After adjusting for working days, exports increased by 5.3% (real: + 2.3%) in January 2017, boosted by chemicals and pharmaceuticals. Imports, on the other hand, fell by 1.2% (real: -6.8%). The trade balance loops on a record monthly surplus of 4.7 billion francs.Read More »
Articles by George Dorgan
Once again a massive SNB intervention and a post Trump election record: 4.5 billion CHF at a EUR rate of 1.0648.Read More »
Speculators increased their EUR net short position against the dollar, but lowered their CHF net shorts (vs. USD). This tendency confirms our view that EUR/CHF will move towards parity.Read More »
Once again a massive SNB intervention and a post Trump election record: 4.5 billion CHF at a EUR rate of 1.0648.Read More »
Arguments for being long the dollar: FX investors because of the difference in monetary policy (e.g. higher US rates), Bond investors long US Bonds because higher bond yields, On the other side, European and Swiss equities are not so much overvalued as U.S. stocks are.Read More »
The Producer and Import Price Index rose in January 2017 by 0.4% compared with the previous month, reaching 100.4 points (base December 2015 = 100). The rise is due in particular to higher prices for petroleum products, scrap and watches. Compared with January 2016, the price level of the whole range of domestic and imported products rose by 0.8%. These are the findings from the Federal Statistical Office (FSO).Read More »
A big Swiss bank bets on EUR/CHF 1.10 as soon as the ECB ends their bond buying program. But one should realize that private investors will need to buy the EUR at 1.10, but the SNB is not willing to do so any more. Hence we must see SNB interventions of zero, before EUR/CHF goes to 1.10.Read More »
Speculators are net short CHF with 14.6K contracts against USD. This is less than the 17K last week.Read More »
We are expecting a further strengthening of both dollar and Swiss Franc against the euro over the next 3 months. Reason is the rising Swiss demand the continued dovishness of the ECB, despite rising inflation.Read More »
The reader might have seen the latest Swiss Consumer Sentiment and the UBS consumption indicator. They suggest that the Swiss boom phase should finally come.
I anticipated the boom already in my slides for the CFA Society. The Swiss boom was postponed when the SNB decided to remove the euro peg in early 2015.
Weekly Sight Deposits and Speculative Positions: SNB Intervenes for 2.4 bn CHF, while Speculators increase CHF Shorts
SNB intervenes for 2.4 bn CHF, while speculators increase their CHF shorts to 17K.Read More »
The Swiss Franc index remained around the 2% gain that for the last month, the recovery from the Trump reflation trade. In this trade, investors preferred U.S. against European stocks. This tendency, however, is reversing now – and with it the franc recovered.Read More »
Weekly Sight Deposits and Speculative Positions: Strong Swiss Trade Balance: SNB allows EUR/CHF to 1.0680
With the strong Swiss trade balance, the SNB let EUR/CHF fall to 1.0680. SNB intervenes for 0.5 bn CHF. Speculators are net short CHF with 13.6K contracts against USD, nearly unchanged.Read More »
Speculators are net short CHF with 13.6K contracts against USD. This is nearly unchanged. But net short of Euro and Yen are Diminishing.Read More »
The US dollar spent the first month of the new year correcting lower after a strong advance in the last several months of 2016. We argue that the correction actually began in mid-December following the Federal Reserve’s rate hike.Read More »
Following a decline the previous year, foreign trade grew again in 2016, with chemicals and pharmaceuticals shaping the trend. Exports climbed by a total of 3.8% (real: – 0.8%) to a record high of CHF 210.7 billion. However, the two other large groups – machinery and electronics, and watches – were unable to participate in the growth. Imports increased by 4.1% (real: +1.2%) to CHF 173.2 billion. The trade surplus reached a new peak of CHF 37.5 billion.Read More »
EUR/CHF is slightly above the “in-official minimum band”. The weaker dollar leads to bigger SNB losses in January. SNB intervenes for 0.9 bn at higher EUR/CHF rate. Speculators are net short CHF with 13.7K contracts against USD.Read More »
Speculators are net short CHF with 13.7K contracts against USD. This is nearly unchanged. On the other side, the USD/CHF is falling.Read More »
The US dollar turned in a mixed performance over the past week. The technical indicators continue to support our expectation that after correcting since mid-December, following the Fed’s hike, the dollar is basing.Read More »
The Producer and Import Price Index rose in December 2016 by 0.2% compared with the previous month, reaching 100.0 points (December 2015=100). Inflation was 0.0% in comparison with December 2015. The average annualised inflation rate in 2016 was -1.8%. These are the findings from the Federal Statistical Office (FSO).Read More »
The Swiss hotel industry registered 1.9 million overnight stays in November 2016, which corresponds to a slight growth of 0.5% (+9300 overnight stays) compared with the same period a year earlier. Domestic visitors generated 878,000 overnight stays, representing an increase of 0.9% (+7900). Foreign visitors generated 999,000 overnight stays, i.e. a very slight increase of 0.1% (+1400).Read More »
EUR/CHF slightly above the “in-official minimum band” of 1.0680 – 1.07. SNB intervenes for 1.7 bn at higher EUR/CHF rate. Speculators are net short CHF with 14K contracts against USD.Read More »
Speculators are net short CHF with 14K contracts against USD. This is 1K more than last week. But yen and Euro net shorts are currently diminishing. This could imply that soon CHF net shorts start falling, too.Read More »
Registered unemployment in December 2016 – According to the SECO surveys, 159,372 unemployed were registered at the Regional Employment Centers (RAV) at the end of December 2016, 10,144 more than in the previous month. The unemployment rate thus rose from 3.3% in November 2016 to 3.5% in the reporting month. Compared to the previous month, unemployment rose by 743 persons (+ 0.5%).Read More »
The Swiss National Bank has announced 24 bn profits from 2016. Profits came from the dollar, yen and Canadian dollar, while the pound retreated by 15%. The EUR/CHF is only slightly weaker, mostly because the SNB actively supported the euro.Read More »
EUR/CHF at the “in-official minimum band” of 1.0680 to 1.07. SNB intervenes for 0.7 bn CHF to keep the euro slightly over 1.07. Speculators are net short CHF with 13K contracts against USD, 3K more than last week. This is still far from the post financial crisis record of 26 K contracts. Moreover the net short GBP are increasing again.Read More »
Speculators are net short CHF with 13K contracts against USD, 3K more than last week. This is still far from the post financial crisis record of 26 K contracts. Moreover the net short GBP are increasing again.Read More »
Energy prices in Switzerland turned around from a minus 2.4% in November to a +6.8% in December. Oil prices had seen its trough exactly one year ago.
Especially in Germany and Spain, this translated into inflation rates, that are close to the ECB target rate of 2%.
Last week’s data: FX: EUR/CHF was between 1.07 and 1.0750. SNB sight deposits: SNB intervenes for 0.7 bn. CHF at the EUR/CHF 1.07 level. CHF Speculative Positions Speculators went net short CHF with 10K contracts, this is still far from the 26.K contracts record.Read More »
The sudden adjustment of CHF speculative positions ended (see last week’s post) . Speculators went net short CHF USD with 10K contracts, this is still far from the 26.K contracts record. We should wait for another Fed rate hike, to reach these levels again.Read More »
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The Fed has hiked rates and with this fait accomplis speculators sold the news. They closed their short CHF and opened new CHF longs. The SNB, however, intervened again for 0.5 billion CHF.Read More »
Weekly Speculative Positions: After Fed Rate Hike, Speculators Close their Short CHF and Open Long CHF
The expiry of the December currency futures may spurred more than normal speculative position adjusting. The out-sized 27.9k contract jump in the speculative gross long Swiss franc futures position is a prime example.Read More »
The Swiss National Bank uses a strange formula on the basis of economic growth for the provisions for FX losses. It would be much easier to connect this number to the size of the balance sheet, e.g. 10% of the balance sheet.Read More »
The net short CHF speculative position is close to reaching new records. Shortly before the end of the peg, speculators were net short CHF by 26.4K contracts. Now we are at 25.4K.Read More »
The small adjustment to Fed’s anticipated path for the Fed funds target helped lift the US dollar to its highest level against the euro since 2003, and to ten-month highs against the Japanese yen. The graph shows that the dollar has improved by 25% against the euro, but only by 10% against CHF over the last 3 years.Read More »
The Producer and Import Price Index rose in November 2016 by 0.1% compared with the previous month, reaching 99.9 points (base December 2015 = 100). The slight rise is due in particular to higher prices for scrap and petroleum products. Compared with November 2015, the price level of the whole range of domestic and imported products fell by 0.6%. These are the findings from the Federal Statistical Office (FSO).Read More »
Who has read Milton Friedman knows that the Trump reflation trade is now showing its positive side. US wages are rising by 2.5%, while inflation is still relatively low. According to Friedman, inflation will increase only later.Read More »
The net short CHF speculative position is close to reaching new records. Shortly before the end of the peg, speculators were net short CHF by 26.4K contracts. Now we are at 25.4K.Read More »
FX Weekly Review, December 05 – December 09: Dollar Bulls Running Out of Time to See Parity vs Euro in 2016
Swiss Franc Currency Index The Swiss Franc index remained in a losing position compared to the dollar index. However since November 25, it has remained stable. Given that the ECB extended the QE period, the EUR/CHF has fallen to 1.0730 again. USD/CHF The US dollar is finishing the year on a firm note. It rose … Continue reading »Read More »
The following is the list of “Russian Propaganda sites”, as published by PropOrNot. Several articles by the Washington Post refer to this list. Many sites on that list are based on libertarian ideas and Austrian economics. Those are in favor of a free market economy, they reject central banks and the establishment. The rejection of the U.S. establishment is possibly the only point that are in common with Putin.Read More »
Swiss consumer price inflation remain the lowest in comparison with different countries in the euro zone and the United States. Consumer prices in the U.S. are driven by rising health care costs and asset price inflation in shelter. In Europe, we see the opposite phenomenon: Rents in Italy or Spain are steady or falling. In Germany and Switzerland rent control prevents that asset price inflation moves into consumer prices. In Switzerland, more and more supply is helping to contain housing costs.Read More »
In the summer months, the Swiss hotels registered more guests from Switzerland. from the United States and from Europe. But there was a sharp decline of guest from Asia.
100’000 more overnight stays from Switzerland could not recover the decrease of 200’000. One important reason for decline is the weakening Chinese currency, that reduced their purchasing power, in dollar but also in CHF.
Italy has three options: 1. exit the euro zone and devalue the currency; 2. remain in the euro zone and devalue salaries. 3. go for Japan-like decades-long slow growth with stagnating wages, but also with falling inflation and (positive news!) falling bond yields.Read More »
The Swiss Franc index continued around its 4% loss since the U.S. elections, while the US Dollar index had a 4% increase. The focus shifts to the ECB meeting, where participants are wary of a “hawkish ease”.Read More »
For us the Net National Savings Rate is the best alternative indictator to GDP growth. It is positively correlated with the change in wealth, with the establishment of future productive capacity, the price of government bonds and currency valuations. But today GDP growth is often negatively correlated to the Net Savings Rate. Hence GDP is often a less useful measure.Read More »
The net short CHF speculative position is close to reaching new records. Shortly before the end of the peg, speculators were net short CHF by 26K contracts. Now we are at 24.3K.Read More »
Switzerland’s real gross domestic product (GDP) has remained almost unchanged in the 3rd quarter of 2016 (+0.0%). Consumption was nearly stagnated, while net exports had a decline. But investments increased by 0.5% on the quarter.Read More »
We explained the Trump reflation trade, where the Swiss Franc acts as the usual inflation hedge against the obviously inflationary policies of Trumpeconomics. Trump is about tax cuts – i.e. a fiscal deficit up to 10%, and about protectionism. Trump would restrict global trade and push up U.S. wages.Read More »
After a three-week rally, the dollar bulls finally showed signs of tiring ahead of the weekend. At least against the Swiss Franc index, the dollar index could further advance. We had observed SNB interventions in the previous week that kept the euro mostly above 1.07.Read More »
The latest data releases from Swiss Statistics shows that health care premiums have risen by 3%, while health care prices for consumers have fallen. The reason may be the oligopoly structure of the Swiss health care system. But also that we consume higher and higher quantities of health care. Or is Swiss Statistics cheating on inflation?Read More »
In October 2016, Swiss exports were down 5.6% (in real terms: – 10.4%) against the previous year. Imports rose by 1.8%YoY (in real terms: -1%). The trade surplus diminished, after months of rising exports.Read More »
We explained the Trump reflation trade, where the Swiss Franc acts as the usual inflation hedge against the obviously inflationary policies of Trumpeconomics. Trump is about tax cuts – i.e. a fiscal deficit up to 10%, and about protectionism. Trump would restrict global trade and push up wages. According to Lars Christensen Trumpeconomics is also about monetary stimulus: Trump would push for a more jobs and a dovish Fed, same as his fellow Republican Nixon did. He could even replace the “hawk” Yellen.Read More »
The US dollar has recorded its best two-week performance since Reagan was President. The weeks after Trump’s election continue to see a weakening of the Swiss Franc, while the dollar index is on a steady rise. Still both the euro and the yen have seen worse performance than the Swiss Franc. The euro is currently under 1.07.Read More »
Swiss Unemployment Rate (ILO-based) behind Iceland, Germany and Czech Republic on position 4: All Four Countries Are Currency Manipulators
With 4.8%, the Swiss unemployment rate based on the ILO concept is higher than the rates in Iceland (2.6%), Czech Republic (4.0%) and Germany (4.1%), but lower than the ones of the remaining 25 countries. As for youth unemployment, the Swiss are on position three with a rate of 11%, this is half the rate of the Eurozone, or a fourth of the rate in Spain or Greece.Read More »
The Producer and Import Price Index rose in October 2016 by 0.1% compared with the previous month, reaching 99.8 points (base December 2015 = 100). While the Producer Price Index declined by 0.1%, the Import Price Index rose by 0.3%. The slight overall increase is due in particular to higher prices for petroleum products. Compared with October 2015, the price level of the whole range of domestic and imported products fell by 0.2%. These are the findings from the Federal Statistical Office (FSO).Read More »
The Swiss Franc Index rose sharply, shortly after the U.S. elections. But then the Trump reflation trade came. Trump may fulfills the wet dreams of many economists. With tax cuts he might extend the U.S. fiscal deficit up to 10% per year. This resulted in:
Gains on U.S. stocks, inflows in U.S. Bonds, inflation hedges gold and Swiss Francs.
Swiss consumer price inflation remain the lowest in comparison with different countries in the euro zone and the United States. Consumer prices in the U.S. are driven by rising health care costs and asset price inflation in shelter.Read More »
Sight Deposits: show that the SNB has not intervened to sustain the euro, that dipped under EUR/CHF 1.08. We considered the 1.08 as line in sand for the SNB. The odds of Trump are rising. This causes fear and demand for Swiss Franc. The EUR/CHF fell to 1.0750. Speculators were net short CHF January 2015, shortly before the end of the peg, with 26K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25K contracts. We see these net short levels reached again this year, maybe even more. Reason the recently strong U.S. and European PMIs.Read More »
Swiss Franc Currency Index As visible in the graph, the Swiss Franc index recovered most of its losses against the US Dollar Index for the last 30 days. In the last 30 days, both the USD currency index and the CHF currency index have had a positive performance.Read More »
The weekly speculative position shows increasing short positions on the euro and on the Swiss Franc. On the other side, both currencies have appreciated, what they should not do if net short positions increase. This implies that there is real money, .e.g in the form of cash, bonds, stocks or real estate that is invested in the euro area or in Switzerland. For Switzerland, we will see this in the weekly sight deposits.Read More »
Interim results of the Swiss National Bank as at 30 September 2016 The Swiss National Bank (SNB) reports a profit of CHF 28.7 billion for the first three quarters of 2016. But the volatility is rising: The SNB may lose 50 billion in one year and win 60 billion in the next year or the opposite.Read More »
We have always emphasized that the SNB intervenes between 1.08 and 1.0850. Even if there was no change in sight deposits the 1.08 “line in sand” broke.Read More »
The Swiss Franc Index could recover some of the losses as compared to the US dollar index. Still the USD/CHF remains above 0.99. The US dollar rose against most of the major currencies last week, but the upside momentum appeared to be dissipating, even before the FBI’s announcement about new Clinton emails. There are a few exceptions like the greenback’s performance against the Japanese yen, Canadian dollar, and Swedish krona. The dollar made new multi-month highs against all three currencies in the last two sessions.Read More »
The net short Swiss Franc position against the dollar has risen to the levels seen before the breakdown of the EUR/CHF floor.
It has increased from short 9.4 K contracts to 16.4 K contracts.
