Home » Posts tagged 'swiss national bank' (Page 2)
Tag Archives: swiss national bank
China “Loses Battle Over Yuan”, And Now The Global Currency War Begins
China “Loses Battle Over Yuan”, And Now The Global Currency War Begins
Almost exactly seven months ago, on January 15, the Swiss National Bank shocked the world when it admitted defeat in a long-standing war to keep the Swiss Franc artificially weak, and after a desperate 3 year-long gamble, which included loading up the SNB’s balance sheet with enough EUR-denominated garbage to almost equal the Swiss GDP, it finally gave up and on one cold, shocking January morning the EURCHF imploded, crushing countless carry-trade surfers.
Fast forward to the morning of August 11 when in a virtually identical stunner, the PBOC itself admitted defeat in the currency battle, only unlike the SNB, the Chinese central bank had struggled to keep the Yuan propped up, at the cost of nearly $1 billion in daily foreign reserve outflows, which as this website noted first months ago, also included the dumping of a record amount of US government treasurys.
And with global trade crashing, Chinese exports tumbling, and China having nothing to show for its USD peg besides a propped and manipulated stock “market” which has become the laughing stock around the globe, at the cost of even more reserve outflows, it no longer made any sense for China to avoid the currency wars and so, first thing this morning China admitted that, as Market News summarized, the “PBOC lost Battle Over Yuan.”
That’s only part of the story though, because as MNI also adds, the real, global currency war is only just starting.
And now that China is openly exporting deflation, and is eager to risk massive capital outflows, the global currency war just entered its final phase, one where the global race to the bottom is every central bank’s stated goal. Well, except for one: the Federal Reserve. We give Yellen a few months (especially if she indeed does hike rates) before the US too is back to ZIRP, maybe NIRP and certainly monetizing even more things that are not nailed down.
…click on the above link to read the rest of the article…
The Swiss National Bank Bought Another 500,000 AAPL Shares Just Before 10% Correction
The Swiss National Bank Bought Another 500,000 AAPL Shares Just Before 10% Correction
Three months ago we were stunned to learn, and report, that the Swiss National Bank – a central bank – had been one of the biggest buyers of AAPL stock in the first quarter, when it added 3.3 million shares to its existing position, or 60%, bringing the total to 9 million shares, for a grand total of $1.1 billion. Moments ago, the SNB which unlike the Fed and the other “serious” central banks releases a 10-Q divulging its equity holdings, updated on its latest stock portfolio.
We were amused to learn that in the quarter in which AAPL stock almost hit a new all time high, the Swiss money printing authority which reported a record $20 billion loss in the second quarter, and a record $52 billion in the first half, added another 500,000 AAPL shares, bringing its new grand total to a whopping 9.4 million shares, equivalent to $1.2 billion as of June 30 (well below that now following the recent 10% correction).
At $1.2 billion, AAPL remains the top holding of the SNB, almost double the second largest position, which as of June 30 was Exxon stock valued at $637 million (and is worth much less now, and has most likely been surpassed in notional terms by #3 MSFT).
So what are the the Swiss hedge fund with nearly $94 billion in equity holdings? Here is the full breakdown.
Now if only the Fed would be this transparent about its own equity holdings…
Deflation Is Winning – Beware!
Deflation Is Winning – Beware!
Expect the ride to get even rougher
Deflation is back on the front burner and it’s going to destroy all of the careful central planning and related market manipulation of the past 6 years.
Clear signs from the periphery indicate that a destructive deflationary pulse has been unleashed. Tanking commodity prices are confirming that idea.
Whole groups of enterprises involved in mining and energy are about to be destroyed. And the commodity-heavy nations of Canada, Australia and Brazil are in for a very rough ride.
Whether the central banks can keep all of their carefully-propped equity and bond markets elevated throughout the next part of the cycle remains to be seen. We know they will try very hard. They certainly are increasingly willing to use any all tools at their disposal to keep the status quo going for as long as possible.
Whether it’s the People’s Bank of China stepping in to the market to buy 10% stakes in major Chinese corporations in a matter of weeks, the Bank Of Japan becoming the majority owner of key ETFs in the Japanese markets, or the Swiss National Bank purchasing $100 billion of various global equities, we see the same desperation. Equity prices are being propped, jammed and extended higher and higher without regard to risk or repurcussions.
It makes us wonder: Why haven’t humans ever thought to print their way to prosperity before?
