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The world was saved there briefly overnight after SNB’s giant liquidity shot into CS.

But it didn’t take long fort reality to sink in about the band-aid-like nature of this facility.

However, the situation under the hood may in fact be worse than some thought as Bloomberg reports, according to people familiar with the talks, that ECB Vice President Luis de Guindos told finance ministers on Tuesday that some European Union banks could be vulnerable to rising interest rates.

Guindos said that the ECB couldn’t rule out that some lenders might be at risk because of their business models, according to the people.

The market did not like that reality check with European IG credit spreads now above yesterday’s highs…

Guindos also cautioned not to be complacent and warned that a lack of confidence could trigger contagion.

Touching on a likely key theme of Thursday’s rate decision, Guindos highlighted the potential conflict between the ECB’s mission to bring down inflation and potential damage to some financial institutions from higher interest rates.

And after that headline on bank vulnerability, the odds of a 50bps hike today have tumbled…

What will Christine do?

The Fed’s Couldn’t Even Stomach a 10% Drop in Stocks… It’s Officially in the Bubble Business

June 18, 2020

The Fed’s Couldn’t Even Stomach a 10% Drop in Stocks… It’s Officially in the Bubble Business

The Fed will soon be buying stocks.

Earlier this week, the Fed announced that it will begin buying corporate bonds from individual companies. Before this announcement, the Fed was already involved in the:

The Treasury markets (US sovereign debt)
The municipal bond markets (debt issued by states and cities)
The corporate bond markets by index (debt issued by corporations)
The commercial paper markets (short-term corporate debt market)
And the asset-backed security markets (everything from student loans to certificates of deposit and more).

With the introduction of individual corporate bonds, the Fed is now one step closer to buying stocks outright.

Indeed, the Fed has made ZERO references to stopping its monetary madness. Just yesterday Fed Chair Jerome Powell emphasized to Congress that the Fed is “years away from halting its assets monetization scheme.”

Again, the Fed is explicitly telling us that it plans on buying assets (Treasuries, municipal bonds, corporate bonds, etc.) for years to come.

The next step will be for the Fed to buy stocks.

It won’t be the first central bank to do so…

The central bank of Switzerland, called the Swiss National Bank has been buying stocks for years. Yes. It literally prints money and buys stocks in the U.S. stock markets.

Then there’s Japan’s central bank, called the Bank of Japan. It also prints money and buys stocks outright. As of March 2019, it owned 80% of Japan’s ETFs.

Yes, 80%.

The BoJ is also a top-10 shareholder in over 50% of the companies that trade on the Japanese stock market.

If you think this can’t happen in the US, think again. The Fed told us in 2019 that it would be forced to engage in EXTREME monetary policies during the next downturn.

…click on the above link to read the rest of the article…

Why buy gold now? Because I don’t know

December 6, 2018

Why buy gold now? Because I don’t know

From 2000 through 2012, the price of gold increased every year, rising from around $280 an ounce to nearly $1,700. It was an unprecedented run.

Then, in 2013, gold took a nose dive, losing over 27% of its value.

It was widely reported that the Swiss National Bank, the former bastion of monetary conservatism, lost $10 billion that year just on its gold holdings.

As you probably know, central banks hold a portion of their reserves in gold. The practice goes back to when central banks actually had to have gold on hand to trade in and out of paper money (or even trade for goods and services).

And central banks still hold reserves in gold today, even though they don’t need it to transact like they used to.

So that begs the question, did the Swiss National Bank actually lose $10 billion? It still had every ounce of gold in its vaults. And gold, after all, ismoney.

Plus, the SNB wasn’t holding gold to speculate…

Today, central banks hold gold as a hedge against fiat money. These are the guys with their fingers on the printing press… so they know exactly the effect they have on money.

And right now, banks are buying up gold hand over fist. Central banks currently hold 20% of all the gold ever mined—33,000 metric tons.

And JPMorgan Chase says they’ll buy another 650 tons this year and next.

Why?

Gold is for the I don’t knows.

And right now, there are a LOT of I don’t knows.

Markets have been going crazy over the past few months.

