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The US Paper Dump Continues: Norway's Sovereign Wealth Fund Sells All Of Its US MBS Exposure
Two days ago we noted that foreigners are selling US paper at a record pace, whether to raise capital in a locked out liquidity environment like French banks, or to make a politicial statement, like China. Today we get the first confirmation to this from Norway's Sovereign Wealth fund, best known for its prediction that it would buy and hold Greek bonds in perpetuity back in September 2010. Just recall: "Norway has taken the view that [Greek bonds] will not [default]. The Greek holdings are particularly interesting because the consensus in the market is that they will at some point restructure or default." Well, about a year later it is now official that the best the Norway SWF can hope for is a 50% recovery. So what does it do? It proceeds to dump US paper. Mortgage Backed Securities first. Because if it announced that a sovereign wealth fund instead of buying into the biggest ponzi ever, we finally defecting from it, then all bets would be of. Bloomberg reports: "Norway’s $570 billion sovereign wealth fund sold all its holdings in U.S. mortgage-backed securities as part of a shift of its fixed-income portfolio. The fund holds no mortgage bonds issued by Fannie Mae and Freddie Mac, the U.S.-controlled mortgage financiers, and an “insignificant” amount of private home loan-backed bonds, said Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, today in an interview in Oslo. “We’ve reduced our holdings of mortgage-backed securities,” he said. “MBS has been taken out of our internal policy benchmark. This means that we don’t have mortgage-backed securities issued by Freddie Mac and Fannie Mae any longer."
The stated reason for the dump: prepayment risk: "The debt was sold primarily because of the refinancing risk, he said. In the U.S., when a borrower refinances a mortgage it can cut short the maturity of the bond backed by the loan and reduce the expected interest over time, so-called prepayment risk." The real reason? Why shoring up capital of course. "The fund held 36 billion kroner ($6.6 billion) in bonds from Fannie Mae at the end of the second quarter and 11.5 billion kroner from Freddie Mac at the start of the year." And with the Fed telling us that almost $100 billion in US bonds and MBS having been sold in the past two months, one can be absolutely certain that i) it is not just MBS and ii) it is not just Norway.
From Bloomberg:
The fund’s bond holdings, which totaled $216 billion at the end of the third quarter, returned 3.7 percent in the third quarter, helped by gains in German and U.S. government bonds, the fund said today. The fund’s securitized debt, which was 18 percent of the portfolio, gained 0.3 percent as measured in international currencies.
This is bad news for PIMCO just as the fund was preparing for an MBA-based QE3 launch and buying up every MBS out there. Although judging by the Norwegian's success at predicting markets, the dump may in fact merely bolster PIMCO's thesis.
Fannie Mae and Freddie Mac mortgage bonds fell earlier this week as the U.S. Federal Housing Finance Agency announced changes to guidelines for the government-supported companies’ refinancing program affecting so-called underwater borrowers.
The decline prompted Pacific Investment Management Co., manager of the world’s biggest bond fund, to call for investors to buy the bonds. Pimco boosted mortgage securities to 38 percent of assets in its $242 billion Total Return Fund in September, the most since January, from 32 percent the prior month, according to data on the firm’s website.
And some more color on the fund administering the trade surplus of what some consider Europe's best run country:
The fund announced today it has changed its internal benchmark portfolio, reducing it to 4,000 bonds from 11,500 bonds and keeping primarily corporate and government debt. The fund also weighted its euro government bond holding according to gross domestic product rather than the size of the market, which it had earlier proposed as a way of reducing its holdings in nations with increasing debt.
The investor, which is part of the central bank and gets guidelines from the government, held 55.6 percent in stocks, 44.1 percent in bonds and 0.3 percent in real estate at the end of the quarter. It’s mandated to hold 60 percent in stocks, 35 percent in bonds and 5 percent in real estate, which it first bought this year.
Norway, a nation of 4.9 million people, generates money for the fund from taxes on oil and gas, ownership of petroleum fields and dividends from its 67 percent stake in Statoil ASA (STL), the country’s largest energy company. Norway is the world’s second-largest gas exporter and the seventh-biggest oil exporter. The fund invests outside Norway to avoid stoking domestic inflation.
While Norway may me lucky, its sovereign wealth fund sure isn't. And we venture to say, it isn't the only one.
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Don't metals in and of themselves represent energy? The energy in labour, oil, etc that it takes to extract and purify, is it. If PO makes oil expensive to get, then so much more so it will make metals expensive.
