80% Of Central Banks Plan To Buy More Stocks

Tyler Durden's picture

Regular readers remember how, when we first reported around the time of our launch eight years ago that central banks buy stocks, intervene and prop up markets, and generally manipulate equities in order to maintain confidence in a collapsing system, and avoid a liquidation panic and bank runs, it was branded "fake news" by the established financial "kommentariat." What a difference eight years makes, because today none other than the WSJ writes that "by keeping interest rates low and in some cases negative, central banks have prompted some of the most conservative investors to join the hunt for higher returns: Other central banks."

To be sure, nothing that the WSJ reports is news to our readers, who have known for years how central banks overtly, in the case of the BOJ, PBOC and SNB most prominently, and covertly, as the infamous "leave no trace behind" symbiosis between the NY Fed and Citadel, however we find it particularly enjoyable every time the financial paper of record reports what until only a few years ago was considered "conspiracy theory", and wonder what other current "fake news" will be gospel in 2020.

Meanwhile, for those few who are still unfamiliar, this is how central banks who create fiat money out of thin air and for whom "acquisition cost" is a meaningless term, are increasingly nationalizing the equity capital markets. As the WSJ puts it "these central banks care relatively little about whether such investments make profits or losses—though they can matter politically—because they can always print more of their currency. So risk is less important, analysts say." And since risk was no longer part of the equation, leaving only return, central banks started buying stocks.

“When yields started to get really low and closer to zero in 2014, we decided to start equity investments,” said Jarno Ilves, head of investments at the Bank of Finland, who said he plans to increase his allocation to stocks.

But if you think the farce is bad now, wait until next year. According to a recent study by Invesco on central- bank investment which polled 18 reserve managers, some 80% and 43% of respondents to questions on asset allocation said they planned to invest more in stocks and corporate debt, respectively. Low government-bond returns were behind the moves to diversify, said 12 out of 15 respondents, while three declined to answer.

 

So between central banks outbidding each other to buy "risky" assets with "money" that is constantly created at no cost, very soon all other private investors will be crowded out but not before every stock is trading at valuations that even CNBC guests won't be able to justify.

The good news is that instead of focusing on Ultra High Net Worth clients, a desperate for revenue Wall Street can just advise central banks on which stocks to buy.

The shift has significant implications for markets and the global economy, analysts say. Many central banks are hiring outside managers to handle the nontraditional assets in their portfolios, presenting an opportunity to a financial industry struggling with stagnant revenue growth.

 

“We see more and more appetite by central banks for riskier strategies,” said Jean-Jacques Barberis, ‎who manages central-bank money for Amundi, Europe’s largest asset manager.

The bad news, is that as more people realize that a free "market" now only exists in textbooks, and that Soviet-style central planning is the only game in town, confident in price formation will evaporate, in turn pushing even more market participants out of the quote-unquote market, until only central banks are left bidding on each other's otherwise worthless stock certificates.

At the same time, efforts to invest reserve funds more broadly mean that more markets will be subject to what some critics describe as central-bank distortion, as large and often price-insensitive buyers run the risk of driving up prices and reducing prospective returns for other market participants.

For virtually all central banks, however, the grotesque central planning shift of the past decade means that instead of engaging in monetary policy, the world's central banks are now activist hedge funds, who are focused first and foremost on "investment management":

The South African Reserve Bank’s growing piggy bank drove it to switch “from being a liquidity manager to focusing on investment management,” said Daniel Mminele, its deputy governor.

 

In the third quarter of 2016, global foreign-exchange reserves totaled $11 trillion, according to the International Monetary Fund, up from $1.4 trillion at the end of 1995.

But in the world of central bank hedge funds, no other bank comes even remotely close to the (publically-traded) Swiss National Bank, which has taken risky investing to a whole new level.

In 2013, the SNB opened a branch in Singapore to manage its Asia-Pacific assets, which as of 2015 include emerging-market equities and Chinese government bonds. It was a necessity, since the SNB now manages a mammoth 645 billion franc ($643 billion) in foreign reserves, a pile that grew as the bank tried to push down the value of its currency in a bid to fight deflation and help exporters.