In the last week, speculators raised their short positions by 15% for both the euro and CHF. Euro longs against USD were up slightly, while CHF longs were reduced.
The Swiss Franc index had once again a bad stance against the dollar index. The CHF index was down 1%. The dollar index, however, improved. The US dollar rose against the major currencies last week, except the Australian and Canadian dollars.Read More »
Swiss Quarterly Trade Surplus over 10 bn CHF for the First Time. Exports + 8.1 percent YoY, Imports +7.9 percent in Q3/2016.
In the third quarter of 2016, the Swiss quarterly trade surplus rose over 10 bn. CHF for the first time in history. Exports rose by 8.1% and Imports by 7.9%.Read More »
The Swiss Franc index had once again a bad stance against the dollar index. The CHF index was down 1%. The dollar index, however, improved. The US dollar rose against the major currencies last week, except the Australian and Canadian dollars.Read More »
The Producer and Import Price Index rose in September 2016 by 0.3% compared with the previous month, reaching 99.7 points (base December 2015 = 100). The rise is due in particular to higher prices for petroleum products. Compared with September 2015, the price level of the whole range of domestic and imported products fell by 0.1%.Read More »
The social partners signing the collective labour agreements (CLA) have agreed a nominal rise in real wages estimated at 0.4% for 2016, of which 0.2% is to be awarded collectively and 0.2% at individual level. Minimum wages were increased by 0.7%. The graph shows nominal wages since 1993.Read More »
Privathaftpflichtversicherungen in der Schweiz sind sehr intransparent. Oft steckt der Teufel im Detail, irgendwo in den AGB. Zum Abschluss einer neuen Versicherung sende ich diesen Fragebogen zu verschiedenen Anbietern.Read More »
The Franc index lost considerably in the last week, in particularly in comparison to the dollar index. Reason was the exceptionally strong U.S. ISM Non-Manufacturing Index.Read More »
FX Weekly Review, September 26-30: Dollar vulnerable at the Start of Q4, CHF collapses at Quarter End
The US dollar fell against most of the major currencies in Q3. The Norwegian krone was the best performer, gaining 4.4% against the greenback, followed by Aussie and Kiwi. The Swiss Franc collapsed on Friday at quarter end.Read More »
Swiss Exports + 7.0 percent YoY, Imports +8.4 percent. Trade Surplus +3 bn CHF, Exporters Increase Prices
We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity increases, while REER assumes constant productivity in comparison to trade partners.
In August 2016, Swiss exports were up 7.0% YoY (in real terms: + 1.2%) and imports 8.4% YoY (in real terms: + 5.1%).
The dollar was surprisingly strong this week. This despite a more hawkish ECB, bad U.S. economic data in the ISM surveys.Read More »
Speculators are reducing their net short Euro positions, since Draghi’s comments on inflation. Apparently not only against the dollar but also against the Swiss Franc. This also means that the euro zone may be target real money (like purchases of stocks, real estate and bonds) instead of Switzerland.Read More »
It took the market a few days to overcome the shockingly poor non-manufacturing ISM (51.4 vs. 55.5). However, by the end of the week, the US dollar bulls had regained the upper end.Read More »
During this week the Swiss Franc index lost against both dollar and euro. The CHF index ended one percent down. Despite not convincing US jobs, the dollar index ended in positive territory.Read More »
Since 2008 the balance sheet of the Swiss National Bank has risen from 28% to 102% of Swiss GDP. Balance sheets of other central banks have strongly risen, too. But there is one big difference: The risk for the SNB is far higher, the SNB nearly exclusively possesses assets denominated in volatile foreign currency.Read More »
After winning 5% against the dollar index last week, the Swiss Franc index lost 3% again. CHF lost against both USD and EUR. Reason: An increased probability of a rate hike in the U.S.Read More »
Swiss Exports + 7.9 percent YoY, Imports +11.8 percent. Trade Surplus +2.9 bn CHF, Exporters Increase Prices
We do not like Purchasing Power or Real Effective Exchange Rate (REER). For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity increases, while REER assumes constant productivity in comparison to neighbours. In July 2016, Swiss Exports were up 7.9% YoY (in real terms: + 2.4%) and imports 11.8% YoY (in real terms: + 8.2%). Exporters could even raise prices, as we see in the difference between nominal and real.Read More »
The US dollar lost ground against nearly all the major currencies last week. The sole exceptions were the Australian dollar, where Moody’s decision to cut the outlook for five Australian banks wiped out the previous small gain. The Swiss Franc index gained nearly 5% compared to the dollar index.Read More »
Swiss National Bank President Thomas Jordan keeps saying the franc is “significantly overvalued.” And that’s despite the central bank’s record-low deposit rate and occasional currency market interventions.Read More »
The CHF index experienced its first good week since many weeks, when we compare it against the dollar index. On a three years interval, the Swiss Franc had a weak performance.Read More »
Mainstream media often speaks of the great shale gas/oil revolution and how it makes the United States more productive and a net exporter of oil. We wanted to go into more details,we compare oil production costs for US shale and global oil producers. As reason for the cheap oil we see the combination of two effects:
Demand: Cheap US money supported a Chinese investment boom in factories and housing until 2012. The over-investment phase is followed by lower demand growth.
Supply: The Arab countries need to maintain their social welfare systems, increased production, and – more or less deliberately – kicked high-cost fracking companies out of the market.
The robust US employment report before the weekend allowed the dollar to recoup the losses it experienced earlier in the
week against most of the major currencies. The Australian dollar and Japanese yen managed to hold onto minor gains for the
This economic graph is maybe the most important in the last decade. Service prices are rising, while goods prices have steadily fallen. The main reason for us is the possibility to outsource big parts of the durables supply-chain to China and East Asia. This is where productivity growth happens. Prices of services, however, are ever increasing. …Read More »
Many know that gold is very volatile in the course of year. Gold prices tend to be low in January and rise between July and November. But what are the fundamental reasons behind this seasonality?Read More »
The US dollar advance was stopped in its tracks by the
disappointingly weak Q2 GDP figures. The 1.2% annualized growth rate was
roughly half of the pace expected. The FOMC statement earlier in the week did not leave the impression that a September hike was likely, and with the poor growth numbers, the odds were downgraded
The US dollar gained against all the major currencies over the past week. It also rose against many emerging market currencies. A notable exception was the Chinese yuan.Read More »
GDP growth is a bad economic measure. GDP growth in the form of consumption-driven (hyper-) activity (aka Bawerk’s “GDC” Gross Domestic Consumption) must finally lead to a depreciating currency, inflation, falling government bond prices and wealth in real terms. Instead, GDP should be driven by investment and the consequent improvements in productivity.Read More »
Many people think that Switzerland is related to gold due to its inflation-hedging safe-haven status. Historically this is true. With rising U.S. inflation in the 1970s gold appreciated to record-highs. So did the German Mark and even more the Swiss franc, that maintained low inflation levels.Read More »
A big part of Swiss consumption is imported from Germany. Therefore Swiss inflation is often correlated to German inflation. Capital flows often move to Switzerland and Germany at the same time.Read More »
Our weekly review of currency movements, with focus on the Swiss franc. This week: The US dollar is easily the most traded currency, and despite the plethora of other currencies, it is on one side of nearly 90% of all trades. Yet the movement in the foreign exchange market presently is not so much driven by the dollar as it is by other currencies.Read More »
In the Brexit month, the Swiss franc index clearly underperformed the dollar index. The major reason is that the dollar is seen as a better safe-haven than the Swiss Franc, possibly because Swiss sales are affected more when British demand falls.Read More »
Positive job data in the United States are typically positive for both USD and EUR, because the odds of a rate hike are increasing. Consequently the EUR/CHF rose. In the last two days SNB interventions should have been smaller. The Swiss unemployment rate fell from 3.5% to 3.3%.Read More »
On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger.
Contrary to popular believe, the CHF index gained only 1.73% in 2015. It lost 9.52% in 2014, when the dollar strongly improved.
The British pound has been hammered to fresh lows just above $1.3115. The euro is moving toward GBP0.8500. The immediate catalyst is three-fold. First, one of the UK’s largest property funds has moved to prevent retail liquidation. Second, the BOE reversed an earlier decision on the capital buffer for banks, which is tantamount to easing policy by boosting the banks’ lending capability by as much as GBP150 bln.Read More »
SNB intervenes for 6.3 bil francs in the week ending last Friday. Once again a record high since January 2015. The SNB raised the intervention level to 1.0850. Apparently conversion of GBP->CHF flows into GBP-> EUR flows – via EUR/CHF purchases. Speculators: are long CHF 10K contracts against USD versus 6.3K last week.Read More »
Week after Brexit.: The Swiss franc (-0.3%) and the yen (-0.5%) were the worst performers, as so-called safe haven buying was reversed.
But the Swiss Franc index is still stronger in the last month than the dollar index.
EUR/CHF finished the week after Brexit with slight improvement of 0.18%. The scare mongering by the Swiss media was misplaced. The euro even recovered from a dip after BoE governor Carney’s comments on Thursday. We do not see strong SNB interventions at this elevated price level. We judged that the interventions happened below 1.08.Read More »
Iceland has gained the admiration of populists in recent years by doing that which no other nation in the world seems to be willing or capable of doing: prosecuting criminal bankers for engineering financial collapse for profit.Read More »
The papers from the Reserve Bank of New Zealand describes in easy words where central banks should intervene based on economic history and experience. It avoids the often used econometric considerations. For FX rates those often do not incorporate sufficient long-term data.Read More »
The dramatic reaction to the UK decision to leave the European Union has changed the technical condition in the foreign exchange market. The EUR/CHF peaked shortly before the Brexit referendum, when traders were anticipating a yes. It found its trough when the No was published. Then the SNB intervened.Read More »
If you’d asked any observer four or five years ago which country would be the first to leave the European Union, few would have guessed it would be the UK. Of all the countries in the EU, the UK is probably the one with the least to gain from meaningful changes in its economic relationships with its neighbours.Read More »
Most economists, like the ones at the Swiss National Bank (SNB), claim that the franc is overvalued. Many use misleading Purchasing Power Parity (PPP) measures like the Big Mac index, the OECD index or the PPP based on consumer prices for computing fair values.
The second big mistake is to compute the Real Effective Exchange Rate (REER) with the wrong “base year”The third error is to ignore massive Swiss current account surpluses, helped by high savings and by immigration of cheaper highly qualified personnel. Both help to reduce unit labor costs and achieve productivity gains. Eventually the ex-post FX evaluation based of capital flows in the balance of payments should clearly take precedence against the ex-ante FX evaluations REER and PPP, that are obviously misleading for the franc.
The Swiss Franc was the strongest currency. The euro fell from 1.0877 to 1.0808. Two fundamental reasons:
Speculator anticipate that German investors buy Swiss francs in response to the court decision in favor of the OMT and the positive ZEW.
Recently I enumerated the different drivers for the continuing strength of the franc. Most commentators mentioned Brexit fears, but I insisted on the low rate and yield environment in the United States after the last Non-Farm Payroll report and the FOMC.
Today’s jump in sterling confirmed my view. This anticipation of an Anti-Brexit vote was not followed by a franc decline against USD. This also implies that a Brexit will not entrench a huge strengthening of the franc.
Two main events that drove the foreign exchange market. The first iare some post-FOMC meeting movements and the assassination of Jo Cox, that might be positive for the Anti-Brexit camp . The EUR/CHF has fallen down to 1.0774 and recovered.Read More »
Massive surprise in the US job report was reflected in currency rates. The EUR/CHF surprisingly increased, despite weak US data. This reflects the fact that the ECB is currently considered the most dovish central bank. The dollar lost 2% against the yen, 1.6% against the euro and 1.3% vs. the Swiss franc.Read More »
Q/Q GDP growth: +0.1%, YoY GDP growth: +0.7%.
Until 2014, Swiss GDP was driven by net exports: Exports were rising more quickly than imports, which improved GDP.
Positive change in the trade balance in goods: +8.1% YoY exports, +1.4% YoY imports in Q1/2016.
Negative change in the trade balance for services: export +2.0%, import +6.7% YoY
In 2015 and in Q1/2016 the main GDP drivers were consumption (+1.3% YoY in Q1/2016) and investment (+2.1%).
Government consumption and inventories lagged in Q1/2016, they dragged down GDP to 0.1% QoQ.
Authorities in Switzerland and Singapore are punishing BSI, the private bank based in the Ticino region of Switzerland, for alleged money-laundering offenses, shutting their activities in Singapore and seizing part of its profits.Read More »
The United States spends 17% of GDP for health care, compared to around 10% in many other advanced economies. Thanks to rising health care costs, GDP growth was higher in the U.S. in recent years. The question is if this kind of GDP growth enriches the whole population or only the privileged.Read More »
A share of 20% equities is too much for a conservative investor.
– She increases the CHF debt with continuing interventions at a pace of 10% per year.
– yield on bond investments is less than 1% p.a. and equity markets might not improve a lot any more.
– Expensive dollar: she bought U.S. equities when the dollar was relatively expensive.
SNB Results Q1 2016: Two thirds of SNB profit comes from Gold. Deflation helps with higher bonds prices and profit on negative interest rates.Read More »
The Q1/2016 update on the SNB investment strategy and its assets.
The Swiss National Bank is a passive conservative investor. As opposed to other investors, the exposure in currencies is as important as the strategic asset allocation according asset classes (bonds, equities, cash, real estate). The importance of currencies is one reason why the SNB is often called a hedge fund, the second the volatility of gains and losses.
Speculative position: Speculators are even longer CHF (against USD): +9410x 125K contracts.
Sight Deposits: SNB intervenes for 6.4 bln. CHF in only three weeks. Sight deposits (aka debt) are rising by nearly 1% per month, this is 10% per year. The SNB can never achieve such a yield on investment, her yield is between 1 and 2 percent. Is the bank running suicide again?
Fauke Petry, leader of the Alternative for Germany (AfD), believes Germany “needs more Switzerland … more democracy” and that Switzerland is some way ahead of her country when it comes to a “culture of democracy”.Read More »
We show the history of Japanese FX interventions. The Japanese only intervened when the USD/JPY was under 80. Therefore the 2016 FX intervention threads at 108 are ridiculous.
As opposed to the Swiss National Bank, the Japanese only talk, they do not fight.
Speculative position: Strong shift to CHF long: +4967x 125K contracts after the Fed reduced their expectations of rate hikes for this year. …………Sight Deposits: SNB intervenes for 6.1 bln. CHF during the month of March. This is the higest level since January 2016. ……….FX: EUR/CHF steady slightly over 1.09. As I expected last week, the EUR/CHF …Read More »
We examine the SNB monetary assessment statement of March 17 and the Swiss economy. We explain why negative rates may be a “toothless measure” if a central bank wants to weaken a currency. They have rather an inexpected consequence, they slow down GDP growth, in particular for banks and pension funds.Read More »
According to the latest news release, the Swiss National Bank expects an annual loss of 23 billion CHF, after reporting a loss of 50 billion at the end of June. Primarily thanks to the stronger dollar, the SNB was able to achieve unrealized gains of 27 billion CHF in the second half. This reduced her annual loss to 23 billion. With its rate hike, Fed is helping the SNB: the dollar has appreciated by 6% since July.Read More »
For George Dorgan the “Swiss Franc Shock” celebrated by the Swiss press did not affect the Net Exports component of Swiss GDP, but it rather suppressed growth in consumption. Therefore the Swiss economy could not replace lost export jobs by new jobs in the internal economy.Read More »
Weekly SNB Intervention Update: Sight Deposits and Speculative PositionRead More »
In December 2015, the seven year Joseph cycle ended with a Fed rate hike. These lean years of the Joseph cycle started in December 2008 when the Fed lowered rates to the current level. We think that in the next seven year cycle, even the risk-averse Swiss investors will buy more foreign assets, not only the central bank and speculators. Different crises have passed in the three parts of the world, the U.S. subprime, the euro crisis and the Emerging Markets crisis. The last one culminated in the Russia crisis and the end of the peg in January 2015. At the CFA Society in summer 2014, I predicted the end of the EUR/CHF peg. This time, however, I foresee a weaker Swiss francRead More »
After several years of moderate growth, exports (-2.6%) and imports (-6.9%) fell in nominal terms in 2015. Nevertheless, exports were at their third-highest level ever at CHF 202.9 billion. Prices clearly declined, particularly for imports, against the backdrop of the strong Swiss franc.Read More »
Our analysis of the forecasts of economic data for 2015 shows that the Swiss banks were too optimistic for most data. US growth, the oil price, inflation and interest rates are far lower than expected. The errors for stock indices were smaller.Read More »
Monetary assessment meeting Swiss National Bank: My real-time tweets contain the main important points of the SNB meeting from the view of investors or FX traders.Read More »
The SNB monthly bulletins contain all important data of the SNB and the Swiss economy as of the latest quarter.Read More »
We explain the risks on the rising money supply in Switzerland. We distinguish between broad money supply (M1-M3) and narrow money supply (M0). Both are rising quickly.Read More »
Swiss GDP increased by 0.2% q/q and by 1.2% y/y. Once again, investments on equipment and software (+3.6%) was one of the main drivers. For many economists investment on equipment and software is the most desired GDP growth component.Read More »
According to the figures of Swiss Statistics, the Swiss trade surplus rose by 10.4% in 2014. Therefore its contribution to the 2014 real GDP is higher than 50%. Private consumption lagged compared to the other components of Gross Domestic Product.Read More »
Both Chinese PMI and the producer price index (PPI) are in deflation since 2012. This opens a lot of questions about the sustainability of Chinese economic growth, but also about the certain economic theories that consider deflation as a precursor of depression, as it did in the early 1930s. China’s speed of economic growth simply slows, recently to 7%, according to China statistics “China’s Economy Showed Moderate but Steady Growth”.Read More »
Many claim that China manipulates its economic data. We explain why the best way not to get caught is to lower the GDP deflator, as lower inflation helps to increase real GDP. Lombard Street Research assumes that Chinese officials followed that approach.Read More »
SNBCHF.com most important posts about the Swiss National BankRead More »
For us the five major drivers of government bond yields are:
Inflation expectations and inflation: The by far most important criterion. High inflation expectations must be compensated via higher bond yields. The main driver behind inflation expectations is the wage development, this is the form of inflation that typically persists. Price inflation follows inflation expectations with a certain lag.
