Swiss National Bank
At the open, Europe looked in the abyss, and with no help coming from China, it did not like what it saw: And then the answer came from the Swiss National Bank, which stepped in to prevent the collapse just as Europe was opening. Because seemingly out of nowhere, a tremendous bid came in to life the EURCHF, buying Euros (against the CHF and the USD) and selling Europe's last left safety currency. We now know that it was the SNB, the same central bank which is the proud owner of well over $1 billion in Apple stock.
According to BofA's Jill Hall, "BofAML clients were big net sellers of US stocks in the amount of $4.1bn, following four weeks of net buying. Net sales were the largest since January 2008 and led by institutional clients—after three weeks of net buying, institutional clients’ net sales last week were the largest in our data history."
There’s a specific sort of instability in the world today – a game theoretic instability – which means that it has an identifiable pattern and rhythm you can understand in order to improve your investment strategy. It’s the instability of the game of Chicken, and once you start looking for it, you will see it everywhere here in the Golden Age of the Central Banker. Greece vs. the Troika? Chicken. Western sanctions on Russia over the Ukraine? Chicken. OPEC vs. US energy producers? Chicken. ECB vs. the Swiss National Bank? Chicken. Fed monetary policy communications to markets? Chicken. Abenomics? Chicken. US policy towards China? Chicken. ISIS vs. the world? Chicken.
One hoary old myth claims the interest rate you see isn't real. You see, it’s only nominal. To calculate the real rate, you're supposed to adjust the nominal rate by inflation.
European shares remain higher, close to intraday highs, with the autos and travel & leisure sectors outperforming and basic resources, utilities underperforming. Meeting of finance officials to reach a deal over Greek aid ended in frustration, forcing leaders to call for an emergency summit for Monday. ECB plans to hold an emergency session of its Governing Council on Friday to discuss a deterioration in liquidity at Greek banks, three people familiar said. German airwave auction raises $5.7b to top 2010 sale. Bank of Japan leaves monetary policy unchanged as forecast. Shanghai Composite Index capped its worst weekly decline in seven years.
Neither control for its own sake, nor bail-ins, are the primary drivers of going cashless. It's something more serious than power or loot.
The key events on tap for next week.
W're told that the Federal Reserve protects us from economic waves, indeed from the business cycle itself. The basic idea is that the Fed has both the power and the knowledge to somehow deliver an economic miracle.
Why has the dollar jumped in recent weeks? Global conspriacy and lies? Are thousands of investors and participants being deluded?
"Only if the economy is powered by the marginal borrower who will no longer borrow after a 0.25% hike, does it make sense to believe a hike will derail the economy. Comparisons to 1937, where a hike pushed the US into recession, are incomparable and groundless. On the other hand, maybe the FOMC is worried that the ‘no free lunch’ concept makes them suspicious of the possibility of a meaningfully deleterious market reaction which could have a negative impact on the broader economy. However, under this logic, delaying a hike would only exacerbate such a response."
Will global QE carry on forever...the next month may give out some clues..will it be Junemaggedon after we had May-hem??
"The top 25 hedge fund managers made more than all the kindergarten teachers in the country," declared President Obama. One side supports him, and the other defends hedgies. Both get it partially right.
“You can’t stop an idea whose time has come.”
Shortly after 6pm London time yesterday, The ECB's Benoit Coeure told a non-public audience of hedge funds in London that "the central bank would moderately front-load its purchases in its quantitative easing program because of the seasonal lack of market liquidity in the summer." The reaction was a 50 pips drop in EURUSD... but this was inside information was not released to the trading public until around 8am London time - and resulted in a 150 pip plunge. In other words, a select private group of head funds in London were leaked ECB front-loading news 14 hours before The ECB deemed it 'correct' to publicly release the comments... due to what The ECB calls "an internal procedure error."