Another Economic Reality Check

By Steve McCann

One thing the Obama administration and the once-mainstream media need to learn is: despite all their "spin" (better known as propaganda) the markets will always reveal reality when it comes to the economy.

If one needs another news item to confirm the complete lack of confidence in the economic policies of this regime and the potential future all one has to do is look to the record issuance of dollar denominated bonds by non U.S. companies. These bonds have become attractive to American investors (despite low interest rates) as an alternative to the risk of investing in U.S. based companies.

So far this year the amount raised by non U.S. companies is up nearly 10% over a record in 2009.

Nearly 20% of all bond issuance by European companies have been in the form of "Yankee Bonds" the highest percentage in over 10 years. There has been a record 501 issues so far this year. This is the highest number of Yankee bond issues sold in any year since the creation of the Euro and more than double the number issued over the same period last year. =

This trend will continue. Mark Lewellen of Barclays Capital (London) was quoted as saying: "Much of our corporate pipeline is in the dollar market. U.S. investors are very keen on non-U.S. names."

The investors in the United States (mainly institutional) are not turning their backs on the U.S. purely by choice. As they have a fiduciary duty of maximizing income and minimizing risk for their clients, they are turning to non-U.S. companies. With this governing class in Washington D.C. there is no longer a question of what they may do. The passage of Health Care Reform, Financial Reform, tens of thousands of pages of new regulations and a dramatic rise in taxes are a reality.

A U.S. based company is at a major disadvantage in today's world economy unless it chooses to move its operations and charter overseas. That trend is also picking up steam.

Obama's and his fellow travelers' ideal of a socialist utopia in the United States is not only running afoul of the citizens but the reality of a competitive global economy. Their best efforts at "spin" or outright lies will not change this reality.