Wealth: The higher the wealth of a country, the lower the bond yields. Wealth is typically increased by high savings.
Regular and irregular influences on bond yields by central banks: Regular: Central banks buy government bonds, in particular in US Dollars, the world reserve currency. Irregular: Central banks buy bonds of their own government and depress yields – the “quantitative easing”.
If a country has relatively low wealth then foreigners must help with the purchase of bonds and the following factors become relevant:
Foreign debt relative to GDP: Foreign bond holders want higher yields against risks (e.g. currency risks) of holding foreign assets.
The net international investment position (5a) and change in this position, namely the current account balance (5b).
Deutsche Bank’s George Saravelos was one of the first to use the term “euro glut”. He anticipated a massive capital outflow from Europe that countered the huge European current account surplus. The Euro glut also led to the end of the EUR/CHF peg. Reasons are missing investment opportunities in Europe despite the high savings rate.Read More »
Latest update for June 2015: The pace of SNB intervention is slowing. Sight deposits, the indicator for SNB interventions, rise by 0.5 billion francs per week.
April and May: Sight deposits rise by 1.5 billion CHF per week. Thanks to this intervention the SNB is able to maintain the EUR/CHF around 1.0450.
George Dorgan shows that Gross Domestic Product (GDP) is a measurement in the local currency. Effectively, Swiss real GDP rose by 15% in Euro terms, but fell slightly in CHF. He also emphasizes that Switzerland needs a big rebalancing of its economy, away from exports towards consumption. The Swiss National Bank was right to remove the euro peg. The move towards consumption is only possible when the Swiss franc is stronger because consumers will profit on it.Read More »
We show the two phases or “two innings” of Swiss franc appreciation: The risk aversion phase and the high inflation phase.
With the weakening of emerging markets and the strengthening of the United States in 2013/2014, the Swiss National Bank (SNB) had won the first battle in the war against financial market, the “risk aversion game”, the first inning in two-part match. Risk aversion is lower because the United States recovered with weaker oil prices.
The “inflation game” started earlier than we expected, at least in the eyes of the Swiss National Bank, namely in January 2015. They anticipate higher inflation that will come with rising wages in the United States and Germany.
In this post we will show the history of the Swiss Franc until 1971, a monetary era driven by the gold standard and the Bretton Woods period, both periods with nearly fixed exchange rates.Read More »
In the new series George Dorgan suggests that the euro crisis is a temporary development but not a long-lasting crisis. In the first part he shows that Spain actually created a lot of jobs in last twenty five years.Read More »
The Safe-haven government bond bubble did not pop, but Italy or Spain have become low yielders as well
Government bond yields under 10 years for safe-havens are close to zero. In April 2013, even 20 year bond yields are less than 3%, What can explain this bubble of the century?
We present twelve reasons that could sustain a further euro appreciation to $1.40 or even 1.50 in the upcoming two to four years. The main one is that Germans are net global creditors and Americans net debtors. This is reflected in fiscal and monetary policy and in investors’ behaviour. The post was written in December 2013, but the arguments are still valid today and will continue to be valid in the future.Read More »
Ex-Post FX Evaluation: Is the Swiss Capital Account Able to Neutralise the Persistent Current Account Surpluses?
(post written originally in March 2013)
We reckon that the Swiss National Bank (SNB) will have issues maintaining the EUR/CHF floor in the longer term, because the expected yields on Swiss investments abroad will not be sufficiently higher than the yield on investments in Switzerland. Because of this insufficient risk-reward relationship, outflows in the capital account of the Swiss balance of payments will not cover the persistent Swiss current account surpluses. Only strong outflows in the capital account may lead to a carry trade that may make SNB interventions obsolete.
We judge that the balance of payments model is the only useful ex-ante estimation and ex-post FX rate valuation.
Other ex-ante FX estimations like the Real Effective Exchange Rate for the Swiss franc need to be rejected.
Money creation and sight deposits may have two points of view:
1. The central bank creates money – i.e. the SNB decides to increase sight deposits when it does currency interventions
2. Commercial banks create money – inflows in CHF on Swiss bank accounts make those banks increase their “sight deposits at the SNB. If inflows in CHF are higher than outflows then CHF must rise, unless the central bank does currency interventions.
We will present both alternatives.
This IMF data on the SNB website shows SNB Forex and gold reserves in the last month. It is so-called “IMF Special Data Dissemination Standard (SNB Data)”Read More »
In his first response to the Swiss financial tsunami on January 15, George Dorgan suggested that the EUR/CHF of 1.10 will not be reached any time soon. He explains where the SNB should intervene and if they sell Euros and dollars.Read More »
Libertarians close to UP Schweiz (Swiss independent party) ridiculed the Green Liberal Party, GLP and the Pirate Party as being in favor of the state and left-wing, hence not libertarian. George Dorgan suggests that both GLP and the Pirate Pirate are pretty close to UP, hence all three are libertarian parties. He thinks that the discussion if one is “Left” or “Right” needs to be left out completely, when we speak about liberty.Read More »
The concerted actions in September 2012 between the two big central banks reflected two fundamental economic principles: The Fed opted for Keynes’ law, the ECB for Say’s Law with conditionality. And apparently the ECB was successful.Read More »
The four best US economic indicators, in form of concurrent indicators, can be seen at Doug Short, here in detail.Read More »
We compare aspects of the Net International Investment Positions for Italy and SwitzerlandRead More »
In this post we give a comparison of breakeven prices by major investment houses for different shale oil fields and different opinions on itRead More »
The effects of so-called “currency wars” and other central bank actions are small compared to the long-term impact made by these five catalysts, which include credit cycles, trade balance, differences in economic growth, and more.Read More »
We indicate the main factors that influence FX rates in the longer term. We explain the movements of currencies based on these factors.Read More »
German spending is one factor that drives currencies in Northern Europe.Read More »
An economic theory that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency’s purchasing power.Read More »
The OECD purchasing power parity compares consumption prices in different countries.Read More »
The following table compares the Big Mac and the Starbucks Tall Latte index among different countries. It explains the issues with these measurements.Read More »
Typically poorer countries have a basket with a higher weight for food and other consumption goods, but richer states give them a smaller weight. Here the full details over different countriesRead More »
The best posts by Marc Meyer, the biggest and most influential enemy of the Swiss National Bank. He regularly published in German on InsideParadeplatz.chRead More »
Selected essays on the end of the EUR/CHF pegRead More »
The weighted average of country’s currency relative to index or basket of other major currencies adjusted for inflation. We explain the Real Effective Exchange Rate for the Franc, the Yen and RenmimbiRead More »
If we calculate Real Effective Exchange rates on the base year 1965, the Japanese yen remains the most overvalued currency.
This analysis is based on the real effective exchange rate (REER) provided by the Bank of International Settlement (BIS) and a consumer price-index adjusted exchange rate.
The real value of the yen is around 50% higher than 1965, the same applies to the Swiss franc.
In August 2013 the Bruegel blog offered one of the best comparison of long-term real effective exchange rates (REER). The data is CPI based and therefore not as good as the producer price index (PPI) that reflects tradable goods better.
However the data is huge with three different sources – BIS, World Bank, Eurostat, OECD and Bruegel. The data indicates how the real value of the currencies of China and many other Emerging Markets (EM) have improved against 1995. In order fulfill basic needs like food, transportation and housing, this expansion required more and more commodities. By consequence the commodity producers Canada, Australia, New Zealand, Russia, Brazil and OPEC countries but also less known oil producers like Angola, Guatemala, Honduras, Sudan went into a boom.
In this chapter we connect three related concepts: inflation, central banks and interest rates.Read More »
The interest rate parity gives a mathematical explanation for the purchasing power parity and real effective interest ratesRead More »
Carry Trades, Central Bank Interventions, Fundamental Data, mean reversion, Momentum Trades, Overshooting, trend followingRead More »
Gold and silver are the most complicated assets to price. Stocks, currencies, commodities mostly depend on their fundamental data, supply and demand. Gold and silver, however, are priced indirectly.Read More »
In Switzerland the ordinary people have started several initiatives to protect their savings against the establishment. After the first gold referendum failed in November 2014, a new gold initiative is trying to introduce a gold-backed Swiss currency, as parallel currency or investment vehicle.
With the end of the EUR/CHF peg and the apparent risks caused by the SNB, the importance of the Gold Franc initiative has increased. Different groups want to introduce parallel currencies in addition to the Swiss franc. CHF is based on fractional reserve banking and, according to the critics, its quantity is increasing too rapidly.
A sound money initiative (German “Vollgeld”) wants to abolish fractional reserve banking, while the new gold franc initiative desires a gold-backed currency. Already now, the so-called WIR money (“Our Money”) is a local currency created during the Great Depression. “WIR money” allows borrowing and lending, in particular for real estate. It is fully backed by commodities, like real estate. By law, parallel currencies, like WIR money, are not legal tenders. Due to a lack of convertibility into foreign currency, WIR money trades at a slight discount to the Swiss franc. This, however, might change when the SNB gets further into negative equity.
In the following we will compare the two gold initiatives.
The Balance of Payments is the sum of current and capital account. The Balance of Payments model states that a currency appreciate when the Balance of Payments is positive. We give an explanation in around 400 words, that clarifies the relationships.Read More »
George Dorgan explains why currencies of countries with trade surpluses must appreciate over the long-term. Thanks to these surpluses, inflation and costs of companies rise more slowly than in other countries. In Forex a mean reversion does not exist, but only an inflation-adjusted reversion to the mean: a real exchange rate mean reversion or in short the “real mean reversion.”Read More »
We will apply the balance of payments model for determining FX rate movements and FX interventions by central banks.Read More »
George Dorgan extends the previous discussion on trade surplus countries. Now he explains the Penn and the Balassa-Samuelson Effect. He applies these principles to Germany, to Greece and to Switzerland.Read More »
Private savings finance public deficit and current account surpluses. Important for understanding the euro crisis and the drivers of government bond yields.Read More »
(5.5) FX Theory: Currencies of Countries with High Economic Freedom, Immigration and Savings Must Appreciate
Economic freedom, immigration and high savings are main drivers for strong currencies. Switzerland, Singapore, Norway, Sweden and in the future even Germany are examples. Strangely most are in Europe.Read More »
It was tweeted out and annotated by James Plunkett and it’s based on a chart from inequality economist Branko Milanovic.Read More »
This page discusses two closely related concepts: the carry trade and the reverse carry trade.Read More »
The EUR/USD is going on its longest winning streak for a long time. Since May 27, it has improved from 1.2850 to 1.3396 and is approaching 1.34. What are the reasons?Read More »
The Asset Market Model implies that a currency will be in higher demand and should appreciate in value, if the flow of funds into financial market of the country such as equity and bonds markets increase.Read More »
Direct or indirect intervention is credible only in countries where domestic asset prices are undervalued and CPI/asset price inflation are no issues. Otherwise they create medium-term risks.Read More »
Availability of funds (wealth and the international investment position): One of the 5 key indicators for FX rates. Often currencies of countries with a a lot of funds appreciate when markets decline.Read More »
A comparison of the net international investment position (NIIP) of several countries. We explain why asset valuation effects this position at the example of the United States.Read More »
The yen overshot during and after the financial crisis. The USD/JPY fell from 120 in 2008 to lowest levels of 74, by 62%, but rose to 102 again. What are the reasons?Read More »
We extended our existing post to contrarian investing. It was published on Seeking Alpha and awarded the Editor’s Pick.
Gross Domestic Product(ion) is (or has become) a measurement of activity and consumption, but not of capital accumulation and production.
In many cases, GDP growth is negatively correlated to saving. Higher savings (aka austerity) leads to lower GDP growth today, but to higher GDP in the future.
In its worst case, GDP growth could be completely based on credit, eliminating the capital basis of a country (example Greece).
FX rates are less driven by GDP but by savings and investments, in particular on the corporate side, by investors and micro-economic indicators.
In addition to micro-economic indicators like price to cash flow or price to book ratio, the saving rate is the best macro-economic indicator of the investment style called “contrarian investing.”
Read our contrarian insights: We provide regularly contrarian indications to technical Forex movements. Trade after work and do not look at markets during the day, third read scary facts about stops.Read More »
In our view the Swiss franc is not a pure Safe-Haven, but a “Safe Proxy for Global Economic Growth”. Global investors want to participate via the purchase of safe Swiss multi-nationals in global growth. This means inflows into Swiss franc denominated assets. Together with the big Swiss trade surplus, this implies a stronger franc. China stands for global economy, its slowing growth has a negative influence on the profits of Swiss multi-nationals and is therefore negative for the franc.Read More »
Arguments in favor of and against the Swedish Krona,as safe-haven during the euros crisis. Extracts from tradingfloor.comRead More »
In this post we give our (Swiss) view for the financial tsunami on January 15.
The SNB has preferred its secondary mandate, namely financial stability, and the elimination of risks on its own balance sheet caused by ECB QE.
It will not obey its primary target, price inflation, for the next three to five years. While in the mid-term (5 -10 years) inflation should move up.
Differing perceptions between Switzerland and the Anglophone world about “price stability in the medium and long-term” is the second explanation for the financial tsunami.
The massive trade surplus of 10% of GDP is the third reason.
The Swiss National Bank reported a profit of CHF 38 billion for the year 2014. They obtained price gains in all asset classes, in bonds, stocks and gold. Interest payments and dividends achieved a yield of 1.7%.Read More »
In the following we present the drivers of Swiss price inflation. We first present the components of the consumer price index. Then we explain which are upwards-drivers of inflation and which ones cause downwards adjustments.Read More »
We are currently looking for an curator of this category. The aim is explain how to obtain sustainably nice returns on stocks and bonds. The focus here should be also on global macro. Sustainability is key: “buy today and sell far in the future”, for example when you get retired. Publicity for own books or publication is allowed.Read More »
The following table compares the dividend yields for blue chips in the SMI, DAX and Dow Jones.Read More »
Blog entries on the SNB that got last updated in 2014Read More »
Blog pages last updated in the year 2014 on the Swiss Franc.Read More »
Composition of the Fed’s Federal Open Market Committee (FOMC composition), needed to know if the Fed is opting for quantitative easing or not.Read More »
The main drivers of demand for Swiss francs are the euro crisis and, even more, the behavior of American investors, who go out of the dollar in the fear of bad US economic data and/or Quantitative Easing (QE). Risk-friendly investors move into risky assets like stocks or currencies of emerging markets, while risk-averse investors fear inflation and buy inflation-resistant assets like Swiss francs.Read More »
European national central banks released European household wealth reports in Spring 2013. According to that data, “median” German households were far poorer than many of their European counterparts. Based on 2012/2013 data we compared apartment prices and discovered that French prices were strongly overvalued or German ones undervalued.
We wanted to know if this is still the case in 2014 and integrated our 2012/2013 data with the one of 2014. We discovered that German home prices are quickly recovering their delay against French ones. Hence German wealth is ticking up again.
