Swiss Franc action, almost -1% interest rate now, pop for gold??
DrBuster
Posts: 5,379 ✭✭✭✭✭
Hmm, interesting. Holding francs now costs you -0.75%. Could there be some action out of francs into gold??
Link to article
<< <i>The ECB is widely expected to announce stimulus measures on January 22. That will flood the market with euros, making it difficult for the Swiss to defend a fixed exchange rate with the currency of its major trading partner.
However, in an effort to ensure investors don't get too excited about swapping their money for francs, the central bank also pushed interest rates further into negative territory, down from -0.25% to -0.75%.
>>
Link to article
<< <i>The ECB is widely expected to announce stimulus measures on January 22. That will flood the market with euros, making it difficult for the Swiss to defend a fixed exchange rate with the currency of its major trading partner.
However, in an effort to ensure investors don't get too excited about swapping their money for francs, the central bank also pushed interest rates further into negative territory, down from -0.25% to -0.75%.
>>
0
Comments
If I was a Swiss citizen I might be very pissed today, but tomorrow I might buy Europe.
Gold pops to $1260 on this news.
<< <i>If the Swiss were holding more gold in their forex reserves maybe they wouldn't have had to peg to the Euro 3 years ago. The Swiss people just voted down a 20% gold reserves referendum. And that just cost them 9% if they were holding the Swiss stock market. Hmmm, maybe those half dozen or so countries holding 50-80% of their forex reserves in gold aren't so dumb after all.
Gold pops to $1260 on this news.
Do you think the Swiss Franc might be just a wee bit more than a tad higher if it did have large gold holdings? My guess is that it would be A LOT higher and the Swiss economy in a depression. They still might get there.
Knowledge is the enemy of fear
<< <i>Do you think the Swiss Franc might be just a wee bit more than a tad higher if it did have large gold holdings? My guess is that it would be A LOT higher and the Swiss economy in a depression. They still might get there. >>
If they get there it won't be because of having had too much gold. They are running only around 8-11% of their reserves in gold....similar to the Russians. They have over $500 BILL in reserves (1,000+ tonnes of gold). The Swiss have sold off 1330 tonnes of gold since 1997. While that certainly helped the Rubin/Summers strong dollar-gold carry trade policy, those gold tonnes would come in handy today rather having paper reserves.
To double their pain, most of those tonnes were sold off at much lower prices than today as part of the ECB annual "depression" sales. The goal was to keep gold down in the $300-$800 range. Didn't work out so well for them and the other European nations that dumped gold on behalf of the USD/US Treasury/FED. The US didn't sell any of their gold though.
What happens when algo's go wild on currencies:
<< <i>
<< <i>Do you think the Swiss Franc might be just a wee bit more than a tad higher if it did have large gold holdings? My guess is that it would be A LOT higher and the Swiss economy in a depression. They still might get there. >>
If they get there it won't be because of having had too much gold. They are running only around 8-11% of their reserves in gold....similar to the Russians. They have over $500 BILL in reserves (1,000+ tonnes of gold). The Swiss have sold off 1330 tonnes of gold since 1997. While that certainly helped the Rubin/Summers strong dollar-gold carry trade policy, those gold tonnes would come in handy today rather having paper reserves.
To double their pain, most of those tonnes were sold off at much lower prices than today as part of the ECB annual "depression" sales. The goal was to keep gold down in the $300-$800 range. Didn't work out so well for them and the other European nations that dumped gold on behalf of the USD/US Treasury/FED. The US didn't sell any of their gold though.
What happens when algo's go wild on currencies:
Had the Swiss not sold off some of their gold, the Franc would be MUCH higher. The Swiss economy would make Angola look good. Nearly 10% of Switzerland's jobs are either directly or indirectly related to tourism. Most of those jobs would be lost. Who is going to pay $1000/night to see mountains, when they can see the same US or Canada for $300? Real estate, which is currently the most expensive on the planet, would drop 70%. The 2 largest banks in Switzerland are both larger than the country itself--both could fail. Switzerland would be a disaster---and might be headed that way.
Knowledge is the enemy of fear
Nah.....why bother.
I woke up early this morning, looked at the chart, and was confused for a while... a 14% increase today? Must be a typo.
I'll be very curious as to how this shakes out over the next few days!
<< <i>Had the Swiss not sold off some of their gold, the Franc would be MUCH higher. The Swiss economy would make Angola look good. Nearly 10% of Switzerland's jobs are either directly or indirectly related to tourism. Most of those jobs would be lost. Who is going to pay $1000/night to see mountains, when they can see the same US or Canada for $300? Real estate, which is currently the most expensive on the planet, would drop 70%. The 2 largest banks in Switzerland are both larger than the country itself--both could fail. Switzerland would be a disaster---and might be headed that way. >>
Has the race to the bottom (to protect the internal economy, i.e. exports and in the Swiss' case, tourism) in the currency war now officially resumed?