 

In 2009, equities only made up 7% of the SNB’s reserves, four years after it started buying them. Now they are 20%, including investments of $1.7 billion in Apple Inc., $1.08 billion in Exxon Mobil Corp., and $1.2 billion in Microsoft Corp., according to third-quarter Securities and Exchange Commission filings.

Having bought hundreds of billions in equities carries risks even for central banks, if only on paper: in 2015, the SNB booked a loss of 23.3 billion francs, when officials stopped maintaining a ceiling on the value of their currency. As the currency jumped by as much as 22% against the euro, the value of their foreign assets fell. Last year, it offset those losses with a 24 billion-franc profit, as its equity investments paid off.

Others did not fare quite as well: "the Czech National Bank started buying stocks in June 2008 just before the financial crisis. The subsequent stock market crash wiped out a third of its equity investment that year, then roughly 2.5% of its total reserves."

* * *

By now it is common knowledge that central banks openly intervene in markets, the most vivid and recent example of which is the BOJ, which as of this moment owns two-thirds of all Japanes ETFs...

... and at the current rate of expansion, within a few years the world's monetary authorities who are tasked with "financial stability", will have acquired a majority of the world's equity tranche, effectively nationalizing it. We bring it up in light of recent ridiculous allegations that "Russia hacked the US elections" - we wonder, will the liberal press blame the USSR after it dawns upon the world's intrepid press that while it was busy comparing the Obama and Trump crowds, the world's greatest wealth transfer was taking place right below everyone's nose.

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Antifaschistische's picture

Money laundering by the cb counterfeiters

booboo's picture

What's a share worth when what you paid for it with is free? Once that sinks in the music stops.

peddling-fiction's picture

All it takes is an approved SQL statement, and a new record of that new money will exist in the database.

Right out of thin air.

But is is not magic.

It´s chicanery.

38BWD22's picture

 

 

The Central Bank of 38BWD22 plans to buy gold, not stocks.

TeethVillage88s's picture

And so it begins...

Well... no it was like 1989 stock crash (89?)

I Wonder. I wish I could really know who invests in the USA, what they invest in, how foreigners invest, if foreigners are buying mortgages (yes), Subprime Auto Loans (yes), US Debts (Yes) and how much foreigners... and rich foreigners like bankers invest in the USA.

Is it possible our wealthy & Banks don't invest in the economy, but rather just are Rent Seeking in the main (Mainly)?

Who IS INVESTING IN THE USA?

Rest of the world; foreign direct investment in U.S.; asset, Level
2014:Q1: 3,249,001.2 Millions of Dollars (+ see more)
Quarterly, Not Seasonally Adjusted, ROWFDNQ027S, Updated: 2014-06-05
http://research.stlouisfed.org/fred2/series/ROWFDNQ027S

compare

Gross Private Domestic Investment
2014:Q2: 2,829.3 Billions of Dollars (+ see more)
Quarterly, Seasonally Adjusted Annual Rate, GPDI, Updated: 2014-07-30
http://research.stlouisfed.org/fred2/series/GPDI

US Corporations are Not Loyal, Not Investing, Not Patriots, Don't have a "Good" Vision for the USA, and apparently are out of Ideas other than cutting US Labor Rates, Labor Benefits, and Cutting the Workforce.

Interesting of the $26 Trillion in Foreign Owned US Assets put out by BEA.GOV on IIP Data, looks like about half is accounted for in the 2013 Data Report as Equities, LT Corporate Debt, LT Agency Debt, LT Treasuries. Which leaves me to conclude foreign owned US Real Estate must be about $12-14 Trillion (page 30). But I am not an Economist or Financial guy. Maybe Europeans are also buying US Real Estate.

http://www.treasury.gov/ticdata/Publish/shl2002r.pdf (short term & Long term investments in Treasuries and Stocks)
http://www.treasury.gov/ticdata/Publish/shla2013r.pdf
http://ticdata.treasury.gov/Publish/mfh.txt
http://www.bea.gov/newsreleases/international/intinv/iip_glance.htm

Here is 2014 data, long term foreign holders of US Treasuries, a possible indication of growing wealth or safe harbor in US Dollar/Treasuries... Something going on... and they combined caribbean islands and petro countries in recent years.

