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The Swiss National Bank Is Long $94 Billion In Stocks, Reports Record Loss Equal To 7% Of Swiss GDP
Exactly three months ago, the Swiss National Bank issued a report which everyone was eagerly anticipating: its interim results for the quarter ended March 31 in which it laid out just how much it had loss after it took on an "artificially strong" Swiss Franc market back in September 2011... and admitted defeat when on January 15 in a shocking statement, it announced it would remove the EURCHF 1.20 peg despite reiterating just days earlier the peg was rock solid. The result: a record loss of CHF 29.3 billion ($32 billion).
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 even though the CHF crosses barely registered any of the mammoth moves experienced in the first quarter, suggesting that the SNB was hit by the double whammy of its own currency devaluation in Q1, followed by the launch of ECB's QE which crushed the EUR in Q2, and which happens to be the currency in which the bulk of SNB FX holdings are denominated.
Amusingly, the FX loss was despite a CHF530 gain resulting from negative deposit rates charged on sight deposit account balances since January 22, 2015 when Switzerland went full-NIRP.
This is how tthe SNB described its loss:
The Swiss National Bank (SNB) is reporting a loss of CHF 50.1 billion for the first half of 2015.
The loss on foreign currency positions amounted to CHF 47.2 billion. A valuation loss of CHF 3.2 billion was recorded on gold holdings.
The SNB’s financial result depends largely on developments in the gold, foreign exchange and capital markets. Strong fluctuations are therefore to be expected, and only provisional conclusions are possible as regards the annual result.
Loss on foreign currency positions
The negative result on foreign currency positions amounted to CHF 47.2 billion in total.
On 15 January 2015, the SNB decided to discontinue the minimum exchange rate of CHF 1.20 per euro with immediate effect. The subsequent appreciation of the Swiss franc led to exchange rate-related losses on all investment currencies. For the first half of 2015, these amounted to a total of CHF 52.2 billion.
Interest income provided a positive contribution, at CHF 3.5 billion, as did dividend income, at CHF 1.2 billion. Movements in bond prices differed from those in share prices. A loss of CHF 3.9 billion was recorded on interest-bearing paper and instruments. By contrast, equity securities and instruments benefited from the favourable stock market environment and contributed CHF 4.1 billion to the net result.
As the WSJ notes, the SNB, like most other central banks, is mandated to secure price stability and isn’t obliged to make a book profit. After all, it can just print its way out of any undercapitalized position even though the SNB, which is publicly traded and which issues 13-Fs every quarter, has private shareholders. And as CA's Valentin Marinov reminds us, "SNB profit goes to its shareholders – the Swiss Cantons – the impact of the loss is comparable to a sizeable fiscal austerity."
Expect tortured screams from the 26 Swiss cantons once the realize that none of the billions in proceeds they are used to obtaining from the SNB will be forthcoming this year as a result of the massive loss which will not be made whole unless both the CHF crashes and the EUR soars, offsetting all the year to date losses. The WSJ adds:
The central bank’s loss could jeopardize the customary payments it makes to Switzerland’s federal and regional governments. The payments are politically sensitive in Switzerland, where many of the country’s smaller cantons rely on them to help balance their budgets.
The SNB came in for criticism when it canceled the payments in 2013 for the first time in its history after posting an annual loss on falling gold prices.
Stopping the payments might add to pressure on the SNB, which has been criticized for imposing negative interest rates on deposits it holds as part of effort to blunt the strength of the franc. Critics say the minus 0.75% rate—an effective charge—penalizes savers, especially because it has been levied on government-run vocational pension funds and other private funds.
An SNB spokesman said it was too early to make assumptions about the central bank’s full-year result, but that if returns don’t improve then the payments and dividends could be suspended again.
It would be ironic if what many consider to be Europe's soundest and best positioned economy, undergoes a bout of "austerity" that puts to shame the spending cuts that Greece is looking at.
We are confident the Swiss can handle it, and if not - maybe they should just petition the SNB to stop charging them 75 bps for funding Swiss banks with their deposits.
And yet, like last quarter, what once again caught our attention was not the SNB Income Statement but its Balance Sheet. Here, we find that while the total assets of the SNB have risen to CHF577 billion as of March 31 from CHF 561 billion at the start of the year, of which the bulk was due to "foreign currency investments", which amounted to CHF530 billion.
That's impressive, but that's not the punchline.
What is, just like back in April, was the following table, according to which 17%, or CHF91 ($94 billion) of the foreign currency investments and CHF bond investments assets held on the SNB's balance sheet are foreign stocks...
... Such as AAPL, of which as we revealed back in May, the SNB owns a whopping $1.1 billion in stock.
... and numerous other US stocks:
In other words, the SNB holds 15% of Switzerland's GDP in equities!
We'll give the SNB credit: while every other central bank is loaded to its gills in stocks, few dare admit it. At least the SNB files a quarterly 13-F.
So here hoping that other money printing hedge funds central banks follow suit: hedge funds such as the NY Fed, which having participated directly and indirectly (via Citadel) in the market for the past decade if not longer, are holding hundreds of billions, if not more, in equity exposure either on its balance sheet or in off-balance sheet vehicles (via Citadel).
