In the most ironic story of the day, the company that makes the paper that Swiss banknotes are printed on was just bailed out by the money-printing, stock-purchasing, plunge-protecting, savior-of-global equities…Swiss National Bank.
* * *
In a quarter in which the world was – supposedly – growing on all cylinders, and in which the S&P was making record high after record high, one central bank was quietly buying everything in sight….
* * *
Switzerland is a small country of just 8 million people, but they make an outsized impact on economics and finance and money.
Because Switzerland is considered a safe haven and a well-run country, many people would like to hold large amounts of their assets in the Swiss franc. This makes the Swiss franc intolerably strong for Swiss businesses and citizens.
So the Swiss National Bank (SNB) has to print a great deal of money and use nonconventional means to hold down the value of their currency. Their overnight repo rate is -0.75%.
As Icahn was selling, or just before as we don’t know precisely when Icahn, who has since indicated he has turned massively bearish on the overall market, one entity was buying every AAPL share it could find. In fact, according to its latest 13F, everyone’s favorite central bank that openly admits it is also a wholesale buyer of stocks (with a portfolio of some $100 billion), the Swiss National Bank reveals that in Q1 it bought another 4.1 million in AAPL shares, bringing its total to a record 14.5 milion shares.
* * *
By now it is common knowledge that when it comes to massive, taxpayer-backed hedge funds, few are quite as big as the Swiss National Bank, whose roughly $100 billion in equity holdings have been extensively profiled on these pages, including its woefully investments in Valeant and the spike in its buying of AAPL stock at its all time high.
But while the SNB’s stock holdings are updated every quarter courtesy of its informative SEC-filed 13F (we wish the Fed would also disclose the equities it holds courtesy of its Citadel proxy), getting a gllimpse of the flow is more problematic, and involves waiting for the hedge fund’s, pardon central bank’s annual report.
Overnight, the SNB which unlike the Fed and the other “serious” central bank hedge funds, released a 13-F updating on its latest stock portfolio. We learned that in the quarter in which AAPL stock tumbled to $92 during the August 24 ETFlash crash, the Swiss money printing authority which reported a record $20 billion loss in the second quarter, and a record $52 billion in the first half, added another 909,000 AAPL shares, bringing its new grand total to 10.3 million shares,
– “Mystery” Buyer Of Stocks In The First Quarter Has Been Identified (ZeroHedge, May 7, 2015):
Three days ago, when looking at the unprecedented, record outflows from US equities (coupled with continued inflow into bond funds into what BofA’s Hans Mikkelsen would likely dub the Great Antirotation) we asked a simple question: “who is buying… no really“.
Then yesterday, the spoofing algos were briefly spooked when Yellen, for the second time in under one year, issued a warning about valuations, only this time instead of bashing the biotech and social media sector, the non-Series 7, 63 certified financial advisor brought attention to the entire market saying “equity market valuations generally are quite high.”
– The Swiss National Bank Is Long $100 Billion In Stocks, Reports Record Loss (ZeroHedge, April 30, 2015):
When the Swiss National Bank revealed its long awaited Q1 financials earlier today, everyone was eagerly looking at the number showing just how massive the quarterly P&L loss would be to the central bank following its shocking decision from January 15 to remove its EURCHF 1.20 floor, which sent the CHF soaring and by implication caused huge losses to the mostly EUR-denominated SNB assets.
The loss was indeed, massive, coming in at CHF 29.3 billion, or $32 billion.
This was the biggest quarterly loss for the Swiss central bank to date, dwarfing that of CHF18.5 billion incurred in the second quarter of 2013, when the price of gold plummeted, and certainly one of the biggest central bank losses in history, if of course, the others tracked their P&L the way the SNB does.
– The “War on Cash” Migrates to Switzerland (Acting Man, April 24, 2015):
Banks Increasingly Refuse Cash Withdrawals – Switzerland Joins the Fun
The war on cash is proliferating globally. It appears that the private members of the world’s banking cartels are increasingly joining the fun, even if it means trampling on the rights of their customers.
