Another day of SNB intervention - Oct 6th 2011

Well, today more intervention on behalf of the SNB, imo.

See this post also:

http://eurusd-fx.blogspot.com/2011/10/eurchf-snb-intervention-ahead-of-news.html

No news from SNB itself, but with the number of people involved in decision to intervene and or fix price level, the market probably gets wind before...

On Oct 4th it was a survey of CFOs that sparked buying: Most ever CFOs were negative on the economy.

Today Oct 6th numbers showed the hotels are seeing less and less foreign tourists, most likely due to strong swiss franc. A drop of between 6-10% was reported yoy.

Thomas Reuters price increases 2012: 10% for popular products

We're heading into disinflation or deflation, banks everywhere cutting, and what's Reuters doing? Increasing prices for most popular products by 10%

"I am writing you to inform you of changes to the price of our products and services that will apply from January 1st 2012 or your first 2012 invoice.

The annual price increase supports our commitment to continually invest in an aggressive agenda of content and technology innovation to ensure that our customers have the most critical tools to meet their business objectives in today's challenging markets. Last year we launched our two major platforms Thomson Reuters Eikon (for the desktop) and Thomson Reuters Elektron (network and trading infracstructure). The launch of these platforms marks the beginning of a signigficant series of investments in advanced capabilities" ...

"Pricing for Thomson Reuters Markets products and services will be increased 5% unless listed below."

"D. an increase of 10% .... : Thomson Reuters Eikon, Thomas Reuters Messaging, Reuters 3000 Xtra ... etc etc"

EURCHF - SNB Intervention ahead of news Wednesday Oct 5th 2011

Considering the negative EURO-News all over the place. The Dexia news. And more... isn't it surprising those jumps we're seeing on EURCHF this evening CET.

I think language tomorrow from SNB could be: We're not happy with 1.20 ! And they're intervening in the market to back the claim.

UBS Rogue Trader loss of USD 2 billion - My thoughts

So this trader hid at least USD 2bn of losses and worked for the London equities division of the bank.

Funny that just the other day, the CEO of the bank, Oswald Grübel was saying they'd increased efficency since 2008/09. Who'd have thought he meant in incuring trading loses.

Got to love this analysts comment: "The pressure to finally downsize this rotten investment banking is rising!"

Not even analysts like the casino arms of these global banks... that says a lot!

Commentator: I wonder if the USD 2bn is including his bonus? Might be 2.1bn or 2.2bn including it!

Why the Swiss Franc CHF won't be a safe haven near or even medium term

Markets have reacted quickly to the Swiss money printing. Safe haven investors have decided to look for currencies that offer the same security. And they've found interesting new places: Norway and Sweden. These two countries currencies have not reached the same overvaluation that Switzerland had seen.

The investors who are really interested in safety in times of a melt down know: the SNB is more likely to push Switzerland into inflation along with the EUR-Zone than back down. The SNB president is a former pro swimmer, who would only bend to most extreme pressures, I reckon.

I picture the situation as follows: The CHF was the fit, strong soldier that everyone wanted to protect their property/assets with. The Captain America of currencies so to speak. Then he shot himself in the leg. He won't and can't be forced into battle anymore.

So if I were a hedge fund manager I'd really think twice about betting against the SNB... Especially as the real safe haven flows have easily found a new home in Norway, Sweden - countries with similar GDPs but less fundamental reason to intervene and floor their currencies....

Proportion of EUR by country based on GDP 2009

This pie chart shows the EURO-Countries GDP as of 2009. I gather that if you know what the GDP of a country is, you can deduct how much of the EURO currency they account for.

So according to my calculations based on IMF data found on Wikipedia Germany was 27%, France 21,5%, Italy 17%, Spain 12%.

If Italy and Spain really follow through on fiscal austerity, they'll probably fall into recession.

What I'm not sure of: If they improve their debt situation but cause consumption to drop, unemployment to rise, how do they get around paying more for their debt? Aren't they in a sort of Catch-22 or vicious circle.

The ECB will have to increase the amount of sovereign debt they buy off them to keep them from the vicious circle. That in turn leads to Germany, the healthiest, to get infected with the debt cancer, in my opinion.

I don't think Greece is of any real relevance except to show what happens when a country fails to comply with rules and guidelines: they get bailed out. But who will bail out the ECB? Their printing press. That's why Gold isn't dropping.

What in heavens name can bring back confidence? Jobs right? But jobs, factories are in China, India, Vietnam and other countries right? Why would they come back?

Why Asmussen Being On The ECB Board Is Killing The EURO

So the german Stark resigns as of year end.

For him the germans want to send a certain Asmussen.

