Increased Wall Street-America Decoupling
Swedish neoconservative blogger Dick Erixon is as clueless as usual when claiming that
Just about the only fact he got right was that Wall Street is at record highs (or at least the Dow and the S & P 500, NASDAQ is still nearly 50% below its March 2000 peak). Yet as I've explained before,
Wall Street and the
We have gotten more confirmation of this trend this week. First, in many earnings reports (which BTW have been surprisingly weak so far. While they are still likely on average the beat official estimates, they seem to be doing so with a smaller margin than usual) it is reported that revenue and earnings growth is concentrated to its foreign operations. Case in point is Coca Cola, which saw domestic sales volumes drop 2%, while its non-U.S. sales volumes rose 9%.
We also saw another explanation to why stocks have been rising so fast despite stagnant earnings growth, besides the rapid money supply growth I reported about a few days ago. The Treasury International Capital Data reported that foreign net acquisition of U.S. stocks rose to a record $41.8 billion in May, after being $27.4 billion in April, after being roughly $10 billion per month the 10 months before that. It is also far higher than the roughly $10 billion monthly acquisition of foreign stocks by
This reflects a global trend where both operations and ownership of companies are increasingly globalized . This, as I've discussed before, is a factor which have helped reduce cyclical fluctuations in the economy. It also means that local stock markets will to a lesser and lesser extent follow the movements of the local economy.