Yesterday we came across an article at Zerohedge, in which Dr. Salerno of the Mises Institute notes that JP Morgan Chase has apparently joined the “war on cash”, by “restricting the use of cash in selected markets, restricting borrowers from making cash payments on credit cards, mortgages, equity lines and auto loans, as well as prohibiting storage of cash in safe deposit boxes”.
– Swiss Franc Is Tumbling, Retraces 60% Of SNB Move (ZeroHedge, Feb 18, 2015):
Is the SNB buying Euros to keep the mirage alive that Grexit is “managable”? EURCHF is up dramatically in the last 2 days, retracing 60% of the Swiss Franc’s valuation surge against the USD…
– How The Swiss National Bank Almost Crushed George Soros (ZeroHedge, Jan 23, 2015):
Minutes after last week’s Swiss National Bank shocker, jokingly we mused:
Will be ironic if Soros was long EURCHF
— zerohedge (@zerohedge) January 15, 2015
… because there would be nothing more ironic if the man who “broke the Bank of England” ended up being FXCMed himself by another central bank, over two decades later and just as he was set to finally retire, at the age of 84, formally, something he supposedly announced in Davos yesterday.
– Swiss Shocker Triggers Gigantic Losses For Banks, Hedge Funds And Currency Traders (Economic Collapse, Jan 19, 2015):
The absolutely stunning decision by the Swiss National Bank to decouple from the euro has triggered billions of dollars worth of losses all over the globe. Citigroup and Deutsche Bank both say that their losses were somewhere in the neighborhood of 150 million dollars, a major hedge fund that had 830 million dollars in assets at the end of December has been forced to shut down, and several major global currency trading firms have announced that they are now insolvent. And these are just the losses that we know about so far. It will be many months before the full scope of the financial devastation caused by the Swiss National Bank is fully revealed. But of course the same thing could be said about the crash in the price of oil that we have witnessed in recent weeks. These two “black swan events” have set financial dominoes in motion all over the globe. At this point we can only guess how bad the financial devastation will ultimately be.
But everyone agrees that it will be bad. For example, one financial expert at Boston University says that he believes the losses caused by the Swiss National Bank decision will be in the billions of dollars…
“The losses will be in the billions — they are still being tallied,” said Mark T. Williams, an executive-in-residence at Boston University specializing in risk management. “They will range from large banks, brokers, hedge funds, mutual funds to currency speculators. There will be ripple effects throughout the financial system.”
– The SNB’s Wake-Up Call: Keynesian Central Banking Is Destroying Money And Markets (David Stockman’s Contra Corner, Jan 17, 2015):
It seems everyone was short the franc (CHF) as a matter of taking monetarism at face value. In other words, it amounted to believing the central party line about the economy and normalcy despite the fact that markets have been increasingly pessimistic about it all and actively and aggressively betting against it. Goldman Sachs is just one of many:
– What Really Happened At The SNB Yesterday: One Person’s Take (ZeroHedge, Jan 16, 2015):
Here are a few theories on what really happened at the Swiss National Bank on January 15, 2015. That fateful day, the SNB suddenly decided to end suppressing the value of the Swiss Franc versus the Euro.
What happened at the SNB?
– Largest Retail FX Broker Stock Crashes 90% As Swiss Contagion Spreads (ZeroHedge, Jan 16, 2015):
UPDATE: Knight Trading 2.0? Jefferies executive are reportedly on-site at FXCM discussing a $200 million bailout
As we first reported last night, FXCM was among the first of many retail FX brokers (and the largest) to see its clients suffer massive losses from yesterday’s Swiss Franc surge following the SNB decision to unleash market forces. There are now at least 4 retail FX brokers (FXCM, Excel Markets, OANDA, and Alpari) who have announced “issues” but FXCM, being among the largest and publicly traded is the most transparent example of wjust what can go wrong when average joes are allowed 100:1 leverage. FXCM is now stuck chasing clients for money they do not (and will never) have.. and its stock is down 90%, trading a $2 this morning (down from $17 on Wednesday). As Credit Suisse notes, time is running out as regulators “tend to be impatient once capital requirements are breached.”