This guy was behind the policy of german banks like IKB, KfW and Landesbanken to buy ABS (asset backed securities) and CDS (credit default swaps) instruments. They subsequently got taken to the cleaners.

He was on the boards... He was member of the derivatives lobby org "True Sales International GmbH" that was promoting the ABS markets.

So if the markets tank due to this news, it's rational. This means a loss of discipline at the ECB and acceleration of money printing.

Fasten your seat belts!

Activist Sovereign Wealth Funds

If I ran the SNB book I'd

a. invest a shit load of EUR I owned (maybe 50% of the 150bn?) in the equities markets

I'd probably buy lots of utilities companies and food producers. Maybe interesting tech companies too.

b. as a.) might cause a bit of a political problem I'd scatter my EUR among value and activist hedge funds or just plain old funds, but make sure they were buying the good stuff.

I wouldn't buy any developed world debt. They're going to debase/devalue/inflate their debts away or be crushed.

I love the idea of investing in Africa, but I'm pretty sure the Glencores' of this world are busy bribing important officials so they can pull out the natural resources without leaving any money in the country...

EURCHF 1.20 floor

I wonder if the SNB move was premature. Just today Credit Suisse came out with a study saying that while the strong Swiss Franc was hurting, it was not suffocating the economy.

But I guess this is one of those game changers like when the US prohibited Gold purchases back in the depression? Now: "No more hoarding of CHF allowed"

I guess people betting on a strong CHF just have to remember, that the CHF is a relatively small market and it won't take that much to scare the buyers of Swissies away.

I'm untouched by this move personally, having been killed on the CHFGBP move from 1.52 to 1.25... now 1.35-1.37.

Not much room for upside though... and the population at large isn't as uniformly behind the SNB measures as one would imagine. I wonder if they haven't become a media-scared victim...

Nice move on the SMI. +4% in minutes...

Fellow bloggers view:

A+++++ to Switzerland for finally slapping down these disgusting parasitic speculators pushing up the Swiss Franc to absurd levels that were 40% or more above fair valuations. Switzerland already made it clear to these manic speculators that it was totally unacceptable to be bidding up the Swiss Franc beyond fair value and fortunately they have finally taken effective and correct moves to slam down these unwanted and unwelcome speculators in the Swiss Franc who have caused massive damage to the Swiss economy. Thank you, Switzerland, for doing this and moving towards returning to a stable and reasonable valuation of the Swiss Franc.

Fellow bloggers view:

This is no good for Switzerland - they just gave up their "hard currency" for some dubious short-term benefits, good only for a small segment of their society - they have effectively chained their lifeboat to the sinking Titanic!

I hope though that this move will only be temporary - that the Swiss rebels and forces their stupid (or corrupt?) central bankers to reverse this move! If not - one lifeboat less for the rest of us...

Thanks GOD for (physical) gold and silver for they will be serving as Noah's Ark!

Fellow bloggers view:

This is a very poor decision by the SNB. They will now find depositors from all over Europe choosing the Swiss Franc. Marginally solvent European banks will also choose the Franc as a haven. We are now in a new stage of Currency Wars and uncooperative economic decision making. That is dangerous.

seth8777 | Sep 7, 2011 04:16 AM ET

How can a central bank with a strong currency not sustain forever weakening it? They just run the printing presses. And how can they make a loss if they buy a weaker currency and sell it again once it appreciates? In the contrary, they gonna make huge profits like the German Bundesbank did in the 80s and 90s when tried to weaken the German mark against the USD. Only a country with a weak currency will eventually run out of currency reserves trying to keep a peg to control import prices (like Russia was almost bled dry in 2008). It seems like this is just a hedgefund manager who cries foul since he lost a safe haven where to park his money while shortening the markets (together with his pal Soros). Oh, and the suggestion to invest in Chinese Renminbi, well, China has not been too well-known on its transparency, have they. How many bad loans from the real estate bubble are lurking in Chinese banks books? Also Rogers is known for his commodity investment advice in 2008, that backfired. Oil is still not back at 147 USD.

CashMcCall | Sep 7, 2011 09:10 AM ET
SOUR GRAPE... Rodgers was long SWISS FRANCS. So today his is bitter and telling the world the Swiss made a huge mistake when in fact, he and SOROS his old pal make the big mistake.

Jim Rodgers has been a relentless promoter of commodity bubbles. He has used the crisis just like Soros to promote his absurd theories about economics with half truths. But neither he nor Soros are economists.

There is one absolute certainty, if you push up the price of oil, you kill economies. Every modern recession has been preceded by high cost energy futures. Goldman is the largest trader of oil along with Morgan. Rodgers trades oil, so does Soros. They know that if they push up oil, all agricultural commodities follow. It take a lot of diesel to grow an acre of food or to raise a pound of beef.

