[A-List] Americans Put Their Weakening Dollars to Work Overseas

["Yoshie Furuhashi" <critical.montages@xxxxxxxxx>]

Net Purchases by Americans of Long-Term Foreign Securities:
<http://www.nytimes.com/imagepages/2007/05/19/business/20070519_CHARTS_GRAPHIC.html>

<http://www.nytimes.com/2007/05/19/business/19charts.html>
May 19, 2007
Off the Charts
Americans Put Their Weakening Dollars to Work Overseas
By FLOYD NORRIS

American investors, having seen the dollar weaken and foreign stock
markets consistently outperform the American market, are putting
record amounts of money into overseas securities.

Figures released this week by the Treasury Department showed that
Americans spent a net $40.3 billion on overseas securities in March,
making that the second-heaviest outflow ever, trailing only the $48.7
billion figure for last December.

The accompanying chart shows 12-month totals for such purchases, with
smaller charts breaking down stock and bond transactions. All figures
are net, the difference between securities purchased and sold, so
negative numbers show when Americans were net sellers.

For the 12 months through March, Americans bought a record $277
billion in foreign long-term securities.

Those purchases pale next to the offsetting purchases of American
securities by foreigners, which came to $1.15 trillion over the most
recent 12 months. Nonetheless, they are important because the United
States needs to attract foreign investments to offset the huge trade
deficit, which is only starting to decline. For the 12 months through
March, that deficit came to $754 billion.

With Americans clamoring to buy foreign securities — not to mention
the foreign cars, toys and other goods that make up the trade deficit
— the dollar has lost value, particularly against the euro and the
British pound, the two principal currencies whose central banks do not
intervene to keep them from rising.

The figures show that Americans bought a net $168.9 billion of foreign
bonds over the 12-month period. By contrast, for all of 2005 the
figure was only $45.1 billion.

The attraction of foreign stocks has also been strong, but is not at
record levels. The $108.3 billion purchased during the 12-month period
is well below the record of $140 billion, set in the 12 months through
last May.

The popularity of foreign stocks has come as foreign markets
consistently have done better than the American one. For the 12 months
through April, the Standard & Poor's 500, a prominent index of large
American companies, was up 13.1 percent. But the Morgan Stanley
Capital International EAFE index, which covers all developed countries
except the United States, rose 17 percent.

It was the 44th consecutive month that the EAFE index has shown a
better 12-month performance than the S.&P., matching the record length
of a stretch that ended in February 1989, another time of dollar
weakness.

By contrast, Americans were net sellers of foreign stocks in 1999, a
time when the dollar was strong and the American stock market was
roaring ahead. For 56 months that ended in August 1999, the S.&P. 500
showed better 12-month performance than did the EAFE index.

If Americans keep sending their dollars overseas — whether to buy
socks or stocks — that could put further pressure on the value of
those dollars.

--
Yoshie