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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: ild who wrote (22340)	11/23/2004 4:52:37 PM
From: russwinter	Read Replies (2) of 110194

Today's Contrary Investor, and chart: we have marked in blue the one month purchases of Treasuries by the Caribbean community. As you probably well remember, this is the key domicile of both the tax advantaged domestic and global hedge fund community. And as can be seen, the always loyal and true blue hedgies bought just shy of 60% of total US Treasuries purchased by the macro "foreign community" in September. By implication, the hedge funds were the major provider of capital to the US Treasury market in terms of what is defined by foreign influence. Wonderful, right? After all, the last time we checked, the hedge crowd weren't acting to support their export economies. Their allegiance to US Treasuries is simply measured in short term rate of return. Nothing more and nothing less. To be honest, the influence of the Caribbean based hedge crowd in terms of purchasing Treasuries has been growing significantly during 2004. Their net holdings as of September month end have essentially doubled to just over $100 billion. Suffice it to say that hedge related UST purchasing activity in 2004 has become very meaningful in terms of change at the margin. Just the kind of folks we want loading up on Treasury exposure as we're absolutely sure of their long term loyalty to the asset class, right? We need to keep a sharp eye on Caribbean based accumulation and acceleration in terms of Treasury buying. If anyone was ever fearful of the foreign community potentially selling UST's, believe us, it's a whole new world in terms of the hedge crowd. At the first sign of real trouble, they'll be gone in sixty seconds. And with Caribbean based holdings of UST's having doubled this year to just over $100 billion, they have become a force of such magnitude that deserves monitoring ahead.

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