So Rodgers commodity fund is built on a house of cards and speculative bubbles. As long as he can broadcast from his home in Singapore this expatriate can reach the US marketplace media and deliver his poison message.

He and Soros both got nailed by the Swiss who got tired of the swiss franc bubble.

Something Positive

I think it's a given that the developed world won't grow for the next years. Japan could be some kind of playbook for what the markets have installed for us.

But there are going to be some very nice winning stocks. I'd like to see CEOs merging and acquiring and cutting costs. It's the only logical thing to do. Just like banks are doing.

That's what's got me optimistic at the moment. There's a big chance that states and consumers suffer in the coming years with unemployment remaining elevated. That doesn't mean that the companies listed on stock exchanges will suffer aswell.

Even if half the companies went bust, there would suddenly be a huge opportunity for cash rich companies. From a "Darwin" point of view, 20% of companies going bust might be a good basis for sprouts to appear. The more acceptable way of achieving that solution: Two companies merge and lay off 10% of their combined workforce...

I'm sure will see some of that in coming months, years. The companies just keeping still and changing nothing are the ones I wouldn't want to be near... unless they have lots of cash obviously...

Barclays also negative on sustainability of current rally:

Consequently, for the time being we are not inclined to change our tactical asset allocation: we advise investors to remain neutral risky assets, while being underweight European risk across assets. The latter would be offset by higher regional equity, rate and credit exposure to the US and/or Japan and EM, which should serve us well in a short-lived bounce in risk sentiment. While valuations of many risky assets look attractive following the recent sell-off (see, for instance, Reaction to the US sovereign downgrade, 7 August 2011, for an assessment of present US equity valuations), we recommend to stay invested “close to home”, as value at risk is particularly elevated at this juncture and the interplay of macroeconomic momentum and policy-driven events does not provide a clear buying signal for risky assets other than for a very short-term recovery in risk sentiment. Neither would we want to be short risky assets, as decisive policy action, particularly by euro area politicians, if it were to happen, could provide the trigger for a more substantial relief rally. By contrast, while we expect the macro momentum to improve in the course of H2, the effect on asset prices would most likely be modest and gradual. That said, we would review this tactical view should a more credible, comprehensive and timely approach be adopted by politicians in Europe to contain the crisis and address the underlying reasons.

Buying Now Could Be The Proverbial First Mouse Going For The Cheese

Well the market got the Reversal I wrote about yesterday morning.

I've seen comments out from BlackRock, Henderson, Pioneer Investments saying this is the moment value investors can find interesting purchase prices.

A lot of the argument is based on historical P/Es, S&P downgrade alone not suffice to cause selling of Treasuries and panic reaching investors. However some of the above are only expecting 6-10% rally from the low. Well we've had that by today (I believe) in some markets.

Some points that make me pessimistic:

A majority of the several longterm investors I spoke to think we haven't seen a bottom yet. They're not in the least in panic mode.

There are two rating agencies out there Fitch and Moody's who haven't done the obvious yet. Downgrade the US.

I can imagine a prolonged drip-feed of negative news into the market over coming months as sentiment drops occuring feed into real consumption reduction.

Worry often gives a small thing a big shadow

or "Every path has its puddle"

well this path seems to be a river now.

I guess it's like in the mountains, near the top, small little streams, but at the foot of the mountain cascading waterfalls...

We need a nice -10% day WITH REVERSAL now....

Then again with a US president saying his country will always be Tripple A just shows lots of people haven't "got it" yet. The greek guys said the market was being unfair and overreacting.

I think it's depression time. Or time to take a step back and see what matters in life. Mostly it's not numbers in an account. I know exactely how it feels though, if you do think that, after getting clobbered...

Why the US equity market is overreacting, in my opinion

It's about the STATE not the COMPANIES...

This just released from S&P....

"The sovereign downgrade will not affect the ratings or stable rating outlooks on the six U.S.-domiciled highest-rated nonfinancial corporate issuers: Automatic Data Processing Inc. (ADP; AAA/Stable/A-1+), ExxonMobil Corp. (AAA/Stable/A-1+), Johnson & Johnson (AAA/Stable/A-1+), Microsoft Corp. (AAA/Stable/A-1+), General Electric Co. (AA+/Stable/A-1+), and W.W. Grainger Inc. (AA+/Stable/A-1+).

WHY THERE IS NO IMPACT ON OUR TOP-RATED U.S. INDUSTRIALS

According to Standard & Poor's criteria, ratings on a nonfinancial corporate borrower may exceed those on the sovereign if we expect the borrower to continue to fulfill its financial obligations, even in a sovereign default scenario. Depending on the industry sector or individual company's financial strength, a company may be better or less able to withstand macroeconomic shocks or other country-related risks. In considering corporate ratings vis-à-vis the sovereign rating, we consider how exposed a company would be to a typical sovereign stress scenario, which, in the past, has included: sharp currency movements, credit shortages, a weakened banking sector, higher government taxes and fees, late or partial payments from the public sector, a more difficult regulatory environment, economic contraction, and rising inflation and interest rates.