That is exactly correct Malikai. A gold coin not only represents scarcity but a sunken cost of exploration through refining/minting. When you understand that mining companies grade gold mines in grams/ton they you will understand the amount of effort in BTU's it takes to mine just one ounce of gold, not withstanding the time, effort and permitting it takes to access the gold in the ground. When oil becomes exponentially more expensive it will become obvious why a bird (gold coin) in the hand is going to be way better than two in the bush (gold mine), IMO.
Trav,
But you own silver, remember? LOL!
Silver is the same as gold, but with a slightly shorter decay period. It is a little more plentiful, but it does act as monie, as it meets all four standards of the definition.
Heard it through the grape vine that silver use will be accelerating in medicinal use. Not just around the house
but in hospitals as well. See Curad silver infused products, anti bacterial use in clothing and now silver in bedding. I'm
just about to order some of these new products. I was in a CVS pharmacy and did not notice anything with silver in the bandage
department.
Actually, doctors HATE silver. It causes the wound to turn black, making it difficult to tell if there is necrosis, or to gauge the rate of wound healing, not to mention that the stuff is toxic to human cells, and accumulates in the liver.
There are other technologies that will take the wind out of silver's sails in the coming years. Selenium and quaternary amines are both superior technologies, and are non-leaching, so the possibility of toxicity is greatly reduced.
This is at the center of my research. Selenium in particular is a truly amazing technology. In twenty years, that tech will be recognized as the most important advance in medicine since the advent of sanitation.
Whatta bullshit! Doctors hate silver because it's better and cheaper than modern antibiotics. Toxicity!!! where did you get that propoganda shit ? I drink colloidal silver (pure silver particles), every day for last 5 years and feel like 25 again. Never heard about wounds turning black maybe you just have to use pure silver solution.
You've been drinking silver everyday for 5 years?
Now I've heard everything
I'm curious...what does your shit look like?
Sorry, kiddo, that info is straight from the horse's mouth. Call up any physician from any surgery department in any university in the US and you are likely to get the same opinion.
Do you even know the mechanism for silver's antimicrobial effect? Here's a hint: it interferes with protein folding. You know what else has to fold proteins to live? Human cells. Accumulation IS a problem.<br><br>
If you want to see wounds turn black, go pick up heavily silver laden bandages, such as Acticoat and Actisorb. Put that shit in some water. It will turn black within a day. Sorry, that is the color of silver in solution. There is nothing you can do about it.
And as to toxicity, we tested that ourselves. It is highly toxic in solution. Nothing you can do about that either.
You need a better technology. For a proven one that is already on the market, you can look at quaternary amines, but those are vulnerable to surfactants (soap), so they are fairly useless. Our own technology, selenium, is effective and resilient while resisting leaching (the killer agent is the superoxide that it produces catalytically).
I know what I am taking about. This is my bread and butter.
Australia's SWF just posted a 2%+ loss due to "market uncertainties"....no doomers in management there.
OT: Can anyone recommend any decent tax heaven incorporation sites?
God@paradise.com
Tax heaven? I think most people would call that hell.
Sure, it's called land in another country. You buy it there, emigrate and then sell everything in your ex-host country.
Buying land in a foreign country is easier said than done. I looked into it...
When China starts to pump money into Euro. The mother of dollar sell-off would be started off
i'll bet you ten bucks they bought PMs!
I want a piece of that action: I've got a silver maple on my flank that says slewie's right.
Any takers?
As long and they can find a Greater Fool to sell to all is fine
Beat me to the draw!
Norway Sells All of MBS Holdings - Cites REFI Risk - Cost of Administration's Streamlined Refinancing Plan Begins to Show
http://confoundedinterest.wordpress.com
Obama plan will cost MBS holders, so the stupid argument that this won't cost taxpayers a cent is outrageous!
snakeeyes: thanks for the site link. Excellent.
Who would buy bonds froma country that is ruled by Mugabe 2? Filled with morons brainwashed by TV.
So wait, is Turbo Timmy telling the Europeans to go ahead and sell US assets in a bid to lower the dollar and defacto raise the Euro? Are they telling Europe that direct US Dollar currency intervention (printing) is politically impossible at this time and that the U.S. citizen will instead "pay" for bailing out Europe through INFLATION??
If true, does America think it will be able to supress its' citizens better than Europe can when people here go apeshit over 10$ gallon milk and 7$ a gallon gasoline??
