.
Sunday, January 11, 2015

“Wise Man” sinks SNB?

 

The Federal Reserve made a whopping $98 Billion in 2014. That’s a huge amount of money. How big is it?

- It’s about equal to the state budgets of NY, California and Texas.

- It comes to $300 for every man woman and child in the country. It is equivalent to $600 for every worker.

- It is more than the top TBTF banks make in a year.

- The profit is equal to 175% of the Fed’s equity. Way-to-go!

 

I could on with this; $98B is a big pile of money. But it’s chump change compared to what is going on in Switzerland.

 

The Swiss National Bank earned an incredible $38B in 2014. Compare that to the Fed’s results:

- On a GDP comparison the SNB earned 9Xs what the Fed did.

- It comes to $5,000 per person, and $9,000 per worker.

- The SNB’s earnings cover half of the entire Swiss budget. The Fed’s profits are only equal to a half of one percent!

 

So if you worry about the size of the Fed’s balance sheet you should be horrified by what is happening in Switzerland.  These incredible numbers from the Central Banks are not a sign of health – They are a sign of weakness and distress.

 

I bring this up because there has been a development. In today’s Neu Zuricher Zeitung (NZZ) there was an article featuring one of the Swiss “Wise Men” -Ernst Baltensperger. The following quotes are close to a stake in the heart of the Swiss National Bank:

- the National Bank to abandon the rigid connection of the franc to the euro.

- The rate floor has been served excellently Switzerland. But it was always clear that it also involves costs and risks.

- it would be desirable if the SNB might loosen their minimum rate policy, at least in the foreseeable future.

- you could replace the current minimum rate by a lower limit for a basket of currencies, for example, each is half dollar and euro.

- (the change to a basket) would create the possibility that the Swiss franc appreciates against the euro in a certain degree.

And finally, the question about the SNB profits in 2014:

 

-It would be very dangerous to keep this asset to normal.

 

I said on 12/19, that the SNB’s resolve to defend the Peg would be tested in January. Baltensperger’s comments will stoke the fire. The fact that this discussion appeared in the most influential newspaper in Switzerland adds to its significance. I also said that the test of the SNB’s resolve would have far reaching consequences to the concept of the All Powerful Central Banks.

 

Side Note:

Baltensperger was asked what will happen if the ECB initiates a QE program, his answer:

– Quite possible that the rate floor (EURCHF Peg) is then retested.

Mario Draghi will announce an ECB QE plan in eight trading days. The EURCHF FX rate is a small factor in the global markets. It might soon take center stage at the big circus.

 

Screen Shot 2015-01-11 at 12.16.38 PM

 

Comments

  1. As the Fed’s cost of funds is zero, it can maximize profits by holding large quantities of assets with yields in excess of zero. It is important to note that the Fed has exempted itself from GAAP, such that it does not have to mark its book to market. Had it done so, it would have made big gains as bond yields fell from 15% to 1.5%, and would report big losses if yields ever rise again. Since the Fed is 100% owned and controlled by the Federal Government, under GAAP it should be consolidated for accounting purposes, which would eliminate the Fed’s “profits” and the Treasury’s interest expense on the Fed’s bond holdings.

  2. What would you do from a trading perspective?

  3. @Chris Mahoney –
    From Wikipedia:
    The Fed is an independent financial institution formed within the United States, that works separately from the executive or judicial branches of government. The Federal Reserve System is considered to be an independent agency that exists outside of the cabinet of the executive and its powers are derived directly from Congress.

    In Lewis v. United States,[8] the United States Court of Appeals for the Ninth Circuit stated that: “The Reserve Banks are not federal instrumentalities for purposes of the FTCA [the Federal Tort Claims Act], but are independent, privately owned and locally controlled corporations.” The opinion went on to say, however, that: “The Reserve Banks have properly been held to be federal instrumentalities for some purposes.”

    All nice and opaque….just the way the “owners” like it.

  4. ETUAC – I don’t think a break in the CHF peg is imminent. You can wait to position this.

    In the meantime short EURUSD is a decent proxy. I also favor long USDJPY.

  5. You just need to traffic racer hack specialize. So,
    enjoy the company Aksetta Kazan together with the ability to move from one part of the character.
    Apple’s announcement of the TV set or even more with
    it. Personally I found the control scheme really shines when you deploy
    your forces it cost something like energy and you can hire outsourcing development company.
    The purpose of communication and entertainment through mobile recharge feature at any point of time in them.

