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Behold The Carnage: Hedge Funds Most Short The Swiss Franc Since June 2013
It appears the Swiss National Bank decided to wait til they saw the whites of the eyes of the 'speculators'. The SNB's surprise decision to scrap the EURCHF ceiling has unleashed major pain across the hedge fund community as speculators, according to CFTC data, are the most short Swiss Francs (long the USD) since June 2013. Holding a huge 24,171 contracts short USDCHF futures (which surged 24 handles on the news) will not go unnoticed by the margin clerks...
Speculators are the shortest Swiss Franc (against the USD) since June 2013...
Which explains the massive liquidations...
Here are the 10 "halts" (courtesy of @NanexLLC) in Swiss Franc futures...
For a sense of the move - that 24 handle surge cost each contract holder $30,000 - almost 9 times the initial margin required for hedge traders.
Charts: Bloomberg
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Although the Swiss National bank change of strategy was shocking as well as sudden, but this is what happens when a bankrupt Govt / Central bank keeps buying EUR and selling (printed) CHF endlessly. It never works and always fails!
In short, that is what happened in Switzerland today! The damn debt kept rising and became uncontrollable!
In addition, do note that all the muppet people across Europe (especially Eastern Europe) whom the totally incompetent Swiss bankers advised to take mortgages or loans in CHF just lost 20% in currency alone and will have to pay more to pay back the CHF loan than they saved with 1% interest rates instead of paying 3% interest rates in EUR or whatever else. These interest rates are approximations.
Additionally, the large Swiss banks and most Swiss banks earn anywhere from 70% to 80% of their incomes from clients in non francs. Imagine, they earn USD 100m in US, when converted into CHF this money just lost 20% of its value! In one single day! Because the ever so stable 'Swissie' is not so stable after all!
The default ratios from all CHF borrowers who live outside Switzerland and do not earn in CHF just went up by a few notches.
Expect more foreign banks to leave Switzerland (while Swiss banks merge, reduce staff and leave shores afar) before their entire economy becomes one big mess!
All real estate became 20% expensive inside Switzerland in one single day!
I got that feeling that ECB is going to do something insane like QE or whatever else on 22 Jan 2015.
India also reduced interest rates suddenly today in order keep growth alive, in light of dwindling exports, declining GDP, fragile banks and rising inflation despite falling oil prices!
These 2 Central banks know something that rest of us don't (yet)!
Wait for lines inside Switzerland (and outside Switzerland across EU) to grow a bit longer in a few weeks when thousands of jobs are lost in/around Switzerland!
You have been warned!
Could this be the reason why SNB had to act today to protect the nation? if Swiss secrecy ends and ALL information on real estate and bank accounts is allowed to be shared with all countries worldwide, then why would anyone need a Swiss bank account?
It is too much of a coincidence to announce anti secrecy draft laws on one day and SNB to act suddenly on the next!
Has the alpine Swiss nation just caused itself to become more detached and insulate itself more from the dysfunctional Eurozone?
Switzerland unveils draft laws to dismantle bank secrecy
switzerland draft laws secrecy
Nobody expects the Swiss Intervention! Amongst our weaponry are such diverse elements as fear, surprise, ruthless efficiency, an almost fanatical devotion to the CHF, and very accurate watches—oh damn!
Doesn't seem that big a deal to me. So tyler is saying 24k contracts X 30k loss was transfered pockets? Thats only 720M. Thats like Apple's annual toilet paper budget.
https://www.youtube.com/watch?v=zK0JaEde4VI
SNB wins the pie-eating contest
24,125 contracts x $30,000 per contract = $725,130,000 that is going to have to come from somewhere.
Less than a billion so in the grand scheme of things it doesn't amount to much.
But if you are looking to sell your mansion in Greenwich, CT, you might want to put that baby on the market NOW.
725,130,000 x levered margins calls = way more than a billion
"725,130,000 x levered margins calls = way more than a billion "
Exactly.
Some of those contracts were probably so heavily levered that they CANNOT BE PAID. Speculating with Other People's money means you may be able to cash in if you win and run away if you lose leaving Someone Else holding the flaming bag of shit.
Then there are the derivatives contracts that have been placed with consideration of the Euro peg.
Then there are the 'hedges' and forward contracts that have a PRICE associated with them that may in effect have moved drastically in a flash. IF you have contracts to deliver/recieve -Oil or Nat. Gas or copper for instance- that are denominated in CHF...
Contango might be a bit of a problem right now for some people...
