Norway Government Forces Sovereign Wealth Fund To Buy $100 Billion More In Stocks "To Safeguard The Country's Riches"

Tyler Durden's picture

As we reported late last year, the Norwegian government ordered its Sovereign Wealth Fund to increase its equity allocation to 70% to try and paper over what’s expected to be a 70 billion kroner ($11.1 billion) drawdown – the first in the fund’s history.

That money was needed to plug a budget hole created by falling oil prices, and it seems the brilliant minds at the Norwegian Ministry of Finance and the Norges Bank figured they could easily recoup the fund's losses by upping its risk exposure. Indeed, they’ve already raised the fund’s expected average annual real return to 2.5 percent over 10 years and to 3.5 percent over 30 years, compared with 2.1 percent and 2.6 percent previously.

Eight months later, the MoF is still planning to make the shift, which would result in it buying about $100 billion in global stocks, though prices have risen considerably in the interim. Despite the fund’s rush to raise its 10-year earnings forecast, fund officials said worries about a near-term market slump played “little part” in their investing plans," according to Bloomberg.

Norway’s $970 billion wealth fund has been ordered to raise its stock holdings to 70 percent from 60 percent in an effort to boost returns and safeguard the country’s oil riches for future generations. Any short-term view on growing risks will play little part, according to Trond Grande, the fund’s deputy chief executive.

 

‘We don’t have any views on whether the market is priced high or low, whether bonds and stocks are expensive or cheap,’ he said in an interview after presenting second-quarter returns in Oslo on Tuesday. The decision to add stocks ‘was made at a strategic level, on a long-term expected excess return that we’re willing to take risk to achieve. And parliament has said that they wish to spend some time to phase in that increase.’”

According to data cited by Bloomberg, the fund held 65.1 percent in stocks, 32.4 percent in bonds and 2.5 percent in properties during the second quarter. Its mandate is now to keep about 70 percent in stocks, 30 percent in bonds, with about 7 percent in real estate that’s now separate from the main portfolio.

However, Grande says he’s keeping a “close eye” on market indicators.

“It doesn’t lead to anything in concrete terms, other than the fact that we’re keeping a close eye on the indicators that could indicate whether there’s a risk there, and what they’re saying,” Grande said. “Some risk indicators have actually not shown underlying risk -- take growth for example. So you should be a little cautious when the skies are all blue.”

While the fund has said little about its investment preferences, Bloomberg reports that the fund has recently been expanding into emerging markets.

“Owning 1.3 percent of global stocks, the Norwegian fund largely follows indexes but is allowed some active management of its portfolio. It has been expanding more into emerging markets and recently got permission to raise its stock holdings after Norway last year started withdrawing cash from the fund for the first time.”

Sovereign wealth funds have like Norway's have benefited immensely from a virtuous cycle of central bank buying. So perhaps Norges Bank Deputy Governor Egil Matsen, the official in charge of the fund’s oversight, has some special insight into the thinking of central bankers, the primary engineers of the global post-crisis market rally. 

Central bankers like Thomas Jordan and his colleagues at the Swiss Central Bank, which earlier this month revealed itself as the “mystery buyer” that kept US stocks afloat during the second quarter while retail and institutional investors headed for the exits.


 

Whatever it is, the rest of us will have to wait to find out.

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hedgeless_horseman's picture

 

Hurry up, CALPERS, the train is leaving!

 

gigadeath's picture

Announced soon after Clinton campaign chairman and dominoes enthusiast John Podesta's visit. Complete coincidence, Im sure.

All Risk No Reward's picture

Here is how it works.

1. The Debt-Money Monopolist insiders want to sell at the top of the bubble, but they need buyers.
2. They use their Mega-Corporate and government vassals to buy at the top while they sell at top dollar, just ahead of the collapse. This transfers money from ordinary people to themselves... and the transferred money is inextinguishable debt to everyone else since money-debt = money-asset in debt-money systems.
3. When markets are collapsed, they then get their mega-corporations and governments to sell while they buy.

This is why the Mega-Corporate management teams can consistently but the top and sell the bottoms without losing their jobs (which would be the rational action excluding this little con).

"The game is rigged, the table is tilted, but nobody seems to care, nobody seems to mind..."
~George Carlin

SWRichmond's picture

Keeping the prices high of things you own by buying them from yourself.  What could go wrong?

Thought Processor's picture

 

 

So um....     The Fed has bought over 40 billion (and counting) US equities, China has bought over 150 billion, and Norway is now in the hundreds of billions?!?!?!?!?

 

And yet there are people who still believe everything is just fine?

 

This is the very definition of crazy (doing the same thing over and over again and expecting a different result).  

 

So were just gonna find out the hard way how far the 'pretend' can be extended?

 

We're so fucked.

