Booming foreign purchase of US securities is another sign of coming bear market
Sam Adelton
Oct. 17, 2006

Foreigners bought US securities like anything last month. $116.8 billion in net purchases of U.S. securities in August shows the level of euphoria on US stocks and short covering by the international players.

Every bear market in every country has started with foreigners with little knowledge of the local environment going crazy over the stock market of a country. The 1987 crash saw the same thing before the black Monday.

The stealth rise of interest rates, the enthusiasm among the foreigners, the insider sell, the divergences in indices, the momentum divergence, the sentiment indicator and the smart money flow – all point towards start of a massive multi-decade bear market.

The fact the foreigners were so enthusiastic and smart money is buying puts on the stocks, show that the market is really vulnerable.

However according to history this is not the time to get over bearish. This trend can continue for months if not years. It is conceivable that Dow will reach 15000 or even higher before the start of the crashing bear market. All it says is that the bubble is there and it has to burst one day. The later that day comes, bigger will be the bubble and the bust will be just nastier.

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