Sale of U.S. Treasuries Risk to FFH

[dartmonkey]

1 minute ago, KJP said:

On 1/20/2026 at 2:21 PM, Munger_Disciple said:

Foreigners in aggregate, cannot reduce their dollar based holdings. So this thing about foreigners selling dollars doesn't make sense to me. 

 

Can they do it by swapping dollar-based holdings for the non-dollar based holdings of US persons, e.g., a UK holder of U.S. treasuries swaps assets with a U.S. holder of gilts?  That would reduce the gross amount of foreign dollar-based holdings.  

Foreigners AND non-foreigners can influence the price of bonds is a lot of them (unlike myself) have lost confidence in the long-term perspectives of the US economy, and wish to reduce their holdiings of US treasuries. Obviously this does not affect the number of treasury bonds that are in circulation, but it could conceivably reduce the price where a a willing buyer can be found to take up the bond from the willing seller.

 

However, if the US govt looks like it might be in for a run of inflation (for instance, because a Fed president who is relatively hawkish monetarily is being replaced by one who will drop short-term rates and let inflation get out of control, or just because there is no end in sight to huge fiscal deficits), you might also get longer rates going up, not down. 

 

We are probably not going to be able to figure this one out, nor much less change each others' minds about which direction rates are going. Fortunately for us, we don't have to !

 

 

[gfp]

The irony is that the best reason to sell a longish dated treasury bond is because you are getting more bullish about US economic growth.

 

The US economy doing shitty is a positive for treasury bond investors.   The US economy doing well is bearish for treasury bond investors.  

[KFRCanuk]

On 1/19/2026 at 5:12 PM, Parsad said:

if much of the globe decides to sell US treasuries.

 

It seems that this has passed, for now (today?).

[Munger_Disciple]

8 hours ago, KJP said:

 

Can they do it by swapping dollar-based holdings for the non-dollar based holdings of US persons, e.g., a UK holder of U.S. treasuries swaps assets with a U.S. holder of gilts?  That would reduce the gross amount of foreign dollar-based holdings.  

 

It's a circular argument. How exactly does a US person acquire such a non-dollar based asset in the first place? 

[KJP]

8 hours ago, Munger_Disciple said:

 

It's a circular argument. How exactly does a US person acquire such a non-dollar based asset in the first place? 

 

I agree it's circular if past trade patterns continue.  

[TwoCitiesCapital]

12 hours ago, KFRCanuk said:

 

It seems that this has passed, for now (today?).

 

It's a secular trend. USD/treasuries have been falling as a percentage of global reserves for over a decade. Foreign ownership of treasuries have been falling for years. 

 

You don't need a mass exodus/migration to give them reason for the marginal transaction to accelerate away from the US and for it to impact the USD and Treasury rates over the coming decade 

 

19 hours ago, gfp said:

The irony is that the best reason to sell a longish dated treasury bond is because you are getting more bullish about US economic growth.

 

The US economy doing shitty is a positive for treasury bond investors.   The US economy doing well is bearish for treasury bond investors.  

 

I think the best reason to buy them is simply because there is a massive spread to current inflation rates (and near-term forward rates) giving an attractive real return AND optionality to move in your favor. 

[MMM20]

So is this also the “risk from Carney government aligning with communist China right in the US’s backyard and that won’t fly” and “risk from Canada’s economy barely growing for a decade and policymakers shooting themselves in the foot even worse right now” thread? Asking for a friend with CAD investments. 

 

Edited January 24 by MMM20

[dartmonkey]

1 hour ago, MMM20 said:

So is this also the “risk to Fairfax from Carney government aligning with communist China right in the US’s backyard and that won’t fly” and “risk to Fairfax from Canada’s economy barely growing for a decade and policymakers shooting themselves in the foot even worse right now” thread? Asking for a friend with CAD investments. 

 

Possibly. On the other hand, we’ve had these obvious problems for ten years and, although 1-2 years ago it looked like we might deal with them, there’s very little hope of that now, it is just more b.s. with a little less of the moronic look of the previous government, but basically the same values and policies. 

 

So our political situation is depressing from a Canadian citizen’s standpoint, yes, but from an investing standpoint, it is nothing new, and in any case, the vast majority of Fairfax’s business is not here anyway, so it doesn’t change the investing case very much. 

[Txvestor]

50 minutes ago, dartmonkey said:

Possibly. On the other hand, we’ve had these obvious problems for ten years and, although 1-2 years ago it looked like we might deal with them, there’s very little hope of that now, it is just more b.s. with a little less of the moronic look of the previous government, but basically the same values and policies. 

 

So our political situation is depressing from a Canadian citizen’s standpoint, yes, but from an investing standpoint, it is nothing new, and in any case, the vast majority of Fairfax’s business is not here anyway, so it doesn’t change the investing case very much. 

