Bank Of Israel To Double Down On Equities, Will Invest In European Stocks

Tyler Durden's picture

Stanley Fischer, who cost his central bank a lot of money with his ill-timed bet to invest billions of the Bank of Israel's foreign  currency reserves on names such as Apple last year, has demonstrated that Einstein's definition of insanity is alive and well when it comes to central-planners, has just decided to double down on stocks. Alas, this is not a joke. Bloomberg reports that "The Bank of Israel plans to almost double equity holdings by the end of the year after falling bond yields prompted the central bank to invest in European shares for the first time. The bank will increase its stock holdings to as much as 6 percent of foreign-exchange reserves, or about $4.5 billion, from 3 percent at the end of 2012, according to Yossi Saadon, a Bank of Israel spokesman. Investments in shares rose to about 4.5 percent of assets in the first four months of 2013 as the institution made a “small allocation” to European equities in addition to its U.S. funds, he said." Well, if the BOI's investment in AAPL was the beginning of the end for that company, one can start shorting Europe - an academic Keynesian just called the top.

Why is the Bank of Israel gambling in a manner that until recently was seen as taboo by even the most clueless of economist PhDs? For a reason only an absolutely clueless academic could come up with: "risk-premia." Bloomberg again:

“The basis for the decision to invest in equities is the expected equity-risk premium over bonds,” Saadon wrote in an e- mailed response to questions today. “The goal of this move is to improve the return-to-risk ratio of the reserves.”

Is that like Obama's "profit and earning ratios"?

Where will Israel allocate capital ?

The Bank of Israel bought equities for the first time in March of last year, according to Saadon. The initial purchases were made through UBS AG and BlackRock Inc. The bank’s investments are in passive funds tracking broad MSCI indexes, including companies like Apple Inc.


“There has been talk for a long time that they needed to diversify out of Israel,” said Uri Landesman, president of New York-based hedge fund Platinum Partners, which manages about $1.2 billion. “I’m not thrilled with the European equity market this second, but when a central bank makes a move like this, it’s not a day trade. They’re not going to reverse themselves overnight.”


The Israeli institution joins the the Swiss National Bank in buying shares this year. The Zurich-based SNB’s stock portfolio rose to 15 percent of assets last quarter, from 12 percent at the end of last year, according to data released yesterday on its website.

And that is how it's done.

So for all those who still have something as trivial as a cost-basis when chasing risk in the "new normal", and unlike central banks, can't simply conjure buying dry powder out of thin air printer, which they then use to accumulate "foreign reserves" with which to buy stocks, all we have to say is "condolences."

Of course, the central banks know this, and hope that everyone else merely comes along for the ride and front runs the banks to such an extent that an actual investment is unnecessary. Kinda like Draghi's Europe and the whole still non-existent OMT. The one thing these same academics forget is that the reason nobody wants to invest in markets anymore, is because being side by side central banks guarantees yet another epic bubble burst just like last time. And since the market is now officially broken, and since everyone else will get to exit first, what is the point of being herded into whatever stock some Princeton or MIT professor says you should buy?

In the meantime, central banks can just buy and sell stocks to each other sending "markets" to 30,000, 40,000, 50,000 or some other now meaningless number. Everyone knows now we are in the biggest and final bubble. If nothing else, at least having cluless economists buying stocks regardless of prices will bring the final reset that much faster.

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jubber's picture

didn't they buy Apple @ $700

Pladizow's picture

The insanity quote WAS NOT Einstein's!

But I guess repeating that it is over and over agian would be!

Divided States of America's picture

Its getting bad when the Jews on Wall Street is shafting their own from Israel just to make a buck....Guess they took a page right out of Madoff.

fourchan's picture

they are going for the origional play out of the rothchild play book,

own europe, crash europe, buy everything(when napolion is defeted at waterloo).

NotApplicable's picture

I think you've got a flawed definition. "Their own" is not a valid concept, as it deals with an abstract collective, while the true "their own" is a reference to all of their individual buddies.

Of course, that's how collectivism always destroys, as it undermines the individual.

The Big Ching-aso's picture

All this is just a little shmear of Bernanke on some wry bread.

francis_sawyer's picture

Yeah N/A... Any criticism of jews or the Apartheid State of Israel is a 'flawed' definition... I learned that by listening to Rothschild owned Reuters & Associated Press, & jew controlled MSM... They have a great track record for telling the truth...


Now ~ when you're ready to have a serious conversation about how 'usury', fractional reserve debt, theft, & false propaganda, undermines & destroys the individual, we can sit down & talk,,,

logicalman's picture

Dead on.

Interest & Fractional Reserve are truly the roots of (most) evil.



Abraxas's picture

How do you say "Good luck with that!" in Hebrew? or Yiddish?

McMolotov's picture

Schlemiel, schlimazel, hasenpfeffer incorporated.

NotApplicable's picture

Damn you! I did NOT need that earbug.

john39's picture

yeah, but think about it...  where is the purchase money coming from?  what have they got to lose?  what happens when all the markets tank and the serfs sell?  who owns everything, gold and any stock worth anything at the end of the day?  

sampo's picture

Yeah, one day not so far away from this one somebody might get an idea of starting to mine some gold from a high density corner of the Mediterranean sea, or something?

Croesus's picture

Oy, Gevald!

Will they be investing that foreign aid package they get from the US taxpayers?