Dear friends and readers, Christmas is family time. But since my blog is contrarian, you read here a contrarian family post by one my idols, Lars von Trier. I just want to thank all my loyal readers and followers for following and commenting on my blog and any discussion on Twitter. Since the blog is driven by …Read More »
The Swiss National Bank has introduced negative interest rates. They apply only to sight deposits in excess of 20 times minimum reserves. Therefore they will affect hardly any bank and can be considered symbolic or even toothless. The view of the SNB is different.Read More »
We judge that negative or close to zero yielding government bonds reflect three points: Risk off environment, long-run currency gains on currency with low inflation, insufficient supply of government bonds for bank refinancing purposes.Read More »
In a referendum, the Swiss had to decide about:
1) Ecopop, an ecological-political movement that wants to limit immigration to 0.2% of the population.
2) Abolishment of tax advantages for rich foreigners.
3) A gold initiative.
All three initiatives were rejected, the gold initiative by 78%.
George Dorgan summarizes the outcome. He explains what it means for gold, CHF and the SNB. He argues that the next economic cycle will be driven by stronger wage growth in Germany and in the United States. He argues that in some years time the major enemy of the SNB will become inflation that is caused by rising Swiss asset prices and rents and from inflation spill-overs from Germany and the U.S.
The SNB will finally react according to the proposal raised by Prof. Janssen, a major supporter of the gold initiative: with a managed currency appreciation.Read More »
Heterodox economic theories focus on the human desires to spend, to save, to obtain credit in order to anticipate spending and future earnings, to increase or to reduce debt or even to deplete existing savings, on human behaviour. Those theories neither think that humans are rational nor that markets are efficient.Read More »
Der frühere UBS-Banker und Ökonom George Dorgan sieht in der Debatte um die Goldinitiative vier Fronten aufeinander prallen. Dabei wird die Abstimmung über das Schweizer Gold immer mehr zu einem Entscheid über den Fortbestand oder die Abschaffung des Euro-Mindestkurses.Read More »
The recognized Austrian economist Keith Weiner and the Wall Street Journal argue that the SNB must keep the euro over 1.20 in order maintain stability in the Swiss banking system. A rapid appreciation of the franc would create losses on the balance sheet of Swiss banks.Read More »
To find further explanations as to why the gold price was weak in the late 1990s we analyze sector balances. Effectively private spending and private debt went in two different directions: a heavy increase in private spending and debt in the US against less growth in private spending and less debt in the rest of world. This combination fostered GDP growth in the US and weakened it in other countries. Real interest rates were positive. Markets thought that the debt-financed growth could continue for years; they created the dot com bubble on top of it that strengthened technology stocks and the related currency, the dollar. This rare situation led to excessively weak oil and gold prices.Read More »
High inflows of around 400 billion francs between 2009 and 2012 in the Swiss balance of payments could only be countered with an increase in reserve assets and interventions by the Swiss National Bank. This number is far higher than the one seen during the collapse of the Bretton Woods system, when the ten times bigger Germany had to buy reserves for 71 billion German Marks (at the time around 56 billion CHF). We look at the detailed history of these interventions.Read More »
Das Thema der “Abstimmungs-Arena” im Schweizer Fernsehen war „Gefährdet die Gold-Initiative die Handlungsfreiheit der SNB“? Dieser Blog versucht zu vermitteln, dass die SNB ihre Handlungsfreiheit im Sinne der Einhaltung der Preisstabilität schon im September 2011 verloren hat, als sie den Euro-Mindestkurs einführte.Read More »
Latest gold referendum poll November 19: The latest poll shows 27% surely in favor of the gold initiative, 36% surely against the initiative. The most important development is the decision of the gold initiative to actively fight against the SNB’s minimum euro rate.Read More »
George Dorgan held a presentation at the CFA society in Zurich on September 1. The subjects of his speech were:
Reasons why the EUR/CHF exchange rate will fall under 1.20 once the deflationary pressures in Europe have ended
The missing link in the CFA program between its chapters on micro-economy, macro and currencies
Does history repeat? From Bretton Woods to Bretton Woods 2 and its slow end. Why the unexpected, the black swan happens more often than you think.
The slow end of Bretton Woods 2: rise and fall of the global carry trade and debt-driven growth
The contention that the Swiss franc must depreciate is often based on a simplified view on currency drivers and on “solely” one piece of the balance of payments. An evaluation must take place in full assessment of all drivers.
According to the latest polls 38% of voters would support the Swiss gold initiative, 47% are against it. The previous poll, recognized as more reliable, showed 45% pro gold and 38% against.
A win of the initiative would most probably imply a breakdown of the EUR/CHF floor.
According to the polls, low income groups are in favor. Effectively their purchasing power would increase when the CHF appreciates.
High income earners and stock owners are rather against it. If CHF improves Swiss stocks could collapse; this explains their voting intentions.
The place of birth of the Ukrainian leaders give us hints where the country is headed. Most of them come from the very West of Ukraine, from places that formerly were part of the Austrian-Hungarian empire, of Poland or Romania.Read More »
Already in 2013, the Swiss National Bank (SNB) spoke out against the gold initiative and revealed that the Swiss gold is stored mostly in Switzerland and 20% in the UK and 10% in Canada. There is no Swiss gold in the United States according to SNB chairman Jordan. In this post we provide an exchange of Jordan’s arguments against the ones of the gold initiative. We also state our view that is not as strict as the one of the referendum proponents.Read More »
On this page we show that
Inflation expectations and wages drive the behaviour of the Fed and Treasury bond yields.
Excessive wage increases lead to recessions, more or less voluntarily caused by central bank tightening
Central banks pin down the short end of the yield curve, while financial-market participants price longer-dated yields
Some Emerging Markets seem to copy strong wage increases and inflation that we lived in the 1970s
Quickly rising higher wages in emerging markets may narrow their competitive advantage against the U.S. and Europe
Therefore the “secular stagnation” might not be so long as expected.
In this Cross Asset Global Macro Analysis we name our reasons for the current dollar strength. The main causes are ECB’s euro “downtalk”, tight monetary policy in Emerging Markets, rising savings of the aging populations. This leads to weak global spending and growth. With the help of Fed-financed higher asset prices and falling gasoline prices, …Read More »
Will the SNB be able to survive an upturn in inflation: We focus on income and yields for foreign exchange position and gold and find out if the SNB makes enough income to survive a franc appreciation.Read More »
Before the upcoming SNB monetary policy assessment meeting on June 19th, rumors started the SNB could follow the ECB and set negative rates on banks’ excess reserves. We would like to deliver the whole background, starting with the question why Swiss inflation has been so low in the past and why CHF always appreciated.Read More »
Monetary policy is and remains tight in Emerging Markets, in particular since many of their currencies collapsed in summer 2013. This created inflation and led to lower spending. We want to find out which stock indices in the developed world have which exposure to Emerging Markets.Read More »
Das deutsche Zeitungswesen ist gleichgeschaltet und schreibt und kopiert die gleiche Propaganda, egal ob FAZ, n-tv.de, Spiegel, Süddeutsche, Focus oder das Staatsfernsehen (ARD & ZDF). Seiten wie compact online, Cicero, Deutsche Wirtschaftsnachrichten des Kopp Verlag sind aber dann wieder zu polarisierend. Es fehlt eine Zeitung von Qualität, die wirklich neutral informatiert und Meinungen vergleicht.
Es bleiben nur das Handelsblatt und die Schweizer Weltwoche als relativ neutrale Medien. Die Zeit ist noch einigermassen ertragbar.
Der Herausgeber des Handelsblatt hat in “Der Irrweg des Westens (Ложный путь Запада)” die Propaganda der Mainstreammedien kritisiert, ohne auf die stark polarierende Sicht von Compact “Querdenker jenseits von Links und Rechts” zu schwenken. Wahrscheinlich als Reaktion dazu hat die Frankfurter Allgemeine Zeitung (FAZ) anfgefangen über sich selbst zu reflektieren
Ich persönlich lese mittlerweile mehr die FAZ-Kommentare, da diese häufig eine bessere Qualität haben als der FAZ-Artikel selbst. Ein Auszug.
We name thirteen macro-economic reasons why Russia is currently the best place for contrarian investments.Read More »
The Bubble Bubble is produced by economic analyst and Forbes columnist Jesse Colombo, who was called one of the “Ten People Who Predicted the Financial Meltdown” in 2008 by the London Times.Read More »
Despite macro-prudential measures like the countercyclical capital buffer, Swiss credit to the private sector is rising more quickly than previously. On the other side, real estate prices are not increasing so rapidly any more. Global risks let M3 money supply growth slow in June 2014.Read More »
The second part on Net National Savings in % of gross national income, our preferred alternative indicator to GDP. This part contains the consumption-driven economies, which are Latin America and our Western countriesRead More »
Swiss parliament member Lukas Reimann outlines the importance gold. In a future inflationary environment, prices of SNB holdings, the ones of German Bunds and US Treasuries will drop, while gold will appreciate.Read More »
strong suspicion that Ukrainian air control deliberately facilitated and enabled the shot-down. Combining Western and Ukrainian propaganda with pro-Russian propaganda helps. In each piece of “manufactured or exaggerated news” there might be a bit of truth. Still there is only one party to this conflict that has to gain from a deliberate blowing up of MH17, this is not Russia or the so-called “Donezk People’s Republic”.Read More »
In summer 2013, even the sceptical and “gold-friendly” economist John Mauldin followed the mainstream thinking that fracking and other technology could reduce OPEC’s and the Chinese advantage in global trade and reduce the U.S. trade deficit. Recently both claims got refuted: the first with WTI crude oil prices rising to nearly 108$ despite enhanced supply. Detailed data showed that rising U.S. industrial production was not caused by more manufacturing but by mining and the oil industry. We think that any way the U.S. current account deficit could effectively shrink. The reason, however, is that the savings rate of Americans could rise further and the balance sheet recession continue. Traditionally currencies appreciate with higher savings (in local currency) and depreciate with more spending.Read More »
We recently explained that China will overtake the United States not only for GDP but also for wealth. In this post we explain what is still missing to become a world reserve currency and how quickly this could happen.Read More »
We examine how long the U.S. Dollar will remain the unique world reserve currency. The most important criterion for being a reserve currency is wealth. While China has recently overtaken the U.S. as for inflation-adjusted GDP, in the next step, it will overtake the U.S. as for wealth.Read More »
Inflation expectations drive the Fed’s and markets behaviour. Bond yields adjust, often but not always, with an inflation premium against short-term rates.Read More »
Financial Cycles History, 1991-1998: Overspending in Germany, Asia and former communist countries, Housing Busts in Japan and Northern Europe
In this post we present financial and credit cycles in the history: Due a weak credit cycle, Germany was a weak economy under many other weak ones.Read More »
Two additional criteria important for Emerging Markets: High foreign debt, a weak net investment position and a current account deficit increases government bond yields.Read More »
The typical backstops of all improvements in business cycles are high oil prices and inflation. Inflation is mostly caused by local effects.Read More »
The Bretton Woods time from 1945 to 1966 was a period of strong growth, especially in country like Germany, France, Italy and Japan.Read More »
Rational expectations led to a wage-price spiral in the United States, which was followed later by a similar phenomenon in Germany. In both cases credit and money expansion paved the way for spending sprees.Read More »
The next financial cycle takes from 1981 to 1990: The dollar was strong, Latin America lost a decade and the Japanese created their bubble.Read More »
Financial Cycles History, 1990-1996: Breakdown of Communism, German Reunification, Housing Busts in Europe and Japan
A history of financial cycles: 1990-1996 the breakdown of communism leads to a boom in Germany and – due to high interest rates and inflation – to a breakdown of the European monetary system.Read More »
Financial Cycles History, 1998-2002: The Dotcom Bubble and Bust and European and Asian Austerity as its Enabler
In this post we present financial and credit cycles in the history: Due a weak credit cycle, Germany was a weak economy under many other weak ones.Read More »
A critical Swiss Franc History: Between 2000 and 2007, the SNB made the Swiss cantons happy and delivered some billions of francs to prop up their finances. The gains were unfortunately not caused by strong asset management capabilities, but mostly due to gold price improvements and gold sales at quite cheap prices.Read More »
A Critical History of the Swiss Franc: During the “global carry trade” period between 2004 and 2007, the euro strongly appreciated against the Swiss franc. Most astonishingly this happened, despite the fact that the Swiss GDP growth was on average 0.5% higherRead More »
A critical Swiss Franc History: Between 1996 and 2004 Switzerland and its main trading partner and FX proxy Germany saw slower growth compared to other European countries. We explain the reasonsRead More »
A critical Swiss franc history: This chapter describes the most controversial episode in the Swiss monetary history: How the Swiss National Bank helped to wreck the Swiss real estate market in the 1990s.Read More »
After the Volcker moment or sometimes called “Volcker shock”, commodity prices plunged, the gold price collapsed. Thanks to additional supply, e.g. from Northsea oil, a so-called oil glut appeared. After the increase of debt in the 1970s, some economies in Southern America collapsed. The major reason was Volcker’s tight monetary policy with high interest rates and the dependency on US funds. Global economic growth remained lack-lustre during these years.Read More »
We shows the massive appreciation of Swiss franc and German mark in the 1970s, the reasons were: stagflation and the wage-price spiral.Read More »
We establish a long-term view and history of the Swiss franc. We compare the franc with gold.Read More »
On June 18th, 2014, the new radical libertarian party UP!, “Unabhängige Partei”, Independent Party was founded. The party is co-headed by the former head of the Swiss young liberals, Brenda Mäder, the former head of the young liberals St. Gallen Simon Scherrer and Silvan Amberg, the former leader of FDP’s homosexual association. The FDP is losing some of their brightest minds.Read More »
In June 2014, the ECB decided to introduce negative rates on the excess reserves of banks. We explain that German banks had already removed most excess liquidity before the ECB meeting of June 2014, and they will continue to do so. Hence hardly any German bank will pay negative rates after the recent ECB decisions at that meeting.Read More »
In our view, the ECB measures of June 2014 want to increase German lending, spending, salaries and inflation. Finally they target a reduction of German competitiveness. The ECB wanted to talk down the euro but will not succeed. We explain why the measure are bullish for the euro. We expect EUR/USD of 1.40 in the …Read More »
The European Central Bank (ECB) has the habit of reacting late. As seen in July 2008 and July 2011, the ECB is often the last major central bank to hike rates. They hike rates at the moment when others prepare for a recession or a significant slowing. Currently we are witnessing the opposite movement: The world is getting …Read More »
The tendency of the European parliament elections seems to be that in the Northern countries rather right-wing parties obtain more votes, like British UKIP, German AFD, Danish People’s Party, Austrian FPÖ or Sweden Democrats. In the austerity countries the left-wing movements are getting stronger and stronger, led by SYRIZA in Greece and Sinn Fein in …Read More »
We name the main drivers of disinflation and the downwards manipulators of the CPI: Markets, central banks, investors, governments, statisticians, ageing, entrepreneurs, global competition, technology and last but least the euro. Despite that downwards-manipulation we realized that inflation is there, just not where you might live!Read More »
Labor Participation Rates: Falling in the Ageing U.S., Rising in Ageing Germany and Crisis-Hit Italy
The most effective ways of measuring employment is by looking at the Labor Participation Rate. We compare the participation rates of the United States, Canada, the U.K., Germany and Italy.Read More »
Cleveland Fed: Price inflation is a monetary phenomenon. Hence, the money multiplier theory is still valid, just not in the US and in Europe.Read More »
The major reason for rising British and American home prices is for us the relatively new phenomenon that they are to able to finance at cheap rates. Swiss or Germans have seen relatively low mortgage rates for more than three decades (with a short exception in the mid 1990s after the German reunification). The main driver of low rates …Read More »
A list of long-term sector balances and related provided by Nomura’s research institute and its chief economist Richard Koo.Read More »
Hans Werner Sinn has formulated his critique with Piketty. Sinn says that r ≠ i > g. Interest rate are usually higher than economic growth, but not necessarily increases of wealth.Read More »
SNB First Quarter Results: 1.7% annualized Yield on Seigniorage, 2% annualized Loss on FX Rate Change