Added to that, the whole hemisphere virtually is moving right of center. More of this is expected in Colombia and possibly Brazil this year too, And Mexico is recognizing its privileged trading position and negotiating and collaborating more-so than fighting.
So it's interesting that Carney is doubling down on his approach. USMCA is up for renewal this summer. We can likely expect fireworks. 

Additionally its striking to me that the Canadian economy outside of its natural resource abundance and auto manufacturing strengths has very little dynamism or innovation. Carney seems to be betting that he can change that. Not such an easy task. 
Additionally real estate particularly in its cities seems pricey. 
 

The US is a continental economy it has sufficient interconnectedness both inter state and internationally that a hit in one area can be easily absorbed by a shift to another.
Economic Size, Diversification and interconnectedness is an undeniable advantage. Besides this, how reliable will China be? They have a mercantilist policy and I highly doubt anyone comes out with the upper hand trading or doing any sort of business with them. Thats been the history. Just ask Germany. But with all that said, I wish my northern neighbors well. Trump will be gone in 3yrs but the effects of these actions by the Canadian leadership may end up being more long lasting. 

Edited January 24 by Txvestor

[UK]

On 1/24/2026 at 4:39 AM, Txvestor said:

Besides this, how reliable will China be? They have a mercantilist policy and I highly doubt anyone comes out with the upper hand trading or doing any sort of business with them. Thats been the history. Just ask Germany. But with all that said, I wish my northern neighbors well.

https://archive.is/NYLD6

Western leaders navigate a lonely world

China cannot and will not save mid-size American allies from Donald Trump

 

Visiting China from January 14th to 17th, Mr Carney said that Canada would import 49,000 Chinese-made electric vehicles on preferential terms. That breaks with America’s strategy of keeping Chinese EVs out of North America with 100% tariffs, a policy that Canada signed up to in 2024, bowing to America’s leverage as the buyer of more than two-thirds of Canada’s exports. In return for Mr Carney’s concessions, China signalled it would buy more Canadian farm produce and fossil fuels, among other commodities. It showed a readiness to warm relations that were icy for much of the past decade.

 

There has been facile talk, including among conservative commentators in America, that Mr Carney was taking sides with China, against Mr Trump. Yet China’s welcome for Mr Carney stopped a long way short of a new grand bargain. While in Beijing, Mr Carney thanked China for a partnership “that sets us up well for the new world order”. His warm words were not reciprocated by China’s leader, Xi Jinping, who tersely advised Canada to forge ties based on respect. Chinese official media ventured that past bilateral tensions had revealed important “realities” to Canada.

 

[Txvestor]

On 1/24/2026 at 11:17 PM, UK said:

https://archive.is/NYLD6

Western leaders navigate a lonely world

China cannot and will not save mid-size American allies from Donald Trump

 

Visiting China from January 14th to 17th, Mr Carney said that Canada would import 49,000 Chinese-made electric vehicles on preferential terms. That breaks with America’s strategy of keeping Chinese EVs out of North America with 100% tariffs, a policy that Canada signed up to in 2024, bowing to America’s leverage as the buyer of more than two-thirds of Canada’s exports. In return for Mr Carney’s concessions, China signalled it would buy more Canadian farm produce and fossil fuels, among other commodities. It showed a readiness to warm relations that were icy for much of the past decade.

 

There has been facile talk, including among conservative commentators in America, that Mr Carney was taking sides with China, against Mr Trump. Yet China’s welcome for Mr Carney stopped a long way short of a new grand bargain. While in Beijing, Mr Carney thanked China for a partnership “that sets us up well for the new world order”. His warm words were not reciprocated by China’s leader, Xi Jinping, who tersely advised Canada to forge ties based on respect. Chinese official media ventured that past bilateral tensions had revealed important “realities” to Canada.

 

I'm certainly n no position to credibly advise a Canadian PM. However I'll say this. Presidents come and presidents go. Neighbors and shares culture, values and in many cases even family relationships are much more durable. 
I'm not clear Carney is making the right moves here. CUSMA is up for renegotiation this summer. This trip to China and his speech at Davos was ill-timed to say the least. When he says China is Canada's second largest trade partner, he might be technically correct but when there's more than an order of magnitude difference between no. 1 and 2, a bit more tact would have been the better option. In addition hard times expose fault lines and the libertarian steak out west may take on an unexpected turn of things go too far down that road. He could have taken a page out of Sheinbaum's

book. The US is in a massive struggle against China in more ways than one can imagine. 
It's time allies step up on Defence spending, drug spending and many other areas where the US has shouldered a disproportionate burden. Many Americans feel that way rightfully or not. Ideally they'd all sit around the table and have a grown up convo on this but that didn't work for decades so this is the outcome. 

