# Central Banks to begin buying equities



## Starcraftmazter (2 March 2012)

http://www.zerohedge.com/news/next-...egin-buying-us-stocks-outright-starting-today

Obviously this has pretty significant repercussions for the stock markets affected. I wonder if that is one reason why the SPX500 has been outperforming our SPI.


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## McLovin (2 March 2012)

Starcraftmazter said:


> Obviously this has pretty significant repercussions for the stock markets affected. I wonder if that is one reason why the SPX500 has been outperforming our SPI.




Central banks have been buying equities since at least 2000 (maybe earlier). This is just zerohedge trying to turn a mountain out of a molehill. It's a shame because they used to be a fairly good site.


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## Starcraftmazter (2 March 2012)

McLovin said:


> Central banks have been buying equities since at least 2000 (maybe earlier). This is just zerohedge trying to turn a mountain out of a molehill. It's a shame because they used to be a fairly good site.




Can you provide some sources on that?

I also do not see a failure in their reporting; central banks are currently moving to buy equities.


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## McLovin (2 March 2012)

Starcraftmazter said:


> Can you provide some sources on that?




Here's a reference from 2005, from the BIS:


> Things have changed since then. Nowadays central banks move way out on the yield curve, looking for ways to improve return. Moreover, some are moving down the credit spectrum in a further attempt to reduce the cost of holding reserves. A few have even moved into equity investments.
> 
> In this intensive search for improved yield on reserve assets, central banks are actually acting in the same manner as private sector investors. Usually this activity is restricted to investments outside the country itself. Nevertheless, risk management decisions must be free from actual, and perceived, conflict of interest. If, for example, a central bank were seen to be using “inside” information about policy to increase its own return on capital, trust - not only in the central bank but also in monetary policy - could be jeopardised.
> 
> The fact that central banks are increasingly taking risks in an attempt to improve the return on their reserves raises the question of whether or not they should be expected to hold capital against these risks, as would be expected of any firm in the private sector. Looking across the spectrum of central banks in different countries, there is in fact a wide variation in the extent to which central banks actually do hold capital. Most of these differences are historical and reflect earlier decisions about what arrangements are most suitable for providing the central bank with adequate financial resources.




I do remember something about CB's and equities in the early 2000's when I was at uni.



Starcraftmazter said:


> I also do not see a failure in their reporting; central banks are currently moving to buy equities.




The headline is misleading. If CB's have been buying equities for years then how can the Central Bank of Israel buying equities represent the "Next Leg of The Ponzi". If they were being honest then they would have at least mentioned that central banks owning equities is not new.


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## sinner (2 March 2012)

McLovin said:


> I do remember something about CB's and equities in the early 2000's when I was at uni.




What a reference! I'll add that to the wikipedia on CB reserves.



> The headline is misleading. If CB's have been buying equities for years then how can the Central Bank of Israel buying equities represent the "Next Leg of The Ponzi". If they were being honest then they would have at least mentioned that central banks owning equities is not new.




The headline is damn specific. *Foreign* Central Banks to begin buying *U.S stocks* outright. 

This is as opposed to the BoJ buying NIKKEI ETFs and Tokyo REITs, or similar CB actions to stave off deflation in the last decade or so.


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## McLovin (2 March 2012)

sinner said:


> What a reference! I'll add that to the wikipedia on CB reserves.




I provided a perfectly usable reference from the BIS. The other one was anecdotal.





sinner said:


> The headline is damn specific. *Foreign* Central Banks to begin buying *U.S stocks* outright.




Err...no the headline is...

_Next Leg Of The Ponzi Revealed - Foreign Central Banks To Begin Buying US Stocks Outright Starting Today_



			
				Sinner said:
			
		

> This is as opposed to the BoJ buying NIKKEI ETFs and Tokyo REITs, or similar CB actions to stave off deflation in the last decade or so.




I'm not sure how a CB invests it's foreign exchange reserves in it's own stock market.


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## Timmy (2 March 2012)

McLovin said:


> zerohedge ... used to be a fairly good site.



 I agree. There is still the very occasional item of interest on the blog, amongst the dross from the cranks and kooks, but spending the time to find the odd item is not worth the time (for me, at least). I will say, though, I have ZH on my Twitter stream, they are usually the quickest to report on news developments (almost always only the bearish ones, unfortunately, but hey, it is ZH LOL) ... and I can just about cope with their c rap when its only 140 characters or less .


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## skyQuake (2 March 2012)

I'd say at the moment Equities (in this case an index basket) is a lot safter than say Eurozone bonds


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