Help me out here.
...and pension checks are bouncing. And...and...and.
People are angry right now, when everything doubles, that will wick the flame of hatred even deeper.
"If true, does America think it will be able to supress its' citizens better than Europe can when people here go apeshit over 10$ gallon milk and 7$ a gallon gasoline??"
Yep you bet, unlike EuroLand, US SWAT-POLICE are armed to the teeth, backed by the Patriot Act and lots of prison space will quell any revolt or riots.
So I wonder what the practical implication would be of the U.S. FRB buying all the U.S. Treasury debt with fiat currency and then just cancelling the obligation. A little inflation, but the U.S. debt problem would be solved.
Can someone explain what this means to a dummy like me?
Are the Norweigans bailing out because they think US MBS are about to get trashed? Or is it because the USD is about to get trashed?
Or is this because they see no solution in Europe, believe the Euro mess is about to bring banks, sovereign states and the whole economic system crashing down?
Thanks.
You're not a dummy. The financial "system" is now moving at hypervelocity. And it is impossible to game all permutations given the global rampant distortions, money flows, and outright balance sheet manipulation by central banks, bankers, sovereigns and corporates. Look at all the shit that is going on: U.S. Fed and its secret bank bailouts (revealed only because of litigation), central banks wreaking havoc with interest rates, central banks and their emergency currency pegs, money printing, quantitative easing and other "asset puchases" a la Maiden Lane (stealth bailout of AIG counterparties), ISDA invalidating credit-default swaps, and massive -- massive -- balance sheet inflation when goddamn banks use bilateral netting to report miniscule exposures. Well ask Greek bondholders how those nets worked out.
This system is total, utter, complete shit. The global financial system is being massively gamed every fucking day by governments because they know we're teetering on a massive debt implosion the likes of which the world has never seen.
Are the Norweigans bailing out because they think US MBS are about to get trashed? Or is it because the USD is about to get trashed?
Truth is only the people at the sovereign fund know why they sold. In all likelyhood they are seeing increased risk in holding all US paper(not just MBS) due to the ponzi-like nature of the US. They are probably concerned that no one will be buying MBS in the near future and wanted to get out.
Thanks Sequitur, thanks GeneMarchbanks
It just sees a giant rigged mess.
I am not an experienced trader by any means but I am watching my hard worked for cash savings being eroded by inflation and watching the markets rise about 2,000 points on the back of nothing - am I the only one who thought that the Euro meeting gave absolutely no solution to the mess, but still the markets rose sharply?
In my mind they have just kicked the can down the road a bit further allowing those in the know to make money from equities whilst retail investors are scared to stay in cash, but scared stiff that the rally in equities is all part of a plan to fleece Joe Public of their savings.
There is no money to bail out the Euro banks - none. It is still not certain that bond holders will take a haircut on Greece. Then what about Ireland, Spain, Portugal and Italy - why should the pay 100% of what they owe when the Greeks walk away with a 50% write-down?
This ain't going to end well... but some appear to be making lots of money buying the dips and selling on the illogical highs.
This game continues until one of the major sovereigns goes belly up. Everyone is focused on Italy and Spain, so unlikely they will be it. My guess is China implodes and "nobody saw it coming". The whole world right now is levered off the USA - Asia money debt spiral.
I think Norway is an insignificant little pipsqueak and is being managed by the squid to extract its wealth.
Euro taking the begging bowl to China seems a bit od to me.
Either Europe is so broke that it needs/think China is the place to get cash - much in the same way that Cina bought US paper debt - or no one in the EU has figured out that China looks close to melt-down itself. How many of those 300K USD appartments, of which they have built hundreds of thousands in China, have been sold? There are entire empty new cities in China.
No, China will iplode - it is just a matter of when.
Everyone keeps saying that the global economy is about to go into melt-down but people have been saying it for a few years now. Everytime it seems close the banksters and politicians appear to find a new way of kicking the can a bit further down the road.