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>..... Nearly 10% of Switzerland's jobs are either directly or indirectly related to tourism. Most of those jobs would be lost. Who is going to pay $1000/night to see mountains, when they can see the same US or Canada for $300? Real estate, which is currently the most expensive on the planet, would drop 70%. The 2 largest banks in Switzerland are both larger than the country itself--both could fail. Switzerland would be a disaster---and might be headed that way. >>
Maybe so. Could be that the Swiss saw an even bigger disaster waiting in the wings with the Euro falling further off the cliff as Greece (and others?) default. Maybe they figured there were going to be just many Euros to have to buy, exceeding any realistic vision of what they were capable of buying. The end result may be the same though. At least they are in picking the options rather than having them assigned. It does go to show how little room for error there is in our paper/algo-driven/derivative's heavy financial markets. What looks untouchable one day (like the 1.2 EUR/CHF floor) is toast the next day. For those with big bucks, they will still prefer a vacation in the Swiss Alps to a mountain in Canada.
The day that the Swiss pegged their currency to the Euro in Sept 2011, was the day that Gold peaked out at $1923 and the bear market started.
<< <i>
<< <i>..... Nearly 10% of Switzerland's jobs are either directly or indirectly related to tourism. Most of those jobs would be lost. Who is going to pay $1000/night to see mountains, when they can see the same US or Canada for $300? Real estate, which is currently the most expensive on the planet, would drop 70%. The 2 largest banks in Switzerland are both larger than the country itself--both could fail. Switzerland would be a disaster---and might be headed that way. >>
Maybe so. Could be that the Swiss saw an even bigger disaster waiting in the wings with the Euro falling further off the cliff as Greece (and others?) default. Maybe they figured there were going to be just many Euros to have to buy, exceeding any realistic vision of what they were capable of buying. The end result may be the same though. At least they are in picking the options rather than having them assigned. It does go to show how little room for error there is in our paper/algo-driven/derivative's heavy financial markets. What looks untouchable one day (like the 1.2 EUR/CHF floor) is toast the next day. For those with big bucks, they will still prefer a vacation in the Swiss Alps to a mountain in Canada.
The day that the Swiss pegged their currency to the Euro in Sept 2011, was the day that Gold peaked out at $1923 and the bear market started. >>
This just signals that the Swiss were getting out of the way of the Q to Infinity announcement that may be made by the ECB on January 22. Strap your big boy pants on.
FYI the Swiss Franc has been artificially held down for three years. About time
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
"central banks are no longer aligned and again a source of volatility rather than calm in financial markets."
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
MA knows a thing or two about currencies and capital flows. He said this peg being removed was inevitable. He forecasted this at his Berlin conference. Pegs are just more CB manipulation. The Swiss were tired of losing a fortune and took the only logical step, regardless of the initial pain it may cause. He's turning bullish on gold IF it can hold above $1250. Imagine....central banks can't trust each other any more.
Estimate by DBank in derry's link above suggests that $10 TRILL in cash was pumped into the system since the 2008 recession. Easy come....can become easy go.
You may want to skip the Canadian mountain vacation - Target closing 133 Canadian stores on massive losses - 17,600 jobs at stake
The Canadian shopper was not fooled.
I'm shocked. Shocked, I tell you.
Time to start watching Libor, mates.
FYI the Swiss Franc has been artificially held down for three years. About time.
Estimate by DBank in derry's link above suggests that $10 TRILL in cash was pumped into the system since the 2008 recession. Easy come....can become easy go.
And as a result, we've got volatility. I think it's gonna be the new normal, which should help gold as people get tired of guessing what's going to happen to their 401Ks next week. It doesn't mean they'll make money in gold, but it does mean that they'll want to do what Baley's been doing.
I knew it would happen.
Gold has been rising with the dollar for 11 weeks now. And the SM is slightly down in that same period. The fiat bugs tell me that's not supposed to happen.
<< <i>Swiss stock market down 9%. U.S. investors may want to pay heed to that.
Nah.....why bother. >>
Yes, and if they panic and decide to sell it all today and stay out forever, they can lock in that % loss vs yesterday's price. And lock in whatever return they've earned since they bought their shares.
Or they can ride it out. Or buy more... Or anything in between. Same as everyone.
Liberty: Parent of Science & Industry
Which may not be a bad move. It could be a major turnaround in the market. It is possible.
I knew it would happen.