The main task of a central bank occupied with QEE (quantitative easing or exchange intervention) is to obtain higher gains on seigniorage than it loses with its “ever appreciating” currency. Otherwise its equity capital would be absorbed. In the first quarter of 2014, the Swiss National Bank (SNB) was unable to accomplish this task.Read More »
There are different discussions ongoing if a central bank may monetize debt and act of a quasi-fiscal agent. One opinion was the Modern Monetary Theory that advocates monetizing debt.Read More »
The Indian central banker Rajan recently accused his Western colleagues of lax policy until 2007. Furthermore he argued that FX intervention using so-called “quantitative easing or exchange intervention” (QEE) help to dry up the needed money supply in India. We will look on his statement from this money supply angle: In some countries, the money …Read More »
In some countries, the money multiplier is falling, in some others it is increasing, mostly due to central bank tightening. Does this justify to speak of secular stagnation?Read More »
The power distance between employer and employee enforces the importance of the leader, the entrepreneur. Moreover, the collectivite Asian society does not want unemployment, employees prefer to renounce to salary hikes in favor of the collective. These cultural reasons can qualify as drivers of the Japanese balance sheet recession.Read More »
Based on four different data sources, we prove that Swiss the home price to income ratio is small in global comparison and in a historic perspective. Combined with another decade of near zero interest rates, reason enough to think that the Swiss real estate boom should continue for another decade.Read More »
A repo provides liquidity to banks while the reserve repos aims to reduce liquidity and reduce inflation. In 2011, the SNB used SNB bills and reverse repos to reduce inflationary pressure. SNB bills are short-term bonds that pay a certain interest.Read More »
According to Swiss Statistics the yearly inflation rate is at 0.0%, and the monthly rate is +0.4%. The Spanish CPI is already under zero at -0.2%, and the Italian one is at +0.3%, not to speak about severe Cyprus or Greek deflation . Still in February 2012, the difference between the Swiss and Euro …Read More »
Official Eurostat Trade Balance Massively Distorted by UK Sales Of 1464 Tonnes of Gold To Switzerland
Somebody who follows regularly the trade balance figures from Eurostat, may have noticed a sentence that was repeated in each monthly release from the Eurostat trade statistics in 2013: “The EU28 trade surplus increased significantly with Switzerland”. The reason was massive gold sales from the UK to Switzerland.Read More »
Update March 21, 2014: Total SNB sight deposits increased to 367.8 bln. CHF, but flows reverted a bit. Foreign banks and “non-banks” reduced their CHF exposure at the SNB to 50.8 bln, possibly converting a part of the difference into USD. Dollars are more useful when sanctions will hurt both Russian and German firms. On …Read More »
Official Eurostat Trade Balance Massively Distorted by UK Sales Of 1464 Tonnes of Gold To Switzerland
In 2013, private investors from the UK sold net (!) 1464 tons of physical gold (and similar) for a value 44.3 billion EUR. This was 1 464 000 kilograms each at the current price of 30254€ per kiloRead More »
In the 2014 assessment for Switzerland by the International Monetary Fund several sentences caught our eyes; we will contrast them with our recent critique. The most important one was that for the IMF is only “moderately overvalued”, this would have no negative effect for exporters.Read More »
In the 2014 assessment for Switzerland by the International Monetary Fund, several sentences sparked in our eyes; we will contrast them with our recent critique.Read More »
The Swiss government see Swiss GDP growth at 2.2% in 2014 and 2.7% in 2015. Our estimate sees a divergence in the GDP components; we expects a lower trade surplus and higher spending. in both cases CHF should rise.Read More »
Der Propagandakrieg in Russland, in den USA und insbesondere in Deutschland und auch in der Schweiz geht weiter. Russische Medien trichtern den Menschen ein, dass eine riesige Flüchtlingswelle von Russen aus der Ukraine stattfindet. Deutsche Medien sind gleichgeschaltet: von links (TAZ, Spiegel, Stern) bis rechts (FAZ, n-tv.de und Welt) trichtern sie den Deutschen ein, dass …Read More »
The Swiss National Bank (SNB) is reporting a loss of CHF 9.1 billion for the year 2013 (2012: profit of CHF 6.0 billion). Valuation losses on gold holdings amounting to some CHF 15.2 billion contrast with a profit of CHF 3.1 billion on foreign currency positions and a net result of CHF 3.4 billion from …Read More »
The main task of a central bank occupied with QEE (quantitative easing or exchange intervention) is to obtain higher gains on seigniorage than it loses with its “ever appreciating” currency. Otherwise its equity capital would be absorbed.Read More »
For anybody complaining about gold that caused the big loss of the Swiss National Bank. Since 2000, the total SNB profit was 32.1 bln. CHF, of which 24.6 billion came from gold.Read More »
According to the latest data from the SECO,Swiss GDP rose by 0.2% in Q4/2013. Despite the relatively weak headline, the detailed data showed a couple of characteristics that speak for an upcoming boom. At the same time, the Swiss National Bank is printing money again: both the monetary base and money supply are increasing.Read More »
The conflict between labor and capital is a long and illustrious one, and one in which ideology and politics have played a far greater role than simple economics and math.Read More »
Am 7. Februar hat George Dorgan eine Präsentation bei den Jungfreisinnigen Zürich gehalten. Themen waren die weitere Entwicklung des Frankens, die Schweizer Wirtschaft, die SNB und die Auswirkungen der Gold- und Masseneinwanderungsinitiativen.Read More »
It only needs a few years until democratically elected presidents become so-called “tyrants” and “dictators”. The bad economic situation in many emerging markets and Russia, and therefore also in Ukraine, has taken its toll. Demonstrators and Ukrainian nationalists toppled a president that has a Russian mother tongue. But Yanukovych was a protector of the country’s …Read More »
In the referendum on Mass Immigration on Sunday, the Swiss opted for less competition, which implies that with the upcoming Swiss boom, salaries and inflation will rise.Read More »
On Friday the 7th of February at 19.00, George Dorgan is presenting his outlook on the Swiss Franc. He explains if and when the Swiss National Bank is able to generate profits again. Moreover he discusses the influence of the two referendums “Save Our Swiss Gold” and “Against Mass Immigration” on the Swiss Franc and …Read More »
Economists commonly explain rising oil price between 1998 and 2008 with the growth of emerging markets. We argue that the cost-push inflation of the 1970s was also a reflection of rising global demand.Read More »
FacebookShare As usual, the Swiss economy seems to be better than economists thought. After 1.40 still in December, the UBS consumption indicator has risen to 1.81, a value higher than the ones in 2012, when private consumption increased by 2.4%. Similarly as last year, the latest reading contradicts UBS’s own growth forecasts, albeit this year …Read More »
We discuss the net international investment position of the United KingdomRead More »
Last week’s decline in stock markets was probably caused by the HSBC manufacturing PMI for China that contracted for the first time in months, and possibly also by the rapid fall of UK unemployment rates and Bank of England’s response to it. As the rising gold price showed, Fed “tapering fears” were not at the …Read More »
The SNB requires banks to raise the weight of the counter-cyclical capital buffers” (CCB) by holding extra capital worth 1 per cent of the risk-weighted assets in their mortgage portfolios.Read More »
Government and Public-Sector EmploymentRead More »
Switzerland is currently living in a big real estate boom. The bubble bursting would imply that banks’ collateral in the form of real estate falls in value. Therefore the banks’ assets might fall because many home buyers might not be able to repay their mortgage. If a real estate bubble pops, then banks should be better capitalized to absorb such a shock. Therefore the Swiss National Bank introduced macro-prudential measures, like the so-called “counter-cyclical capital buffer” (CCB).Read More »
The concerted actions in September 2012 between the two big central banks reflected two fundamental economic principles: The Fed opted for Keynes’ law, the ECB for Say’s Law with conditionality. And apparently the ECB was successful.Read More »
Since 2008 the balance sheet of the Swiss National Bank is 280% higher, this is the equivalent of 60% of Swiss GDP. So did most other central banks, too. But there is one big difference: The risk for the SNB is far higher, the SNB nearly exclusively possesses assets denominated in volatile foreign currency.Read More »
The 2010 QE2 is a reason why many emerging markets started to slow considerably in the course of 2012. We reckon that this weakness will continue. Bizarrely QE2 helped to reduce global imbalances.Read More »
Another five months till Swiss inflation is higher? When the European economy starts to expand again, who will hike rates first, the SNB or the ECB? December Update According to Swiss Statistics the inflation rate remained stable at 0.1% y/y, while the inflation measured by the European HICP standard was +0.3% y/y, slightly higher than …Read More »
Manufacturing PMIs : most leading and important economic indicators.Read More »
Blog entries on the SNB that got last updated in 2014Read More »
Blog pages last updated in the year 2014 on the Swiss Franc.Read More »
In the early 1980s the Fed stopped the wage-price spiral and destroyed the gold price. Today main-stream economists have discovered that rising company profits compared to stagnating wages could an issue for the U.S. economy. For us this implies that the ultimate Fed goal will be to increase wages and inflation. Consequently the Fed has become the biggest supporter of gold and silver prices.Read More »
While the mainstream is still talking about potential riots in Italian streets, we rather see positive adjustments in the Italian economy.Read More »
Higher exports show that Italy’s economy is trying to become a new German Companies seem to hide their competitiveness. A question remains: Will Italian companies really invest in Italy and create jobs?Read More »
The mandate of the Swiss National Bank is concentrated on price stability, i.e. less than 2% inflation and to avoid deflation.Read More »
The Swiss GDP was again one of the strongest major economies. The quarterly growth rate in the third quarter was 0.5%, the yearly one 1.9%. U.S. GDP improved by 3.6% QoQ annualized. For comparison purposes, our figures are not annualized; hence the equivalent is 0.9% QoQ. In Japan and Switzerland private consumption rose by 0.1% …Read More »
Fundamentals with highest importance: The HSBC Flash Purchasing Manager Index (PMI) for China weakened from 50.8 to 50.4. In particular, new export orders, output prices and employment started to decrease again, while output increased. The preliminary Markit manufacturing PMI for the United States edged up to 54.3 (vs. 52.3 expected), a 9-month high after the …Read More »
GDP Growth per Capita in Developed Nations in the following order: Australia Sweden Germany Switzerland Netherlands Japan Canada United States France United Kingdom Ireland Spain Italy GreeceRead More »
Mainstream economists speak of two Japanese lost decades(s) between 1990 and 2009. Often the United States and the UK are seen as leader in growth. Some statistics might confirm this: When we look on a more subtle criteria, namely GDP growth per capita, available at the world bank, we see a different picture. China and …Read More »
A list of relevant graphs for long-term price earnings ratios and the rising company profits in the last years.Read More »
Fundamentals with highest importance: In Janet Yellen’s hearing at the Senate Banking Commission, the future Fed chair emphasized the need to provide support to the economic recovery and to overcome low inflation. Her speech supported equities, gold and US Treasuries. GDP in the Euro zone rose by 0.1% QoQ in line with expectations, but less …Read More »
Fundamentals with highest importance: The U.S. GDP release for Q3, showed that despite the recent U.S. critique with Germany, the Americans are trying to follow the successful Germans: for the first time since Q1/2012 and Q2/2011 exports rose more than imports. GDP was up 2.8%, but not driven by consumption, it was mostly helped by …Read More »
Says Thomas Jordan.
Need to wait to assess impact of ECB rate cut
Wasn’t totally surprised by the cut
Interest rates will remain low in Switzerland
Low rates may lead to property bubble risk which SNB will respond to if necessary
SNB monitoring property market which is already in difficult situation
I did wonder about the lack of movement in EUR/CHF yesterday considering that nearly every other euro pair took a hit. It’s either become the forgotten currency or there’s some sneaky SNB support that comes in on risk events.
Recently investors moved out of bonds in the expectation that inflation will rise soon. But strangely inflation rates have continued to fall. The great disinflation continues.Read More »
Feel free to click into the other categories “politics”, “business”, #chf, #snb in order to see more articles.Read More »
This week had a focus on – due to the government shut-down – the long awaited U.S. data: Highest importance: The ISM Manufacturing Purchasing Manager Index (PMI) for October came in at 56.4, higher than the 55 expected. The value for new orders and for production remained above 60 despite the government shutdown. The value …Read More »
Our CHF and Gold News Bar on our home page explains daily CHF and gold price movements based on the most important fundamental indicators in a few sentences. Keep in mind that the only Swiss fundamental data that is able to move the CHF must come from the SNB and from Swiss inflation data – …Read More »
UPDATE October 31, The official press release focused on the results for Q1 to Q3. The loss was 6.4 billion after a 7.3 bln. CHF loss in the first two quarters. Over all three quarters especially gold and the yen weakened the central bank’s positions. For the third quarter, it means that income was positive …Read More »
The SNB recently published the latest real effective exchange rate (REER). According to that the franc was only 7% overvalued against the base year 1999. Credit Suisse (CS) has taken some more factors than the REER under consideration: for them the fair value of the EUR/CHF is now 1.22, while the dollar was still undervalued. …Read More »
Major Fundamental Events The week contained a lot of important fundamental events, in particular Non-Farm Payrolls and preliminary “flash” PMI readings. Highest importance for FX rates Non-Farm Payrolls (NFPs) weakened to 148K, private NFPs to 126K, both against 180K expected. Especially the private NFPs were disappointing. The decrease in the unemployment rate from 7.3% …Read More »
Weekly Overview of FX Rates Movements The week was driven by the following factors: Solid Chinese economic data including a 7.8% rise in GDP. The end of the debt ceiling debate, at least for now. The expectation by the Fed member Evans that the government shutdown has delayed Fed tapering. San Francisco Fed’s Williams …Read More »
Swiss industrial production is rather insensitive to price changes and to the recent slowing of global demand thanks to the concentration on pharmaceuticals and luxury products. Based on Eurostat’s industrial production for July and August , we compared the values from 2010 to 2013 for these two summer months. This aggregated two-months comparison is …Read More »
Our weekly summary of fundamental news on FX that aims to explains price movements, with particular emphasis on the possibly biggest mysteries: the gold price (GLD) and the Swiss franc (FXF) . Weekly Overview Hopes on a compromise between Obama and republicans on the U.S. debt ceiling and high U.S. initial unemployment claims sustained …Read More »
SNB’s Jordan Responds to the Critique from the Peterson Institute: What They Forgot to Ask…Read More »
Our weekly summary of fundamental news on FX that aims to explains price movements, with particular emphasis on the possibly biggest mysteries: the gold price (GLD) and the Swiss franc (FXF) . The clear winner of the week was the Aussie, supported by a positive PMI and positive news from the RBA. In the previous …Read More »
Italy, other peripheral economies and later France will follow Japan for a decade or more of balance sheet recession: stagnant wages, falling real estate prices and a reduction of private debt.Read More »
(Originally written in 2012) We maintain that our claim that US energy independent by EIA are misleading. On the contrary, import costs for foreign oil will be the same in 2020 as todayRead More »
German, Swiss and Japanese gold reserves rose continously in the Bretton Woods system, whereas American and British reserves fell.Read More »
Weekly summary of fundamental news on FX with a focus on CHF and gold price movements. Weekly price movements The U.S. budget discussion and rather bad U.S. fundamental data made JPY and CHF the winners of the week. After weeks of improvements, the currencies of the Emerging Markets and carry trade currencies, like NZD, AUD …Read More »
Weekly summary of fundamental news with a focus on CHF and gold price movements. Friday, September 20:The St. Louis Fed president James Bullard explained that the Fed was close to tapering 10 bln. $ and that markets overreacted after the FOMC with their strong performance. As a consequence the S&P500 inched down by 0.6% while …Read More »
Or how to talk down and how to talk up an economy with wrong forecasts American and Swiss mentalities are very different, the Americans have the tendency not to care about the future a lot, the Swiss, however, do things only after careful consideration of potential risks. This tendency can be proven economically with …Read More »
The main drivers of demand for Swiss francs are the euro crisis, but even more, the behavior of American investors, who go out of the dollar in the fear of further bad US economic data and of Quantitative Easing. This will push down the dollar, and both safe-havens like the CHF, gold or the Japanese …Read More »
The weekly summary of global fundamental news with focus on CHF and gold price movements. Friday, September 13:The leading news came from U.S. retail sales and the Michigan consumer sentiment. Retail sales were up +0.2% instead of 0.5% expected, sales excluding autos and gas +0.1% (vs +0.3% exp.) The Michigan consumer sentiment disappointed at 76.8 …Read More »