I suspect it will just implode one day taking us all by surprise of when it happens and where it first happens.
some other dots to connect?
tyler put this up on sept 8, 2011:
it was only a matter of time. A few weeks after every money losing firm in the US and the kitchen sink disclosed it would sue Bank of America in an accelerating attempt to salvage something through litigation, the worst case scenario for Brian Moynhian just got real. As of minutes ago, Norway's Government Pension Fund, which is another name for its Sovereign Wealth Fund, has just announced it is suing Bank of America for mortgage fraud. Not only that but it is also going after Countrywide, obviously, but far more importantly, is also suing KPGM, the auditor on the Countrywide transaction, and, drumroll, ole' Agent Orange himself. If US bank analysts were busy quantifying the damages from every bank in the US suing BofA, just wait until the calculation is expanded to included every firm that bought mortgages from Bank of America... ever...in the entire world.
about a year ealier [sept 24, 2010] we had this: FT.com / Companies / Banks - Norway's central bank sues Citigroup (paste): Alleged misstatements caused wealth fund heavy losses to the Norwegian sovereign wealth fund. In a lawsuit filed in New York, Norges Bank alleged that it lost ... The suit names Vikram Pandit, the group's current chief executive, and Chuck Prince, his predecessor, among the defendants. ...
something about knowing the difference between shit & shinola, perhaps? and actually paying attention to it?
No doubt they've had enough. Dumping anything US related. Can't blame them.
Makes sense to sell them now since the Fed is buying and interest rates are near zero. Hard to imagine any scenario in which the value of MBS would go up. Lots of ways they could go down - rising interest rates for one. They probably have a better investment like foreign petro resources.
"Truth is only the people at the sovereign fund know why they sold. In all likelyhood they are seeing increased risk in holding all US paper(not just MBS) due to the ponzi-like nature of the US."
I think that covers it. Right now their decision on Greece in 2010 looks decidedly bad, but they were certainly not the only ones who made that call, and if the ISDA hadn't gone all criminal schizo on the CDS to protect the US institutions which underwrote the contracts, Norway could have walked away from it winners. Logic dictates that if a country's institutions rob you blind in one transaction, they will not hesitate to rob you again. I wish the UK would follow suit and dump any USD holdings before it is too late. I suppose the Fed bought the MBS?
GeneMarchbanks
Gene, ask yourself this, would YOU, if it were your money leave it in a product doomed to continue devasluing?
Answer.........NO, esp w/ no hope of recovery likely, EVER.
Gimme my Moneeeee
GeneMarchbanks
Gene, ask yourself this, would YOU, if it were your money leave it in a product doomed to continue devaluing?
Answer.........NO, esp w/ no hope of recovery likely, EVER.
Gimme my Moneeeee
A question, I have been having trouble with. Sorry if kind of out of context.
Morgan Stanley traded through the past leg down in the market as a proxy for European woes. This changed once Morgan Stantely announced its earnings during which it indicated that it has lower net eurpoean exposure contrary to what has been speculated and it soared 20 something percent. Does this lower net exposure conculsion include adjustment that account for the payout on a CDS in case of a default?
If it does. Does the debate over CDS triggers mean that the assesement of MS's european exposure is unreliable?
Your premise is that MS is honest about its exposure. I wouldn't make that assumption.
Norway has figured out Germany's EFSF math problem.
Ma and Pa Kettle do math
<smacks on gums> Dat's gud rithmatick Pa!
What Tyler's trying to say is Norway (and soon the world) is now afraid of soft defaults on the heels of Greece. The unanticipated side effects of decisions. Up to now, for better or worse, the globalists refused to allow any 'haircuts' at all within the charmed circle of developed country sovereign and gov agency bonds. However Greece now changes everything: defaults are possible. I'm sure there's suspcion about DC's new mortgage refi plan and whether it represents a soft default (prepayment). MF GLobal, by the way, will be viewed as a sort of canary in the coal mine of unintended consequences of allowing defaults. Will they get bailed? Looks grim. That spooks
You mean Norway doesn't trust US paper anything?
Don't we say that every weekend? And yesterday somebody wrote that Americans won't stand for it when gas is unaffordable. Who defines unaffordable? I can't afford cable TV or a Gulfstream Four and I'm doing OK.
I don't remember, is PIMCO the good guy or the bad guy?
too funny. go to OWS chat room and say anything that isn't radical left wing and they will ban your IP permanently. this little crowd of wannabe Maoists is so fucking scared of anything but their approved group-think; they must be on the verge of completely crumbling apart.
Apart from the Greek fiasco (Greece will never default! ...well the judges are still out on whether a 50% headcut is considered a default, so technically these idiots can still be right) it is not a secret that the Norwegian SWF is heavily invested in other PIIGS debt paper. When the Spanish Cajas are getting wiped out and last weeks' Greek haircut is re-re-negotiated, once Europe finally realizes that 50% might be 50% short, then eventually the Norwegian SWF will have to take a 800 billion NOK headcut, or roughly about a years' state budget.