After a record bull run for stocks, we are now seeing massive volatility with the Dow regularly jumping 500+ points in a single day. Just yesterday, the Dow fell a whopping 800 points.

…click on the above link to read the rest of the article…

Switzerland – A Once-in-a-Lifetime Chance to spreading Positive Banking News to the World

May 15, 2018

Switzerland – A Once-in-a-Lifetime Chance to spreading Positive Banking News to the World

It’s called “Vollgeld Initiative” – in German, meaning more or less “Referendum for Sovereign Money”. What is “Sovereign Money”? – Its money produced only by the Central Bank, by the “Sovereign”, the government, represented by its central bank. Money created in accordance with the needs of the economy, as contrasted to the profit and greed motives of the banking oligarchy – wat it is today; money creation at will, by private banking.

The people of Switzerland are called to vote on 10 June 2018 whether they want to stop the unlimited, unrestrained money-making by the Swiss private banking system, and to return to the “olden days”, when money was made and controlled only by the Central Bank; and this not just in Switzerland, but in most countries around the globe. Switzerland is one of the few sovereign countries within the OECD, and possibly worldwide, that has the Right of Referendum written into her Constitution. With 100,000 valid signatures anybody can raise a referendum to amend or abolish a law, or to create a new one. – This is a huge privilege to Right a Wrong.

Most Swiss and probably most westerners in general don’t even know that the loan or mortgage they get from their bank is no longer backed by the bank’s capital and deposits. How could they? Instead of being told the truth, they are being lied to, even by their own party and politicians. And that in the case of Switzerland, by nobody less than the CEO of the UBS, the largest Swiss bank. Just watch this short video (in German and Italian – 2 min) https://www.youtube.com/watch?v=5m5ifQV4aIg .

Lying is a felony, hence Mr. Sergio Ermotti, CEO of UBS, should be prosecuted. Unlikely to happen, though. What Mr. Ermotti in essence says in this interview is that loans are backed by deposits. This is directly contradicted by the Swiss National Bank and the German Bundesbank (Central Bank).

…click on the above link to read the rest of the article…

The Swiss National Bank Now Owns A Record $88 Billion In US Stocks

November 3, 2017

The Swiss National Bank Now Owns A Record $88 Billion In US Stocks

In the third quarter of 2017, one in which the global economy was supposedly undergoing a unprecedented “coordinated growth spurt”, and in which central banks were preparing to unveil their QE tapering intentions, in the case of the ECB, or raising rates outright, at the Fed, what was really taking place was another central bank buying spree meant to boost confidence that things are now back to normal, using “money” freshly printed out of thin air, and spent to prop up risk assets around the world by recklessly buying stocks with no regard for price or cost.

Nowhere was this more obvious than in the latest, just released 13F from the massive hedge fund known as the “Swiss National Bank.” What it showed is that, just like in the prior quarter, and the quarter before that, and on, and on, the Swiss central bank had gone on another aggressive buying spree and following its record purchases in the first quarter, the central bank boosted its total holdings of US stocks to an all time high $87.8 billion, up 4.2% or $3.5 billion from the $84.3 billion at the end of the second first quarter.

As reported earlier this week, as of Sept.30, the Swiss central bank had accumulated foreign exchange worth 760 billion francs (roughly the same in USD) due to its relentless open market interventions to depress the Swiss franc, and has “invested” those funds created out of thin air in both stocks and bonds. At the end of the second quarter, it held 20% in equities, of which the bulk was in US stocks.

…click on the above link to read the rest of the article…

Fed’s Asset Bubbles Now At The Mercy Of The Rest Of The World’s Central Bankers

September 20, 2017

Fed’s Asset Bubbles Now At The Mercy Of The Rest Of The World’s Central Bankers

“Like watching paint dry,” is how The Fed describes the beginning of the end of its experiment with massively inflating its balance sheet to save the world. As former fund manager Richard Breslow notes, however, Yellen’s decision today means the risk-suppression boot is on the other foot (or feet) of The SNB, The ECB, and The BoJ; as he writes, “have no fear, The SNB knows what it’s doing.”

