A Short Lesson In Red Ink

Chuck Butler of Everbank is a great teacher of all things related to currencies AND since 2006, their firm offers pooled accounts for purchasing gold overseas. So he knows that physical gold is currency too. He understands what makes things (TIC)K. You will see what I mean – from his Daily Pfennig, this morning:

“Front and Center this morning, the TIC Flows data from June was very interesting yesterday... Before we get into this, let me explain what I'm talking about for the new "kids" in class... TIC stands for Treasury International Capital, and it's just a fancy way of saying that someone is tracking the Net Security Purchases... Why is this important? Well... Security Purchases by foreigners is how the U.S. finances its ever growing deficit. For, example... The Trade Deficit and foreign direct investment makes up the Current Account... But just to keep this simple, the Trade Deficit in June was $49.9 Billion... The net security purchases to finance that deficit in June was... $44.4 Billion...

So, we were net negative in financing in June... What happens now? Well, we kick the can down the road even further... The U.S. rolls this negative forward... How long can they do that? Well, they can do it as long as foreigners keep lining up to buy... Not until foreigners say "no mas" does it all come crashing down...

So, what's the Big News from the TIC data yesterday besides the fact that we were negative in June? Well... And this is for the guy that keeps writing me telling me I'm wrong about China... According to Bloomberg... China cut its holdings of Treasuries by the MOST EVER in June! Total Chinese investment in U.S. debt declined 2.8% in June, following a 3.6% slide in May...”

There you have it – from Chuck Butler. Your protection – buy gold from Lear Capital - not a source of red ink!