– Peter Schiff: Swiss Surrender Wins Currency War (Euro Pacific Capital via ZeroHedge, Jan 15, 2015):
By ending its three year currency peg to the weakening euro Switzerland has become the first major economy to surrender in the international currency war, and in so doing has given a long-delayed victory to the Swiss people. Contrary to the indignant reaction by the media and financial establishment, the decision is not a disaster for Switzerland. A continuance of an open-ended peg to the euro could have ultimately ruined the country. Its surprise move, perhaps prompted by the European Central Bank’s recently announced intentions to unleash its own quantitative easing program, may be looked at in the future as the first significant counter-attack against our current global system of monetary insanity.
– Swissnado Stuns Stocks, Bonds & Bullion Bid (ZeroHedge, Jan 15, 2015)
What would you (as SNB) do if you knew that the euro is doomed?
– So Much Changes In 48 Hours (ZeroHedge, Jan 15, 2015):
January 12, 2015: “We took stock of the situation less than a month ago, we looked again at all the parameters and we are convinced that the minimum exchange rate must remain the cornerstone of our monetary policy,” SNB’s Jean-Pierre Danthine.
January 15, 2015: “Recently, divergences between the monetary policies of the major currency areas have increased significantly – a trend that is likely to become even more pronounced. The euro has depreciated considerably against the US dollar and this, in turn, has caused the Swiss franc to weaken against the US dollar. In these circumstances, the SNB concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified.”
– “It’s Carnage” – Swiss Franc Soars Most Ever After SNB Abandons EURCHF Floor; Macro Hedge Funds Crushed (ZeroHedge, Jan 15, 2015):
“As if millions of macro hedge funds suddenly cried out in terror and were suddenly silenced”
Over two decades ago, George Soros took on the Bank of England, and won. Just before lunch local time, the Swiss National Bank took on virtually every single macro hedge fund, the vast majority of which were short the Swiss Franc and crushed them, when it announced, first, that it would go further into NIRP, pushing its interest rate on deposit balances even more negative from -0.25% to -0.75%, a move which in itself would have been unprecedented and, second, announcing that the 1.20 EURCHF floor it had instituted in September 2011, the day gold hit its all time nominal high, was no more.
What happened next was truly shock and awe as algo after algo saw their EURCHF 1.1999 stops hit, and moments thereafter the EURCHF pair crashed to less then 0.75, margining out virtually every single long EURCHF position, before finally rebounding to a level just above 1.00, which is where it was trading just before the SNB instituted the currency floor over three years ago.
– Swiss Central Bank Plunges Into NIRP, Sends Deposit Rates Negative, Scrambles Against Safe-Haven Capital Flight (ZeroHedge, Dec 18, 2014):
Everyone thought that any major monetary policy surprises and/or capital controls today would come from Putin during his annual press conference. Boy were they wrong: just after 2 am Eastern, none other than the Swiss National Bank joined the ranks of the ECB in scrambling to stem the wave of capital flight, not to mention the cost of money, when it announced it too would start charging customers for the privilege of holding cash in its banks, when it revealed a negative, -0.25% interest rate on sight deposits: a step which according to the SNB was critical in maintaining the 1.20 EURCHF floor.
The Swiss National Bank (SNB) is imposing an interest rate of –0.25% on sight deposit account balances at the SNB, with the aim of taking the three-month Libor into negative territory. It is thus expanding the target range for the three-month Libor to –0.75% to 0.25% and extending it to its usual width of 1 percentage point. Negative interest will be levied on balances exceeding a given exemption threshold.
– Swiss National Bank Admits Directly Buying Small-Cap Stocks (ZeroHedge, Nov 14, 2014):
While we have noted previously that “a cluster of central banking investors has become major players on world equity markets,” and the BoJ has recently tripled its direct manipulative buying of stocks (after buying a record amount in August)… the conspiracy-theorist-dismissers will have to close their eyes and ears as the Swiss National Bank admits in its 2013 annual report that it greatly expanded its share of foreign stocks purchased… most notably small-cap companies.
Maybe it is time to reign in the SNB with the Gold Initiative?
* * *
So does anyone still think the Fed does not do this?