Global Purchasing Manager Indices: Europe and China Recover while other Emerging Markets Still Struggle
Emerging markets: Years of strong increases in wages combined with tapering fears have taken its toll: Higher costs and lower investment capital available. EM Companies have issues in coping with developed economies. Some of them even need to shed jobs.Read More »
The Swiss GDP for Q2/2013 was in line with its peers in developed countries. The quarterly (not annualized) change was +0.5% compared to 0.6% for Japan and the United States, +0.7% for Germany and +0.5% for Australia. Swiss and Japanese growth was driven more by consumption, while the U.S. advances were based more on …Read More »
SNB did not intervene. Deposits of Swiss Post Finance had been reclassified from other sight liabilities to deposits of domestic banks.Read More »
Submitted by Marc Chandler, Global Head of Currency Strategy, Brown Brothers Harriman The main tension in the foreign exchange market is between positions adjusting pressures, which are US dollar negative, and widely held ideas that the trajectory of growth and interest rate differentials favor the US, which is dollar positive. There are some important economic data due …Read More »
It was obvious already at the latest SNB Monetary Policy Assessment, the SNB is becoming more and more hawkish. At the forefront is its ueber-hawk Jean-Pierre Danthine, the person responsible for the overheating Swiss housing market. He has now announced: SNB would end franc limit once it raises interest rates The Swiss National Bank will …Read More »
According to Swiss statistics, the yearly change in the Swiss consumer price index has risen from -0.1% to 0%. The headline MoM figure fell by 0.4% due to the yearly sell-off in the retail sector. The difference between euro zone and Switzerland in terms of the European Harmonized Index of Consumer Prices HICP has …Read More »
The United States trade balance has strengthened to a deficit of only -34.2 bln USD in June 2013. This is nearly half the record-high trade deficit of 62 bln. $ in August 2008 and not too far from record-lows of 26 bln. $ in July 2009, when oil was really cheap. In the first six …Read More »
Five myths about libertarians The specter of libertarianism is haunting America. Advocates of sharply reducing the government’s size, scope and spending are raising big bucks from GOP donors, trying to steal the mantle of populism, being blamed for the demise of Detroit and even getting caught in the middle of a battle for …Read More »
We regularly publish the SNB asset structure by currency, rating & duration, they might be a template for the tactical asset allocation in these dimensions (CHF certainly excluded) for other fixed income and/or rather conservative asset managers. here the newest data Total Balance Sheet and Liabilities The total balance sheet size decreased from 511 bln. …Read More »
In this analysis we describe why the long-lasting financial cycle of debt reduction is one key driver of the EUR/CHF exchange rate. We claim that EUR/CHF can rise more strongly only when the competitiveness of the European periphery increases. When this happens, then debt will be reduced and both public and private deficit spending will stop.Read More »
A Nationalization of Swiss Foreign Assets? SNB Owns 56% of Swiss Net International Investment Position
The SNB currently owns 56% of the Swiss net international investment position (“NIIP”). In the year 2007 this number was only 12%. Is the central bank implicitly nationalizing the Swiss international companies?Read More »
UPDATE: July 30th, 2013: Our estimate for the quarterly loss missed the reality by 1 billion francs. The quarter results: 18.3 billion francs loss. The loss for H1 was 7.3 billion CHF. July 1st 2013: We estimate that the Swiss National Bank (SNB) obtained a loss of 17.3 billion francs in the second quarter 2013. …Read More »
While the FT says: Abenomics is succeeding in bringing inflation back to Japan. The preferred core CPI measure, which excludes volatile food prices, rose a higher-than-anticipated 0.4 per cent in June (year-over-year), the highest reading since November 2008 and the first positive reading since April 2012. (The reading was flat in May). Overall inflation …Read More »
Still in summer 2013, too much debt was an issue. By 2014 things have changed: Europeans have too many savings.Read More »
Some extracts from BIS Working Papers No 419 Caveat creditor: The Bank for International Settlement stresses the importance of getting “overlending” under control.Read More »
In this second part of our series we provide arguments why the widely expected strong dollar period might not come. We look at the most important economic indicators that might justify a stronger dollar: the ISM manufacturing index and the interest rate differences between the U.S. and Europe.Read More »
The Swiss ZEW investor sentiment has risen to 4.8 by 2.6 points, news that do not influence markets. More interesting is the following: Swiss ZEW Investor Survey Sees 1.20 per Euro Cap Gone within 2 Years * Majority see no change in euro/franc for next 6 months (Reuters) – The Swiss National Bank will most …Read More »
We examine the relationship between strong dollar phases and austerity in other parts of the world. Between 1983 and 1985 one reason for the strong dollar were high real interest rates in the U.S. after the defeat of the Great Inflation period, the enforced austerity in Southern America and cheap commodity prices caused by generally …Read More »
In the Euro zone bank lending is contracting, M3 is rising very slowly. As opposed to that, Swiss bank lending is currently rising by 4.4% per year, M3 is increasing by 10% per year.Read More »
Based on four different data source, we find out that Swiss home price to income ratio is small in global comparison. Therefore we wonder why the SNB must contain home price rises, but the Fed must artificially increase them.Read More »
At the end of May, SNB president Jordan admitted that the EUR/CHF floor will not raised (here also cited by Bloomberg): “We cannot arbitrarily manipulate our currency. In an even worse crisis situation this would be disastrous and counterproductive. The floor must be legitimized. The current minimum exchange rate is realistic and has helped the Swiss economy.”Read More »
The Swiss National Bank (SNB) delivered a, for her standards, very hawkish monetary assessment with the focus on the risks in the financial sector. This does not come as a surprise for us. Each time, after the United States has recovered from a crisis – just like now – inflation and risks increased in Switzerland. …Read More »
Via CNBC Against the backdrop of increasing home prices and the prospect of much higher mortgage rates, it’s a “great time” to sell, Spencer Rascoff, CEO of online real estate marketplace Zillow, told CNBC on Thursday. That is, if you can find a place to buy, he added. “As mortgage rates inevitably come from …Read More »
Totalitarian regimes, like China, fear bubbles and revolutions. Strangely, these regimes help to prevent asset bubbles, and the resulting unequal distribution of wealth between rich asset owners and the poor without assets. Today’s FT article shows how Chinese authorities fear the bubble and the revolution. China cash crunch deepens as PBOC withholds funding Short-term interbank …Read More »
Economic experts and even rating agencies remain in dis-accord about the height of Chinese total debt and if this will continue to slow the Chinese economy.Read More »
Disinflation Finally Starting in Italy The Swiss site preisbarometer.ch is run by the Swiss Consumer Association. Their price data shows that a food basket is 46% more expensive when compared between the German “Kaufland” shop and the Swiss “Coop”. Going to France into “Leclerc” gives you an advantage of 38% against Coop. However, for a …Read More »
Abenomics has failed It was doomed from the very beginning. You cannot create out of risk-averse Japanese risk-tolerating Americans. Public Japanese opinion puts enormous pressure on BoJ policy and on the government; the risks of rising JGB yields are too high. Japanese hate volatility, the government cannot risk its funding. The emphasis on the word …Read More »
Imagine wages and factor prices are stable. Hence deflation means productivity growth: Higher quantities bought for a lower price. Low inflation or even deflation is the Swiss success story for decades and the success story for the United States recently. The Pigou effect seems to be saving the US economy, just as it did in …Read More »
SNB Vice Chairman Jean-Pierre Danthine is undoubtedly the most hawkish member of the governing board, an opposite personality to the rather interventionist and Keynesian hedge fund manager Philip Hildebrand. Danthine has perfectly understood that times for the SNB might get hard again in 2014. Jean-Pierre Danthine has made some comments recently: – Swiss franc stays …Read More »
We believe in the Chinese economy, but it has just gone into a cyclical and a exchange-rate induced slowing. Any Cassandra views like recently by Charles Dumas, chief strategist of Lombard Research, but also some of Richard Koo’s earlier views, that there will be a burst of the Chinese housing bubble, are exaggerated. Markets Insight: …Read More »
Employment growth since Dec ’07: Oz +8.1%, Switzerland +6.9%, Germany +5.8% Canada +4.3% Sweden +2.6% UK +0.9% Dutch +0.7% USA -2.1% Japan -2.3% Italy -3.1%Read More »
Cheaper energy prices and long-lasting contracts help against inflation. Swiss inflation increased by 0.1% against April. According to Swiss Statistics, on a year basis, the CPI fell by 0.5%. Major reasons for lower figures were the 6.3% YoY decrease in energy prices, 4.5% YoY lower clothes and footwear price and technological improvements in communication that caused …Read More »
We name the main drivers of disinflation and manipulators of the CPI: Markets, central banks, investors, governments, statisticians, ageing, entrepreneurs, global competition, and last but least the euro.Read More »
Questions to George Dorgan Is there any chance that the SNB or other central banks could follow the BOJ and just depreciate the currency? George Dorgan: What did the BoJ do? Monetary easing and talk down the yen in a mercantilist style. A central bank is able to talk down a currency only if there …Read More »
we slowly move into an inflationary environment and prices of German Bunds and US Treasuries are falling…. ECB and Fed interest rates seem to be nailed to zero for years.Read More »
Precisely at the moment when the dollar undergoes a secular bashing with a 6% loss against the yen and 3% against the euro, Pictet publish their “secular dollar bull era” video and recommend investors to avoid gold. “Secular movements” in currency markets are mostly driven by current account (CA) surpluses or deficits, while housing …Read More »
Update June 26: The Swiss economy has grown more quickly than the United States in Q1 2013. Japan is in the lead of the global comparison with 1.0% quarterly growth, Australia and Switzerland follow with 0.6%, the US has 0.45% QoQ (or 1.8% annualized), Germany 0.1% and Italy slowed by -0.5%. Weakest currency, strongest …Read More »
Yesterday’s German CPI has given a first insights of what is coming these years: German inflation. For years excessive risk averseness put pressure on German yields. Most recently, energy prices helped to push down inflation and on German yields possibly for a last time. But many ignore that the main reason for inflation are rising …Read More »
UPDATE, February 2014 According to the latest data from the SECO,Swiss GDP rose by 2% in 2014 and not by 0.9% as the UBS predicted. Once again the Swiss economy seems to be stronger than expected. UBS’s consumption indicator for April came out at 1.46 (details). This number seems at odds with the weak private …Read More »
The Swiss trade balance for goods clearly indicates its global orientation. Switzerland has a trade surplus with the US, Canada, the UK and many emerging markets. Swiss exports are mostly luxury products and pharmaceuticals. The total surplus for the 4 first months in 2013 was 7.7 billion CHF, about 1.2% of GDP, annualized around …Read More »
Response to Prof. Nick Rowe, Carleton University, Canada and Lars Christensen, the leading “Market Monetarist“. Nick Rowe: Is the Bank of Japan trying to push down bond yields? Well, yes and no. Yes, it is fighting a battle to push down bond yields, but that battle is part of a wider war for economic recovery. And …Read More »
Everybody is wondering why China is currently so weak, with a HSBC manufacturing in contractionary territory. No wonder, the main competitor in electronics and many more products,the Japanese yen has appreciated by nearly 40%. While China has to fight years-long appreciation of wages, the Japanese profit on years-long deflation and cheaper costs. At the …Read More »
From FT Alphaville: Excess reserves do not mean banks are not lending, and enforcing negative rates may do more harm than good because it is ultimately contractionary rather than expansionary.Read More »
Investment “bubbles” have been inflating and bursting for hundreds of years.Read More »
Perfect charts by Goldman’s Jim O’Neill that help to understand the former and future growth of different emerging, “growth markets”, the BRICS. We criticise his partially over-optimistic views.Read More »
Beautiful charts by Goldman’s Jim O’Neill that help to understand the former and future growth of different emerging, “growth markets”, the BRICS. We criticise his partially over-optimistic views.Read More »
Disconnect between Wall Street and Main Street. While asset prices are inflated by continued Fed interventions, boosting profits widening the wealth gap between the top 20% of Americans and the rest.Read More »
The Fed’s excessive monetary easing QE2 caused an inflationary period, that created a balance of payments crisis during which the Eurozone members were obliged to introduce excessive austerity measures.Read More »
The so-called “inflation lie” : money printing does not create inflation. The cyclical slowing in emerging markets shows that it actually did cause inflation, just not in developed economies yet.Read More »
Italy will follow Japan for decade(s) of balance sheet recession. There is one mean to avoid it. The periphery should use current positive market sentiments and low inflation to exit the euro zone.Read More »
We regularly publish the SNB asset structure by currency, rating & duration, they might be a template for the tactical asset allocation in these dimensions (CHF certainly excluded) for other fixed income and/or rather conservative asset managers. Composition of SNB Forex Reserves, Q1/2013 With the strong results of 11.2 billion francs, the SNB reduced the …Read More »
Despite the weaker franc, sight deposits at the SNB are still rising. Last week they increased by 300 million CHF – details here. For us the SNB is not buying euros, but traders are taking more and more derivative (carry trade or FX positions) against the franc that do not show up in the sight …Read More »
Most recently the Bundesbank critised the ECB decision to reduce Italian yields contained in the OMT program. To put things into perspective: Germany paid 5% interest for 10 years government bonds between 1996 and 2002. This at average inflation-adjusted GDP growth rates of 0.5%. But there was no ECB that was buying German bonds …Read More »
About the trade-off between economic recovery and financial stability In the recent post on gold prices, we maintained that the Fed will raise interest rates far later than most FOMC members admit. This would imply that the years of financial repression will continue and investors will push up asset prices, incl. gold, instead. Many libertarians …Read More »
Which Of The Six Major Fundamental Factors For Gold And Silver Are Still Positive? Which Are Not? (April 2013)
Having identified the 6 fundamental price factors previously we speak about the gold-silver ratio. We explain which fundamental factors speak for an increase of gold and silver prices and which don’t.Read More »
By Stephen Jen (via Itau Global Connections). Bottom line Now that the Bank of Japan will be led by a team of super-doves, the mechanism through which a more aggressive BOJ could influence the yen is through capital flows. We have used the analogy of a two-stage rocket to describe how USDJPY could be propelled. …Read More »
Manufacturing Purchasing Manager Indices (PMIs) are considered to be the leading and most important economic indicators. August 2013 Update Emerging markets: Years of strong increases in wages combined with tapering fears have taken its toll: Higher costs and lower investment capital available. EM Companies have issues in coping with developed economies. Some of them …Read More »
Cheap ECB rates and rising home prices helped to enrich Southern Europeans between 1999 and 2007. Germany’s middle-class and poor, most of them not owning a home, were the ones that financed it.Read More »
The U.S. economy regularly improves between October and April, this year additionally fueled by “unlimited” quantitative easing, weaker gas prices and higher competitiveness thanks to a stronger Chinese yuan and weaker Asian economies. Update 2013: The Case-Shiller index continued to climb in April 2013; it became clear that this year the “Sell in May” …Read More »
The Transfer Union from South to North since 2008: Wolfgang Schäuble, the Evil Genius of the Euro Crisis
Wolfgang Schäuble has become the evil genius of the euro crisis. He has understood that the Cyprus crisis won’t lead to a bank-run and collapse of capital markets. We all know that the US is now recovering.Read More »
Switzerland continues to see a robust economy, even if the leading KOF indicator fell to 0.99 after highs of 1.68 in September. On other side, real and nominal wages continue to increase. As opposed to the KOF value, the UBS consumption indicator is rising. This shows that the internal economy is able to balance …Read More »
UPDATE March 25 The final compromise: via Reuters TOP NEWS Detail of EU/IMF bailout agreement with Cyprus Sun, Mar 24 22:19 PM EDT BRUSSELS (Reuters) – Cyprus clinched a last-ditch deal with international lenders on Monday for a 10 billion euro ($13 billion) bailout that will shut down its second largest bank and inflict heavy …Read More »
The initial compromise The Cyprus compromise combines a 10 billion € bailout with European, basically German tax-payers money, that also obliges rich account owners (9.9% levy) – rich Russians and Brits – and poorer account owners (6.75% levy) – Cypriot tax-payers money – to take part in the deal. Initial reactions from Zerohedge over Keynesian mainstream …Read More »
If the upcoming referendum “Save our Swiss gold” wins, the SNB must increase gold holdings from 10% to 20% of its balance sheet. Gold purchases and/or sales of fiat money implies an end of CHF cap.Read More »