Adding insult to injury, they decided to diversify their portfolio with the new coke of the coming decade, after all Real Estate has bottomed . . ...Right?
As to the precious metals complex (Gold, Silver) it's quite astonishing that neither our Norwegian financial acrobats at the SWF nor the Norwegian Gov't have ANY exposure.
I mean why should you diversify to something as tangible as physical Gold when you can chase the PIIGS Paper Debt high yield roller-coaster to hell?
"And some more color on the fund administering the trade surplus of what some consider Europe's best run country"
ROTFLMAO, I can only but wonder who these some are
Who is managing this fund? Maybe Goldman Sux? It looks like Norway has been a source of dumb money - based on your comments. If it's true - I hope some heads will roll in Oslo.
No, to my knowledge the Norges wisely keep GS et al slavering at arm's length; probably the very reason they weren't been blown up in 2008, IMO.
Losses to the Greeks could have been a token gesture of aid,mb? Why would heads roll if the overall balance sheet is still deep in the black? Which it most certainly is; barring that best guess of how far down the rabbit hole they've gone of course.
Should that actually happen, yeah, heads will roll. But as of right now I'm not sure that estimate of their exposure is even correct, though I am open to seeing any new info.
This isn't a chart depicting 'dumb money' IMHO.
Sure illustrates how overpriced oil is....Norway is drilling for this stuff in the ocean and still they have amassed a fortune. Too bad the vampire squid will steal it all away from them....
If they were smart they would just buy up gold for their reserves. Oh no, that would not work so well either...NATO (elite banker attack force) would just come and take it.
http://www.dailymail.co.uk/news/article-2054913/Europe-war-2018-France-h...
Europe at war 2018
Can't wait for the movie! Who will play Angela? Angelina?
France humbling someone's army? They haven't beat anyone since Napoleon and that didn't work out in the end either.
This is not a US credit event.
Interesting discussion about Gold earlier on in this thread, and how the collapse of TRUST and the consequent collapse in fiat currencies will boost gold (in addition to creating a society lacking in TRUST, which means a big spike in crime).
It reminds me of what a ver rich Iranian once said to me about Gold....
"Gold...it's the poor millionaire's currency. A true milionaire, a really rich millionaire, has diamonds. Think about it. If you have 5 million dollars worth of gold, what the heck are you going to do with it when they come for you? When the assasins & looters are at your front gates, you're gonna start loading up brick after brick after brick of gold? you know how much 5 million dollars worth of gold weighs? It's around 180 lbs. The true millionaire has diamonds. 5 million dollars worth of flawless perfect 2 or 3 carat diamonds, would equal around 50 diamonds, a handful or two... You can shove them up your ass. And, other than having a slightly suspicious walk, you'll get out alive. Meanwhile, the guy trying to load up his truck with gold ends up with a bullet between his eyes."
So forget about gold. Buy diamonds.
But, you can't eat diamonds.
LOL @ you can't eat diamonds.
Notice, the very rich Iranian said gold and diamonds are for millionaires. The problem I see with gold, and even worse with diamonds, is they can not be authenticated by the average Joe. They are a fine way to preserve and transport wealth to a better time or place, but in the midst of a crisis they would be worthless. Who will appraise your diamond or assay your gold bars during <insert your favorite emergency here>?
If currencies were to collapse, I, for one, would not accept a silver bar in barter , let alone gold or diamonds. Oooo, its says Canada or Sydney or U.S.? Oooo, it says four 9's? Oooo, its still in the plastic wrapper from the mint? Oooo, its flawless you say? A whole kilo? Here, I'll give you my horse for it. Riiiight.
After realizing this, I sold my gold back to Kitco (hear that U.S. gov? I have NO gold), and bought silver coins of the realm. Every Joe will recognized them. They are denominable. They have a know quantity of silver. And who would counterfeit small change?
To summarize my view; If you wish to preserver your wealth until after the crash, gold or diamonds are a good choice. If you wish to have wealth during the crash, go with the coin of your realm in silver.
Eh? Gold is easily authenticated. Weight it and measure its volume and softness (to ferret out tungsten). Bing, bang, boom.
to PureEvil...'you can't eat diamonds'...OK, good point, but can you eat gold??
