The New World Order And GMM’s New WHQ

#CKStrong

GMM will be going dark for a few weeks as we move our World Head Quarters (WHQ) from the left coast back to Boston to be closer to our Carol K., just released from the hospital after 345 consecutive days.  We will be back with more focused content. 

Watch This Space

We are waiting anxiously for Monday’s U.S. Treasury release of the TIC data’s, particularly the major foreign holdings of U.S. Treasury securities. We are closely monitoring the foreign official flows into/out of the U.S. Treasury market.  March will be the first data point after Western nations sanctioned the Russian Central Bank at the end of February. 

Foreign Central banks, which are not price or market-sensitive with their securities holdings, are now net sellers of Treasuries, albeit only slightly, with their holdings hovering around $4 trillion since 2017.   At the end of the aughts, central banks owned almost 75 percent of total foreign investments. They were recycling their current account surpluses back into the Treasury market to protect exchange rates from strengthening and becoming overvalued.  Today, foreign central banks hold a little over 50 percent.

China

China’s holdings peaked in November 2012 at $1.3 trillion and are down about 20 percent to $1.05 trillion in February.  We suspect China has accelerated its sales after the West sanctioned the Russian Central Bank.  We believe the Chinese may perceive it would be foolish to keep $1 trillion of their $3 trillion in reserves in a country they view as an increasingly hostile power.   Stay tuned.

New World Order

Russia’s invasion of Ukraine will likely usher in a multi-block New World Order with contracting international trade and capital flows, reversing many of the disinflationary forces of the past 25 years. 

The numbers to watch in the TIC data on Monday to monitor if the big bang has taken place are China’s and foreign official holdings. We suspect both will be lower. 

See you in a few weeks.