As we reported previously, In the second quarter of the year, one in which unlike in Q1 fund flows showed a persistent and perplexing outflow from US stocks, a trading desk rumor emerged that even as institutional traders dumped stocks and retail investors piled into ETFs, a “mystery” central bank was quietly bidding up risk assets by aggressively buying stocks.

The answer was revealed this morning when the hedge fund known as the “Swiss National Bank” posted its latest 13-F holdings. What it showed is that, as rumored, the Swiss National Bank had gone on another aggressive buying spree in the second quarter, and following its record purchases in the first quarter, the central bank boosted its total equity holdings to an all time high $84.3 billion, up 5% or $4.1 billion from the $80.4 billion at the end of the first quarter.

Via Bloomberg,

So here we go with the latest installment of the Fed’s will they or won’t they show. It seems from reading all the insights that we’re meant to expect a dovishly spun hawkish move.

…click on the above link to read the rest of the article…

Can Switzerland Survive Today’s Assault on Cash and Sound Money?

August 8, 2017

Can Switzerland Survive Today’s Assault on Cash and Sound Money?

“Switzerland will have the last word,” wrote Victor Hugo in the late 19th century. “It possesses one of the most perfect forms of government in the world.” A contemporary of his, Frederick Kuenzli, a scholar of the Swiss Army, boasted: “No purer type of Republican ideals, no more fixed and devoted adherence to those ideals can be found in all the world than in Switzerland.”

On many levels, there is reason to believe that, indeed, Switzerland remains a unique oasis of rationality and intelligence in the ocean-wide bloodbath that is contemporary Western fiscal and social self-sabotage. On the other hand, there is the Swiss National Bank — the central bank — that oddly appears to be encouraging the same monetary policy dance-with-death that has tripped up the country’s masochistic neighbors. How viable yet is the Swiss element in that which we still admire as the nation of Switzerland? First the good news:

Direct democracy is alive and kicking: No mere opinion poll, the power and vibrancy of the referendum — one that can be launched by any local who can gather 100,000 signatures in support — constitutes one of the most impressive displays of true citizen-republicanism that there is. There is an upcoming vote on the Swiss Sovereign Money Initiative — a movement to obstruct financial speculation; recent referendums that were voted into law include a phasing out of nuclear energy to be replaced by renewables, and easier naturalization of third-generation immigrants.

Cash is still very much king and carrying around personal debt is a social blackmark. In fact, the love of cash has a counter-cultural dimension to it as an anti-State, anti-globalist, anti-anti-privacy gesture intended to underscore the Swiss love of freedom. The Swiss will use huge denominations (the 1000-franc note, for example) like they use pocket change to pay for everything from monthly utility bills to buying a sandwich.

…click on the above link to read the rest of the article…

Swiss National Bank’s U.S. Stock Holdings Hit A Record $63.4 Billion

February 9, 2017

Swiss National Bank’s U.S. Stock Holdings Hit A Record $63.4 Billion

Being able to print your own money and buy stocks at any price sure can be fun. Just as the SNB which unlike many other (if ever fewer) central banks admits to doing just that.

In its latest 13F filing, the Swiss National Bank reported that the value of its portfolio of US stocks rose again in the fourth quarter, increasing by 1.6% from $62.4 billion as of Sept. 30 to a record high $63.4 billion at the end of the year.

Over the past two years, the total Assets under management of this massive hedge fund, which occasionally engages in massive currency manipulation with disastrous results, have increased from $26.7 billion to $63.4 billion, a 138% increase, mostly as a result of relentless currency manipulation and monetization of various assets, including both bonds and stocks.

In its latest 13F, the SNB reported stakes in 2,564 companies, up from 2,536 in the previous quarter.

SNB policy makers, among them Governing Board Member Andrea Maechler, have said many times that they invest for the benefit of monetary policy, replicating broad-based indexes, and not to generate a profit, although with the S&P500 at all time highs, they have also achieved that. The SNB excludes some companies on ethical grounds, according to Bloomberg.

The SNB’s biggest holdings as of December 31 were the following:

But the biggest surprise in the latest filing – aside from a central bank admitting to buying stocks of course – is that for the second consecutive quarter, the amount of AAPL shares, the SNB’s top position, has actually declined, dropping to 15 million as of Dec. 31, from a peak of 15.6 million as of June 30. The value, however remained roughly unchanged making some wonder if the SNB may have hit its limit when it comes to US equity allocation, if only for the time being.