Franc is this strong what about gold itself?
<< <i>
<< <i>Swiss stock market down 9%. U.S. investors may want to pay heed to that.
Nah.....why bother. >>
Yes, and if they panic and decide to sell it all today and stay out forever, they can lock in that % loss vs yesterday's price. And lock in whatever return they've earned since they bought their shares.
Or they can ride it out. Or buy more... Or anything in between. Same as everyone. >>
They can do a lot of things including drowning their sorrows in a tub of softly melted dark chocolate. Down another 5% as this is being typed.
The U.S. investors take heed part of that is not for you Baley as you have a pretty good grasp of the markets. More for the stray newb that believes that central banks are their friends and can only drive equity markets higher until everyone is rich as Rockefeller.
I would suggest a nerve racking shock for most of us here....myself included if we woke up to $900 gold and 15500 on the Dow Jones. That is a lot of power for a small group of decision makers to bestow, and one tepidly trusts that they did not tip off their friends first.
<< <i>
<< <i>
<< <i>Swiss stock market down 9%. U.S. investors may want to pay heed to that.
Nah.....why bother. >>
Yes, and if they panic and decide to sell it all today and stay out forever, they can lock in that % loss vs yesterday's price. And lock in whatever return they've earned since they bought their shares.
Or they can ride it out. Or buy more... Or anything in between. Same as everyone. >>
They can do a lot of things including drowning their sorrows in a tub of softly melted dark chocolate. Down another 5% as this is being typed.
The U.S. investors take heed part of that is not for you Baley as you have a pretty good grasp of the markets. More for the stray newb that believes that central banks are their friends and can only drive equity markets higher until everyone is rich as Rockefeller.
I would suggest a nerve racking shock for most of us here....myself included if we woke up to $900 gold and 15500 on the Dow Jones. That is a lot of power for a small group of decision makers to bestow, and one tepidly trusts that they did not tip off their friends first. >>
It was a financial shock to me when they announced they were pegging the swiss franc to the euro in the first place. I lost 37K that day. Yesterday felt like redemption for me.
The swiss are the sharpest tools in the shed.
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>.....The swiss are the sharpest tools in the shed. MJ >>
Looks like time for a steel cage match between MJ and Cohodk. Very different views on the Swiss move.
Maybe time for a poll? Was this the best move for the Swiss....Yes....or.....No.
The swiss are the sharpest tools in the shed.""""
First move was idiotic, second move was reckless.
<< <i>""""It was a financial shock to me when they announced they were pegging the swiss franc to the euro in the first place. I lost 37K that day. Yesterday felt like redemption for me.
The swiss are the sharpest tools in the shed.""""
First move was idiotic, second move was reckless. >>
First move proved to be necessary. Second move probably more necessary. Euros were about to come home to roost next week. Hot potatoes. Time will tell.
Mark
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>First move proved to be necessary. Second move probably more necessary. Euros were about to come home to roost next week. Hot potatoes. Time will tell. >>
I will defer to your knowledge on the subject. How though can one operate an international bank or import/export business out of Switzerland with those types of government orchestrated moves*?
*unless of course you were tipped off in advance.
Liberty: Parent of Science & Industry
<< <i>First move was idiotic, second move was reckless. >>
Obviously, those making these decisions do not have access to the types of information, nor the sound judgement, that you do, since they make mistakes of this magnitude
Liberty: Parent of Science & Industry
While it's true that UBS and Credit Suisse are 6x Swiss GDP (vs. 60% of GDP for the top 6 banks in the US) those banks probably don't own the bulk of the world's otc derivatives. If someone could direct me where to find that information that would be helpful. So far no luck in finding info like the US OOC puts out (SNB published "monthly turnover" date in 2013 but not notional amounts held). The Top 6 US banks own otc derivatives that are 18X the size of the USEconomy. That doesn't seem smart. In looking at the BIS tables, 67% of the world's otc interest rate derivative's contracts are denominated in the Dollar/Euro. The currencies involved in the USDX make up 90% of all otc derivs. The Swiss Franc...only 1%. Could be a good thing to be a standalone Swiss Franc again rather than sitting on the derivative's see-saw.
<< <i>
<< <i>First move was idiotic, second move was reckless. >>
Obviously, those making these decisions do not have access to the types of information, nor the sound judgement, that you do, since they make mistakes of this magnitude >>
So you are comfortable with a couple of bespectacled old economists turning a nations markets upside down over a shot of cognac?
I recall the days when markets moved on corporate performance and perceived affiliated conditions. Not a couple of professors from the London School of Economics.
