Norway

Back in September 2010, Norway's sovereign wealth fund, the second largest in the world, decided to be contrarian for contrarianness' sake, and announced it had "stocked up on Greek debt, as well as bonds of Spain, Italy and Portugal. Finance Minister Sigbjoern Johnsen says he backs the strategy, which contributed to a 3.4 percent loss on European fixed income in the second quarter, compared with gains on bonds in Asia and the Americas." The explanation was one that not even the high priests of obfuscation and lies back in the US, which only invest in "maturity" could come up: "“The point is, do you expect these guys to default?” said Harvinder Sian, senior fixed-income strategist at Royal Bank of Scotland Group Plc, in an interview. “Norway has taken the view that they will not. The Greek holdings are particularly interesting because the consensus in the market is that they will at some point restructure or default. Norway says its long-term perspective will protect it from losses. “One could say we are investing for infinity,” Johnsen said in an Aug. 27 interview. “It is important when you look at the time scope of the fund and the investments that there should be a portion of active management." Less than a year later, infinity appears to have finally arrived. The FT reports that the fund "recently announced plans gradually to reduce exposure to Europe, which currently accounts for half its equity holdings, as part of efforts to increase diversification but Mr Slyngstad said the fund remained bullish about the region in the long-run. However, he acknowledged the “enormous challenge” facing eurozone policymakers and voiced concern over the potential repercussions of a possible restructuring of Greek debts. “It is difficult to see all the secondary effects of such a move and therefore I think there will be a lot of caution before any such decisions will be taken,” he said." But, But... Didn't they say just 9 months ago that there was no risk of Greek default? Perhaps it is a good thing nobody actually holds these gentlemen, or anybody else for that matter, accountable for the outright stupidity they tend to spout on way too many occasions.

And here comes the first domino: according to Swiss journal NZZ, the Greek bailout is about to take a turn for the worse. "Norway will first stop all further financial aid payments to the highly indebted Greece. The reason is that Greece does not fulfill its obligations descendants, the Norwegian Foreign Minister Jonas Gahr Store said on Thursday before the Parliament." And with Norway which is a member of the European Economic Area, and actually one of the few solvent and non-basket case European countries saying let the chips fall where they may, it is just the first. Look for every other country currently on the sidelines vis-a-vis Greece (and just as insolvent) to follow suit as the European experiment falls apart.

In a move to combat rising inflation, Norway's Government Pension Fund Global, valued at $548 billion at the end of last year, is slashing its bond holdings and shifting to real estate and infrastructure...

Norway's fund dropped $25 billion in the second quarter, pummeled by the European debt crisis and BP's downturn after the Gulf of Mexico spill.

Der Spiegel conducts a stunning interview with Norway's foreign minister Jonas Gahr Støre, in which the Scandinavian official rips the G-20 (which is meeting this weekend in Toronto), in a manner far more vicious than any of the tens of thousands of protesters could hope to ever do. Støre essentially compares the Group of Twenty to the most cataclysmic event in the history of mankind: calling it "the "greatest setback" for the international community since World War II." Any other day, this would result in a diplomatic gaffe, and the expulsions of various ambassadors. Today, with the entire world agreeing with the Norwegian, except those, of course, in attendance in Toronto, nobody bats an eyelid. One of the smartest countries in Europe (having refused to join the utter disaster that is the European Union... twice) once again proves its wit, when its minister "questions the legitimacy" of the G-20, stating "We no longer live in the 19th century, a time when the major powers met and redrew the map of the world. No one needs a new Congress of Vienna." Ah, but we do, as otherwise the spoils from the greatest generational wealth transfer would go equally and ratably to all, instead of being concentrated in the greedy hands of those who have already stolen so much, they have no place to put the loot. Which is why the G7, G8, G20, etc. will continue to exist as the world's most potent parasite until there is nothing left to steal anymore.

While Bernanke is preparing to hit the TV circuit (after hiring Obama's exhausted teleprompter team) to cash in on his Time Warner accolade, even as he is set to do nothing at all about the liquidity bubble forming in every aspect of the economy, the much more logical and efficient country of Norway is doing the right thing, and in making sure its economy does not overheat, has raised interest rates by 0.25% to 1.75%. The target rate: 1.25%-2.25%. In other news: Goldman Sachs is not moving to Oslo.

After interest rates had been lifted in several commodity producing countries, the rate game is shifting to the old continent, where Norway has become the first country to announce it is raising its interest rate by 0.25% and has signaled it anticipates steeper increases over the next three years as "inflation accelerates and unemployment remains low." Count the NOK as the latest currency that will be using the dollar as a short-funding vehicle.

One story that has not made much headlines in the MSM is the sudden escalation in hostilities between Iraqi's Kurdistan Regional Government (KRG) and Norwegian E&P company DNO International ASA. The firm, whose trading on the Oslo exchange was suspended yesterday, and which likely will not trade for several days, has seen a forced halt to its key Iraq oil exploration over a dispute involving a potentially illegal stock sale. As Iraq operations account for a bulk of the company's enterprise value, many shareholders will be quite concerned when shares resume trading sometime on Wednesday.

Long perceived as a bastion of stability due to their oil-extraction based economy, and socialist system that the US can only dream to emulate, today the Norwegian Central Bank conducted a Dutch auction in which it exchanged NOK10 billion of government securities for residential and commercial mortgage loans. And not just any loans, but including those denominated in SEK, DKK, EUR, USD, GBP and CHF (well, in retrospect, looks like pretty much any loans). Exchange swaps will cover maturities between December 2012 and 2014. But aside from the specifics, it seems that even the Norges are starting to monetize MBS: a process demonstrated to work phenomenally well at propping up a hollow economy by the likes of economic alchemists such as Ben Bernanke and Tim Geithner.

Bloomberg has done a good (and lengthy) analysis of the worst year ever of the world's third largest sovereign wealth fund, the $300 billion Norway Government Pension Fund.