The International Monetary Fund (IMF) judges “that the SNB’s net revenue is subject to large fluctuations, and sizeable losses could occur if an appreciation of the Swiss franc was to take place before foreign exchange interventions were unwound.”Read More »
Gold came under pressure in early February when stock market strength but also U.S. gas prices rose. US purchases, however, help to improve foreign economies and therefore also the gold price.Read More »
Nicosia will impose a 9.9 percent one-off levy on deposits above 100,000 euros in Cypriot banks. This constitutes maybe the final stage of the euro crisis, with the very last country to be rescued. Or will it be a new escalation and may be the most dangerous one, a bank-run? How many Cyprus clients managed …Read More »
Producer prices and “real mean reversion” for currencies show that the yen is currently fairly valued. Many momentum factors could, however, speak for some further weakening, while seasonality favours an appreciation. For us, the US dollar is back as the preferred funding currency. The real mean reversion for currencies Some economists, like Goldman’s O’Neill, in the case …Read More »
In our series about emerging markets, we name some that are overheating and could face increases of government bond yields due to higher inflation and weaker current accounts. At the same time, banks are aggressively selling emerging market bonds as possibility to achieve high yields. Tristan Hanson, head of asset allocation at Ashburton Asset …Read More »
The German Bundesbank decided to opt for full transparency of their gold reserves and their whereabouts since the second world war. Our details:Read More »
The gap has fallen from 3.7% in February 2012 to 2.1%. Swiss CPI is rising on monthly basis, but still negative with 0.3% YoY.Read More »
We regularly publish the SNB asset structure by currency, rating & duration, they might be a template for the tactical asset allocation in these dimensions (CHF certainly excluded) for other fixed income asset managers. Moreover we publish the yield on investment. Composition of SNB Forex Reserves, Q4 2012 The Swiss National Bank (SNB) saw …Read More »
A new study by Credit Suisse claims that the SNB needs to hike interest rates in order to avoid excessive risk taking in real estate markets; in particular around the centers of Geneva and Zurich, but also in the Southern Swiss cantons with lower income, but high real estate prices. More detailsRead More »
Hedge Funds have lost their power. This year has shown that their only remaining possibility to gain easy money is a concerted action with some of their friends manipulating currency markets, calling it “currency wars” and creating an unholy alliance with the dovish prime minister Abe. Some of the biggest U.S. hedge-fund investors have made …Read More »
Italy overtook Japan with the worst real GDP growth of all advanced economies since 1991 (0.79% per year, an amazing and sad distinction). Italians and French are clearly getting tired of austerity.Read More »
A list of relevant graphs for the long-term price earnings rations and different stock market returns over the last 2 years. Moreover we show the return of the S&P 500 for each of the year.Read More »
Wir sind beeindruckt von dem Leitartikel der Weltwoche, der doch ganz unserem Gedankengut entsprochen hat. Der deutsche Kanzlerkandidat Steinbrück hat der deutschen Demokratieverachtung und EU-treuen Überheblichkeit dann noch das i-Tüpfelchen hinzugefügt. “Zwei Clowns haben gewonnen.“ Von Roger Köppel, Die Weltwoche Demokratie ist, wenn es anders herauskommt, als Meinungsführer, Journalisten und tonangebende Politiker gedacht haben. …Read More »
Collection of 6 sources showing: Housing Market Index,Home Inventory, S&P/C-Shiller, New Home Sales&Prices and Ratio to Population, MBS Purchases by the Fed, Household Liabilities and Dependency Ratio.Read More »
Krugman in the 1990s: “France represents the most extreme case of “eurosclerosis”: of “ludicrously overregulated” labor markets and overprotected jobs. These issues and the unsuited German monetary policies to create the euro were the source of France’s troubles.” View Craig Willy’s blog.Read More »
Deutsche und Schweizer Medien sind oft vereint mit den Europäischen Leadern, Deutschen Exporteuren und den Finanzmärkten im Kampf gegen den gemeinsamen Feind, Silvio Berlusconi, das Enfant Terrible, das Gegenteil der Schweizer Bescheidenheit- und “Bloss nicht zu laut”-Etikette. Berlusconi soll Schuld sein am Abstieg Italiens seit den 90igern, obwohl auch die Linke mit Romani Prodi zweimal …Read More »
SNB sight deposits are rising again, by 700 million CHF in one week. But the amount of cash in form of bank notes and coins has risen by 10% since September. It seems that the central bank is now not only virtually printing (via sight deposits) but also physically. SNB liabilities reached a new record high. DetailsRead More »
We reckon that a sustained US recovery will make it possible that the eurozone splits up. Today’s Italian elections are maybe the start of an upcoming Italian euro exit.Read More »
Central Bank data show that the Swiss National Bank (SNB) remains the only central bank that strongly participated in currency wars with FX intervention, while the Japan was just verbal intervention.Read More »
From FT Alphaville: Excess reserves do not imply that banks are not lending, enforcing negative rates may do more harm than good because it is ultimately contractionary rather than expansionary.Read More »
Most recent Swiss inflation data show that several items have risen by 1% in one month. Former ECB member Lorenzo Bini Smaghi claims that a currency war would lead to financial repression even by central banks that predominantly concentrate on price stability – like the SNB. A must read on the FT.Read More »
UPDATE February 2013 inflation data: The inflation figures for February showed the upwards movement we expected. On monthly basis inflation rose by 0.3%. The Swiss CPI is getting closer and closer to the one of the euro zone. We explain the January 2013 data on Swiss inflation and indicate which components drive the consumer …Read More »
Submitted by Mark Chandler, from marctomarkets.com Last week the euro was the weakest of the major currencies and the recently beaten up sterling and yen were the strongest. A similar pattern was also evident in the dollar-bloc. The New Zealand dollar had been the strongest and last week had was the weakest, with the …Read More »
We give an overview of opinions of leading economists that want to help Japan out of deflation. Paul Krugman, Richard Koo, Adam Posen and Kyle Bass.Read More »
Thoughts on the Japanese Currency Debasement (part 3) In previous posts we looked on the following aspects of the recent Japanese currency debasement: Overview: What different leading economists – Paul Krugman, Richard Koo, Adam Posen, Kyle Bass – think about the Japanese currency debasement and the way to more private spending and investing instead of …Read More »
We show that Target2 imbalances and the SNB currency reserves represent the same issues, namely current account surpluses/deficits and capital flight. Therefore it makes sense to compare them, in total and by inhabitant.Read More »
As we explain here, , Target2 balances and SNB currency reserves represent the same concept, namely capital flight (in a positive and negative sense) and current account imbalances. While Target2 numbers for Germany and Northern Europe go down, SNB reserves remain the same, only 3 billion CHF away from record highs.Read More »
The U.S. economy regularly improves between October and March. This year the improvement was a bit earlier thanks to QE3. By March the economy already weakened according to the latest ISM PMIs.Read More »
The U.S. economy regularly improves between October and March. The SNB should use the moment to sell some currency reserves. From May on, the typical seasonal effects will push the SNB into a defense.Read More »
Still in September, SNB’s Zurbrügg was speaking of negative rates and deflationary risks in Switzerland. At that meeting we told him that deflationary risks were absurd given rising M1/M3, higher salaries and strongly rising home prices . Now he admits that negative rates will not come.Read More »
In 2012, austerity, the commitment of ECB and Fed and the weak euro helped to reduce peripheral yields, current account and partially fiscal deficits. The euro zone has possibly won the war. Now the weak countries need to win the peace, namely generate growth via competitiveness says Hans Werner Sinn in FAZ.Read More »
While FX traders and some hedge funds are long EUR/CHF and some short covering happened, sight deposits show a different picture. They rise again, this time with 100 million francs (see details) in one week. Risk-off investors are not convinced yet that the euro crisis is finished, while other investors keep profit of the rising SMI and Swiss real estate prices.Read More »
Manufacturing PMIs are considered to be the leading and most important economic indicators. After a strong slowing in summer 2012 and the Fed’s QE3, this is the fourth month of improvements in global PMIs January 25th Expansion-contraction ratio: There are 15 countries that show values above 50 and 14 with values under 50. Positive-negative-change ratio: …Read More »
When the Swiss National Bank introduced the 1.20 lower limit, it wanted to eliminate the deflationary risks for Switzerland. For a certain period, namely when a global recession was looming in Autumn 2011, and the Swiss franc was hovering around 1.10, this risk was really present. In this post we would like to know if …Read More »
We show that Target2 imbalances and the SNB currency reserves represent the same issues, namely current account surpluses/deficits and capital flight. Therefore it makes sense to compare them, in total and by inhabitant.Read More »
While FX traders and some hedge funds go long the EUR/CHF, sight deposits at the SNB rise by 2 bln. francs (see details) in one week, M3 by nearly 10 bln. (nearly 2%) francs in one single month (see details). In normal circumstances this would imply upcoming rate hikes (see explanation).Read More »
The newest paper by McCulley and Poszar “Helicopter Money: or how I stopped worrying and love fiscal-monetary cooperation” presents fiscal policy and monetary policy along these two criteriaRead More »
The Swiss National Bank (SNB) obtained a profit of around 6 billion francs for the year 2012 (full statement). The profit was reduced from 16.9 billion francs between Q1 and Q3 2012, which means that in Q4/2012 the bank had a loss of around 10.9 billion francs. The profit in gold fell from 6.2 billion …Read More »
During the Bretton Woods system, Germany managed to obtain current account surpluses. They converted these surpluses into gold. At the time they bought it at 35$ per ounce at a relatively cheap price – at the end of the 1960s the price was augmented to 42$. At the end of the 1960 and with …Read More »
According to Bloomberg, at least prime minister Abe is taking the nuclear option and is following the SNB in buying foreign assets. This is a huge change in global monetary policy.Read More »
Primary surplus is the difference between government revenues and expenditures excl interest. Debt is reduced if rel. primary surplus is higher than debt multiplied by interest minus GDP growth.Read More »
Or how to talk down an economy with wrong forecasts Read the introductory post here, if you haven’t yet. Details of SECO forecasts In the following we give the details about the SECO, the Swiss government economic agency’s, forecasts. Forecast Q1/2009 Sharp recession in 2009, gradual stabilization in 2010 Bern, 17.03.2009 – Economic …Read More »
The same as every year in December/January: Swiss media and economists are doomsaying. This time they claim that the banking industry and the UBS job losses will bring Switzerland into trouble. Once again they do not understand that the Great Recession was only to a small part a banking crisis, but it was mostly a …Read More »
Why there is no real estate bubble in Switzerland yet and why the SNB will help to create one With the current recovery in the United States the discussion in Switzerland switched from a discussion about the EUR/CHF floor to the Swiss real estate boom, the so-called “housing bubble”. It seems that the Swiss …Read More »
Potential losses due to money printing are for the Fed: 1.2% of GDP, Bundesbank: 5% of GDP, SNB: 12% of GDP.Read More »
The SNB will not be able to realize a fixed currency peg over the long-term. The consequence would be that Switzerland loses its competitive advantage, lower Swiss rates, if it follow euro inflation.Read More »
Or why we do not believe in the American economy. Like every year in Q4, analysts proudly present the end of the great recession: 2009: The big picture: The Great Recession is Over! Long Live the Ordinary Recession …. 2010: Mish Global Trend Analysis: The Great Recession is Over; Bad News: It Doesn’t Feel Like …Read More »
Central banks often want to follow two targets: low inflation and low unemployment. to achieve both criteria they look for a formula that incorporates bothRead More »
The link gives an overview about the upcoming SNB events.Read More »
The balance of payments leads to many confusions because definitions vary. For example, the IMF’s definition is different from the usual or historical definition. Secondly, the relationship between the balance of payments and reserve assets is difficult to grasp, especially in the IMF definition. Thirdly the origin of “errors and omissions” is often unclear. Therefore …Read More »
Between 2011 and 2017, the reduction of debt , the hunt on the rich and investment into countries with low debt will become the main rational expectation and the determinant of the next financial cycle.Read More »
History of SNB monetary policy assessments vs. the Swiss gross national product (GDP) and gross national income (GNI).Read More »
Two ways for building the Northern euro, exit of Southern members or slow creation of Northern euro with currency interventions of central banks.Read More »
The must-read Goldman analysis on Zerohedge: it is not enough to reduce wages in Greece or Spain. These countries will see lost decade(s). Completely in-line with our analysis that production costs rise more quickly in the periphery than in Germany despite falling real wages. Here our synthesis that a Northern Euro would reduce imbalances and suffering.Read More »
The main drivers of demand for Swiss francs are the euro crisis, but even more, the behavior of American investors, who go out of the dollar in the fear of further bad US economic data and of Quantitative Easing. This will push down the dollar, and safe-havens like the CHF, gold or the Japanese Yen up. …Read More »
Aymo Brunetti, the former chief economist of the SECO, the Swiss national bureau of economy, says that Switzerland must exit the peg against the euro in two or three years time. This is in line with our analysis of upwards and downwards drivers of Swiss inflation. We judged that in 2 or 3 years time, upwards drivers will clearly outweigh downwards drivers. Details about Brunetti’s interview on Tagesanzeiger.Read More »
Government bond yields under 10 years for safe-havens are close to zero. In April 2013, even 20 year bond yields are less than 3%, What can explain this bubble of the century? Update August 16, 2013: So, 10-year Treasury yields have ended the day closer to 3 per cent. But not as close as they …Read More »
Similarly as European leaders knew what they were doing with the euro, namely introducing a not feasible currency, Swiss National Bank did between 2005 and 2008, namely the absolutely wrong thing.Read More »
In yesterday’s post we focused on several economic events that weakened the position of the Swiss National Bank (SNB). In this extended replacement post, we give several reasons for recent movements in the gold price and explain the correlation between German economic data, gold and the Swiss franc. IFO data shows that Germany will not …Read More »
Eventually the euro will be abolished, a Northern Euro introduced: politicians and their economic advisors might just be waiting for a calm moment, especially with upcoming German inflation.Read More »
Manufacturing PMIs are considered to be the leading and most important economic indicators. Since the Fed’s QE3, this is the third month of improvements in global PMIs after a strong slowing in summer 2012. January 25th Expansion-contraction ratio: There are as many countries that show values above 50 as under 50. Positive-negative-change ratio: 18 countries …Read More »
To us, the big theatre surrounding Greece was just a preview of a much bigger crisis that will happen in the coming years in Spain, the upcoming Spanish lost decade(s). Greece was an absolutely desperate case; therefore, everything was quick. It took just two years till we arrived at the official sector participation and yearly German transfer …Read More »
After the disappointing US current account data, traders have realized which countries have strong trade balances, namely Germany and Switzerland (see here for our details on the ever rising Swiss trade surplus), additionally fueled the good German IFO data. Both the euro and the Swissie strongly rose against the dollar. Due to Abe’s pressure on the …Read More »
Charles Wyplosz, Professor of International Economics, Graduate Institute, Geneva repeats our arguments in “Who says No to Austerity, Says Yes to the Northern Euro“ about the impossibility of getting out of the common currency – recession – austerity – cycle. Similar as we do, he proposes a public debt haircut, an end of austerity and a decentralization of remaining debt. We go one step further, we want to break not only austerity but also the current form of the common currency. Read more on Prof. Wyplosz entry on VOX.Read More »
In our post we look on two questions concerning competitiveness for the European periphery: When will local production be cheaper than imported products? Do people have the money to buy these local products? It does not help reducing labor costs if local production costs still more than imported products. The second aspect is: even if …Read More »
The four best “recession” indicators, in form of coincident economic indicators, can be seen at Doug Short/Advisor Perspectives Update September 2013 Update December 21th, 2012 We observe the following: US indicators point upwards, when the rest of the world is slowing. After capital left many emerging markets and Europe, this capital helps the United States …Read More »
Some must reads: According to the Economist the biggest time bomb in the euro zone crisis is France.
We wonder why the United States and Britain, that have same weak trade balances, the same weak competitiveness and a debt overhang, shouldn’t have a problem?
Just because France must do austerity according to the German Fiscal Compact wish, and the US and Britain do not need to do this?