Groundhog Day's picture

with 4 billion a year from the US taxpayers, i'm sure they will be able to dollar cost average aapl at 400...300...200

FieldingMellish's picture

Having an endless supply of cash, its the logical thing to do (with other peoples money).

Cognitive Dissonance's picture

Now see, you just don't understand how this works. It is NOT other people's money. It's their money. The 'other people' just get to use it until they lose their usefulness. Then its gone. 

All that remains are the real things "they" bought with their fake currency. All you and I are left with is the fake currency and debt.

Get smart. Get Gold (and Silver too).

NotApplicable's picture

Exactly. I'm having a hard time understanding how any CB can "lose" anything, given their cost is ZERO.

Hedgetard55's picture

They can't, at least, not in REAL terms. Nominal yes, but not real. Their REAL cost basis for buying shit is ZERO, as they merely print the money from nothing.

thisandthat's picture

So they're buying toilet paper with toilet paper, then

Inthemix96's picture

Sounds Kosher enough, in my eyes like.

Kirk2NCC1701's picture

No doubt they're investing in German U-boat makers:

Q:  Does this mean that Germany will get its gold back from the Fed, when they deliver the last of the subs in ~ 7 years, and that 'payment' for them will be getting the gold?

Q: Since these Cruise missiles can handle nukes, but Israel does not have any, it must mean that they can use only spent nuke fuel from their nuke reactor.  So how can you avoid confusing one of theirs with a similar dirty nuke from one of the other 'Nukes of Hazard', like Iran via Hezbollah?  Does theirs have a 6-star blast-pattern, whereas the terr'ists have a Crescent-shaped pattern?  How can you tell?  Spock?  Where's Spock?

bagehot99's picture

I think they should start a record label. 

astoriajoe's picture

or perhaps purchase a sports franchise?

slaughterer's picture

Kev wheeling in the VIX crucher algo int he last hour to close the DOW in green.  

pragmatic hobo's picture

only one word comes to mind ... schmuck ...

YHC-FTSE's picture

"Disgust" came to mine. But then again,  that always happens when I hear the words, Israel or Bank. Double disgusting. 

Hondo's picture

Actually, this should be criminal.  There is so much wrong with this from a governance and fiduciary stand point it reeks.  I suppose they will vote with management on pay raises, bonuses, etc.  Can we sue the company if the government is an owner or do they have sovereign immunity?  Basically they are nationalized (although by foreign means) industry.

NotApplicable's picture

Hey, if one allows the criminality of a CB, then what's so wrong with how they use it?

firstdivision's picture

The bank’s investments are in passive funds tracking broad MSCI indexes


There's your levitation.  Guess this takes some weight off of Ben's shoulders.

Golden_Rule's picture

lol.  Europe is what-- at least 3 - 5 years out till they see any growth?...  fukin dumb zionists

MFLTucson's picture

Are they talking about Goldman Sachs when they talk about the Bank of Isreal?

Gringo Viejo's picture

If I could print paper, call it money, and buy stocks with it.....I would.

css1971's picture


I'd buy vast estates, huge yachts, personal 747s, maybe a couple of research projects to build a huge airship I could use to cruise the world, never having to land again.

If you can print paper and call it money you can bypass stocks and go directly to Dr. Evil.

McMolotov's picture

The real trick is to print paper, use it to buy stocks, bid the price up bouncing it back and forth between friends, then dump it off on some poor schmo.

That way you don't just print paper and buy shit, you print paper and steal from others, too. Then you end up with even more power and even more money so you can move on to the buying of even more estates, yachts, etc.

Kirk2NCC1701's picture

Ah yes, the laws of mechanics, when applied to finance & power: 

Position, leverage, ratchet up.  Re-position, leverage, ratchet up...  Repeat process until desired goals achieved.

How come our parents didn't teach us these wealth & success principles, instead of sending us to Sunday/Putz School?

NotApplicable's picture

If you haven't noticed, they already own nearly ALL of the tangible assets that exist on the planet. Every home, every car, every business.

Meanwhile, collateralized, leveraged debt owns us.

Magnum's picture

Sayanim will be put into place throughout the European govt as part of the bargain.

sluggo's picture

If my math is correct ("as much as 6 percent of foreign-exchange reserves, or about $4.5 billion") then Israel has around $75 billion of reserves.  Why then are we giving them foreign aid to the tune of $3 billion per year (and a total of $115 billion from 1949 through 2013)?

source: wikipedia

optimator's picture

I think it's called "Tribute".  They also get an equal amount from "Loan Forgiveness".  We should at least borrow the money we give Israel from Israel and cut China out of the deal.

kito's picture

@sluggo....they are getting 3 billion a year so they can turn around and use it all for american made military equipment....just another round about way of furthering the govt sponsored/socialist defense industry..............

wcvarones's picture

They didn't buy AAPL, they bought the index.  And they are up 15% since last March.  Zimbabwe Stan learned from the best.

Ropingdown's picture

Buying European equities at the moment is also a play on the apparent need of the ECB to start printing euros again in a big way.

The Gooch's picture

I'm doubling down on house of cards burning by years end.

maskone909's picture

Buying at record highs? Wayto go guys lol

Cacete de Ouro's picture

And the Bank of Israel Gold Reserves....?

Kirk2NCC1701's picture

Stored near their nuclear facility in the Negev desert, along with Barbaric Relics from other CB's.  This reduces storage costs for all, when in a common and multi-use facility, and guarded by IDF instead of expensive private firms.  Also promotes world peace, when they all have Relic in the Game.