And as for gold being easily verifiable....'weigh it and measure its softness'? Oh yeah, measuring the softness of gold sounds really easy. To verify diamonds, on the other hand, you get one of those eye-piece thingys that jewelers use and within a second you can see whether a diamond is real or not. I'm not saying that EVERYONE can verify a diamond's authenticity, but to claim that gold is easier to verify than a diamond is just not true. Both require a certain amount of expertise and both require some kind of equipment. Anyway, the point from the guy I was quoting was more related to transportability in times of crisis....
I kinda agree with the other post too though...come the revolution, neither gold nor diamonds will work when it comes to trying to buy basics like bread & milk for your kids. In that sense, it's better to have a variety of HARD and REAL assets. Maybe, to take care of basic grocery items it would be better to have a few cases of vintage wine or premium whiskey. A bottle of 82 Lafite in exchange for a few grocery items? Seems more plausible than trying to give a guy a bar of gold (and asking for change!). Depending on who you're bartering with, different hard assets will have different values. Heck, you may find that the best way to pay for basic groceries is to give the guy a few classic vintage Penthouse or Playboy magazines!
But once the dust settles and there's a return to some kind of rule of law, then your wealth or lack thereof will be determined by claims to property and holdings of real assets like gold, silver or diamonds etc
And the guys who say "yeah, but I own $2 million worth of shares in Morgan Stanley" will starve...
Not if the US invades them.
I moved to Norway 2 months ago. It's great here.
perhaps we need someone to rally around like we had with Lindbergh in the 30s. (that's until he tilted pro Nazi)
I say the perfect candidate is Mark Block. Who's he you ask? Cain's campaign manager that made that
seminal campaign ad last week. In my mind, it will someday be as iconic as the 1984 Apple commercial
or the dancing dwarf in Twin Peaks.
as evidence please review the following:
Mark Block goes head to head in an existential campaign ad against Breathless's Jean Paul Belmondo
http://www.youtube.com/watch?v=WSIRcwHO-WI
Mark Block goes gangsta and butts up against Goodfellas' Robert De Niro
http://www.youtube.com/watch?v=Nc4sn-mFLI4
...
Mark Block: A man for our time!
What took them so long?
Interesting, they sold the MBS investment because they "do not like the return of their principal". Their 100% Invested Mandate will ensure that they never get it back.
US bond markets and dollar are about to crash. There is no appetite for both anymore. The austerity measures in EU mean a lot of foreign assets in US will be sold. Banks need to fix their balance sheets. China will probably also experience huge domestic debt problems soon and start financing those with selling US bonds and other assets.
Pendulum is about to swing back to US (and UK) big time and this time it is a huge wrecking ball...
K Denninger often seeks which simple basic principle is violated in financial scandal.
Here he is on the principle of Risk-Adjusted Rate Of Return: [my highlights]
"...Here's reality and a much-more succinct view: These "financial innovations" were and are a raw fraud.
Again, back to basic laws of business balance:
Nobody works for free
. Ever.The risk-adjusted return available on any lending transaction is a fact and not subject to "massage." While default on any single loan is binary (it either does or doesn't) default on a sufficiently-large and diverse group of loans with a known set of characteristics is a statistical function.
Each person who touches
such a transaction or group of transactions, therefore, must inevitably reduce the total amount of return below the risk-adjusted amount, and the more people who touch it - that is, the more complex it is - the more the total return must inevitably be BELOW the risk-adjusted amount.The less transparency in a given set of transactions the more "spread" or "vig" those who process the transaction are able to retain for themselves through the obstruction of price discovery.
This leads to axiom #1:
IN EACH AND EVERY CASE OF FINANCIAL INNOVATION THE RETURN PAID TO INVESTORS MUST ALWAYS BE LESS THAN THE RISK-ADJUSTED RETURN. THAT IS, THE MORE COMPLEX THE INSTRUMENT THE WORSE INVESTORS GET SCREWED. ..."
I recall 40+ years ago, retailer's signs that read "We carry our own paper".
I guessed then, correctly, that there was something worthy about not reselling [unloading] the paper at a discount; also the corollary that there was something fishy hidden in the practice of not carrying the original debt paper. I.e., the mystery in the non-transparency held unknown risks unevaluated by the debtor.
E.g., a buyer at a local furniture store who later is notified to send his monthly payment to another company in another state, which later hassles him unmercifully when he falls behind. A locally-owned retailer is less likely to offend fellow townsmen.
