Temporary Friends

Drawn into the stream
Of undefined illusion
Those diamond dreams
They can't disguise the truth
--Level 42

Kyle Bass echoes other comments I've read recently. Currently, investors see the US as the best house in a bad neighborhood. Global investments will therefore flow our way. Thus, we see phenomena like the present yield arbitrage in government bonds.

Happening now: @MorningsMaria @FoxBusiness "we have some of the best growth across the world. People will buy US companies w great yields, they'll buy our bonds. The rest of the world is a basket case" - @Jkylebass "where are you going to invest? China w no rule of law?"

— Maria Bartiromo (@MariaBartiromo) August 22, 2019

But friendly flows of capital toward the US are likely to be temporary. As more money flows in our direction to take advantage of relative price differences, those differences diminish as the benefits get arbitraged away.

Directional bias toward the US will also diminish as investors seek better opportunities.