Lastly, anyone that took loans in CHF that thought they would be able to roll them out of CHF before any change in the peg made the loans UNeconomical just got smoked badly. How would you like to have a major construction or import project underway that was just forcibly re-priced +20% or more that you can't get out of. Profit margins might not be a concern at this point if operating margins cannot even be met without defaulting on cross-currency contracts.
-And this isn't just about CHF and Euro by a long shot.
Call it a tax on the wealthy to the real royals of the world, and all of them have homes in switzerland and that corner of italy that abuts. The top figurehead of all is king of somewhere. England does not have a king.
They think they can keep the farce going by pumping the S&P and the DOW, but the truth of the matter is the moment you flip the QE switch to off the bottom starts to drop out of everything else. Commodities have taken a dump with oil headed to never never land and the liquidity crunch is causing central banks to go "everyman for himself".
Cooperation between CBs is going to start to fracture unless they turn the tap back on state side.
We're going to have more QEs than police academy movies.
Well that is the buy opportunity some wealthy are waiting for. The bottom of the commodity market.
Some are waiting for a Volcker moment.
Also those are only exchange traded contracts, I'd imagine there were some OTC's that dervied their value based on CHF/X$
It is just me, or we are really seeing part from the book "Financial meltdown engineering 101"?
nobody expect the swiss intervention?
bullshit
last couple of weeks when SNB introduce negative deposit rate, the deposit keep rising, rising..
If you're referring to what I think you are referring, you forgot. the comfy. chair.
https://www.youtube.com/watch?v=WlBiLNN1NhQ
Bank secrecy has been so much a foundation of Switzerland that the loss of bank secrecy is almost akin to loss of Sovereignty.
Something is amiss.
Yes, IMO it has been one of the secrets of Switzerland's "success".
indian banks aren't fragile . Their gdp is on a decline ? How so ? Rest everything you mentioned is correct .
Max,
Please see charts here:
The rise of the bad loan
Recent FT article here:
india government cannot capital inject banks
4 billionaires went bankrupt in 2014 (Mallya, Roy, TV Reddy, Siva), more should follow in 2015. Some perspective here: http://www.newindianexpress.com/business/news/The-Men-Who-Owe-the-Banks-...
Except for the decline in 2009, India's GDP is at a decade low. http://www.tradingeconomics.com/india/gdp-growth-annual
Government is slashing health budget, already the lowest in the world: http://in.reuters.com/article/2014/12/23/india-health-budget-idINKBN0K10...
As well as its defence budget : http://www.deccanherald.com/content/453570/cong-attacks-modi-govt-over.h...
When the money finishes, things get tough!
India is the only major country in the last 5 years except China whose ratings have not been downgraded, the time is coming closer!
Thanks for the information . What sort of ratings ? Ratings from politically driven rating agencies or world bank/imf ?
The useless ratings which most fund houses look at in order to determine their investment criteria or banks look at before considering changing the interest rate risk premium in the rigged world of ours. By S&P, Moody's and Fitch, is what I meant.
A step in the right direction in our multi polar world on which a fantastic article came today:
Russia, China and India building new multipolar world orderI am surprised ZH missed it but this came yesterday.
Russia and China setting up Universal Credit Rating Group to rival West's 'Big Three' credit ratersThanks . Modi govt is making a grave mistake by altering nuclear liability law for obama . India could be next Japan . Chutiyaap kr rhe hn . He mentioned Dagong's comment on russian corproate debt though .
Boy, they cut thru this like Swiss cheese... What a holey alliance... but stinks like limburger...
"I got that feeling that ECB is going to do something insane like QE or whatever else on 22 Jan 2015."
Probably what SNB figured ... and the amount of "printing" the swiss would have to do to keep up? ... well, probably assumed the hampster wheel would fly off
really, no choice ... a Big Boom now ... or a BIG BOOM later
Citigroup's losses on forex will be absorbed by U.S. taxpayers.
http://www.motherjones.com/politics/2014/12/spending-bill-992-derivative...
Switzerland is just as insolvent as all the other alleged 'nations' on this planet.
Brace yourselves!
if Swiss secrecy ends and ALL information on real estate and bank accounts is allowed to be shared with all countries worldwide, then why would anyone need a Swiss bank account?...
I haven't seen a Swiss franc and as a US citizen wouldn't be able to read any verbage printed on same, but perhaps if other currencies included the US' FRN's statement: "this note is legal tender for all debts, public and private" everyone the world over could enjoy reserve currency status.
C'mon, this central bank stuff is easy when you try.
jmo.
So Davos meetings are just for shits and giggles,
This is a BIG thing not planned...?
Ohmmmmmm
if Swiss secrecy ends
Enough said.
