It's finally happened. Latest US capital flows numbers show that foreign central banks have begun to sell their US assets. Official foreign institutions sold $14.4bn of US securities in March. That's the first month of selling for three years, and the second-heaviest selling on record - beaten only by August 1998.
Is this a disaster? Not quite. Private investors are still heavy buyers. They bought $74.5bn of US securities in March, in line with the average for the last few months. Buying has averaged $76.2bn in the last four months - a record high.
A further comfort for investors is that most of this buying was of bonds, not shares. Foreigners bought only $1.7bn of equities (net) in March. That's sharply down from the last few months. This is good, because this buying is a good predictor of subsequent annual moves in the UK All-share index, with big buying being a bearish sign. Since January 1990 a regression of annual changes in the All-share upon this buying gives us:
All-share = 9.51 - 1.00 x foreign buying.
This has an R-squared of 17.8 per cent - which I think is impressive, given how volatile both series are.
Had Warren Buffett kept his bet another couple of weeks, he may not have lost $310m!!
Posted by: Snafu | May 17, 2005 at 12:54 PM
Cant feel sorry for a guy worth $31bln losing $310mil
That is like me throwing £100 away
Posted by: Monjo | May 17, 2005 at 03:31 PM
I'd feel sorry for you if you threw £100, because of all your mates going, "Look at that tosser Monjo! Threw away £100, could have kept him in beer for a month that!" It's the same for Buffett, only small countries instead of pints.
If you've got £100 you don't need, let me know and I'll send you my address. Cash or cheque will do nicely.
Posted by: chris | May 18, 2005 at 11:41 AM