[Parsad]

23 minutes ago, Txvestor said:

I'm certainly n no position to credibly advise a Canadian PM. However I'll say this. Presidents come and presidents go. Neighbors and shares culture, values and in many cases even family relationships are much more durable. 
I'm not clear Carney is making the right moves here. CUSMA is up for renegotiation this summer. This trip to China and his speech at Davos was ill-timed to say the least. When he says China is Canada's second largest trade partner, he might be technically correct but when there's more than an order of magnitude difference between no. 1 and 2, a bit more tact would have been the better option. In addition hard times expose fault lines and the libertarian steak out west may take on an unexpected turn of things go too far down that road. He could have taken a page out of Sheinbaum's

book. The US is in a massive struggle against China in more ways than one can imagine. 
It's time allies step up on Defence spending, drug spending and many other areas where the US has shouldered a disproportionate burden. Many Americans feel that way rightfully or not. Ideally they'd all sit around the table and have a grown up convo on this but that didn't work for decades so this is the outcome. 

 

A grown up conversation may have to wait until there are all grown ups at the table!  I think it is very likely that Trump's powers will be greatly diminished after November.  Otherwise it will be a very uncomfortable two more years.  Cheers!

[Parsad]

2 minutes ago, Haryana said:

is this thread destined to the political dustbin

 

Looks that way.  We'll let it run until it become untenable and annoying!    Cheers!

[MMM20]

I didn’t mean to derail the thread. My point was that I am more concerned about the domestic Canadian businesses like the restaurants and sleep country, with the backdrop of the worst economic growth among developed economies for a decade plus now, if I’m not mistaken, and seemingly no political will to shift back toward free enterprise. I’ve also been reading about the Alberta separatist movement and how damaging that could be to the already relatively weak Canadian economy

 https://www.politico.com/news/2026/01/23/scott-bessent-canada-alberta-independence-00743947 
No clue what to make of that / the odds of it. Not to mention that the banks’ AML controls also appear to be almost non-existent by western standards, which seems to explain the distorted real estate market. Maybe capital controls will come into play. Maybe FFH HQ-type investment talent will leave the country. Are these sorts of issues covered in the mainstream Canadian media? I would rank these things above short/mid term US treasury risk on what keeps me up at night as a FFH investor. All of them tail risks, to be clear, but it belongs in the same conversation. While this is obviously a global business, these issues might partly explain why there has been a lid on multiple expansion and it still trades at a discount to peers. I’ve never posted a political thing on this site - I see this as economics not politics. 

 

Edited January 27 by MMM20

[Parsad]

Ok, so I started this thread on the 19th and a couple of you thought it was ridiculous...since then, there has been a debasement of the U.S. dollar against other currencies.  

 

Now this might be a rapid, but minor blip...or could it be something more long-term as sovereign nations readjust their reserve holdings.  

 

Gold and the stock market, tend to be leading indicators of what to expect months out.  The movement of the U.S. dollar and gold seems to indicate inflationary pressure coming down the road.  

 

This seems to indicate that rates will not fall anymore and there is the possibility that rates might go up due to dollar intervention or inflationary pressure in the economy.

 

Again, I'm no expert in macroeconomics, but there is some risk here again, similar to the bond market in 2022. 

 

Cheers!

[Junior R]

4 hours ago, Parsad said:

Ok, so I started this thread on the 19th and a couple of you thought it was ridiculous...since then, there has been a debasement of the U.S. dollar against other currencies.  

 

Now this might be a rapid, but minor blip...or could it be something more long-term as sovereign nations readjust their reserve holdings.  

 

Gold and the stock market, tend to be leading indicators of what to expect months out.  The movement of the U.S. dollar and gold seems to indicate inflationary pressure coming down the road.  

 

This seems to indicate that rates will not fall anymore and there is the possibility that rates might go up due to dollar intervention or inflationary pressure in the economy.

 

Again, I'm no expert in macroeconomics, but there is some risk here again, similar to the bond market in 2022. 

 

Cheers!

@Parsad did you convert your USD back to CAD

[Santayana]

6 hours ago, Parsad said:

Ok, so I started this thread on the 19th and a couple of you thought it was ridiculous...since then, there has been a debasement of the U.S. dollar against other currencies.  

 

Now this might be a rapid, but minor blip...or could it be something more long-term as sovereign nations readjust their reserve holdings.  

 

Gold and the stock market, tend to be leading indicators of what to expect months out.  The movement of the U.S. dollar and gold seems to indicate inflationary pressure coming down the road.  

 

This seems to indicate that rates will not fall anymore and there is the possibility that rates might go up due to dollar intervention or inflationary pressure in the economy.

 

Again, I'm no expert in macroeconomics, but there is some risk here again, similar to the bond market in 2022. 

 

Cheers!