    You will find numerous powers up for making calls.

  6. I like the valuable info you supply to your articles. I will bookmark your
    weblog and take a look at once more here regularly. I am
    quite certain I’ll be informed lots of new stuff right right here!
    Best of luck for the following!

  7. Google is my king since he has assisted me to find this outstanding
    site!.

  8. I think more writers ought to write with enthusiasm just like you.

    Even informative articles such as this can have personality.
    That’s what you have injected in this helpful article. Your views are very unique.

  9. Bruce, right now 4:40 AM Swiss Central Bank Ends Minimum Exchange Rate, Lowers Interest Rate to -0.75%…???

    I would love to hear your opinion about where and how it ends…

    EUR/CHF 1.07 FROM 1.20 FLOOR

    USD/CHF 0.95 FROM 1.01

  10. Wow I enjoy reading your posts, saved to favorites!

  11. Well Bruce, looks like the peg finally broke. I appreciate all you wrote on this. I always thought it would break, but the wait was so long that I did not have a trade on. So it goes.

  12. Nice work on anticipating the Swissie debacle this morning!

  13. Bruce: Hope you made some money.

  14. Boom!

    Who’s next?

  15. Please let me know if you’re looking for a author for your
    site. You have some really good articles and I think I would be a good asset.

    If you ever want to take some of the load off, I’d really like to write
    some material for your blog in exchange for a link back to mine.
    Please send me an e-mail if interested. Thanks!

  16. At the same time it is also important to motivate the employee.

    Acting as king of the castle, Sultan of the Sandbox or
    a powerful digger or whatever they play they control
    the environment and their characters. More importantly,
    the driving school that you have chosen for your young driver should
    have a professional and experienced driving instructor who can put
    your kid at ease while they instill confidence
    in them during the training. This institute is in close
    proximity to the residential locations and hence it
    becomes easier for the students to commute to the school every day and for the distant students the school does provide the transportation facility.
    Medical education in the USA offers to get employment in the country and
    any part of the world easily. The site is located in India,
    and many but not all of the stories focus on Indian graduates and their accomplishments.
    On Monday the 18th of September 2000 the BBC published an article referring to primary
    science being ‘too hard’. Benefits of coeducation lead to more
    balance between two genders because of mutual interest between the genders.

  17. Mobile games allow mobile user can hence start playing it is just the short temple run 2 hack
    list. Then if your need, Internet access and log in from anywhere, anytime and anyplace.
    Internet has been observed that mobile games make us relaxed and rejuvenated.

  18. Its such as you read my thoughts! You seem to grasp so much
    about this, such as you wrote the guide in it or something.
    I believe that you simply can do with some percent to force the message house a bit,
    however instead of that, that is magnificent blog. A fantastic read.
    I’ll certainly be back.

  19. So what are some of the most controversial issues in education that are debated all across the country.
    It will give you a fine advantage in choosing a driving school that will give you the fine advantage and potential.

    In a recent report ranking public school education, nationwide, North Carolina once again found itself in the bottom 20 states.
    After qualifying the entrance exams, students will be eligible for taking admission in various law courses to the students.

    French where a boy shepherd wins his father’s respect by recovering a
    stolen caravan. These kinds of tools include different sized needles, biohazardous-spill kits, tourniquets,
    skin puncture tools, blood culture bottles, locking arm rests, bandages as
    well as tape. The guide book ought to have chapters devoted to different topics and tips for shortcuts.
    There are all kinds of textbooks, reference books not to mention dummy guides that are
    intended to make learning easy.

  20. Glossing over some of the details of the original movie, Spirit of Vengeance picks up with Johnny Blaze (Nicolas Cage) laying low in a remote area of
    eastern Europe, trying to avoid human contact — particularly with those of an evil nature,
    who would trigger his demonic Rider alter ego to send
    them where the sun don’t shine. You get what you pay for
    and when paying nothing, you can’t really complain. Internet has become the first and foremost choice of movie freaks,
    as through this way not only they can watch their
    desired movies via streaming way online, but they can also easily
    and quickly access much more interesting stuff concerning movies.

  21. There has to be a video file open in Movie Maker for
    this option to be available, otherwise it will be greyed out.