Well, that’s the problem. They have.
And it has always ended up disastrously. History shows that the closest thing that economics has to an inviolable law is: There’s no such thing as a free lunch.
Sadly, all of our decision-makers are trying their hardest to ignore that truth.
First, The Fall….
So how will all of this progress from here?
We’ve always liked the Ka-Poom! theory by Erik Janzen which we explained previously like this:
…click on the above link to read the rest of the article…
Losing Control
Losing Control
Markets are beginning to signal that policy makers are losing control. Many second-order-effects of the unprecedented and experimental global actions taken since the 2008 crisis are beginning to manifest. There are always causes and effects that develop; but they do so at different speeds. Many actions in recent years have prioritized ‘benefits today’ over ‘consequences tomorrow’. ‘Tomorrow’ is approaching ever more quickly. There is no ‘free lunch’.
Market damage and volatility due to policy interference, or due to the deliberate influence of security prices, are a shame. Markets should ideally operate with unencumbered fluidity. Markets should operate in a manner where adjustments to new information allow buyers and sellers to rapidly, and seamlessly, find a natural clearing price. Authorities and regulations should be like good referees in a soccer match; they provide the conditions for a fair match, and you rarely notice their presence.
- The beginning-of-the-end of official control happened earlier this year when the Swiss National Bank (SNB) retracted its currency-peg-promise, triggering a 40% move in the G-7 currency in 10 minutes.
- In early May, shortly after the SNB event and the launch of ECB QE and EU negative interest rate experiments, the EU bond market became dysfunctional. The absurdity of sustaining $4 trillion of negative rates came into focus. The German 10-year Bund moved from 0.05% to 0.75% in under a month.
- A series of Greek policy and troika bailout mistakes – actions that never resulted in a realistic and sustainable solution – are now culminating toward a tipping point (more tomorrow).
- Chinese authorities that have allowed and encouraged an equity bubble to manifest (and other central banks for that matter) are starting to see how ‘bubble blowing’ typically ends. Other central banks are hopefully watching. Chinese equities have lost $3.2 trillion in value in 30 days. To put this into perspective, this is equivalent to the entire stock market capitalization of Germany and France combined.
…click on the above link to read the rest of the article…
Time for Some Mattress Padding
Time for Some Mattress Padding
Can you imagine borrowing $1000 from the bank and receiving $10 per year interest from the bank? I didn’t think so. However, this is the happy situation facing some European countries and even a few Swiss companies. The Swiss, Swedish, and Danish governments and the food multinational Nestle are now borrowing money from lenders who are happy to pay them for the privilege. In what may signal the beginning of the end of the current financial system, we have moved beyond zero percent interest rates to negative interest rates.
…click on the above link to read the rest of the article…
Reckless Stock-Market Leverage Intoxicates Politicians
Reckless Stock-Market Leverage Intoxicates Politicians
The sudden bloodletting that leveraged currency speculators experienced when the Swiss National Bank yanked the cap on the franc should have been a warning: central-bank promises that everything is under control are meaningless. And because of leverage, innumerable trading accounts blew up in a matter of moments.
Leverage acts like a powerful drug. It creates buying pressure and inflates asset prices further on the way up. But when asset prices sink, leverage begets forced selling, which drives down asset prices further, which begets more forced selling….
And stock-market leverage, encouraged by the Fed’s monetary policies that make nearly free money available to all sorts of speculators, has ballooned.
Some of it is closely watched, like margin debt. FINRA’s 4,000 member securities firmsreported that their customers carried $496 billion in margin debt by the end of December, after a multi-year surge. Margin balances had peaked in September at $504 billion, by far the highest in absolute terms, and at 2.8% of GDP, the highest ever in relationship to the economy. Alas, the last two stock-market leverage bubbles ended in phenomenal crashes – the dotcom implosion and the Financial Crisis.
And corporations are issuing mountains of debt to buy back their own shares at peak prices – replacing equity with debt on their balance sheets, leveraging them up to the hilt, like others leverage up their brokerage accounts. In many cases, such as IBM, “tangible net worth” has turned negative, and stockholders are already under water.
Other forms of stock-market leverage are more difficult to quantify, like people borrowing against their home equity lines of credit or their credit cards to plow that moolah into stocks to make that quick buck that their neighbors have been bragging about.