 

venturen's picture

billions? I think you missed the massive printing...it is nearer $10 TRILLION! Where do you think all these trillions went? Example Tesla...will never make a profit...but by stock value largest American car company

Macavity's picture

One for the history book: how to steal 1/2 of a nation's long term accumulated collective wealth. Or how to humble a wealthy independent nation. Or how to fall from 1st world to third world.

The big question is who are the stooge/rats getting the fund to do this. From anybody and everybody's perspective, this looks foolhearty.

Like that Gaddafi story, "how GS 'lost' $2bn of Gaddafi's money".

All Risk No Reward's picture

They may only steal half of the nation's resources (I think that number is low, BTW), but they will leverage whatever they steal to CONTROL 100% of anything big. In fact, they already do.

By "they" I mean the Debt-Money Monopolists, not your Jewish neighbor. Only a Bankster programmed mind incapable of rational thought would parrot such tripe and use such incorrect language.

By Debt-Money Monopolist, I mean European Royalty, the Rothschilds, and whomever of the Black Nobility still wields control over the money supply (here's looking at you De Medici descendants). These are the Debt-Money Supremacists - the true Supremacists who project their supremacy onto a group of debt-slaves with white skin... and the debt-slave white people are so brain damaged they believe these lies, too!

We are in trouble... because ordinary people really don't care and aren't honest. "prophecy unto us lies...."

Macavity's picture

Your version of invisible reality seems more appropriate than the anti(())) one. Is there anything i can read to learn more?

GUS100CORRINA's picture

Norway Government Forces Sovereign Wealth Fund To Buy $100 Billion More In Stocks "To Safeguard The Country's Riches"

My response: So NORWAY's WEALTH lives or dies by the VALUE OF THE STOCK MARKET?

What is WRONG with this PICTURE? Does the America of 1929 RING A BELL?

What has me really concerned at times is that President TRUMP appears to think this way as well.

venturen's picture

does 2007 ring a bell...they are going to LOSE 1/3 of this beat...they have NO IDEA

GoinFawr's picture

It sure does.

Speaking of having "NO IDEA":

Does NOrway's SWF kicking ass from 2007-2010 and beyond ring your bells?

http://www.rischiocalcolato.it/wp-content/uploads/2015/10/Norwegian-SWF-...

Ghost of PartysOver's picture

For those thinking the market will crash just remember that you are fighting "Peak Stupidity".   When the printing presses are creating cash out of noting to buy stocks to put a bid under the market to protect the stocks they already own creates an environment where is it extremely difficult for the market to crash.  The Great Philosopher Ron White once said "you can not fix stupid".

For those that missed the reference https://www.youtube.com/watch?v=QDvQ77JP8nw

lasvegaspersona's picture

If stupidity got us into this mess...why can't it get us out?

Wil Rogers.

Lumberjack's picture

Their investment in offshore wind is going bust.

runnymede's picture

Nah---they're long Manhattan condos and Wyndham timeshares

Buck Johnson's picture

Calpers is going to hurt California. Also this is idiocy but hey everything has been artificially proped up in order to delay the inevitable.

 

skbull44's picture

Buying moar stocks is sure to safeguard one's wealth...until it doesn't.

kliguy38's picture

LOL this shit just can't get worse

Ben A Drill's picture

Buy Russia. No GMO products there.

Grandad Grumps's picture

Maybe they should buy a small country, such as Latvia instead. But, then again, no.

Fritz's picture

I'm sure that will end well.

Bam_Man's picture

Wow.

Talk about "Dumb Money".

This is "BIG, Dumb Money".

A. Boaty's picture

Looks like a game of hot potato. Norway's turn to keep it going.

BandGap's picture

They have no potatoes. Just a distraction.

They should just by paper gold and silver as a store of wealth. Idiots.

BigCumulusClouds's picture

Well if they were smart, which they aren't since they gave the greatest warmonger the Nobel Peace Prize, they'd take at least 10% of those bonds and use the proceeds to buy precious metals.

Boca's picture

FYI The Nobel Peace Prize is awarded by Sweden not Norway.  Although I think it is a stupid move by Norway to increase exposure in stock, keep in mind this is a surplus, Norway has 970 billion in a fund and ZERO dept.

 

 Now compare that to US, the USA, oh we are so smart, we are paying 404 billion a year in interest alone to service our fucking 20 trillion in debt.

 

So please don't say Norwegians are dumb

BigCumulusClouds's picture

Uh, are you a liberal? The Peace Prize is awarded by Norway. The Swedes handle all the other prizes. I've been there. And Just because USA does stupid things, that does not make Norwegians smart. That's bad logic. And anyone who'd give Obama the killer a peace prize is a fuckin moron.

http://www.deccanchronicle.com/141210/world-europe/article/why-nobel-pea...

shizzledizzle's picture

Doesn't sound very Sovereign

youngman's picture

Well there goes Apple to the moon..and Tesla...and Netflix...all the brand trendy names

runnymede's picture

The late stages of a ponzi are always where the fun starts. Going all in on a pair of twos will work only if your opponent folds. And since he can print his call to infinity.......

jmack's picture

lol, that will work out well.    I am sure when they lose 50%, they will just pass a law saying they didnt lose 50% and make the issuers of the stock cover the difference?

