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Friday, April 06, 2007


fcb purchases resurgent

the levitation of capital markets in the face of what appears ever more ominous economic data has been mystifying for many skeptical observers. news that could easily have forced a selloff has been ignored. why?

in short, foreign central bank purchasing -- as noted by both russ winter and lee adler.


The week’s foreign central bank numbers were an absolute stunner, most certainly a record as they bought $20.8 billion in Old Maid Card securities. I suspected as much when I saw the markets ignore awful news this week. This time it was heavily skewed towards Treasuries, $18.8 billion worth, a record. It’s completely out of the hands of the Fed at this stage, with the shots on monetary policy being conducted exclusively by corrupt clerks in Toyko, Beijing and Dubai.

and adler, who has been monitoring the fed as it has sopped several billion in liquidity out of the market through the fomc this week:

I wrote yesterday that the source of the liquidity was probably a renewal of the foreign central bank (FCB) buying binge. Sure enough, the numbers out last night, while not a record, were huge. FCBs continue to massively subsidize US financial markets.

The FCB indicator published in the Wall Street Examiner Professional Edition suggests that this is a major inflection point. It is either the end of a multi month buying binge, second only to the one from August 2003 to January 2004, or it is a platform for a surge to even greater extremes.

My guess is that it’s the former, but we’ll get a signal one way or the other over the next month or so. The chart and a more complete analysis will be posted in the next WSE Pro Fed report on Monday.

one should note that these price-insensitive forces -- trade-surplus-laden asian central banks, petrodollar recyclers, corporate buyback schemes -- continue to drive the markets in contravention to economic data. one suspects that in many incarnations past, stocks would have sold off much harder by now, given the outlook.

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