Last Data is from December 2014.

Belgium 2002 = $10.8 B, then 2013 = $163 B, Today $335 B
Bermuda 2002 = $14 B, then 2013 = $94 B, Today ??
Cayman Islands 2002 = $10.7 B, then 2013 = $66 B, Today ??
Canada 2002 = $8.4 B, then 2013 = $46.6 B, Today $69 B
China 2002 = $95 B, then 2013 = $1,272 B, Today $1244 B
France 2002 = $11 B, then 2013 = $42.4 B, Today $79.2 B
Germany 2002 = $38 B, then 2013 = $54 B, Today $72.7 B
Hong Kong 2002 = $37 B, then 2013 = $89 B, Today $172.6 B
India 2002 = $5.2 B, then 2013 = $56.6 B, Today $83 B
Ireland 2002 = $6 B, then 2013 = $91 B, Today $138.6 B
Japan 2002 = $260 B, then 2013 = $1,023 B, Today $1231 B
Luxemburg 2002 = $20.2 B, then 2013 = $107 B, Today $172 B
Mexico 2002 = $16.7 B, then 2013 = $52.7 B, Today $84.8 B
Norway 2002 = $5 B, then 2013 = $74 B, Today $81.6 B
Philippines 2002 = $3 B, then 2013 = $36 B, Today $40.6 B
Poland 2002 = $7 B, then 2013 = $31 B, Today $27 B
Russia 2002 = $3 B, then 2013 = $138 B, Today $86 B
Singapore 2002 = 19.4 B, then 2013 = $82 B, Today $110 B
Switzerland 2002 = $28 B, then 2013 = $157 B, Today $190 B
Taiwan 2002 = $0 B, then 2013 = $183 B, Today $175 B
Turkey 2002 = $2 B, then 2013 = $18 B, Today $77 B
United Kingdom = $45.7 B, then 2013 = $130.6 B, Today $189 B

$64 Trillion USD in Current Total US Debt... is the dollar supported by Military Actions around the world or what? Hegemony?

http://research.stlouisfed.org/fred2/series/TCMDO

hibou-Owl's picture

Nice comment,
Nearly every Central bank is appointed by an elected government (eu exempt), and the political stop loss is quite relevant. But valuing stocks can be a lagging process, at some point a stop loss will be triggered out of voter rage. Sadly this stop loss is very low, and accountability low.

So the free money valuation isn't zero but bloody close.

It will be like Gordon Brown dumping gold at rock bottom prices, chasing yeild. No accountability

Francis Marx's picture

How do we know that Invesco isn't putting out fake news?

sysin3's picture

Very old joke, but quite true in this instance:

Guy calls his broker every day and says "buy more XYZ".  Because it's going up.

One day, he calls his broker and says "sell XYZ".

Broker says "Sell ? To whom ?  You're the only one who has been buying."

nmewn's picture

Well lets see, the creators of inflation, intend to keep debasing the very thing they love most. I'm sure there's some bitter sweet lesson of their lives in there to form the basis of a million love stories or docudramas ;-)  

booboo's picture

Don't worry, once they own it all they will change the rules.

detached.amusement's picture

As you know, its expensive and time consuming to un-debase gold.  Which is why it was first removed from circulation, then from use entirely.

 

Cabreado's picture

They have to, that's the point.

orez65's picture

"... we decided to start EQUITY INVESTMENTS,” said Jarno Ilves, head of investments at the Bank of Finland ..."

EQUITY INVESTMENTS ???

When a Central Bank buys stocks with fiat money that they have, literally, pulled out of their ass holes, IT IS NOT INVESTMENT, IT IS THEFT !!!

