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

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.

More from Globes:

The Bank of Israel today began investing a small part of its $77 billion in foreign currency reserves in US stocks. The central bank's latest Markets Division report states that the new Bank of Israel Law (5770-2010) allows the Bank of Israel to make equity investments, and that it began to do so today.

The Bank of Israel will invest $1-1.5 billion in US stocks, 2% of its portfolio. The report adds that the Bank of Israel has been investing in public bodies in developed countries since 2010.

The Bank of Israel said that the investments in US stocks would be made through UBS AG (NYSE; SWX: UBS) and BlackRock Inc. (NYSE: BLK) The Bank of Israel's Markets Division, which specializes in bond investments, will not be handling the equity investments. It added that the traders will have very limited discretion, and that they may only quote leading indices, in order to reduce the risk.

"We have almost no exposure to countries with big problems. We constantly examine where we invest the foreign currency reserves, and I can promise you that you can relax," Governor of the Bank of Israel Prof. Stanley Fischer said at a closed conference in mid-January.

"The Bank of Israel does not disclose the currency composition of its portfolio, especially not the composition of its equity portfolio," says the Bank of Israel. At the January conference, Fischer said, "Imagine if we were to begin publishing where you invest, so when you stop buying the bonds of a particular country, and this is published, we'll get complaints. That is why we do not publish." He added, "We have an external committee that conducts the examinations. You can assume that we're aware to the fact that there are problems in certain countries."

In other words, while the Fed's charter forbids it from buying US equities outright, it certainly can promise that it will bail out such bosom friends as the Bank of Israel, the Swiss National Bank, and soon everyone else, if and when their investment in Apple should sour.
Luckily, this means that the exponential phase in risk is approaching as everyone will now scramble to frontrun central bank purchases no longer in bonds, but in stocks outright, leading to epic surges in everything risk related, then collapse and force the Fed to print tens of trillions to bail everyone out all over again, rinse repeat, until this chart becomes asymptotic. We say luckily, because it means that the long overdue systemic reset is finally approaching.


Chart: Diapason


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Gold leads precious metal rally

Gold advanced to a three-month high and silver posted its biggest gain in eight weeks as investors bought precious metals as an alternative to a US weakening dollar. Platinum and palladium also rose.
The US dollar fell for the third time in four sessions against a basket of currencies and the euro rose to a three-month high as the European Central Bank prepares to allot a second round of three-year loans to help the region's banks tomorrow. The MSCI All-Country World Index of stocks climbed as a gauge of US consumer confidence jumped to a one-year high.
"The euro is stronger against the dollar and that's one of the major supportive factors" for gold, Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said by telephone. Higher equities are "also supportive" for commodities, including gold, he said.

Gold futures for April delivery advanced 0.8 per cent to settle at $US1788.40 an ounce on the Comex in New York, after climbing to $US1792.70, the highest level for a most- active contract since Nov. 14.
Prices are up 14 per cent this year after a 10 per cent increase in 2011, the 11th consecutive annual gain, as investors sought to diversify from equities and some currencies. The dollar index has declined 1.2 per cent this month while gold advanced 2.8 per cent.

Supporting gold
"The dollar's weakness is supporting gold," Rick Trotman, a senior research analyst at MLV & Co. in New York, said in a telephone interview.
Holdings in exchange-traded products backed by gold extended a climb to a record 2,398.2 tons yesterday, data compiled by Bloomberg show.
NYSE Euronext's Liffe said it began options trading in gold and silver futures yesterday. The contracts will be available as options on 33.2 ounces of gold and 1000 ounces of silver, the exchange said in a statement posted on its website.
Silver futures for May delivery rose 4.5 per cent to $US37.205 an ounce on the Comex, the biggest gain since Jan. 3. Earlier, the metal rose to $US37.295, the highest for a most-active contract since Sept. 22. It's the best-performing precious metal this year, up 32 per cent.
"The funds seem to be very actively buying silver today," Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview.
On the New York Mercantile Exchange, platinum futures for April delivery rose 0.5 per cent to close at $US1,723.50 an ounce. The metal gained 5 per cent last week. Palladium futures for June delivery rose 2.1 per cent to $US722.20 an ounce, the biggest jump in a week.

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