…click on the above link to read the rest of the article…

Time to Get Real: Part I

September 10, 2016

Time to Get Real: Part I

In a world where fair value is a central bank veiled enigma it’s frankly a challenge to keep things real, but I’ll have a go at it in what will be a 3 part series covering central banks, the underlying fundamental picture, and a technical assessment of charts. In this part I’ll be covering central banks and putting their actions into context of the realities of a changing world and will aim to address some of the implications.

Part I: Central banks

After years of watching central bankers do their bidding I’ve come to the conclusion that they are the designers of the ultimate Pokemon Go game by leading investors to ever more extreme locations to find little yield nuggets on their screens.

My largest criticism of this game has been that free market price discovery is largely dead and nobody knows what is real any longer, producing a false sense of security as, at any signs of trouble, central banks feel compelled to intervene ever further removing markets from their natural balance. In short: Creating a bubble with devastating consequences we will all end up paying for in one form or another.

For now one may call it a market of pure multiple expansion as GAAP earnings and price have completely diverged in 2016:

Indeed, as earnings have declined since their peak in 2015 we have seen one central bank intervention after another. Just in 2016 alone we have witnessed dozens of new rate cuts, the ECB modified and added to its QE program with QE3 an almost forgone conclusion, Japan added stimulus with the BOJ on track to own 60% of all ETFs in Japan with more to come. China intervened repeatedly, the UK cut rates and re-launched QE as well, and central banks such as the SNB have been busy expanding their share purchases of US stocks.

…click on the above link to read the rest of the article…

HSBC Looks At “Life Below Zero,” Says “Helicopter Money” May Be The Only Savior

February 27, 2016

HSBC Looks At “Life Below Zero,” Says “Helicopter Money” May Be The Only Savior

In many ways, 2016 has been the year that the world woke up to how far down Krugman’s rabbit hole (trademark) DM central bankers have plunged in a largely futile effort to resuscitate global growth.

For whatever reason, Haruhiko Kuroda’s move into NIRP seemed to spark a heretofore unseen level of public debate about the drawbacks of negative rates. Indeed, NIRP became so prevalent in the public consciousness that celebrities began to discuss central bank policy on Twitter.

When we say “for whatever reason” we don’t mean that the public shouldn’t be concerned about NIRP. In fact, we mean the exact opposite. The ECB, the Nationalbank, the SNB, and the Riksbank have all been mired in ineffectual NIRP for quite sometime and the public seemed almost completely oblivious. Indeed, even the financial media treated this lunacy as though it were some kind of cute Keynesian experiment that could be safely confined to Europe which would serve as a testing ground for whether policies that fly in the face of the financial market equivalent of Newtonian physics could be implemented without the world suddenly imploding.

We imagine the fact that equity markets got off to such a volatile start to the year, combined with the fact that crude continued to plunge and at one point looked as though it might sink into the teens, led quite a few people to look towards the monetary Mount Olympus (where “gods” like Draghi, Yellen, and Kuroda intervene in human affairs when necessary to secure “desirable” economic outcomes) only to discover that not only has all the counter-cyclical maneuverability been exhausted, we’ve actually moved beyond the point where the ammo is gone into a realm where the negative rate mortgage is a reality.

…click on the above link to read the rest of the article…

Interview With Dr. Emma Dawnay on the Swiss Referendum on Monetary Reform

February 1, 2016

INTERVIEW WITH DR EMMA DAWNAY ON THE SWISS REFERENDUM ON MONETARY REFORM

The following questions have been answered by Dr Emma Dawnay, on behalf of Monetäre Modernisierung, the organisation bringing the Swiss Sovereign Money Initiative (or Vollgeld-Initiative in German). The interviewer is The Cobden Centre Editor, Max Rangeley.

How does the current monetary system affect the economy?