Baley....are you really comfortable with this type of central bank scheming? I know that you like to take the opposing views on many issues discussed and that is fine, but does not an overnight move of 25% on a nations currency, price of gold and 10% on their stock market concern you?
Perhaps Justacommem and Baley can convince this businessman that the moves were beneficial.
Maybe not. Capitalism is so last generation.
Did this turn of events affect you in an other than abstract way? I will admit to being interested in the subject of the Swiss Franc action and the gold price, but have no dog in the fight
Edit: But I do believe that the big thinkers that actually make these decisions are aware of the context and are doing what they think is best about what they are in charge of.
Liberty: Parent of Science & Industry
<< <i>Edit: But I do believe that the big thinkers that actually make these decisions are aware of the context and are doing what they think is best about what they are in charge of. >>
On that we disagree. Many empires have fallen when too few were trusted unquestionably.
The maneuver did not impact me directly. Past experience in the jewelry business tells me that remittances are due shortly on the Swiss timepieces that were purchased for Christmas. The translation from Dollars and Euro's into the Swiss Franc will no doubt hammer the watchmakers. Perhaps they refused to pay off....ah support the right candidates.
<< <i>""""The Swatch Group's CEO, Nick Hayek, was less optimistic. He said the central bank decision on the franc is akin to a "tsunami" that will hit exporters and the entire nation."""""
Perhaps Justacommem and Baley can convince this businessman that the moves were beneficial.
Maybe not. Capitalism is so last generation. >>
That same businessman reaped rewards when the franc was pegged to the euro!!! Before that, the swiss franc was the strongest currency in the world and hurt exports. It is now free to seek it's proper level without invention. Shouldn't that make you happy? Nah, nothing does. Everything is a plot. Maybe, just maybe the SNB knows what the heck its doing and is actually doing a good thing in the long run for its citizens and its sovereignty? You always seem to want it both ways and argue against the middle. That is easy.
Mark
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>It is now free to seek it's proper level without invention. Shouldn't that make you happy? >>
Should have never been tampered with in the first place. That is the point to you one world order fans.
<< <i>
<< <i>..... What looks untouchable one day (like the 1.2 EUR/CHF floor) is toast the next day. ....... >>
I think this is backwards. The Swiss franc was formerly pegged at 1.2 francs to the 1.0 euro. That peg was removed and the two currencies seem to be trading at about parity now. I can't see how it will affect me at all personally but I'm happy for Justacommeman and I hope he recoups his previous loss.
<< <i> I can't see how it will affect me at all personally >>
Seems to be the operative attitude. As long as the next schmuck gets hosed all is well.
Kind of the same when the housing market crashed.....well at least until it took down the stock market.
<< <i>
<< <i>It is now free to seek it's proper level without invention. Shouldn't that make you happy? >>
Should have never been tampered with in the first place. That is the point to you one world order fans. >>
I agree, but they had a runaway currency in the middle of a global crisis. They had the most expensive house on a crappy block. They did what they thought was right. As much as I don't like it, I can actually respect it even if it hurt me at the time. Not everything is nefarious. Being that I'm a card carrying libertarian your last sentence makes me laugh. Sometimes you have to bend, not to break. Not everything is absolute .Not everything is all in. Not everything is one way. I've started several successful businesses. The thing I learned to be most useful? Learn to adapt and to improvise on the fly.
Mark
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i> Being that I'm a card carrying libertarian your last sentence makes me laugh. Sometimes you have to bend, not to break. >>
Always an excuse to flush the free market down the toilet.
<< <i>
<< <i> Being that I'm a card carrying libertarian your last sentence makes me laugh. Sometimes you have to bend, not to break. >>
Always an excuse to flush the free market down the toilet. >>
Sometimes it's prudent to cut off a hand to save the arm. You are so brave.
Good luck on Planet Glicker where you seem to want to orbit yourself.
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>Good luck on Planet Glicker where you seem to want to orbit yourself. >>
Just requesting a level and uncorrupted playing field for all participants.
<< <i>
<< <i> I can't see how it will affect me at all personally >>
Seems to be the operative attitude. As long as the next schmuck gets hosed all is well.
Kind of the same when the housing market crashed.....well at least until it took down the stock market. >>
Friend, I don't know if this fais-do-do is any such event as the housing market crash. I have many acquaintances who are involved in or with housing, as tenants or owners, etc., but know very few who are involved heavily with the euro/swiss franc rate.
In any event those of us who had not gotten indebted beyond our ability to repay were untroubled by the housing crash. Speculators burned and crashed, homeowners as a group did not.
Speculators in foreign exchange are not motivated by a near universal desire to house themselves and their families, they are mere gamblers. And when a gambler bets 'black' and it comes up 'red', tough.
