Data supports blog prediction

Bloomberg is reporting this morning that demand for long-term U.S. financial assets surged in March and April.  Recall that I predicted this would happen because of the turmoil in Europe, as well as the fact that the U.S. economy is strengthening.  In March the net buying of U.S. financial assets was a staggering $140.5 billion, and in April it was a more modest, but still impressive, $83 billion.

I consider this a great time to be buying U.S. financial assets, especially stocks.  The shocks that led to the stock markets falling precipitously in May were mostly due to political events.

Yes, there was a chance that the collapse of the Greek economy would spread like a contagion throughout the world.  But the EU finally addressed long-standing structural problems with its charter to help quell the viral spread of Greek dumbness.  This was a good, ne great, thing.

We also had North vs. South Korea bubbling.  With South Korea having plead its case to the UN Security Council yesterday, and the international community’s response not even approaching a breeze, we can say that crisis has abated.

The other big crisis was Turkey vs. Israel that roiled investors’ fears.  However, Turkey has demonstrated that it is content with bluster, rather than military muster.  That crisis is still warm, but far, far from hot.

U.S. consumers scaled back retail buying last month, but who could blame them when the stock market was doing stupid and scary things?  That too has abated.  Still, my intuitive read of the situation is that the average U.S. citizen is feeling a bit queasy.  They seem to be deeply insecure about their lives and especially about the institutions that have served as the backbone of U.S. power for most of the last 90 years.  The government is clearly inept and probably even a bit corrupt (witness the response to the oil spill); businesses continue to screw their customers and employees while recording large profit increases; U.S. businesses are not hiring American workers; and those same U.S. businesses have not come up with a meaningful innovation in 5 years (what beyond the Internet, 3G cellphones, and flat panel TVs is there?).  Ugh.  But…

All of this U.S. malaise is still better than the ROW malaise.  The Rest Of the World is not nearly as far along as the U.S.  And that’s why capital will continue to flow here and continue to buoy our financial markets.  The data today bear that out.

Jason