…click on the above link to read the rest of the article…
Russell Napier: “The Most Dangerous Thing In Finance Is The Thing That Never Ever Moves – Until It Moves”
Russell Napier: “The Most Dangerous Thing In Finance Is The Thing That Never Ever Moves – Until It Moves”
The PBOC – How to fail in business without really flying
“Terrain seems a bit unstable…and there seems to be no sign of intelegent life anywhere”
– Buzz Lightyear (Toy Story)
“That wasn’t flying…that was falling with style”
– Woody (Toy Story)
Another day, another central bank failure. In a world of currencies backed only by confidence, every failure is masqueraded as success. Like the ballet dancer who transforms the stumble into a pirouette, central bankers, knocked to the ground by market forces, smile and pretend that this was all part of the routine. Financial market participants, having bet everything on the promised omnipotence of central bankers, do indeed seem happy to see genius in every stumble. However a fall is a fall regardless of the style of the descent. So when will investors see that the earth is rapidly approaching and that style is just style?
The key for investors today is to see behind the masquerade and the mask, the façade of those putting up a front behind a public face, and be able to tell the difference between the soaring flight of reflation and the perilous fall of deflation. The more attitude you hear from policy makers, the more you can be sure it’s style compensating for the lack of real substance and that this is falling and not flying. And as the attitude becomes more high-handed, the lower the altitude gets. The attitude quotient is rising rapidly.
Two weeks ago we noted the ‘flying’ undertaken by the Swiss National Bank as the market forced them to abandon their exchange-rate target. Deposit rates in Swiss Banks are now at such a low level that investors are better off converting deposits into bank notes and placing them under the bed. The Danish Central Bank has also instituted negative interest rates with the consequence that deposits in Denmark might also fly into paper. As the central bank managed to create over DKK106bn (US$16.3bn) in bank reserves, trying to stop a revaluation of their exchange rate last month, there will be no shortage of banknotes to go round should a ‘bank run’ from deposits to banknotes begin.
…click on the above link to read the rest of the article…
All eyes on Fed, Greece after ECB fires bazooka
All eyes on Fed, Greece after ECB fires bazooka
PARIS (Reuters) – After the surprises from central banks which rocked markets at the start of the year, the U.S. Federal Reserve will be watched as closely as ever this week to see that it doesn’t stray from its own policy path.
The atmosphere will already be tense as the fallout from Sunday’s snap election in Greece settles and concern has grown in some quarters that central banks, which played such a big part in guiding economies through the financial crisis, are becoming less predictable.
The shock of the Swiss National Bank abandoning its cornerstone currency cap had yet to fully subside when the European Central Bank said it would flood markets with over a trillion euros, more than expected, to prevent the euro zone from sliding into deflation.
Canada also cut its rate out of the blue and Denmark did so twice to navigate a world of tumbling oil prices and weak growth.
Now, after Europe mostly dominated the start of the year, attention will turn to the Fed’s rate-setting meeting on Tuesday and Wednesday for any sign that its resolve to start raising interest rates mid-way through the year could be softening.
Expectations are for the U.S. central bank to stick to its guns despite the turmoil elsewhere, with top Fed officials citing in the past weeks strong U.S. economic momentum and falling unemployment.
But questions have been raised due to weak wage growth and five-year low oil prices that have dragged U.S. consumer prices down to their biggest drop in six years in December and heightened deflation fears in Europe.
…click on the above link to read the rest of the article…
Axel Merk: Why Asset Prices Must Return To Lower Levels
Axel Merk: Why Asset Prices Must Return To Lower Levels
Saying it’s been a busy week and half on the central bank front is perhaps a sizeable understatement.
First, the Swiss National Bank stunned the world (and its brethren central banks) by removing its peg to the Euro. This was quickly followed by Mario Draghi finally making good on his longtime threat of firing QE bazooka, announcing that the ECB will pursue a 60 billion Euro per month easing program for the next 16 months. And amidst all the smoke, the Canadian central bank snuck in a surprise rate cut to its interest rate.
To make sense of both the “Why?” behind these extreme moves, as well as the “What?” in terms of their implications, Axel Merk, founder and Chief Investment Officer of Merk Funds joins us this week.
In his opinion, recent events are exactly the kind the symptoms he’s been expecting as the prime strategy pursued by central banks since 2008 — to force capital into speculative assets — approaches its natural and inevitable denouement. Indeed, he projects the surprises in store for us and the systemic instability we’re beginning to see are just getting started:
Ultimately, central banks are just sipping from a straw in the ocean. I did not invent that term. Our senior economic advisor, Bill Poole, who is the former president of the St. Louis Federal Reserve taught us this: that central banks are effective as long as there is credibility.
