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.