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An example of how a Central Bank is at the whimsy of the market or how every Swiss citizen lost $325

cohodkcohodk Posts: 19,155 ✭✭✭✭✭
in Precious Metals
I cant believe no one posted this yesterday.

http://www.theaustralian.com.au/news/world/swiss-regions-lose-out-as-snb-axes-dividends/story-fnb64oi6-1226796873655#


Last year the Swiss Natl Bank paid out about $2.6 billion in dividends, or about $325 per citizen. They aint gettin that this year.

But what I found more interesting in other related articles is that the SNB gold holdings represent about 10% of their holdings. So a drop of only 3% (30% drop in gold on a 10% position) caused such havoc to the bank. And why didnt the other 90% of their holdings compensate for this this loss? Is the FED going to have to bail out the SNB someday?


Excuses are tools of the ignorant

Knowledge is the enemy of fear

Comments

  • MGLICKERMGLICKER Posts: 7,995 ✭✭✭


    << <i> Is the FED going to have to bail out the SNB someday? >>



    They already have!
  • bronco2078bronco2078 Posts: 10,231 ✭✭✭✭✭


    the SNB better buy the S & P if it wants the F E D to bail it outimage


    Assuming the other 90% is fixed income type investing Bonds , etc. Negative real interest rates would mean they would have to go risk on to pick up the slack wouldn't it? Or cut the dividend and wait out the rough patch
  • secondrepublicsecondrepublic Posts: 2,619 ✭✭✭
    The story doesn't make a lot of sense. Gold sitting in their vaults doesn't produce any income stream; so why would a change in the value of their gold holdings affect the dividends the bank pays out? Those dividends presumably are 100% based on income the bank earned from assets other than gold. Seems more likely they're blaming gold when some other culprit it to blame.
    "Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
  • CaptHenwayCaptHenway Posts: 32,171 ✭✭✭✭✭
    Did they pay out a big dividend when gold went up in the 2008-2010 period?
    Numismatist. 50 year member ANA. Winner of four ANA Heath Literary Awards; three Wayte and Olga Raymond Literary Awards; Numismatist of the Year Award 2009, and Lifetime Achievement Award 2020. Winner numerous NLG Literary Awards.
  • cohodkcohodk Posts: 19,155 ✭✭✭✭✭


    << <i>The story doesn't make a lot of sense. Gold sitting in their vaults doesn't produce any income stream; so why would a change in the value of their gold holdings affect the dividends the bank pays out? Those dividends presumably are 100% based on income the bank earned from assets other than gold. Seems more likely they're blaming gold when some other culprit it to blame. >>




    The banks use mark to market accounting. "Unrealized" gains or losses affect their balance sheet. (A lesson for those who think they didnt lose if they didnt sell). Their gold holding declined by about 16 billion and other assets increased about 6 billion. Overall they took a 10 billion hit.

    Yes, Capt, I believe their holdings increased in value during those years and dividends were paid.

    But if the SWISS NATIONAL BANK can lose such a large sum, how about small schmucks? How have they fared?
    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

  • rawteam1rawteam1 Posts: 2,472 ✭✭✭


    << <i> Gold sitting in their vaults doesn't produce any income stream; >>



    simply not true... good place & time to start a little dilligence...
    keceph `anah
  • secondrepublicsecondrepublic Posts: 2,619 ✭✭✭


    << <i> But if the SWISS NATIONAL BANK can lose such a large sum, how about small schmucks? How have they fared? >>



    They've lost less? image
    "Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
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