In several ways. The most drastic way is that the current system is inherently unstable – giving rise to gradual unsustainable build ups of debt which can turn into financial crises, as we have seen in 2007/2008. This happens because money comes into circulation almost entirely by banks making loans. In Switzerland 90% of the money supply M1 has been lent into existence by banks, and only 10% comes from the Swiss National Bank. Banks base their decision on whether to give a loan on one criterion only: do they expect it to make a profit for them? They do not have to check they have sufficient reserves, nor do they take the health of the economy in general into account. The result is that they tend to make too many loans in the economic good times, and they tend to stop lending in the bad times when boom turns to bust, which means either too many or too few projects get funded. The trouble with a financial crash is that it doesn’t just affect financial industries, but the whole economy and society.

Another way the current monetary system affects the economy comes from the fact that it is much easier for a bank to lend money into existence against collateral – either financial or real estate assets – than to lend against a business plan. This means that the way money enters the economy is more likely to inflate asset prices than to generate jobs, goods and services.

…click on the above link to read the rest of the article…

“Time To Panic”? Nigeria Begs World Bank For Massive Loan As Dollar Reserves Dry Up

January 31, 2016

“Time To Panic”? Nigeria Begs World Bank For Massive Loan As Dollar Reserves Dry Up

Having urged “don’t panic” just 4 short months ago, it appears Nigeria just did just that as the global dollar short squeeze forces the eight-month-old government of President Muhammadu Buhari to beg The World Bank and African Development Bank for $3.5bn in emergency loans to help fund a $15bn deficit in a budget heavy on public spending amid collapsing oil revenues. Just as we warned in December, the dollar shortage has arrived, perhaps now is time to panic after all.

In September, Nigerian central bank Governor Godwin Emefiele ruled out a naira devaluation on Thursday and told people not to panic about a government order which risks draining billions of dollars from the financial system.

In an interview with Reuters, Emefiele said he was ready to inject liquidity if needed into the interbank market, which dried up this week following the directive to government departments to move their funds from commercial banks into a “Treasury Single Account” (TSA) at the central bank.

The policy is part of new President Muhammadu Buhari’s drive to fight corruption, but analysts say it could suck up as much as 10 percent of banking sector deposits in Africa’s biggest economy – playing havoc with banks’ liquidity ratios.

With global oil prices tumbling, banks and companies are already struggling with the consequences of a dive in Nigeria’s energy revenues that has hit the naira currency and triggered flows of capital out of the country.

Then JP Morgan kicked Nigeria out of its influential Emerging Markets Bond Index last week due to restrictions that the central bank imposed on the currency market to support the naira and preserve its foreign exchange reserves.

Since taking office in May, Buhari has vowed to rein in Nigeria’s dependency on oil exports which account for 90 percent of foreign currency earnings.

…click on the above link to read the rest of the article…

Nigerian Currency Collapses After Central Bank Halts Dollar Sales To Stall “Hyperinflation Monster”

January 12, 2016

Nigerian Currency Collapses After Central Bank Halts Dollar Sales To Stall “Hyperinflation Monster”

Having told banks and investors “don’t panic” in September, amid spiking interbank lending rates and surging default/devaluation risks, it appears the massive shortage of dollars that we warned about in December has washed tsunami-like ashore in oil-producing Nigeria. Following the Central bank’s decision this week to halt dollar sales to non-bank FX market operators, black market exchange rates spiked to 282/USD (vs 199 official) and CDS spiked to record highs implying drastic devaluations loom.

As Reuters reports, Nigeria’s central bank is halting dollar sales to non-bank foreign exchange operators and letting commercial banks accept dollar deposits with immediate effect, its governor said on Monday, in an effort to shore up dwindling foreign reserves.

Africa’s biggest economy, an OPEC member state that depends on oil sales for about 95 percent of its foreign reserves, has been hammered by a collapse in global oil prices, which has triggered a slide in its naira currency.

Godwin Emefiele said the sale of foreign exchange to bureaux de change would be discontinued because they were using up the country’s foreign reserves for illegal transactions and selling the dollar at 250 naira compared to the official central bank rate of 197 naira.

The currency hit a record low of 282 per dollar on the unofficial market on Monday after the central bank’s announcement.

Emefiele said foreign reserves stood at around $28 billion compared with $37 billion in June 2014, and that the bureaux were depleting them at a rate of $28.4 million per week.