What central banks have done is to try to make risky assets appear less risky, so that investors are encouraged or coerced into taking more risks. Because you get no interest or you are penalized for holding cash, you’ve got to go out and buy risky assets. You’ve got to go out and buy junk bonds. You have to go out and go out and buy equities.
…click on the above link to read the rest of the article…
Are Central Bankers Losing The Plot: “The SNB Move Signals A Spectacular Loss Of Nerve”
Are Central Bankers Losing The Plot: “The SNB Move Signals A Spectacular Loss Of Nerve”
As we have reiterated very frequently over recent years, the biggest vulnerability in the post crisis environment was that central banks start to make policy errors, by taking activist and precipitous decisions. Thus following on from last year’s error by Norges Bank (and noting that we would not call last week’s SNB decision a mistake, despite the shockwaves that it caused), the Bank of Canada joins that policy error club.
What does not compute, in an eerie mirror image of the Norwegian central bank’s rationale, is for the BoC to
- Slash headline CPI forecasts, while keeping core CPI forecasts around 2.0% (around target), and
- Tweak GDP forecast lower to 2.1% this year but upping the GDP forecast for 2016, and
- Still taking policy action
It signals a spectacular loss of nerve that central bankers should always try and eschew, above all when you have a country like Canada with the worst household debt levels in the developed world, and an overheated housing market.
The as expected cut in 2015 GDP forecast looks optimistic, when one considers that the energy sector accounts for 25% of business investment in GDP terms, and one might suggest that the GDP forecast should be closer to 1.0%, on the basis that there is likely to be a much broader fall-out from the energy sector “stall” (housing, transport, employment to name but a few).
As the evidence on this accumulates through the year, there appears to be considerable risk that the BoC’s forecasts look foolish – primarily in GDP terms, but quite possibly in CPI terms too, if the CAD starts a slide to USD 1.30 and the BoC’s disinflation problem evaporates. At which point memories of the very undistinguished period of Gordon Thiessen’s stewardship of the BoC may come back to haunt it.
But in broader terms, this is symptomatic of the whole mirage of stability that developed world central banks have sort to foster in the post crisis era starting to unravel in a rather disorderly fashion… the ECB’s task tomorrow looks ever more unenviable!
Macro Digest: Endgame for central bankers
Macro Digest: Endgame for central bankers
The Swiss National Bank’s removal of the franc’s peg to the euro last week had far-reaching consequences because we were all taken by surprise. The fact that it would (and should) happen eventually was not lost on the market, but the SNB was as late as last week end talking tough and telling the market that the floor was an integral part of Swiss monetary policy – until it suddenly wasn’t any more.
I fully understand the rationale for the move (Jakobsen: SNB move is rationality itself) but like most of the market I’m extremely disappointed in the SNB’s communication and handling of the issue, but that’s the bigger lesson: Why is it most people trust or bother to listen to central banks?
Major central banks claim to be independent, but they are totally under the control of politicians. Many developed countries have tried to anchor an independent central bank to offset pressure from politicians and that’s all well and good in principle until the economy spins out of control – at zero-bound growth and rates central banks and politicians becomes one in a survival mode where rules are broken and bent to fit an agenda of buying more time.
…click on the above link to read the rest of the article…
Swiss Shocker Triggers Gigantic Losses For Banks, Hedge Funds And Currency Traders
Swiss Shocker Triggers Gigantic Losses For Banks, Hedge Funds And Currency Traders
The absolutely stunning decision by the Swiss National Bank to decouple from the euro has triggered billions of dollars worth of losses all over the globe. Citigroup and Deutsche Bank both say that their losses were somewhere in the neighborhood of 150 million dollars, a major hedge fund that had 830 million dollars in assets at the end of December has been forced to shut down, and several major global currency trading firms have announced that they are now insolvent. And these are just the losses that we know about so far. It will be many months before the full scope of the financial devastation caused by the Swiss National Bank is fully revealed. But of course the same thing could be said about the crash in the price of oil that we have witnessed in recent weeks. These two “black swan events” have set financial dominoes in motion all over the globe. At this point we can only guess how bad the financial devastation will ultimately be.
