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JPM Ridicules SNB Intervention, Tells Clients To Short EURCHF With 1.25 Target
Sorry Jamie Dimon, no stocking stuffer for you from Philipp Hildebrand this year. From JP Morgan:
- We would need to check my records a little more careful but we suspect the SNB has set a new world record with its FX intervention in May. Data released by the Swiss Statistics Office and confirmed to us by the SNB puts intervention at CHF 78.8bn in May (yes, that is the change of reserves, not their level). To put this into perspective, this is nearly three times the previous largest monthly intervention and amounts to 15% of GDP in just one month. Current reserves are now CHF 232bn or 43% of GDP.
- We knew the SNB intervened in heroic quantities to defend the 1.40 level but this figure is way beyond even the most extreme estimates. It is in fact just plain silly, and confirms an FX policy that: 1) has run out of control; and 2) is even more unsustainable than thought. And even should the SNB be reckless enough to want to repeat intervention on this scale, we can be pretty certain that it will only do so on a liquidity-sterilised basis. There is simply no way the SNB is going to conduct unsterilised intervention on this magnitude and very quickly lose complete control of domestic money supply. The fact that EUR/CHF has declined by 10% even though the SNB has sold nearly CHF 190bn, or 35% of GDP, since the spring of last year, is a clear a demonstration that sterilised intervention, for this is what the SNB has done, simply does not work. It is a con-trick, one which the market is learning to look through.
- This data should embolden the market to re-sell EUR/CHF. Many positions were squeezed out in the stop-fest up to 1.45, leaving positions an awful lot cleaner than for some time. We re-sold EUR/CHF in the latest FX Weekly and suspect that now is the time to think about more extreme targets than the rolling 2-3% per quarter depreciation seen over the past year. One-touches in the mid-low 1.20's over the coming year are starting to look a good prospect. We are therefore opening a 1Y EUR/CHF 1.2500 at-expiry digital put, priced at 13% off a 1.3870 spot.
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"....is a clear a demonstration that sterilised intervention, for this is what the SNB has done, simply does not work. It is a con-trick, one which the market is learning to look through."
This will be apparent to everyone with every central bank eventually. The "moral suasion" employed only works when there's some credibility backing them up. That was squandered years (decades?) ago and the only thing that's held this piece of s**t together this long was the central banks massive manipulation. Along with out- sized profits funneled to key participants for as long as they looked the other way or jumped when told to do so.
No longer baby. End game coming. Time to put on your really comfortable dancing shoes because the beat is about to be picked up to double and triple time.
i think a CB flagged you as junk....
This has only worked due to massive force on the part of government and the assent of those forced. It is our shit that we prefer not to look at.
The reason it is coming to a close is the PTB are upping the ante to see who among the sheep will *get the f out* and who will *spread em and whimper.*
It's sort of a graduation day conveyor belt, where grasping and executing certain concepts gets you to different exits. But this divergence is sizable.
Biz as usual in the classroom.
"End game" ??? define: "End" lol, right?
Heads, JPM wins. Tails, they repo it to the Fed at mark-to-unicorns.
Sounds like a solid trade to me.
+1000
Government Sachs and JPM can play all the shell games they want - dollar is going bye bye too.
Dude, you rotated in another picture for your avatar. Nice.
Next time could we get the left profile? Thanks. :>)
of course it is. but think of it this way: if you're stuck on a river that is ending in a waterfall, do you stand on your little log loudly proclaiming that your log as well as all the other logs are definitely going to head over the edge?
or, do you jump from log-to-log (the analogy here being making money along the way) before reaching safety somewhere on the edge?
It is a con-trick...
takes one to know one.
reason for the move today was this: Pre-decision about Swiss Banking Secrecy Rule
http://finance.yahoo.com/news/Swiss-lawmakers-reject-deal-apf-334047202.html;_ylt=AlcG.64C1NjkXobEhjlaRiixba9_;_ylu=X3oDMTFlMTEwOHM2BHBvcwMxMgRzZWMDbmV3c0h1YkFydGljbGVMaXN0BHNsawNzd2lzc2xhd21ha2U-?x=0
It's a great little scam you know - "advising" clients to take the opposite side of their trades and then ripping them to shreds. What's more surprising is that the "clients" fall for it everytime, which means they probably deserve the ripping in the first place. Come to think of it, can't blame JPM really.
Not at all. I pine for the old days when insane heretics called this stuff fraud. Crazy talk!
Good heavens, man. Didn't you read the sign on the door. It says: "Being hit on the head lessons." Now if you are looking for proper investment advice, please seek the door marked: "Egress." Have a nice day.
"It is a crime to leave the sucker with any of their money." :: W. C. Fields.
I wonder if buying CHF will turn out to be a really dumb trade. The safe haven view of CHF probably understates the exposure the Swiss Banks have to peripheral Europe, denominated in CHF (a cheap funding currency), which means their counterparty risk books will be feeling the heat. It is worth remembering Swiss banking "assets" are multiples of GDP and as with all banks, as a depositor your capital has been leveraged to the max and "put to work."
At least you may end up with a timeshare of a Hungarian apartment in exchange...
On his latest, Bruc Krasting agrees with the position but not the trade, and I agree. I think it may be a case of a research guy going to the trading desk and asking for a standard bearish trade, and getting one. Without thinking too much.
I can't believe JP will hold this position to expiry - even as a paper trade for their research guys, its just too long and too expensive.
However thats just the duration. When the SNB is slowing the fall as it has, the option skew may be cheap.
So just buy a September 1.30 put.
Or if you are OK to sell the skew (I wouldnt), then buy a September 1.30/1.20 put spread, which is like the JP trade but shorter, cheaper, and simpler to manage. However if the SNB lets go, we could see a gap and a skew increase.
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