And I think they are called 'chumps' rather than 'schmucks'.
<< <i>Speculators in foreign exchange are not motivated by a near universal desire to house themselves and their families, they are mere gamblers. >>
Currency markets are used for much more than the casino experience. Ask any business that trades internationally.
On second thought, these Swiss shylock operations getting their profits whacked is not so bad after all.
<< <i>
<< <i>
<< <i>..... What looks untouchable one day (like the 1.2 EUR/CHF floor) is toast the next day. ....... >>
I think this is backwards. The Swiss franc was formerly pegged at 1.2 francs to the 1.0 euro. That peg was removed and the two currencies seem to be trading at about parity now. I can't see how it will affect me at all personally but I'm happy for Justacommeman and I hope he recoups his previous loss. >>
Thanks RGJohn.
In 2006 I turned a lot of my USD's into Swiss Francs and Canadian dollars as I felt they were the safest banks and currencies in the world. I opened up CD's and or T Bills denominated in both of those currencies. The CD's were renewed every 3 months. My instincts proved correct as both of these currencies rallied hard against the dollar. I traded out of my Canadian T Bill position and rolled everyday up into the Swiss Franc. All was great until they pegged the franc to the euro. Yes, having the rugged pulled out from me sucked especially since I was on the right side of the trade. I couldn't realistically break my CD. The rules changed in the middle of the game. I understood why it was done. However, it still sucked.
Fast forward to today. Last month my banker called and said rather then using CD's as the instrument let's just open a bank account denominated in francs that way you will have more freedom. That's what I did. Overall, I'm ok albeit nowhere now the peak of the trade. Since I did this as financial insurance I can't be too upset. The Swiss Franc remains my weapon of choice.
Mark
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>..... What looks untouchable one day (like the 1.2 EUR/CHF floor) is toast the next day. .......
I think this is backwards. The Swiss franc was formerly pegged at 1.2 francs to the 1.0 euro. That peg was removed and the two currencies seem to be trading at about parity now. I can't see how it will affect me at all personally but I'm happy for Justacommeman and I hope he recoups his previous loss. >>
It may not affect you, but it affected a lot of world investors, especially in Europe. Specifically, the quite numerous Polish and Hungarian homeowners with mortgages in Swiss Francs just saw their monthly payments go up by 15%. That must be sweet. They did nothing wrong. And you want to call them speculators, gamblers, schmucks, and chumps? This is only one example of being fine one day and "toast" the next morning. There are probably hundreds of them via the rule of "unintended consequences." Hopefully, the govts of those nations do something to lessen this blow to homeowners. What else are they supposed to anchor their mortgages in, rubles? yuan? pesos? pounds? dollars? Lira? Their national currencies are the Zlotny and Forint....probably not good choices either.
Not that I care about hedge funds but I'm sure some of them just may have collapsed by heavy bets on EUR/CHF staying above the floor or around the 1.20 level. While it is at parity now during the announcement it fell from 1.2 to 0.75, a 38% drop for those shorts or hedges forced to get out near the low. During instantaneous algo action like this even programmed stops can't guarantee you'll get out (ie a stop at say 1.15 or 1.10 might not even get executed until 0.80).
Armstrong's view of it all
He saw the SNB unpegging as inevitable. Interesting that he says informing the IMF (or anyone else) ahead of the move would have made the situation worse. The IMF & Friends would have front-run the move to line their pockets. The whipsaws would have been worse.
that the CHF/EUR peg would be broken.
<< <i>
<< <i>.....The swiss are the sharpest tools in the shed. MJ >>
Looks like time for a steel cage match between MJ and Cohodk. Very different views on the Swiss move.
Maybe time for a poll? Was this the best move for the Swiss....Yes....or.....No.
What I say?
The Swiss were forced to make this move. It may have been voluntary but was unavoidable. The Swiss franc is too big for the country. They could never buy enough Euros. Better to take the deflation thy so desperately need. Swiss citizens can't even afford their own real estate..they allow one to borrow from your pension (social security) to buy a house. And I think the mortgages are greater than 30 years. Its an overpriced and pompous country that will soon be paying for its historical "neutrality".
Knowledge is the enemy of fear
And warming up in the on-deck circle:
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>I read through Armstong's posts prior to Jan 15 and didn't find any prediction
that the CHF/EUR peg would be broken. >>
In MA's January 17th posting he claims he stated this at the Berlin World Economic Conference in Nov/Dec 2012. I wasn't there. But, I'll take him at his word.
Fallout from the SNB
---------------------
US commercial traders have taken the Dollar futures to their largest net short position in over 10 years (87K contracts net short).
USD weekly chart + COT positioning