BeanusCountus's picture

And this is the problem. We have no idea on how much, who, from what source, is buying stuff at these levels. The vals support almost none of it given current projections. But hey: play it if you choose. Just trade it, but have your finger on the trigger. Still wont save all of your cash, but better not be a buy and hold guy right now.

fix's picture

Well, at least we now know where all the money came from that flooded the market earlier. We also know we should now consider whatever we hold with a 20-60% haircut if we're going to be honest with ourselves.

Manipuflation's picture

Can I buy a derivative of a derivative of a derivative?

CPL's picture

Yes, usually comes in three ply, has pictures of kittens on the wrapper and is insured by the sec.

Manipuflation's picture

I hate the single ply. 

CPL's picture

No one like US bonds either, people have complained that they are flimsy and they end up with shit on their hands using them.  I blame it on cheap jew manufacturing techniques, cheap fuckers always cut corners.  Then again, they are jews, can't count on them for anything done right.

flaminratzazz's picture

doesn't fonestar sell those?

bits and bytes of a bitcoin any different?

small axe's picture

an excellent argument for capital punishment

Cluster_Frak's picture

So they CB will sell soon to be worthless government debt and with those proceeds will buy productive assets. Short debt, long stawks.

GRDguy's picture

Create money from thin-air; then buy stocks with it;

thus owning more and more of each company.

Then merging the companies to consolidate control.

Perfectly fits the old 1889 book The Great Red Dragon telling us

that "their goal is to own the earth in fee-simple."

I keep bringing this up because it can't be killed;

but collectively we can stop feeding the damn thing.

NoDebt's picture

That's right.  CBs buying stocks has exact WHAT to do with their mandate to regulate their own money supply?  NOTHING.  Absolutely nothing.  CBs have a mandate to generate a retun on their "capital"??  No, they do not.  Not by any stretch of the imagination is that part of any CB mandate.  For a sovereeign wealth fund, maybe, but not a CB.

Therefore, something else is going on.  My inner conspiracy theorist says they are buying control of the only thing that really matters- control of the productive resources of their country.  Once the currency collapses they need to have an alternate source of control.  A controlling interest in every corproration they can print their fiat currency to buy into seems like a cheap way to that goal to me.

 

DavidC's picture

"80% of Central Banks Plan To Buy More Stocks".

I'm sorry but they are fucking mad.

DavidC

2rigged2fail's picture

So gold is -25%.  What a total bunch of bullshit

flaminratzazz's picture

How will they pay people to kill all the other people if the money is debased and no one wants it?

 

coast's picture

I did watch part of the inauguration, and I was surprised to hear "Jesus Christ" several times....I thought that name was banned from politics and skools and not pc..It made me feel somewhat good, until I remember my biblical studies...The authorities at the time, basically said "let them have their Jesus, it keeps them calm, quiet and complacent"....it was not until Jesus turned over the money lenders tables, that those in control started paying attention, and Jesus died shortly thereafter....In other words, until Trump, or somebody turns over the tables of the money changers (end the fed), I am not interested in any of the bankster tricks or trump,...We have been fooled for centuries, and maybe you guys dont care, but I wont get fooled...All of the things the bankers worked at, were not working out, so let Trump come in as the new Knight and change it for them...Or should I say, "refine then"   brilliant move by the banksters...and in 4 years from now, the banksters will still be in control, their somewhat faulty designs :new and improved" but we will all still be slaves....watch and see.

flaminratzazz's picture

In all honesty, being alive and making a living is slavery. Back to the situation of "a guys gota eat".

Want slavery? Try subsistence farming

coast's picture

a salve is someone who tries to live off grid and the masters forbid it...organic food is expensive when it should be cheaper,  in many places you cant even have rain catchment, buying any electronics or solar is from china with no long term support much less short term support...un have to get permission what you put on your own land...natural substances such as marijuana, ibogaine, ayahusca, that are not only good for our physica health but good for our mental and spiritual health are all illegal....I could do this all day...You know the problem here?  Many are in love with trump, as were the democrats with obama, so you simply quit thinking for yourselves, and I am growing beyond ZH now...it used to be enlightening but you all seem to have found your savior, same as the democrats found obama....NOTHING NEW UNDER THE SUN

flaminratzazz's picture

I catch the drift, but you also have to realize that they had head choppers going forth from Rome shaking down the countryside 2000 years ago.. So yes same as it ever was but on that note, humans might come back around and realize that we can change back to a simple liberty based life style with the invent of new technology forgoing the tax based bureaucrat forcing HOA type policies..