    As with all love affairs, there were some bumps in the road.
    This movie, directed by the great Otto Preminger is a courtroom drama
    of a murder trial in which a lieutenant in the army is
    charged with murdering a bar owner who had raped the lieutenant’s wife.

  22. This post presents clear idea in favor of the new users of blogging,
    that actually how to do blogging and site-building.

  23. Thanks very nice blog!

  24. Good info. Lucky me I found your blog by accident (stumbleupon).
    I have saved it for later!

  25. If you wish for to increase your know-how simply keep visiting this
    web page and be updated with the latest gossip posted here.

  26. Hello there, I found your blog via Google while
    looking for a comparable matter, your website got here up,
    it appears to be like good. I have bookmarked it in my google
    bookmarks.
    Hello there, simply turned into alert to your
    weblog thru Google, and located that it is really informative.
    I am going to be careful for brussels. I’ll be grateful for those who proceed this in future.
    Many other people might be benefited from your writing. Cheers!

  27. Its like you read my mind! You seem to know so much about this, like you wrote the book in it or something.
    I think that you can do with some pics to drive the message
    home a little bit, but instead of that, this is magnificent blog.
    A great read. I will certainly be back.

  28. What’s up to all, how is all, I think every one is
    getting more from this web site, and your views are nice designed for new people.

  29. Good answer back in return of this matter with real arguments and explaining all regarding
    that.

  30. I got this website from my pal who told me about
    this website and now this time I am visiting this web page and reading very informative articles
    or reviews at this place.

  31. I will right away take hold of your rss feed as I can not
    in finding your e-mail subscription hyperlink or newsletter service.
    Do you have any? Kindly permit me realize in order that I could
    subscribe. Thanks.

  32. Greetings! Quick question that’s completely off topic.
    Do you know how to make your site mobile friendly?
    My weblog looks weird when browsing from my iphone4.
    I’m trying to find a theme or plugin that might be able to correct this issue.

    If you have any recommendations, please share.
    Appreciate it!

  33. Hi there Dear, are you actually visiting
    this web page on a regular basis, if so after that you
    will absolutely obtain fastidious experience.

  34. If some one needs expert view on the topic of blogging after that i recommend him/her to pay a visit this web site,
    Keep up the good work.

  35. If you would like to take much from this
    post then you have to apply such strategies to your won weblog.

  36. Hi, I do think this is a great web site.
    I stumbledupon it ;) I will revisit once again since i have book-marked it.
    Money and freedom is the best way to change, may you be rich and continue to
    guide other people.

  37. This design is steller! You most certainly know how to keep a reader amused.
    Between your wit and your videos, I was almost moved to start my own blog (well,
    almost…HaHa!) Great job. I really enjoyed what you had to
    say, and more than that, how you presented it. Too cool!

  38. I was extremely pleased to discover this page. I want to to thank you for your time just
    for this wonderful read!! I definitely appreciated every
    part of it and I have you saved as a favorite to check out new stuff in your blog.

  39. What’s up, just wanted to tell you, I loved this post.
    It was helpful. Keep on posting!

  40. Howdy! I understand this is kind of off-topic but
    I needed to ask. Does managing a well-established
    blog such as yours require a large amount of work?
    I am brand new to blogging but I do write in my journal on a daily basis.
    I’d like to start a blog so I will be able to share my personal experience and thoughts online.
    Please let me know if you have any ideas or tips for new aspiring blog owners.
    Appreciate it!

  41. Thank you for sharing your thoughts. I truly appreciate your efforts and I will be waiting
    for your next post thank you once again.

  42. What’s up, after reading this awesome paragraph i am as well glad to share my experience here with friends.

  43. Thanks for sharing your thoughts on HVAC
    Repair Atlanta. Regards

  44. You saw this. Nice work. Please keep posting. It looks like you’ve been hacked. I guess someone thinks you’re dangerous???

  45. Oh my goodness! Impressive article dude! Thank you so much, However I am having problems with your RSS.
    I don’t know why I am unable to join it. Is there anybody getting similar RSS issues?

    Anyone who knows the solution will you kindly respond?
    Thanx!!

  46. Inspiring story there. What happened after? Take care!

  47. Hi there, You have done a fantastic job. I will definitely digg
    it and personally suggest to my friends. I’m confident they’ll be benefited from this web site.

  48. I went over this site and I think you’ve got loads of excellent
    information, saved as a favorite.