“This is a huge haemorrhage on our scarce foreign exchange reserves, and cannot continue,” Emefiele told a news conference in the capital Abuja.

To avoid devaluing the currency, a stance so far supported by President Muhammadu Buhari, the central bank adopted increasingly stringent foreign exchange rules last year and effectively banned dollar access for the purchase of 41 items, which has also been criticised at the World Trade Organisation by the United States and the European Union.

…click on the above link to read the rest of the article…

Hang Onto Your Wallets: Negative Interest, the War on Cash, and the $10 Trillion Bail-in

November 21, 2015

Hang Onto Your Wallets: Negative Interest, the War on Cash, and the $10 Trillion Bail-in

In uncertain times, “cash is king,” but central bankers are systematically moving to eliminate that option. Is it really about stimulating the economy? Or is there some deeper, darker threat afoot?

Remember those old ads showing a senior couple lounging on a warm beach, captioned “Let your money work for you”? Or the scene in Mary Poppins where young Michael is being advised to put his tuppence in the bank, so that it can compound into “all manner of private enterprise,” including “bonds, chattels, dividends, shares, shipyards, amalgamations . . . .”?

That may still work if you’re a Wall Street banker, but if you’re an ordinary saver with your money in the bank, you may soon be paying the bank to hold your funds rather than the reverse.

Four European central banks – the European Central Bank, the Swiss National Bank, Sweden’s Riksbank, and Denmark’s Nationalbank – have now imposed negative interest rates on the reserves they hold for commercial banks; and discussion has turned to whether it’s time to pass those costs on to consumers. The Bank of Japan and the Federal Reserve are still at ZIRP (Zero Interest Rate Policy), but several Fed officials have also begun calling for NIRP (negative rates).

The stated justification for this move is to stimulate “demand” by forcing consumers to withdraw their money and go shopping with it. When an economy is struggling, it is standard practice for a central bank to cut interest rates, making saving less attractive. This is supposed to boost spending and kick-start an economic recovery.

That is the theory, but central banks have already pushed the prime rate to zero, and still their economies are languishing. To the uninitiated observer, that means the theory is wrong and needs to be scrapped. But not to our intrepid central bankers, who are now experimenting with pushing rates below zero.

…click on the above link to read the rest of the article…

This Is What Global Currency War Looks Like: A Complete History Of Recent FX Interventions

August 11, 2015

This Is What Global Currency War Looks Like: A Complete History Of Recent FX Interventions

After the dramatic collapse in the SNB’s defense of the Swiss Franc peg to the Euro, there was a period of relative FX peace in which few if any central banks engaged in outright currency intervention (aside from the countless rate cuts so far in 2015 in response to the soaring strength of the USD, which has risen dramatically over the past year for all the wrong reasons). Then China last night reminded us what happens when in a centrally-planned world one or more markets take too great advantage of relative FX differentials, in this case Japan, whose Yen plunged from USDJPY 80 to 125, and the Euro, which tumbled from EURUSD 1.40 to just above parity.

Now, it’s China’s turn.

But as we pointed out before, FX interventions never take place in a vacuum, and especially during periods of rising dollar strength, when the entire FX world, and especially exporters and mercantilists, go berserk.

Furthermore as Stone McCarthy notes, “this is the sort of “international development” that the Fed will need to keep an eye on and assess as conditions align for the start of policy normalization.” The reason is simple: what China just did could make a rate hike impossible as multinational US corporations will be slammed with a double whammy of soaring dollar and sliding CNY, making US exports that much tougher. And as we won’t tire of repeating, the Fed can not print trade.

And just to help remind readers of what happens when the entire world engages in wholesale currency war, here is a complete list of all the recent FX interventions, courtesy of Stone McCarthy.

Summary of Recent FX Interventions:

The last period of any significant Fed interventions in foreign exchange markets was during 1994-1995 when the dollar reached all time lows against what were then the benchmark currencies of the Japanese yen and German deutsche mark, and the period of the Mexican Peso Crisis. After that, it was acting to defend the value of the yen and new-minted euro.

…click on the above link to read the rest of the article…

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