Swiss National Bank

To make people eat their seed corn, we need to add the essential element: a perverse incentive. There’s only one way to make everyone play a perverse game: force. Let’s look at monetary policy in this light.

As asset bubbles are in the way of the Fed’s policy, a decline in stock prices removes the equity market bubble and enables the Fed to print more money and start the process up again. On the other hand, the stock market decline could indicate that the players in the market have comprehended that the stock market is an artificially inflated bubble that has no real basis. Once the psychology is destroyed, flight sets in.

Déjà-vu time!

"I have learnt from history that it is very hard working out what the trigger is. In 2008, it was the collapse of Lehman Brothers that triggered a credit crunch. Now it could be a major event in Turkey or a default of the Brazilian oil company Petrobras or some event in Malaysia. But if I have to pick one I would say it is Turkey introducing capital controls. Such controls will mean that Turkey will not pay back principals amounting to 400 Bio. $ and the interests on it." - Russell Napier

For all those who need validation that they are part of a big hedge fund hotel club, which implicitly means there are few if any incremental fast money buyers left, and wish to know the top hedge fund holdings, here is a list of the 50 stocks which according to Goldman "matter the most" to hedge funds, the stocks which appear among the largest 10 holdings of hedge funds.

Imagine running a rink company at the end of the roller skating fad in the 1980's. You know it is not going to survive for long. How do you operate your business? You milk it. Well, that's now happening across the entire economy.

Carry traders just got their fingers burnt by central bankers, again. Just 7 months after The SNB crushed Swiss Franc free-riders, as Bloomberg reports, The PBOC 'surprised' an armada of easy-money-addicts drawn to the Yuan by its stability, potentially wiping out their highly leveraged returns or leading to forced lqiuidations. Twice in 8 months is enough to shake anyone's faith in central bank omnipotence, but as Ben Hunt noted, potentially more crucial to the 'faith-based' investing of today, the Common Knowledge about Chinese growth – what everyone thinks that everyone thinks about Chinese growth – is dramatically changed for the worse today, and it’s a change that will accelerate unless the Narrative shifts.

To help remind readers of what happens when the entire world engages in wholesale currency war, here is a complete list of all the recent FX interventions, courtesy of Stone McCarthy.

Almost exactly seven months ago, on January 15, the Swiss National Bank shocked the world when it admitted defeat in a long-standing war to keep the Swiss Franc artificially weak, and after a desperate 3 year-long gamble, which included loading up the SNB's balance sheet with enough EUR-denominated garbage to almost equal the Swiss GDP, it finally gave up and on one cold, shocking January morning the EURCHF imploded, crushing countless carry-trade surfers. Fast forward to the morning of August 11 when in a virtually identical stunner, the PBOC itself admitted defeat in the currency battle, only unlike the SNB, the Chinese central bank had struggled to keep the Yuan propped up, at the cost of nearly $1 billion in daily foreign reserve outflows, which as this website noted first months ago, also included the dumping of a record amount of US government treasurys. 

"The future is unknown and we are not dealing with markets that are free markets anymore...now we have government interventions everywhere. [But] in the last say twelve months, I have observed an increasing number of academics who are questioning monetary policies. That's why I think they will take the gold away and go back to some gold standard by revaluing the gold say from now $1000/oz to say $10,000 dollars. An individual should definitely own some physical gold. The bigger question is where should he store it? because... the failure of monetary policies will not be admitted by the professors that are at central banks, they will then go and blame someone else for it and then an easy target would be to blame it on people that own physical gold because - they can argue - well these are the ones that do take money out of circulation and then the velocity of money goes down - we have to take it away from them... That has happened in 1933 in the US."

The demise of the dollar has been greatly exaggerated.  Here is how I see the near-term outlook. 

We were amused to learn that in the quarter in which AAPL stock almost hit a new all time high, the Swiss Central Bank, which reported a record $20 billion loss in the second quarter, and a record $52 billion in the first half, added another 500,000 AAPL shares, bringing its new grand total to a whopping 9.4 million shares, equivalent to $1.2 billion as of June 30 (well below that now following the recent 10% correction).

It's time to challenge the notion that the decline of a currency can be measured simply by the rate of price increases. This price-centric view misses the ongoing hyperinflation.

The SNB reported a record loss, but the real meaning and implication is not what most are claiming.  See why.

Earlier today, the SNB which is perhaps the most transparent hedge fund of all central banks and actually lays out its financial statements in a respectable manner every quarter, released its results for the second quarter (and first half) of 2015. The result: another absolutely epic loss, amounting to €50.1 billion ($51.8 billion) of which €47.2 billion on currency positions - a whopping 7% of Swiss GDP - meaning that in Q2 the SNB lost another €20 billion. This happened despite the SNB having invested 17%, or $94 billion, in foreign - mostly US -stocks.