Maybe..

after will kill enough of them

 

maybe

 

??

 

 

coast's picture

I appreciate your comment...you give my comment credit but also give your opinion, and believe me, I still have a tiny bit of hope that you are right...this has been a very confusing time for me...with obama it was cut and dry, with bush and clinton its cut and dry, but this trump thing is somewhat confusing...seems all over the place and confuses me...thanks for your comment tho, this is how communication should be...thx

coast's picture

and as long as you have your internet, and place covering your head and food in the fridge, you consider yourself free....dear Jesus help us all.  And when the economic thrash comes very soon then get back to me.... I suggest listening to hours of David Icke for a start...He is not perfect, but he has put some great things together.  most are slaves and dont even know it, in fact, they except it...george soros didnt lose any money and he doesnt hate Trump...Trump is his main man, along with all the other banksters....This is all a ploy and it wont be long til you figure it out...watch and see...tump will simply refine the areas of the NWO that were not working as they planned..NOTHING NEW UNDER THE SUN

flaminratzazz's picture

No reason to bust my chops here friend.. I got red pilled by Bill Cooper so yes, wage slave, gov slave, slave to the banksters, pissing in cups, forced insurance, property taxes, police state cash confiscation.. I get it ok?

so when da fvk do we start shooting?

 

wet_nurse's picture

Central banks owning all the stocks until it's just a gang bang with all dudes.

Cassandra.Hermes's picture

Stock market is a Ponzi scheme, buyback and central banks, it is time to explode

Dr.Carl's picture

Whatever

One analyst makes true predictions and proves that by showing time stamped charts. I think it is interesting that no one else can do that. 

https://www.facebook.com/166578775325/photos/a.10153488951800326.1073741...

LowerSlowerDelaware_LSD's picture

This mom’s basement dwelling, failed trader, now spammer - ScamWave - registered the following spam accounts to promote their scam.

Please don't give him the satisfaction of seeing his site hit counter go up from ZH clicks. He's not very bright, but eventually he’ll go away if his spam scam doesn't bring income from ZH. The spam accounts are: AliSONY, Babs.St.Louis, Billy G, Chi Juan, Dr.Carl, ErikE, FemDayTrader, FRLEPU, Irvingm, jasony, John Beau, KanSass, KC Spike, MadhyaBharatx, Marilee, MexInvest, MikeM54, Miss Lou, Mon T, P Christmas Carole, Penny Trader, Pinky and the Brain, PUNE,  RoBERTAZ, RonnieM, RudolPHDs, Sonya B59, Stan Your Man, StevieTexie, Timming, Van G, Virginia Wooolf, wisetrader224, and xantippa
Dragon HAwk's picture

Sounds like they are propping up their Fiat with somebody elses Company.

jonjon831983's picture

As long as they keep pumping prices up by themselves they'll do well.

JailBanksters's picture

Here's my Toilet Paper I painted some numbers on it, and I want to exchange it for some stocks.

They won't accept my Toilet Paper !!

 

The Central Bank will tranfer some one's and zero's from our computer to your computer to exchange it for some stocks.

Sure No problem.

twittering as stocktradr's picture

Hey, Central Bankers, I got stock to sell you.  

Keep on buying!

twittering as stocktradr

 

Red Wire's picture

Hi all, check out my latest market update of the S&P500, Nasdaq and Apple. 

Pay attention to the next cycle, it is about to start! 

https://www.youtube.com/watch?v=3Bi99JxWs7s

TheVoicesInYourHead's picture

This is actually the biggest ticking timebomb and con for developed markets.

Its shocking that the media is not all over this and it is allowed to continue.

Central banks/governemnt entities should be banned from buying publicly traded equities and corporate debt!

detached.amusement's picture

Central Banks should be banned from existence

 

 

there, ftfy