In the current scene, "We carry our own paper" was violated by the bankers/lenders with MBS, CDO, CDS,etc and, sure enough, the hidden risks in the non-transparency [ TooBigToFail, unemployment, dollar devaluation, MERS title fog, etc] are the results.
Obama is going to bail out all the under-water home owners, all 1 million of them. The MBS is safe and secure paper.
1 million? Have you been watching TV again?
HARP 2 lifts the cap on underwater mortgages. Not sure it impacts prepay as much as analysts predict. Regardless, why buy MBS when rules keep changing? No one can model this crap. Never could. Not even PIMCO. They made their money the old fashioned way -- front-running the Fed. Nice biz strategy for those with friends in high places.
I think Tyler has not gotten the whole story around the Nowegian Sovereign Wealth Fund. If you look at the papers the fund has owned the last years, you will see that the fund has actually been quite succesful in reducing its exposure to the PIIGS countries debt.
Country
Greece - Gone from 22.5 bill NOK in exposure in end of 2008 to 9.4 billion NOK in end of 2009 to 4.9 billion NOK end of 2010.
Italy - Gone from 81.8 bill NOK in exposure in end of 2008 to 33.2 billion NOK in end of 2009
Spain - Gone from 13.4 bill NOK in exposure in end of 2008 to 9.7 billion NOK in end of 2009
Portugal - Gone from 14.4 bill NOK in exposure in end of 2008 to 2.7 billion NOK in end of 2009
This means that Norway sold Greece debt through all of 2009 and 2010 and were clearly underweighted in relation to what is a teoretical neutral portfolio. Then they started buying some more during the end of 2010, so that they ended the year with 4.92 billion NOK in Greece debt (giving them an exposure of 0.16% of the fund in Greece sovereign debt).
Sources:
http://www.nbim.no/no/Investeringer/beholdninger/
http://translate.google.no/translate?sl=auto&tl=en&js=n&prev=_t&hl=no&ie...
Hmmm..good datapoints. But whoever did the analysis that led them to hold any Greek debt still should be fired and jailed.
The jerks.
say what? THERE IS ONE TENTH THE AMOUNT OF ABOVEGROUND SILVER INVENTORY AS GOLD.
Since 1980, silver inventoriesare down 90 percent from 11 billion ounces to ONE. Its unrecoverable. Every ounce of gold ever produced is still here.
In fact silver is incredibly rare, Its also been a currency for 6000 years. Try taking a 1800 dollar gold coin to the grocery store. Change please?
The American military does not operate without silver, ever try to row an aircraft carrier into Narvik.
Perhaps 100 thousand manufacturers of every imaginable stripe worldw ide depend on silver. Electronics dont work without it. A cruise missile contains 47 pounds of silver Reputedly missiles produce a low recovery rate.
The supply/ demand situation is a dirty little secret, Its close to panic, A billion ounces of silver could be bought by one respectable hedge fund. .
I have heard it was 1/3rd the amount of gold, but that has been the case for the last several years. Do you have a source for the 1/10th the amount of gold bit?
"Europe's best run country". Yes, if you are a hardcore socialist.
You are talking about a country where 35% of th population above 16 is on some kind of welfare.
A country where if you own a TV set you are forced by law to pay 2800 NOK ($509) per year to the government TV channel.
A country with 25% Sales Tax
A country where the government runs all liquor stores
A country where the Prime Minister publicly endorsed Keynes this week (http://bit.ly/rUTgIA)
With all do respect. I absolutely love this blog, but go beneath the surface.In the long run (when the wells run out) we are f....d
BTW: If the sovereign wealth fund had only purchased gold (since startup in 1996), it would now consist of about 23000 tons of gold. (Not considered impact on market and presence of US/British navy offshore until we started exchanging oil for paper again )
Link to source: http://bit.ly/rDKy2g
Instead we now have looooooots of paper.
Yes, maybe good call with MBS, otherwise screw them for losing my money.
Lots of poor things in this country.
But I actually think the Oil fund has a quite good set up. I obviously would have liked to see some of the reserves put to work in infratructure investments in our country, but as long as the politicions and big companies does not form an alliance, i am fine with the structure we have today.
My biggest fear is that some "think big" people start to give big companies the oil money so they can buy other companies. I am sure that would turn into a huge corporatistic cleptocraty, where all the losers who have difficulties to attract private money (Norske Skog, REC etc) will get state funded money to prolong their lives.
