central-banks-are-loading-up-on-equities

[biaggio]

http://business.financialpost.com/2013/04/25/central-banks-are-loading-up-on-equities/

 

"Central banks, guardians of the world’s $11 trillion in foreign-exchange reserves, are buying stocks in record amounts as falling bond yields push even risk-averse investors toward equities."

 

-personally I have always felt that government will do whatever it takes to inflate there way out of this debt

-they appear to have driven interest rates to near zero

-are stocks next?---print money but instead of buying bonds, buy S&P ETFs or other equity. It would certainly help penson funds that are underfunded, give folks a good feeling-enough to get out + buy stuff

 

-its scary if you re holding a lot of cash, as I can see the purchasing power of cash deteriorate.

 

-at the same time central banks may not have the best track record-so maybe this is a contrary indicator- I am thinking of their decision to sell gold before this last run up in gold prices (I think they were selling gold at $300-400/oz...could be wrong)

What s one to do?

[bmichaud]

According to Google Finance, roughly 578MM SPX shares traded today. At the average price range for the day of 1,586, total dollar volume traded today was $916.71 billion.

 

So if global central banks put 10% of their reserves into US stocks, that's 1.2 days of volume. 20%, is 2.4 days and so on and so forth.

 

Seems like a non-issue.

[Zorrofan]

According to Google Finance, roughly 578MM SPX shares traded today. At the average price range for the day of 1,586, total dollar volume traded today was $916.71 billion.

 

So if global central banks put 10% of their reserves into US stocks, that's 1.2 days of volume. 20%, is 2.4 days and so on and so forth.

 

Seems like a non-issue.

 

 

Central banks can print money - so in theory couldn't they just print off as much as they wanted to (not just reserves) and buy stocks. An over simplification I know, but in theory this could be a big deal. Or what am I missing??

 

thanks

Zorro

[bmichaud]

Yes in theory they could buy the entire world equity market cap. But the article addressed reserves I believe.

 

I believe it is illegal for the Fed to buy equities if I'm not mistaken.

[biaggio]

According to Google Finance, roughly 578MM SPX shares traded today. At the average price range for the day of 1,586, total dollar volume traded today was $916.71 billion.

 

So if global central banks put 10% of their reserves into US stocks, that's 1.2 days of volume. 20%, is 2.4 days and so on and so forth.

 

Seems like a non-issue.

 

 

Central banks can print money - so in theory couldn't they just print off as much as they wanted to (not just reserves) and buy stocks. An over simplification I know, but in theory this could be a big deal. Or what am I missing??

 

thanks

Zorro

 

Thats what I was thinking.

 

Also I may be mistaken in holding cash hoping for a correction only to find out that fed won t let that happen as it will be there buying, in order to support and stabilize market

 

Is it illegal for fed to buy equities? anyone verify that?

[Aberhound]

Market skeptics has a blog showing that interest rate policy correlates better with the Treasury secretary rather than with who leads the Fed. Treasury controls the ESF and the stock market support operations.

 

Treasury has been buying stocks and likely influence government pension fund holdings. How big a proportion they now represent is the big question. Government accounting does a poor job reporting capital assets and gains and losses on those assets. If they had to report consolidated holdings and earnings like the private sector it might entirely change our opinions about the government financial position.

[Zorrofan]

According to Google Finance, roughly 578MM SPX shares traded today. At the average price range for the day of 1,586, total dollar volume traded today was $916.71 billion.

 

So if global central banks put 10% of their reserves into US stocks, that's 1.2 days of volume. 20%, is 2.4 days and so on and so forth.

 

Seems like a non-issue.

 

 

Central banks can print money - so in theory couldn't they just print off as much as they wanted to (not just reserves) and buy stocks. An over simplification I know, but in theory this could be a big deal. Or what am I missing??

 

thanks

Zorro

 

Thats what I was thinking.

 

Also I may be mistaken in holding cash hoping for a correction only to find out that fed won t let that happen as it will be there buying, in order to support and stabilize market

 

Is it illegal for fed to buy equities? anyone verify that?

 

I believe it is currently illeagal for the FED to buy equities directly, but I am sure they could come up with a work around if they wanted.......

 

cheers

Zorro