While this could negatively impact the value of Fairfax's admittedly very large treasury holdings, isn't this a positive in the long run as they will be getting a higher yield in the future?

[Txvestor]

6 hours ago, Parsad said:

Ok, so I started this thread on the 19th and a couple of you thought it was ridiculous...since then, there has been a debasement of the U.S. dollar against other currencies.  

 

Now this might be a rapid, but minor blip...or could it be something more long-term as sovereign nations readjust their reserve holdings.  

 

Gold and the stock market, tend to be leading indicators of what to expect months out.  The movement of the U.S. dollar and gold seems to indicate inflationary pressure coming down the road.  

 

This seems to indicate that rates will not fall anymore and there is the possibility that rates might go up due to dollar intervention or inflationary pressure in the economy.

 

Again, I'm no expert in macroeconomics, but there is some risk here again, similar to the bond market in 2022. 

 

Cheers!

Agreed. This administration whilst they may not say it too loudly is in favor of a weaker dollar. If you're trying to bring in more domestic manufacturing and reduce imports and improve export competitiveness that is logical. It's admittedly a little surprising that with the weaker $ and tariffs we haven't seen the level of inflation one would have expected and it's not showing up thus far in corporate margins either. With over 50% of the S&Ps profits coming from abroad perhaps the weaker $ is helping. Would be interesting to see how it all plays out. 
I think gold flying is definitely reflective of aggressive central bank a large institutional buying. It was underrepresented in most portfolios and people are def hedging more. 

[Parsad]

7 hours ago, Junior R said:

@Parsad did you convert your USD back to CAD

 

No, I'm weighted 50/50.  So for me it's not a big issue.  It could be for those heavily weighted in USD.  Cheers!

[Parsad]

5 hours ago, Santayana said:

While this could negatively impact the value of Fairfax's admittedly very large treasury holdings, isn't this a positive in the long run as they will be getting a higher yield in the future?

 

Yes, I think it is...as they took advantage of it last time.  I'm less concerned about FFH, but more concerned if we see bond losses at other institutions...leveraged institutions.  Cheers!

[Parsad]

5 hours ago, Txvestor said:

Agreed. This administration whilst they may not say it too loudly is in favor of a weaker dollar. If you're trying to bring in more domestic manufacturing and reduce imports and improve export competitiveness that is logical. It's admittedly a little surprising that with the weaker $ and tariffs we haven't seen the level of inflation one would have expected and it's not showing up thus far in corporate margins either. With over 50% of the S&Ps profits coming from abroad perhaps the weaker $ is helping. Would be interesting to see how it all plays out. 
I think gold flying is definitely reflective of aggressive central bank a large institutional buying. It was underrepresented in most portfolios and people are def hedging more. 

 

It's always interesting how markets behave...inexplicable most of the time...but always interesting! 

 

With commodity prices other than oil rising dramatically...what are the risks of input costs to manufacturers?  Do we see a spike in inflation by the end of this year?  Cheers!

[MMM20]

This is not investment advice, but Philip Morris is in my view almost an ideal hedge if you’re a concerned about a weaker (more normal?) dollar and inflationary pressures. If DXY hits 70-80, PM is trading in the low to mid teens on P/E for one of the best businesses in the world. Cigarettes are prison currency, better than gold.

 

Edited January 28 by MMM20

[SafetyinNumbers]

Apollo out with a presentation on why the yield curve is steepening. 

 

[dartmonkey]

16 hours ago, MMM20 said:

This is not investment advice, but Philip Morris is in my view almost an ideal hedge if you’re a concerned about a weaker (more normal?) dollar and inflationary pressures. If DXY hits 70-80, PM is trading in the low to mid teens on P/E for one of the best businesses in the world. Cigarettes are prison currency, better than gold.

 

Trailing P/E seems to be 25, is your hypothesis that foreign earnings will increase in value sufficiently, if the dollar is devalued from 96 (today) to 70-80, to bring the ratio down to less than 15?

[MMM20]

5 hours ago, dartmonkey said:

Trailing P/E seems to be 25, is your hypothesis that foreign earnings will increase in value sufficiently, if the dollar is devalued from 96 (today) to 70-80, to bring the ratio down to less than 15?

 

We should discuss over on the PM thread, but I think it's ~20x P/E on '26 at current exchange rates for a company whose ROIC metrics compare favorably with Hermes and Ferrari. My point is if you're worried about structurally higher US inflation and a secularly weaker dollar, it should make sense to own businesses that report in dollars but have significant international sales. Companies and analysts will look through it and report growth in constant currency, but that doesn't really make sense if this is a long term trend (as PM found out last decade as this went the other direction). My point is that owning a great business and a natural hedge like that makes more sense to me than shorting long-term treasuries on inflation fears. I don't know if Fairfax shares this view.

 

Edited January 29 by MMM20