Or like Ray Dalio called it, are the US and Britain doing a beautiful deleveraging? Or is financial repression and accumulation of debt a real danger?Read More »
The ISM PMI under 50 shows that the United States are in contraction as for industrial production. The dollar is simply too strong. The Americans consume, but the US trade deficit gets bigger. The Chinese, Japanese, Germans and some global US firms take the profits on it. Today a worth-reading propaganda paper came out.Read More »
The discussion about the future of the Euro: Among a Post-Keynesian, a European Etatist, an Austrian economist and an advocate of a Northern Euro on the French website www.atlantico.fr. The French paper is asking: “Sommet européen : créer un euro du Nord est-il le seul moyen de sauver l’Europe de l’austérité ?” Is the creation of …Read More »
The SNB decided to maintain the floor at 1.20 and the Libor target between 0% and 0.25%. As we expected in our outlook on the assessment, there were still important downwards drivers of inflation after the strong appreciation of the franc. Therefore, the SNB has moved its inflation expectations downwards for 2013 to minus 0.1% …Read More »
The main drivers for demand for Swiss francs are the Euro crisis, but even more the behavior of American investors, who go out of the dollar in the fear of further bad US economic data and in the fear of Quantitative Easing. This usually pushes down the dollar and inflation hedges like the Swiss franc and …Read More »
On Thursday, December 13th, 2012, at 09.30 CET, the Swiss National Bank (SNB) holds its quarterly monetary policy assessment meeting. As we explained in the “drivers of Swiss inflation” post, inflation pressures will remain subdued for the next 2-3 years, because the effects of the quick rise of the franc and weakening global growth need to …Read More »
Claudio Messora, one of most well known critics during the “Reign of the spread” between Italian and German bonds.He happy about the return of democracy.Read More »
Italian Prime Minister Mario Monti passed 30 billion euros ($40.3 billion) in tax hikes (17 billion), pension and spending cuts (13 billion).Read More »
With ECB’s OMT & “conditionality”, that requires austerity and implicitly reduction of salaries in European periphery, Merkel & German economists have created consequences similar to a gold-standard.Read More »
The idea that the euro has “failed” is dangerously naive. The euro is doing exactly what its progenitor planned for it to do. According to Robert Mundell, the creator of the Optimum Currency Zone concept, the euro would really do its work when crises hit. Removing Keynesian monetary and fiscal juice to pull a nation out of recession. More about this evil genius on Guardian.Read More »
Switzerland is well known as the country, where even central bankers were allowed to do insider trading. Instead the whistle blowers get problems with the courts. Some new cases of insider trading include UBS, General Electric and Valiant, see the article on cash. At the same time, an initiative for more for transparency on income of politicians, does not have success.Read More »
Like often in global economic downturns, the demand for Japanese cars and electronics has fallen in Q3, especially due to European purchasers. Additionally fueled by a row with China, the current account has become negative. Is Japan doomed because the yen will fall and bond yields will rise? DetailsRead More »
The history of EU reforms, bailouts during the euro crisis and the German perspective on themRead More »
A discussion in the investor forum made clear how currency speculators currently help the SNB to maintain the floor against normal investors. A situation that was different in August/September 2011, when the SNB had to fight against these speculators. A discussion in the investor forum Seeking Alpha: part one Based on our analysis of …Read More »
The must read “Italy is a better bond bet than Britain” on the Financial Times. Unicredit CEO Nielsen implicitly confirms our latest post on global and European imbalances that can be solved only with a Northern Euro and our post why the UK needs to be downgraded similar as France. Both the UK and Italy have the same weak current account, weak investment position and slow growth. They should play together in the Southern euro league.Read More »
Given that most farmers are rather old, he says that the world should be very grateful to speculators that bet on food prices, this helps to obtain the required younger farmers. Jim Rogers has exchanged all his euros into francs, he thinks that the EUR/CHF peg will fall soon. Tagesanzeiger (German or English)Read More »
The American-Taiwanese economist Richard Koo, is the chief-economist of the Nomura Research Institute. In his theory of the Balance Sheet Recession he distinguishes between the “Yang” phase of the economy and the “Yin” phase (the so-called “balance sheet recession”). In “Yang” times companies want to increase profit and people consume a big part of their pay …Read More »
Keeping Greece in euro zone, eurocrats or better “euro morons” have successfully avoided a weak drachma and a following Greek hyperinflation. Instead they successfully created stagflation. Currently European HICP inflation is at 2.5%, far above the max. 2.0% official ECB mandate, but the euro is becoming weaker and weaker. German salaries are rising with 2.6% …Read More »
Nach dem starken Anstieg des Frankens in den letzten Jahren, sagten Ökonomen wie O’Neilly von Goldman Sachs oder die der Schweizerischen Nationalbank (SNB), dass die Schweizer Währung überbewertet wäre. Einige benutzen den “Big Mac Index”, den OECD-Kaufkraftsparitätsindex oder Kaufkraftparitäten auf der Basis von Konsumentenpreisen als Beweis. Wir zeigen, dass aber nur die Kaufkraftparität aufgrund von …Read More »
Credit Suisse and UBS will charge negative interests for cash clearing clients above a threshold. Last year such news was worth 250 bps, on December 3 only 28 bips. One remembers August 26, 2011, when UBS only spoke of negative interests and consequently EUR/CHF rose from 1.1420 to 1.1688. At the time FX traders …Read More »
Evidence from simple tests supports perhaps some belief that crude oil tends to have strong and weak months of the year, Q4 is often the weakest quarter and Q1 and Q2 the best.Read More »
In our manifesto we criticized that central banks created inequality. They pushed asset prices upwards from which only the rich informed investor could take profit. The middle class was left with an over-indebted home.
With the upcoming end of this Joseph cycle even the rich are not able to increase their income. Harvard Business Review.
Ludwig Poullain: Das Ende des Euro rückt näher. Er treibt Völker wieder auseinander. Neid, Missgunst, Verachtung, selbst Hass sind wieder lebendig geworden.Read More »
Total sight deposits at the SNB rose by nearly 1 billion to 374 bn francs in the week ending on November 23th. “Other sight deposits”, the ones of foreign banks and Swiss companies, fell by one billion francs, but the ones of local institutes increased by nearly 2 billion francs.
See full detail on our explanation, historical and our expected development of these SNB monetary data.Read More »
Der Bundesparteitag der Piratenpartei Deutschland, ist für jeden, der auf Basisdemokratie setzt, ein sehr aufregender Anlass für jeden, auch wenn die Ziele der Partei sich nicht unbedingt mit den eigenen politischen Zielen decken.
Die Piratenpartei Deutschland ist eine basisdemokratische Denkfabrik, ganz im Gegensatz zu vielen anderen Parteien, die von einer parteipolitischen Oligarchie, Lobbyisten der Wirtschaft und der Medienlandschaft beherrscht werden.
Who Downgrades France MUST downgrade the UK, too After Moody’s downgraded France, we are waiting the next major sovereign to suffer the same fate. According to the must-read interactive graph on the BBC, France now has a medium risk of default, but the UK is still in risk status “low”. According to the BBC, each citizen …Read More »
Total sight deposits at the SNB rose by 0.5 billion to a total of 373 bn. francs in the week ending on November 16th. “Other sight deposits”, the ones of foreign banks and Swiss companies, fell by 600 million francs, but the ones of local institutes increased by more than 1 billion francs.
See full detail on our explanation, historical and our expected development of these SNB monetary data.
Currently European HICP inflation is at 2.5%, far above the 2.0% official ECB mandate, but the euro is becoming weaker and weaker. German salaries are rising with 2.6% per year. At the same time, the ECB cannot hike interest rates, because it wants to provide cheap money to the periphery. The periphery continues to buy German products, even …Read More »
Saxo Bank, recently called for quitting long Gold and “being scared” trades.
For them shale gas & oil is the game changer for the United States. It should make the US the leader for global growth in the next years. The International Energy Association (IEA) declared that the US would be energy-independent by 2030.
Today a nice article about the history of wrong IEA forecasts came out:
Moreover environmentalists do not stop to protest against the fracking techniques.Read More »
Der „In-einer-Demokratie-herrscht-das-Volk“-Mythos wäre durch nichts nachhaltiger zu entzaubern gewesen als durch den seit Jahren aufgeführten Eiertanz um Griechenland- und Eurorettung, durchgeführt durch eine Bankenoligarchie, die dem unwissenden Bürger immer wieder mit Endzeitdrohungen kommt, sollte das kleine Griechenland die Eurozone verlassen. Die Endzeit erreichen wir nun, weil sich die Deutschen vor lauter Angst vor ESM und Target2 weigern zu konsumieren.
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Manufacturing PMIs are considered to be the most leading and important economic indicators. Jim O’Neill, Chairman of Goldman Sachs Asset Management, believes the PMI numbers are among the most reliable economic indicators in the world. BlackRock’s Russ Koesterich thinks it’s one of the most underrated indicators. Global Purchasing Manager Indices for the manufacturing industry December 3, 2012 …Read More »
Steen Jakobsen, chief economist of Saxo Bank followed our bullishness on US dollar and our shorts on golds and silver of the beginning of October when gold was trading around 1780. At the time, Steen was writing his column, we have already realized some gains on silver and gold shorts. Steen seems to be content with …Read More »
Barack Obama war und ist der präferierte Kandidat vieler Schweizer. Obama scheint der Mann von Welt zu sein, während vom konservativen Mitt Romney eher feindselige Politik gegen Russland, China und Iran zu erwarten ist. Daher sind die Neutralität- und Frieden-liebenden Schweizer eher auf Obamas Seite. Aber auch wirtschaftspolitisch scheinen viele Eidgenossen Obama zu mögen. …Read More »
SNB Q3 Profits: 10 billion francs The Swiss National Bank (SNB) radically reduced its euro share, in the third quarter from 60% to 48%, and bought US dollars and sterling instead. In the second quarter, however, it increased the euro share from 51% to 60% and concentrated on buying euros. Given that the EUR/USD was …Read More »
Euro Crisis Has Affected Germany, Switzerland Still Immune Most Recent Events The Swiss SVME PMI has risen from 43.9 to 46.1. This PMI is dominated by machinery, metallurgical and electric equipment exporters organized in the Swissmem organization. As opposed to the chemical industry, they were not innovative enough to adapt to the stronger franc; but …Read More »
Trend Follower Ashraf Laidi Loses Against the Contrarian Investor SNB The currency strategist Ashraf Laidi recently evoked a EUR/USD exchange rate of 1.35 thanks to the risk appetite after the easing operations of the Fed and the ECB. We show that he and the masses of his Forex rooters actually traded against a big central …Read More »
Composition of SNB Forex Reserves, Q3 2012 The Swiss National Bank (SNB) reduced the share of euros in the third quarter substantially from 60% in Q2 to 48% in Q3 and increased dollar and pound positions. The SNB bought 80 billion euros or more when the common currency was trading around 1.24$, especially at the end of …Read More »
We think that the Swiss National Bank invested far more in Italian and Spanish bonds than analysts like Standard and Poor’s expected and was able to front-run ECB decisions. This new style of hedge funds, formerly called “central banks”, can refinance at zero percent and is able to show a lot better performance than the …Read More »
Seasonal effects, the good months for the SNB and the US economy, but weaker ones for emerging markets and Switzerland Despite the seasonal effects between October and March, the SNB is not able to sell currency reserves consistently. Traditionally the USD gets stronger and stocks rise over the autumn months till January. This year’s stocks appreciation was possibly already anticipated …Read More »
Swiss and German Economic Indicators, October 2012 Both Swiss and German economic indicators show continued signs of stability, but the German situation has become worse and might affect the Swiss. Especially low unemployment, rising real wages and strong trade balances are signs of robustness. Despite that, Germany’s industrial production is weaker than last year, …Read More »
A couple of months ago the euro traded close to EUR/USD 1.20 and the whole world was betting on its breakdown. Once the euro downtrend ended thanks to QE3, OMT and euro zone current account surpluses, the common currency did not stop to appreciate against the yen and reached levels of EUR/JPY 104 and above. …Read More »
Or how Swiss exporters are able to widen their margins thanks to the SNB currency manipulation Last week the Swiss export data for the third quarter was released. The news agency report was simple: Exports from Switzerland fell by a real 8.0 percent in September to 16.49 billion Swiss francs ($17.87 billion), the Federal …Read More »
Seasonal effects, the good months for the SNB and the US economy, but weaker ones for emerging markets and Switzerland Given that the seasonal effects between October to March have started, the SNB might be able to sell some currency reserves. Traditionally both the USD gets stronger and stocks rise over the autumn months till January. This year’s stocks appreciation was …Read More »
Submitted by Mark Chandler, from marctomarkets.com Our big picture view is that the US dollar is carving out an important bottom, after selling off in Q3 as policy makers moved to reduce the extreme tail risks. The position adjustment that inspired among investors appears to have largely run its course.This bottoming of the dollar is …Read More »
This page is the top page for several articles on bonds.Read More »
Some ten days ago, we examined in detail why the monthly job data was no conspiracy as Jack Welch maintained, but simply flawed. Similarly as David Rosenberg we said that the way the BLS obtains data for the household survey was error-prone. Gluskin Sheff’s David Rosenberg That the 7.8 percent jobless rate takes it to the …Read More »
Seasonal effects, the good months for the SNB and the US economy, but weaker ones for emerging markets and Switzerland, have started Given that the seasonal effects between October to March have started, the SNB might be able to sell some currency reserves. Traditionally both the USD gets stronger and stocks rise over the autumn months till January. This year’s stocks …Read More »
In the latest poll, 74.8 percent of the Norwegian population says no to EU membership, while 17.2 said they would vote yes in any referendum. 7.9 percent have not decided. Seven out of ten voters of the ruling party do not share the party’s views on the EU and would have voted no in a possible referendum, …Read More »
This link on the SNB website shows the data the central bank provides to the International Monetary Fund (IMF). It shows the SNB Forex and gold reserves in the last month. It is so-called “IMF Special Data Dissemination Standard (SNB Data)” It is released together with the international investment position, some monetary aggregates and the balance of payments two weeks after …Read More »
As we predicted on October 5 or one day later on DailyFX, metals have started their descent, silver lost one dollar, from levels around 35$ last week to 34$ now. Marc Faber joins our view and says that asset prices are quite vulnerable. “I’m not 100% in cash, for the simple reason that I could …Read More »
Strange movement in the EUR/CHF in the Asian session today The Asian session was a risk-on session, it recovered some of yesterday’s losses. After yesterday’s rather good HSBC services PMI, Shanghai Composite was up today by 1.97%. Therefore safe-havens like the yen and the Swissie were under pressure. At first, some Forex traders …Read More »
Seasonal effects, the good months for the SNB and the US economy, but weaker ones for emerging markets and Switzerland, have started Given that the seasonal effects between October to March have started, the SNB might be able to sell some currency reserves. Traditionally the United States and the USD dollar become stronger and stocks rise over the autumn months …Read More »
Submitted by Mark Chandler, from marctomarkets.com The Price of Protection We have been tracking the deterioration in the technical condition of the major foreign currencies in this weekly note for the past three weeks. The euro’s recovery, off the support we identified here last week near $1.2800, should not overshadow the fact that the dollar’s …Read More »
Conspiracy ? Huge Differences Between the Payrolls Report and the Household Survey based on the extracts of Robert Oak, Noslaves.com and his blog on Economic Populist It’s a conspiracy! The BLS is trying to swing the election! They’re cookin’ de books! By now you’ve seen the claims, accusations and mumblings by the pundits, press, twitter and blogosphere. So …Read More »
The most famous investors Marc Faber and Jim Rogers were in a common interview on CNBC. Marc Faber is of our position, whereas Jim Rogers is still bullish on commodities. Marc points out that China’s bench mark stock index the Shanghai Stock Exchange Composite Index was at 6100 in 2007 even as it …Read More »
Standard and Poor’s critique of the Swiss National Bank, Part 2, extracts from our full report As many readers of our blog know, we are not the best of friends with the current Swiss National Bank (SNB) policy: we recently published a paper claiming that the SNB will go bankrupt and …Read More »
Seasonal effects, the good months for the SNB and the US economy, but weaker ones for emerging markets and Switzerland, have started Given that the seasonal effects between October to March have started, the SNB might be able to sell some currency reserves. Traditionally the United States and the USD dollar become stronger over the autumn months till …Read More »
Part 1: Swiss investments abroad [This paper includes some of the S&P critique, but also aims to clarify some of S&P’s misleading points] Last Thursday Thomas Moser, a member of the Swiss National Bank (SNB) governing council, said that one of the main reasons for the strong franc is the conversion of Swiss foreign incomes …Read More »
In the full report we explain in detail how one can analyze the balance sheet of the Swiss National Bank (SNB) based on several sources of information, for example the monthly bulletin, which shows the changes of the SNB balance sheet and the quarterly distribution of the SNB assets including the information about FX …Read More »
Swiss Gross National Income (GNI) rises by 1.8% in Q2, after Q1 +0.5% According to the latest SNB Monthly Bulletin, the Swiss net international investment position (NIIP) has improved by 64.5 billion francs. The Gross National Income (GNI) rises by 1.8% in Q2. The SNB currency reserves rose by 128 Bln. Francs in the …Read More »
Abstract We determine the main criteria with which markets evaluate currency prices. We focus on explaining the differences between the carry trade era (or like Ben Barnanke called it “The Great Moderation”) and the period after the financial crisis. Our research shows that each one of the following three main preconditions must be fulfilled, …Read More »
Die grossen Schweizer Franken-Mythen: Die SNB kann Gewinne durch die Währungsreserven erzielen Letzten Sonntag behauptete der frühere Nationalbank-Direktor Niklaus Blattner in der Sonntagszeitung: “Nach der Ankündigung von EZB-Direktor Mario Draghi kann kein Zweifel mehr bestehen, dass der Euro fortbestehen und Griechenland in der Währungsunion bleiben wird.” Draghi, Direktor der Europäischen Zentralbank (EZB), …Read More »
Recently we have observed the upward movement of all euro pairs. They have marked more or less continuously higher highs and higher lows thanks to massive support from the central banks ECB, Fed and SNB (ignore Sunday 16th) The first euro pair to finish this upwards trend is traditionally the EUR/CHF. …Read More »