Biderman talks bonds and stocks in reaction to jobs numbers on CNBC

May
03

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10 Responses to Biderman talks bonds and stocks in reaction to jobs numbers on CNBC

  1. Chris on May 13, 2014 at 9:54 pm

    Charles and team – simple request, can you look over the below numbers and if generally correct – what does this say for free-markets (is there one?). Is this near complete lack of a domestic market for our notes/bonds something that can be discussed elsewhere???

    Thanks

    Jan ’00 – ’07 – Feb ’14

    $5.7 T –> $9 T –> $17.5 T (National debt = 305% increase )

    $9.2 T –> $13.7 T –> $16.1 T (GDP = 75% increase);

    6.6% —> 5% —> 2.4% (net interest rate on debt)

    $300B -> $270B —> $223B (net interest paid on national debt)

    74% —> 59% —> 20% (% domestically held notes / bonds)

    Who’s pushing the bond market to new global low yields???

    Jan ’00 – ’07 – Feb ’14

    $1 T —> $1.6 T —> $5.9 T (cumulative “foreign” held US Treasury debt)

    25% —> 40% —> 55% (% of notes / bonds held by “foreigners”)

    1% —> 1% —> 25% (% Fed held notes / bonds…Fed primarily held Bills until ’08)

    Domestic holders of US Treasury Notes/Bonds have relatively collapsed, likely something to do with rationally determing not to allocate capital toward extremely low yielding assets when your plan assumes 7 o 8% annual returns…why would “foreigners” not be similarly concerned??? Particularly since US trade deficit fell in half since ’08 (fewer dollars to be recycled)???

    And the latest holdings (as of a month or so ago)…

    $17.5 T in US Treasury debt

    $5 T intra-gov holdings

    $12.6 T Public debt

    FED ($2.3T) Foreigner ($5.9T) Domestic ($4T non-Fed)

    Bills ($1.65 T) $0 $600 B $1 T

    TIPS ($1 T) $95 B $300 B $600 B

    Notes ($8 T) $1.4 T $4.5 T $2.1T

    Bonds ($1.45 T) $750 B $400 B $300 B

    • Charles Biderman on May 14, 2014 at 3:00 pm

      Your numbers are a perfect correlate to a government committed to doing what it can to
      “fix” our economic problems.

      The world’s biggest problems are created by those not anywhere near as smart as they think they are.

      By definition the top guys at any government that tries to “fix” the markets are not anywhere near as smart as they think they are.

      That is why the perfect correlate end game to government fixing the markets is an eventual major financial calamity.

      The only question is will it be this year or next.

      My hope is that it occurs before the current administration leaves office for karma type reasons.

      Charles Biderman

      • Chris on May 15, 2014 at 12:58 am

        Charles, thanks for taking time to respond and thanks for your candor.

      • Chris on May 15, 2014 at 5:54 pm

        BANKING EU – 1400% increase in US Treasury ownership since ’00 and now 4x’s that of CORE EURO???

        ——-’00 —— ’07 ——- ’14

        Ireland $5 B —> $19 B —> $113 B

        Belgium $28 B –> $13 B —> $381 B

        Switzerland $18 B> $34 B —> $175 B

        Luxemburg $60 B –> $145 B

        TOTAL — $56 B — $116 B — $815 B (1400%+ increase)

        Compare and Contrast w/…

        CORE EURO – 55% increase since ’00

        ——- ’00 —– ’07 —— ’14

        Germany $54 B —> $50 B —> $63 B

        Italy $20 B —> $14 B —> $31 B

        Netherland $13 B-> $15 B —> $35 B

        France $27 B —> $10 B –> $57 B

        Spain $20 B —> $ $23 B

        TOTAL $134 B —- $94 B — $208 B (55% increase)

        Might be interesting to raise topic up and kick it around???

        • Charles Biderman on May 16, 2014 at 1:32 pm

          Conventional wisdom has it that the world is deleveraging post financial crisis.

          Unfortunately, as you point out, global debt is surging primarily due to central banks being willing to print enough money to make good all sovereign debts.

          The bottom line is if global growth somehow miraculously starts to surge to an overall income growth of over 3%, then the surge in debt might be manageable. However, if global growth continues at anywhere near current rates, at some point either debts are written off or the debts get inflated away via money printing.

          Charles Biderman

          • Chris on May 22, 2014 at 10:08 am

            Charles – just in case you run out of interesting things to talk about in the office…

            Why did Russia begin buying Treasury’s in ’07 where they had never shown interest before???

            Why did Russia hit peak ownership in July ’10 @ $176 B and why in decline since???

            Why as Russia peaked and began it’s decline in Treasury’s did Belgium (holding “only” $17 B in Jun ’10…the month before Russia’s peak), begin it’s massive accumulation starting in July ’10??? Belgium had held between $10 – $15 B since the turn of the century…why the big change??? What’s the linkage???