But everyone agrees that it will be bad. For example, one financial expert at Boston University says that he believes the losses caused by the Swiss National Bank decision will be in the billions of dollars…
“The losses will be in the billions — they are still being tallied,” said Mark T. Williams, an executive-in-residence at Boston University specializing in risk management. “They will range from large banks, brokers, hedge funds, mutual funds to currency speculators. There will be ripple effects throughout the financial system.”
Citigroup, the world’s biggest currencies dealer, lost more than $150 million at its trading desks, a person with knowledge of the matter said last week. Deutsche Bank lost $150 million and Barclays less than $100 million, people familiar with the events said, after the Swiss National Bank scrapped a three-year-old policy of capping its currency against the euro and the franc soared as much as 41 percent that day versus the euro. Spokesmen for the three banks declined to comment.
And actually, if the total losses from this crisis are only limited to the “billions” I think that we will be extremely fortunate.
…click on the above link to read the rest of the article…
Swiss National Bank scraps euro cap
Swiss National Bank scraps euro cap
(Reuters) – The Swiss National Bank unexpectedly scrapped its cap on the franc on Thursday, sending the safe-haven currency crashing through the 1.20 per euro limit it set more than three years ago.
Minutes after the announcement the franc had soared by almost 30 percent in value against the euro. SNB vice-chairman Jean-Pierre Danthine had said as recently as Monday that the cap would remain the cornerstone of its monetary policy.
“This is a very risky move. You can see that in the market reaction that is extreme,” Sarasin economist Alessandro Bee said.
In its second surprise announcement in as many months, the SNB said it would discontinue the cap it introduced on Sept. 6, 2011 to fight recession and deflation threats after investors fleeing the euro zone crisis pushed the franc to record highs.
“This exceptional and temporary measure protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate,” the SNB said in a one-page statement.
…click on the above link to read the rest of the article…
Gold “Terrifies” the International Monetary System | Wolf Street
Gold “Terrifies” the International Monetary System | Wolf Street.
Gold is the most maligned asset, if you listen to the Fed, the ECB, and other central banks. This was driven home again in a variety of ways, including what transpired before the Swiss gold referendum and Mario Draghi’s “all assets but gold” declaration. So I asked a man who knows, Fabrice Drouin Ristori, Founder and CEO of Goldbroker.com, why the heck central banks react toward gold in that bizarre manner.
WOLF: On November 30, the Swiss voted down the proposal presented in the “gold referendum.” Was there anything peculiar about the process?
FABRICE: The Swiss National Bank and most Swiss media campaigned for the NO side, which is quite unexpected in a democratic process. There are two lessons to be learned from this referendum: One, this campaign clearly shows that gold is the banking and financial system’s enemy #1 in Western countries, since a return to a gold standard would limit their money creating capacity, thus their power. And two, people in Western countries have lost awareness of what a monetary system based on true money is. The Swiss have now joined this category despite their long experience with the gold standard.
WOLF: Following the ECB’s decision to delay any QE till next year, Mario Draghi said that in terms of asset purchases, the ECB had discussed “all assets but gold.” Why would the ECB consider buying all assets – including “old bicycles,” as German politician Frank Schäffler had said so poignantly in July 2012 – but not gold?
Swiss Gold No – Repatriation, Demand from Russia, India and China More Important | www.goldcore.com
Swiss Gold No – Repatriation, Demand from Russia, India and China More Important | www.goldcore.com.
Introduction
Switzerland’s ‘Save our Swiss Gold’ referendum was convincingly rejected yesterday by the Swiss electorate following an aggressive anti-gold campaign in recent weeks that had been closely watched both in Switzerland and abroad.
Unusually, it involved the Swiss National Bank (SNB) very actively, and ultimately successfully, trying to convince the electorate along with the main political parties to return a ‘no’ vote.
The initiative had proposed a series of measures which would have obliged the SNB to hold a minimum of 20% of its reserves in gold, prevent the SNB from selling any gold, and force the SNB to repatriate that portion of its gold reserves that are currently stored abroad and to store gold in Switzerland.
The referendum campaign had evolved out of a popular initiative which had initially collected over 100,000 signatures between 2011 and 2013. Under Swiss law, this allowed the motion to go forward as an official referendum, even though the Swiss government, Swiss parliament and Swiss National Bank had all come out in opposition to the Gold Initiative.
…click on the above link to read the rest of the article…