That would be terrible.
"but as long as the politicians and big companies does not form an alliance, i am fine with"
If that's your assumption then you are well advised not to look any further under the hood of either Norwegian politics or SWF.
If, on the other hand, you want to dig around a little you are well advised to read some of the comments by Frode Haukenes. Some info from the econotwist:
After the Lehman-incident, Norwegian financial authorities held a press conference saying that Norwegian banks were rock solid, and that the US crisis would have little impact on Scandinavia. I responded with a commentary called "Three Bubbles And One Bank."
Three days after publishing the piece, the Norwegian government pulled a NOK350bn bailout package out of the hat (so that DnB NOR could make the biggest illegal insider trade ever in the nation’s history).
Norway's PM and DnB NOR's CEO is close friends. These two - and the director of The Norwegian Financial Authority - are all members of the same political party.
The Norwegian bank has managed to become "too-big-to-fail" with about 80% of the domestic market share, a key financier to the Baltic countries and the second biggest provider of loans/guaranties to the international offshore industry.
The three Scandinavian central banks have established a backdoor bailout scheme to cover the Nordic banks losses in the Baltic area. (No one - except for the Latvian finance ministry - is willing to comment on this matter).
I have been commenting on this blog about the Norwegian SWF on many occasions, even in this thread(14:04), trying to shed some light as to what these clueless idiots really are doing. This is nothing short of pissing away the wealth of the nation whilst lining the pockets of their financial cronies.
Don't even get me started about those political pro UsSA sock puppets using the Nobel peace prize for their own political gain.
hahahaha! Yeah. Let me guess: you would have, could have, should have, done infinitely better than those 'Clueless Idiots'.
You sure you're not just a 'wishful thinker'? I see lots of those on ZH.
Isnt that what socialism is all about. "Help" losers.
I believe your fears will come true.
The United States policy towards silver, ie suppressing the price to dress up the currency. is one of the dumbest things i have ever seen.
China presently has 97 percent of the worlds rare earth mineral market, , some of whose charts went up 50 to 100 times when this fact became apparent in 2010. If silver ever rose a hundred times, it trades at 3500.
Well, notwithstanding somewhat better geographical dispersion, silver is considerably more rare than any of these rare earths. In fact i prefer to call it a a rare earth METAL. AS opposed to MINERAL>.
The United States military is inoperable without silver , just as is the case with rare earth minerals. And lets make CHINA PAY throough the nose.
The United States should immediately revalue silver to 1000 dollars an ounce, declare it a boring industrial metal with mo particular numismatic importance, hope they can fly the bluff, and start hoarding it like madmen before China gets all of the worlds silver too, which is what they are in the process of doing.
Was wondering who has been buying all those US Treasuries that European entities have been selling.
The Fed? PIMCO? Both? Buffett? Who else?
And they used all the proceeds to buy S&P futures. who needs bonds when you can make coupon return in a week in US stock market. Bull market in Stocks explained.
<----- What? How dare they sell our toilet paper?
DOES ANYONE STOP TO THINK THAT IF THEY "SOLD" IT SOMEONE HAD TO "BUY" IT.... THEN START THINKING ABOUT WHY...
1) That Greek bond investment shows just amazing logic and wisdom.
2) These guys do nothing but play with other people's money.
FADE!!!
Uh back to the article...
Who is buying these packages of MBS and at what price?Is there any transparency to the transactions?
LOL!!!!!! "Prepayment risk"??? NOW???? That's an absolute lie- prepayment risk DECREASES when rates are going up.
The time to use that excuse was anytime up until a month ago.
Wow- that's the best Norway can do?
So, this should boost the yields on US debt right? That's gonna put a damper on operation twist...
Things are going bad indeed.
TIME TO DUMP DOLLARS AND BUY GOLD AND SILVER
ZH YOU ARE DOING A GREAT JOB AND GLAAD THERE IS A WEBSITE LIKE YOURS...WELL DONE BUDDY
TIME TO DUMP DOLLARS AND BUY GOLD AND SILVER
ZH YOU ARE DOING A GREAT JOB AND GLAAD THERE IS A WEBSITE LIKE YOURS...WELL DONE BUDDY
>The decline prompted Pacific Investment Management Co., manager of the world’s biggest bond fund, to call for investors to buy the bonds.
Conflict of Interest much? He yelled into the market "make me rich by raising the price of the things that I own" and they did.