Punters bet against the US, bet on emerging markets

What is clear now is that the US stock market fally of the last year has been fake, brought on by the tremendous amount of money sitting on the sidelines.  Yes, the US did rally in its stock market last year in nominal terms which is all most people look at.  However at the same time, the dollar fell by 20% against many major currencies.  The price of gold, silver and other commodities went up by more than the S&P.  Almost every major stock market blew past the puny real returns of the US market.  What is clear is that people are betting against the US  (See http://bit.ly/7szgUT).

Marketwatch has an interesting analysis that expound on the analysis that we had done a few months prior.  (See http://bit.ly/cpW93a).

International stock funds saw $46.5 billion in net inflows -- fairly substantial flows for a category that had about $760 billion in total assets at the end of January, according to Lipper. The bulk of the outflow has been from U.S. stock funds, which means that investors have been withdrawing money out of the market even as prices have risen sharply. While surprising, it may suggest that investors are being careful in how they allocate cash.

As Roseen noted, while large-cap U.S. stocks are often seen as a safe harbor in a recession, the recent crisis quashed that perception. A weak dollar, higher prices for gold and natural resources and bargain-hunting may have led people into alternatives such as developed and emerging international markets.

Latin American Funds were up 113% in 2009 and emerging markets funds climbed 76%.
We at EconomyPolitics are not so worried about dramatic empire collapse, but instead a long slow walk into economic irrelavance.  To a certain extent it is bound to happen as the developing world catches up to the United States economically.  That is to be welcomed as economies are not zero sum games, but what worries us here is the slip in economic freedom and liberty that leads to dynamic economies. 

Now, Harvard's Niall Ferguson, financial historian at Harvard is talking about financial collapse in Foreign Affairs. You know its bad when Anthropologists and Historians are talking about the demise in America. He echoes a warning (See http://bit.ly/9xKxF8):
Imperial collapse may come much more suddenly than many historians imagine. A combination of fiscal deficits and military overstretch suggests that the United States may be the next empire on the precipice.


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