Thursday, July 16, 2009

Foreign demand for US financial assets down in May

Foreign demand for long-term U.S. financial assets dropped by the largest amount in four months in May, as Japan and Russia trimmed their holdings of Treasury securities.

The Treasury Department said Thursday that foreigners actually sold $19.8 billion more long-term U.S. securities than they purchased in May. That compared with net purchases of $11.5 billion in April.

China, the largest foreign holder of U.S. Treasury securities, bucked that trend. Its holdings rose to $801.5 billion, an increase of 5 percent from $763.5 billion in April. (more)

Wall Street Journal, July 16, 2009

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Mobius Says Derivatives, Stimulus to Spark New Crisis

July 15 (Bloomberg) -- A new financial crisis will develop from the failure to effectively regulate derivatives and the extra global liquidity from stimulus spending, Templeton Asset Management Ltd.’s Mark Mobius said.

“Political pressure from investment banks and all the people that make money in derivatives” will prevent adequate regulation, said Mobius, who oversees $25 billion as executive chairman of Templeton in Singapore. “Definitely we’re going to have another crisis coming down,” he said in a phone interview from Istanbul on July 13. (more)

Peak to Trough Case Shiller and CAR Home Price Declines

Home prices in California gained slightly month-over-month in the non-seasonally adjusted CAR index, resulting in a disappointment for a state that was offering an additional $10,000 in tax rebates to purchase a home (7% - 8% the median home value). As of today, the state is no longer accepting applications as the $100 million alloted towards the $10,000 tax rebates has all been claimed. Median state prices have been more than cut in half and cities have declines varying from 37% to 75% peak-to-trough. This results in the median Californian having lost roughly $330,000 in just 2 years! In higher rent areas the price drops are even more staggering with Santa Barbara South Coast leading the way with a price drop of $875,000 in only a 1 ½ years! (more)

China’s Market Value Overtakes Japan as World’s No. 2

July 16 (Bloomberg) -- China overtook Japan as the world’s second-largest stock market by value for the first time in 1 1/2 years, after government stimulus spending and record bank lending boosted share prices this year.

The Shanghai Composite Index rose 1.4 percent to 3,188.55 yesterday, sending the value of China’s domestic stock market to $3.21 trillion, compared with Japan’s $3.20 trillion. The Shanghai index has gained 75 percent this year, the best- performing major market, against a 7 percent advance in the Nikkei 225 Stock Average. The U.S. remains the world’s biggest stock market with a capitalization of $10.8 trillion. (more)