Corporate entities that we would typically consider to be most exposed to country risk include firms with mainly domestic customers, highly cyclical companies or companies for which profitability is highly correlated with the general condition of the economy, and companies with high exposures to government sector customers. Corporate entities that typically are least exposed to country risk include globally diversified companies and export-oriented companies. Local economic conditions have less of an effect on such companies, and they generally benefit from currency depreciation."

Excerpt!

source: S&P

S&P is the good guy - Uncle Sam a bloody halfwit

"Safe-haven flows saw U.S. Treasury prices erase early losses on Monday, pushing down yields on the securities despite Standard & Poor’s unprecedented decision to cut the U.S. government’s credit rating by a notch below AAA." Marketwatch.com

Got to love all people bitching about S&P doing something "unprecendented". Looking at a graph of US deficit and seeing the level of debt clearly shows the root of the evil. Money junkie governement...

The analyst who had the guts to downgrade the US is a hero in my eyes. If I saw correctly from the S&P press release, he's canadian :)

Trying To Have Sex When Having Just Lost USD 20k

Well, I hadn't just lost it. It has been more of a gruelsome torment over the last several months.

I stopped looking at the FX account - until yesterday. Something about the being bombarded ALL DAY with the news: Record level, Debt, etc... that just doesn't let you keep cool.

So anyway, I have a -1600 pip loss and decide to a. buy 1 lot more around 1.26 (only had one lot) and put in a stoploss on CHFGBP at 1.24. Sure enough this morning I'm closed out at 1.2393 or so ...

Luckily or unluckily my girlfriend has been on my mind most of the time - and enjoying life. But this morning, seeing that loss really affected me physically. I didn't want to let on to her though. There didn't seem any point. She's very careful with money so the thought of me just chucking it out the window in such a way would have been rather couterproductive I felt.

But trust the SNB to intervene once my fear level is reached. For a moment I just thought, that when headlines get really bad a turning point is near. This time it may be so once again. As the "weak" hands, like mine, have now been crushed I wouldn't be surprised.

Now time to about planning a comeback! Or think of another way to fullfill my gambling addiction?!

Why someone with money is the best kind of advisor

Just to get it out straight away: I'm not loaded. I'm well off compared to the majority of people on the planet, but here in Switzerland I'm in the lower half. I don't mind too much though (Work-life-balance etc).

But one thing I've come to realise: People with money, owners of a company with good cash-flow are the people that should advise you when it comes to investing. Recently I was speaking to a guy, owns his own advisory company, has 12 employees and is very well off. When he talks about investing, he doesn't say "you need to buy X, you need to buy Y". He asks everyone he meets their opinion on things his interested and then based on their rational will choose his side, i.e. if he likes it or not.

Another place I noticed you should listen to "sales people" is in swiss private banking. The owners, the guys whose relatives actually founded the bank, are very well off financially. There not interested in the "fast money". They want investments. Specifically the guys I'm thinking of, who work in senior advisor roles at private banks, own substantial wealth and advise with a view to making sure that in 25 years you as client will still be standing and still be paying them for there services.

Long-term dedication is one key. Giving advice that you follow yourself another.

Your thoughts?

Why Big Banks Deserve To Go To Hell

I manage an account, not large, but I'm very active on it. I buy and sell shares on a nearly daily basis. I generate trading income for the bank in excess of 3% of the assets. That's 300bp. Any bank dreams of such customers, believe me.

So today my moronic account manager (just happens to be a woman) sends me prospectus for some fund the bank is going to launch. They charge 1.6% a year for it, plus a 2.5% subscription and 0.5% redemption fee. The subscription fee is waived if I subscribe untill febuary....

Now this prooves a couple of things to me:

1.) The account manager has no fucking idea how much I generate in commissions.

2.) Why would someone managing an account actively, generating 300bps a year, be told to subscribe to a fund on which the bank earns 160bps?! I couldn't trade as actively anymore...

3.) Banks are so keen on stuffing your account with their daft actively managed funds, that they don't even notice if they'll be earning LESS if they sell them to you...

An ETF has a yearly charge of 0.4%. Knowing that most active funds, especially at banks, don't beat the index, why in gods name would I pay 4! times more for it....

And that my friend is why I think these big banks deserve to go bust. They are feeding off us, not paying any attention to what's best for us!!

*rant*

:-) Happy New Year!