From the BEA News Release this morning:
The U.S. net international investment position at year end 2004 was -$2,484.2 billion (preliminary) with direct investment valued at current cost, as the value of foreign investments in the United States exceeded the value of U.S. investments abroad (table 1). At year end 2003, the U.S. net international investment position was -$2,156.7 billion (revised). The -$327.5 billion change in the net investment position from yearend 2003 to year end 2004 was largely due to substantial net foreign purchases of U.S. Treasury securities and U.S. corporate bonds. The impact of these net purchases was partly offset by appreciation of most foreign currencies against the U.S. dollar, which raised the dollar value of U.S.-owned assets abroad, especially of U.S.-owned foreign stocks. In addition, increases in stock market prices raised the value of U.S. holdings of foreign stocks somewhat more than they raised the value of foreign holdings of U.S. stocks.
That debt substantial reflects investments in financial assets (US stocks, bonds etc). In direct investment, the US position is positive (we own more physical assets in other countries than foreigner own in the US). According to my calculations, that direct investment jumped from $476.65 billion in 2003 to $658.51 billion in 2004.
This could be good or bad, depending on how you look at it. The good part is that direct investment helps to offset some of the debt we own the rest of the world. The bad is that it shows that we continue to invest a large portion of our resources in hard (productive?) assets abroad. Unclear, however, whether this jump is due to currency changes (see above), investment in non-productive assets (second homes) or in foreign plant and equipment.
Earlier this year, BEA released direct investment statistics showing that US direct investment abroad increased from $119,41 billion in 2003 to $229.29 billion in 2004. Foreign direct investment into the US jumped from $56.83 billion in 2003 to $95.86 billion in 2004.