and that if the drop in the trade deficit to "only" $58 billion last month had happened during a Democratic administration it would have been front page news.

I think this chart puts things in perspective. You can just barely see the drop from $61 billion to $58 billion on the far right hand side of the chart. Does that look like front page news to you?

While we are on the economy, I think the smart money is taking some off the table.

Oh, and don't miss this piece. The link will only be good for a couple of days. This helps confirm my suspicion that inflation will continue to be a problem looking forward, rates will not get cut, and the stock market will have to come back to some sort of reality.

This is in direct contrast to my all-knowing reader's contention that rates don't matter, inflation will remain low, and the current levels in the stock market correspond to realistic earnings potential.

Of course, when I'm proven right, my dear reader will contend that he never said that.

UPDATE: Looking at the chart, I want to be clear that the small down turn in at the very right of the chart is not that noticeable slope on the last half inch of the screen, but rather the almost invisible little down turn that represents about a millimeter at the very far right. Literally, you have to squint to see it.