We were speechless when we read this from Bloomberg.
The Bank of Israel will begin today a pilot program to invest a portion of its foreign currency reserves in U.S. equities.
The investment, which in the initial phase will amount to 2 percent of the $77 billion reserves, or about $1.5 billion, will be made through UBS AG and BlackRock Inc. (BLK), Bank of Israel spokesman Yossi Saadon said in a telephone interview today. At a later stage, the investment is expected to increase to 10 percent of the reserves.
A small number of central banks have started investing part of their reserves in equities. About 9 percent of the foreign- exchange reserves of Switzerland’s central bank were invested in shares at the end of the third quarter, the Swiss bank said on its website.
The investment will be made in equity index trackers and will include between 1,500 to 2,000 shares, among them stocks like Apple Inc. (AAPL), Saadon said.
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They all better watch out.Sounds like when world governments bought mortgages from wall street banks and look how that turned out!
ReplyDeleteBanks assets consist not only of hard cash, but of equities, i.e. stocks and bonds. The equities values fluctuate, and for banks that are over leveraged (most of them) and bought into the mortgage-backed securities (far too many of them) any significant stock market drop may mean instant insolvency. But if they invest some of their cash in the stock market and drive prices upward, then their balance sheets look a lot better and every dollar spent in purchasing stocks can come back as a $10 gain in asset worth. Of course, this is just another form of bubbling up stocks using market forces, and must lead to another crash somewhere down the road. But I get the sense that the financial "wizards" are not thinking much further than a month or two down the road. And Obama is only worried about making things look good until November!
ReplyDeleteBTW, If Israel has this surplus to invest in the US stock market, why is the American taxpayer still being forced to send billions to Israel every year?