Has anyone been following the Swiss Bank carnage?

[Virgil Showlion]

www.zerohedge.com/news/2015-01-15/its-tsunami-swiss-franc-soars-most-ever-after-snb-abandons-eurchf-floor-macro-hedge-

The Swiss Bank basically decided to abandon their peg to the Euro, apparently losing somewhere close to 60 billion CHF (70 billion USD) in the process. Totally unannounced. It's ripped the guts out of FX traders who were shorting the Franc. This is a "black swan" event of near-unprecedented magnitude.

The bigger question is: Why would the Swiss Bank decouple from the Euro at such enormous costs? The comments in the ZH article give some suggestions.

There be waves a comin'!

[Wisconsin Beth]

from slate.com - if I've copied too much, feel free to cut as needed. 

Why on earth did the ever-conflict-averse Swiss decide to unleash havoc on the markets? Well, you have to start with why they adopted the currency cap in the first place. Switzerland's economy is driven heavily by tourism and exports, 40 percent of which are shipped to the eurozone. Therefore, it needs to keep its exchange rate against the euro reasonably low. Otherwise, its valuable watches, machinery, pharmaceuticals, and jewelry would become too expensive abroad, and vacationers would stop showing up to gorge on chocolate. The problem is, when countries sell lots of exports and
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keep inflation low, like the Swiss, their currency starts to look like an attractive investment option. When the euro crises went into full swing during 2011, panicking money men saw the franc as a safe haven and started buying it en masse, pushing up its exchange rate with the euro, and pushing some exporters into bankruptcy.

Sensing an emergency, the Swiss National Bank declared that it would start buying euros in "unlimited quantities" to keep the franc's value down. Thus, we got the cap.

So what changed? Buying unlimited quantities of euros is about to get expensive. The European Central Bank is about to begin a round of quantitative easing to revive the region's economy—which, for all intents and purposes, means it will be printing lots of euros, which Switzerland would have to purchase in bulk to maintain its exchange rate. That's just not sustainable. So, instead, it's bidding goodbye to the cap, and riding out the nasty economic consequences.

For those who don't follow the movements of the global markets religiously, the basic lesson here is that, just as it can be dangerous when investors collectively decide to your currency (see Russia), it can also be problem if they bum rush your banks to buy it.

But anyway, that's why the hashtag #Francogeddon is on Twitter today and has nothing to do with this guy.

[Virgil Showlion]

Jan 15, 2015 15:18:02 GMT -5 Wisconsin Beth said:

from slate.com - if I've copied too much, feel free to cut as needed. 

Why on earth did the ever-conflict-averse Swiss decide to unleash havoc on the markets? Well, you have to start with why they adopted the currency cap in the first place. Switzerland's economy is driven heavily by tourism and exports, 40 percent of which are shipped to the eurozone. Therefore, it needs to keep its exchange rate against the euro reasonably low. Otherwise, its valuable watches, machinery, pharmaceuticals, and jewelry would become too expensive abroad, and vacationers would stop showing up to gorge on chocolate. The problem is, when countries sell lots of exports and
ADVERTISEMENT
keep inflation low, like the Swiss, their currency starts to look like an attractive investment option. When the euro crises went into full swing during 2011, panicking money men saw the franc as a safe haven and started buying it en masse, pushing up its exchange rate with the euro, and pushing some exporters into bankruptcy.

Sensing an emergency, the Swiss National Bank declared that it would start buying euros in "unlimited quantities" to keep the franc's value down. Thus, we got the cap.

So what changed? Buying unlimited quantities of euros is about to get expensive. The European Central Bank is about to begin a round of quantitative easing to revive the region's economy—which, for all intents and purposes, means it will be printing lots of euros, which Switzerland would have to purchase in bulk to maintain its exchange rate. That's just not sustainable. So, instead, it's bidding goodbye to the cap, and riding out the nasty economic consequences.

For those who don't follow the movements of the global markets religiously, the basic lesson here is that, just as it can be dangerous when investors collectively decide to your currency (see Russia), it can also be problem if they bum rush your banks to buy it.

But anyway, that's why the hashtag #Francogeddon is on Twitter today and has nothing to do with this guy.

*lol* @ #Francogeddon

[bimetalaupt]

Jan 15, 2015 15:11:33 GMT -5 Virgil Showlion said:

www.zerohedge.com/news/2015-01-15/its-tsunami-swiss-franc-soars-most-ever-after-snb-abandons-eurchf-floor-macro-hedge-

The Swiss Bank basically decided to abandon their peg to the Euro, apparently losing somewhere close to 60 billion CHF (70 billion USD) in the process. Totally unannounced. It's ripped the guts out of FX traders who were shorting the Franc. This is a "black swan" event of near-unprecedented magnitude.

The bigger question is: Why would the Swiss Bank decouple from the Euro at such enormous costs? The comments in the ZH article give some suggestions.

There be waves a comin'!

Money!! like going to the lone state of Italy that is in Swiss land on the Lake to loose cheap EUROs. The big three stock markets in the EU trading areas ( including London)were up today.

Germany....^GDAXI 10,032.61.......................... +215.53 +2.20% 8,354.97 10,093.00
Paris.........^FCHI 4,323.20................................ +99.96 +2.37% 3,789.11 4,598.65
London......^FTSE 6,498.78 ...............................+110.32 +1.73% 6,072.70 6,904.90

[Deleted]

I'm always interested in currency movements although I'm not crazy enough to trade on them. We've always had some international exposure through our mutual funds, but also have stock in my previous Switzerland-based employer that's an ADR with the underlying stock in Swiss Francs.

A week before the removal of the cap, it was trading at $82/share.  Today it's at $92.   Too bad we've got only $4,000 worth of it.

[Virgil Showlion]

Jan 20, 2015 13:10:21 GMT -5 @athena53 said:

I'm always interested in currency movements although I'm not crazy enough to trade on them. We've always had some international exposure through our mutual funds, but also have stock in my previous Switzerland-based employer that's an ADR with the underlying stock in Swiss Francs.

A week before the removal of the cap, it was trading at $82/share.  Today it's at $92.   Too bad we've got only $4,000 worth of it.

Still, 12% in a few days isn't too shabby.

I'm not sure what your fees are, though.