GRDguy's picture

Wall Street discovers land of the greater fools.

Blankone's picture

Who's selling or sold into this buying.
Some little group of people have Norway's govt (and others) under their control. Force the citizens public money in, sell into it and watch.

Just more of privatize profits and socialize losses.
But they are cleaver and bold, who would have thought 20 yrs ago that they would get control of sovereign wealth and tax income to this extent.

Paul Morphy's picture

Build the pyre higher.

reload's picture

NORWAY - is a strange country. Between Oslo and Mandal, the coast is a scenic playground for Oslo money. Lots of amazing holiday homes and boats - paradise when the sun is out, but bleak and windy for a lot of the year. Above Stavangar and into Fjordland, up to Bergen and beyond, the influence of money is much less obvious. Up until the 1950`s the whole country was an area agricultural poverty, with some fishing and forestry.

Then the Oil came, and Norway managed to persuade the Danes to give up their oil rights for fishery security! well done Denmark - apparently the then PM was a notable drunk.

The Norwegians are a very hardy and pragmatic bunch, but like everywhere they are suffering an onslaught of liberal, politicaly correct pussification. But as far as money goes, I do not get the impression that the average man takes it for granted, or even believes it will last.

Certainly it is a staggeringly expensive place to go and explore, and considering the absurd cost of pretty much everything except fish and the very high taxation - it is hard to see that the average jo gets a lot of benefit from the Sovereign Fund. That said, the place is wonderfuly clean, well looked after and everything works - great roads and infrastructure.

But what they do all seem to value highly is that they live on a fairly isolated bit of land, and it is not at all crowded, that is their true wealth and I think many of them know it.

GoinFawr's picture

Which is why they demand their gov'ts maintain sovereignty by being fiscally responsible.

On top of that, while the tax rate may indeed be higher, the average Norge also earns far more, for a net benefit compared to, say, Canada.

Youri Carma's picture

Total deepens North Sea exposure with $7.5 billion Maersk Oil deal
https://www.reuters.com/article/us-total-maersk-idUSKCN1B10IU

Bemused Observer's picture

The 'market' is like a huge spinning vortex, sucking more and more into it...what happens when millions and millions of people who have put EVERYTHING into the markets, into the tech, suddenly lose it all?

Not just money, that's only a part of it. Think of all the records, photos, creative works, that currently only exist in digital form. Just like that pension that suddenly went 'poof!'. Here today, gone tomorrow.

Now, when a guy loses all his money, we know a bit about how he'll react, because we've seen plenty of guys lose their money. But what do we know about the reactions of people who lose everything else? What is the trauma to a large group of people who suddenly lose, not just their money, but their records, their family photos, their entire creative portfolios, personal correspondance...everything? The closest we can find to THAT is in war zones, among displaced refugees, or in natural disasters, and the answers are not encouraging.

Never before has humanity put so many of its eggs into one threadbare basket. The losses, when they come, will be epic.

 

 

Oh, off-topic, but related...with so much being in digital forms these days, games, toys, books, etc...what will collectors of the future be able to collect? What actual THINGS are being produced today? Because those are the things that will be available to those future collectors. How will a game collector display his prized finds? How do you display an 'app'?

Music collectors have had sheet music, record albums in several sizes, and a variety of interesting devices to play them on, many still operable today. The albums alone spawned several sub-groups of collectors, with some favoring 78's, others preferring the 45's or 33's. Some collected for the cover art, others chose from numerous genres from classical to death-metal. What will tomorrows music collectors do, put an I-pod behind glass? With a printout of their playlist posted next to it?

It's just kinda creepy, the way we're destroying and rewriting our past, and creating only ephemeral things today. At some point, a lot of people will find themselves living in a very one-dimensional kind of world, no yesterday, no tomorrow, just an endless today.

michelp's picture

"At some point, a lot of people will find themselves living in a very one-dimensional kind of world, no yesterday, no tomorrow, just an endless today."

That is a very zen state to be in.

m.

To Infinity And Beyond's picture

Government buys stocks.
Corporations have bucku bucks to fund politicians.
Bought politicians ensure the money flow never stops.
What a great country!

What you've been left out?

 

AlphaSeraph's picture

Buy stocks when stocks are well past theit ATH's. That's fuckin' rich. And soon to be poor.

Rebelrebel7's picture

I don't think that there is anything funnier on this planet than listening to these guys today!

Under an umbrella of blue skies.

Wtf?! 

The sky is falling!!!

SubjectivObject's picture

retun on capital

or return of capital

your choice