            Here’s the data…

            Jan ’03 – Russia holds less than $5 B / Belgium holds $16 B

            Jan ’07 – Russia holds $8 B in Treasury’s…has not held significant Treasury positions

            Jan ’08 – Russia $35 B / Belgium $13 B

            Jan ’10 = $124 B (Russia peaks in Jul ’10 @ $176 B) / Belgium holds $17 B as of Jun ’10

            Jan ’11 – $139 B Russia / Belgium $32 B

            Jan ’12 – $146 B / Belgium $132 B

            Jan ’13 – $164 B / Belgium $186 B

            Jan ’14 – $132 B / Belgium $310 B

            Mar ’14 – $100 B / Belgium $381 B

            Particularly since the US trade deficit peaked in ’06 (-$752 B/yr) and has fallen nearly in half since (-$475 B/yr ’13)…half as many dollars to be recycled into Treasurys???

            Why did “foreigners” suddenly want to buy so much of something no one in the US (other than the Fed) wanted to buy???

          • Charles Biderman on May 22, 2014 at 10:53 pm

            I am currently scheduled to be on with Maria B Tuesday, May 27 at 9 for the hour. What do you think I should talk about?

          • Chris on May 23, 2014 at 5:31 am

            ha ha…can’t think of anything…

  2. Chris on May 23, 2014 at 7:49 pm

    Ok, thought of something that may make for an interesting discussion given your analysis of flows of funds???

    4 European banking center nations with a net trade surplus w/ the US of $70 B during 7yrs (’07-’14) have purchased nearly $700 B net US Treasury’s in that time…compare this w/ Core Europe or China or OPEC…

    ’07-’14 net Treasury purchases vs. net trade surplus…

    Banking EU 7-1 ratio ($700 B – $70 B)
    EU 1-3.5 ($117 B – $380 B)
    China 1-2.2 ($870 B – $2,000 B)
    OPEC 1-6.5 ($135 B – $700 B)

    Why would 4 EU banking center nations accumulate nearly as much Treasury debt as China or far in excess of the Core EU or OPEC??? Treasury accumulation seems to have radically changed since ’07, particularly interesting due to the collapsing yields and significantly lower US trade deficit. Perhaps you could broach this outsized avalanche of financial centers buying and what it portends?

    Supporting data below (summed from TIC report and US Census data)

    BANKING EURO (Treasury holdings)
    ——– Jan ’00—> ’07 ——> Mar ’14
    Ireland —$5 B –> $19 B —> $113 B
    Belgium –$28 B –> $13 B —> $381 B
    Switzerland $18 B-> $34 B —> $176 B
    Luxembourg – $5 B–> $60 B —> $145 B
    TOTAL ——$56 B–>$126 B —> $815 B (1450% increase)

    These nations ran a net trade surplus (almost entirely Ireland) w/ the US of approx. $10 B/yr since ’07…$70 B net surplus.

    CORE EURO (Treasury holdings)
    Germany –>$54 B —> $50 B —> $67 B
    Italy —->$20 B —> $14 B —> $30 B
    Netherland $13 B —> $15 B —> $37 B
    France —>$27 B —> $10 B —> $54 B
    Spain —->$20 B —> $5 B —> $23 B
    TOTAL —>$134 B —> $94 B —>$211 B (57% increase)

    These nations ran a net trade surplus with the US from $70 B/yr in ’13 to $60 B/yr in ’07…$380 B net surplus.

    Compare this to China (Treasury holdings)
    ——–>Jan ’00 —> ’07 ——>Mar ’14
    China –> $60 B —>$400 B —> $1.27 T

    China ran a trade surplus of $300 B/yr in ’13 up from $250 B/yr in ’07. Stated otherwise…$1.95 T net surplus.

    “oil exporters”
    ’00 —–> ’07 ——> ’14
    $45 B —> $112 B —> $247 B (55% increase)

    OPEC ran a $100 B/yr trade surplus w/ the US…net $700 B surplus.

    • Chris on May 23, 2014 at 8:18 pm

      or cast the net of interesting banking a little wider

      GLOBAL BANKING CENTERS

      “Carribean banking centers”
      $ 35 B —> $68 B —> $312 B
      UK $50 B —> $100 B —> $176 B
      Switzerland $18 B> $34 B —> $176 B
      HK $39 B –> $52 B —> $156 B
      Singapore $30 B-> $30 B —> $91 B
      Ireland $5 B —> $19 B —> $113 B
      Belgium $28 B –> $13 B —> $381 B
      Luxemburg $5 B–> $60 B —> $145 B
      TOTAL $210 B -> $376 B —> $1,550 T(750% increase)

      Nearly a $1.2 T increase in US Treasury debt…

      Or stated otherwise, the Fed / “Foreigners” now own $8 T of $10 T note/bond market…this means the float of domestically held notes/bonds plus lower new issuance is well less than Fed’s $25 B plus continued “foreign” demand…otherwise known as a short squeeze on the largest debt market in the world.

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Charles BidermanCharles Biderman is the Chairman of TrimTabs Investment Research and Portfolio Manager of the TrimTabs Float Shrink ETF (TTFS)

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