Come back when you have more of a clue what the current situation is
Do you know what this means?!?
https://www.youtube.com/watch?v=dIIugm_FJOg&feature=youtu.be
The Swiss National Bank should be praised for defending the Swiss Franc and allowing for its citizens to recover their purchasing power. The peg was the real problem, it was like offering something worth $1.2 and only getting $1 back.
The peg should never have been instigated in the first place as it has eroded the purchasing power of many Swiss citizens. Since the citizens did not vote to back their currency with gold and prevent indirect quantitative easing, the Swiss National Bank has done the next best thing and protected its currency by removing an onerous peg.
For anyone short CHF due to Euro concerns, I ask WHY, because it is just silly, why not directly short the EUR?
:(
Warms you up inside...
Who was "most long" the Swiss Franc? That is what I'd like to know...and...Is politician insider trading legal in Switzerland like it is in the USA?
...- mostly Russians, and some strange guys like me.
it was a no brainer trade to be short EUR/USD, and since CHF was pegged to EUR, its a no brainer to be short CHF/USD...
For Switzerland this is the equivalent of a tsunami - which is not usual for a landlocked country. The FI is going to be rather pricey, given that the local base range is -1%. Madness! .
Negative rates suggest that Switzerland should have closed its borders and lived on chocolate and rostis. Globalisation is tough for big countries. The small ones get crushed under the rollers
rip
This is the definition of risk and now we get to find out how much longer you can float a turd and if I hear the word bailout I'm gonna go Pulp Fiction....
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&...
For those looking for the quote (I suppose one of many possible)
Gee can't the Fed masterminds masters of the universe just fix this with another long winded word cloud?
:) "most short ChFr "in history"" . Well what that show is that degrees in economics in University does not teach reality. May these "hedge funds" die. (I was long Chfr, and still is)
EUR/USD short trade so crowded it spilled over into a CHF/USD shorting (as proxy, the shorters relying on the Swiss CB's promise to maintain the peg)....this is what happens when a trade gets this crowded... I shudder to think what will happen when the EUR/USD trade itself directly unwinds (i.e., BLOWS UP) and all the muppets rush for the exits at the same time.
It's always fun to watch the guys who wear suits every day and think they're the smartest guys in the room (or anywhere else) get their asses blow torched. More fun to come as this unsustainable scam of a global economy falls apart!
problem is...they lost other "folkses" money...
George Hayduke...???!!! Gawd those were good times! 'Skrew You', 'Up Yours' - and Get Even (part 2)...
We swissed off some folks...
Smuck, you owe me a new keyboard. I laughed so hard I hacked all over mine...
Cheers for that mate - all I try to do on this forum is spread a few giggles. What else can one do with what's going on except panic and hide in the basement. Plenty of time for that later....like if/when the day comes ZH goes 404. Then I'll follow (hazmat) suit. Until then, crack a beer and try to grin.
while that sucks for them those long oil AND short chf must really be butthurtz(tm)
Please excuse my ignorance, but besides fine chocolates and watches, what exactly do the Swiss export that it was so important to keep the value of their currency low? Seems to me that they would want to keep it as the world's "elite" currency and export that and import gold and foreign currencies. Then, they could be a miniature China and have the world by the gonads.
That is crazy talk!
;)
Chemicals.
Pharma.
Engineering.
Chocolate cuckoo clocks.
Banking*
*solid as a rock
.
It means that the monetary authorities are trying to discourage foreign investors from buying CHF by making them pay for the privilege, and are encouraging Swiss residents to buy forex so as to stop the uncontrolled revaluation of their currency which is going to crush the economy.
how long till folks who got creamed jump off of buildings?
Markets as usual dont have a clue, moving EUR/USD down when in fact its the same crowd shorting EUR/USD and CHF/USD...that group just lost ALOT of moeny and getting margin calls tonight
I hope Soros was short the CHF.
That would be a bright spot. Just read he was long Ferguson.
Imagine if the swiss bank broke Soros.
Whats to stop the SNB to come bck to the 1.20 cap once the HF flood abates with broken heads?
Order after entropy wipe out.
The bloodbath is happening with the hedgies FX PB exposure, not futures. The CME CHF/USD contract is not that popular and only 125,000 francs, but ya a mk2mkt move of about $20k per contract will catch some sleepy trend followers off gaurd. IM is $2470 per contract so ouch.
Im sorry what about that theing called fat tail risk? Oh, I fell asleep during that part in grad school i guess...
Is this a black swan? Curious. Scanning the skies for more.
Swiss, no...
It;s red with a white cross,
damn, could wear a burka, maybe...............AHHHHHHHHH
It's what will late be referred to as the "SNB Moment."