After all, both the Fed, the SNB and all their peers are desperate to "reflate" the world in the only way they can - through stock market levitation. So if anything, admitting to the world not only that they buy stocks outright, but show which stocks they buy, would result in massive future lagged frontrunning of such central bank 13-F purchases, and everyone jumping into the stock market. After all, piggybacking on a central bank is as close to a riskless trade as exists, at least until they all lose control.
We can hope, but it is that kind of "transparency" that the NY Fed will never agree to because, gasp, someone may just admit that while central banks like the SNB, the BOJ and, of course, the Chinese in the past month, have been openly buying stocks, the "value" of the S&P500 is nothing more than a function of how many times the NY Fed's trading desk at 33 Liberty Street pushes the "buy" button on any given day.
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I like the sound of this!
Feel the Bern.
it would have been worse if they kept the euros, in dollar terms.
Tyler wrote that the Swiss National Bank lost:
"a whopping 7% of Swiss GDP"
Wow... That would be like our Federal Reserve losing a trillion or so dollars, yikes!
EDIT: And their Exxon isn't doing so well today... Such a large holding of Apple would have me worried as well were I a Swiss citizen. Maybe Switzerland should buy more gold.
Or some LinkedIN? That is at a bargain price right about now, and I heard they are going to come out with a new mascot. Something hip. I think it involves a sock.
pods
... the holes in them Swiss cheeses are getting larger ...
$94B is nothing. The Fed has way over $100B.
My dad was just telling me the other day (extremely happily) that he bought more Apple stock. I'm glad it was over the phone because he would have seen my disappointment. Why? Seriously why? I understand but... why?
Is it a latex sock?
They, the FED have lost that and more. They are just not marking to market all of the Fanny & Freddy stocks and mortgages that they have bought to save FHA & FNMA and all the banks that hold or held them.
Not buying it.
The Fed owns over $4 trillion of treasuries, mbs and a small position of agencies. With interest rates at virtually record lows, that portfolio has to have a sizeable gain.
And that's saying nothing of the $99 billion they forwarded to the Federal Gov't last year.
What's wrong with SNB? Telling the truth in such a forthright manner? Don't they know this is the Empire of Lies? The US B. of Economic Analysis should help these fellas out with their troublesome reporting methods.
SNB as stock market muppets, this'll end well......
So it won't be a black swan crashing the """markets"" after all.
But a snow white Swiss selling avalanche !
Everyone knows the SNB is a shithopper for stocks...
and Belgium is the shithopper for bonds. i saw a chart of that, incredible, that the volume has been rising and tiny Belgium is there to buy
At least they don't have gold in a vault. You can lose money on that because its volatile.
Does anyone here have any insight into Swiss politics? I've always wondered how results like this (and the Euro peg disaster) went down with the people after all that ranting against the Save Our Swiss Gold initiative that they got from the govt/central bank?
Do you just get to invoke your moral authority as a central banker or politician there with no consequences for disaster like here?
I guess you know how to blow up a country without bombs-crush Apple.
I guess you know how to blow up a country without bombs-crush Apple.
the SNB = the ECB's and Fed's sperm dumpster.
Any entity holding $94 Billion in stawks ceased to be a "bank" a long time ago in galaxy far, far away...
HOORAH! You win "Comment of the Day". I guess we don't have any banks any more.
GOOD news, Swiss citizens. Your taxes are going UP !!
I mean really. You would think that the SNB could have at least cashed in on the spectacular rise in the Shanghai index. All they needed to do ... was get in and get OUT of Chinese stocks before the rest of the crowd. Who knows, they might have covered their losses fom the US and European markets.
MAN, THIS GLOBAL ECONOMY IS SERIOUSLY SCREWED UP!! When are Central Bankers going to step in front of the mirror and utter the words ... "You know - maybe the problem is me?!".
At least the SNB is honest about what they have on their books. More than we can say for the Fed and the ECB.
Cheesy Bastards
my city did the same thing, using city funds to speculate in the stock market, they lost millions, which is billions to them. nothing has repercussions, the gears in the machine keep turning until the machine breaks and then nothing works
"nothing has repercussions, the gears in the machine keep turning until the machine breaks and then nothing works"
Another great comment. We are rolling today! That big "grinding" sound that we hear ... is smoke coming from out of the machine.
Bearings smokin' ----- wheels a rattlin'.
Not to worry, the Fed can quickly lose a trillion or two on its Treasury holdings if rates normalize.
But VIX is below 11 and so there must be no risk of that happening.
The SNB will just print the money and distribute to the Cantons and Fed gov as usual. It will probably weaken the CHF, but that's what they want anyway.
I thought stocks only go up. Did someone lie to me?
all 7 years of Obama are one giant lie!
'BLICS'
They should get into those Chinese Stock....Money for Nothing...
They're still out performing the PBoC which has all but lost 10% of GDP on stawks.
If the fuckwit Irish Central Bank can manage to report a profit (surplus using the local parlance) €1.7 billion for 2014, then it begs the question as to who is telling the truth, the Swiss or the Irish.
You can access the irish central bank accounts starting at page 101 on this link https://www.centralbank.ie/publications/Documents/Central%20Bank%20of%20...
I actually believe the Swiss.
I see that this could be the trigger for the next global financial collapse! Imagine a bankrupt major central bank!
Interesting to note, Central Banks print money then trade that paper for stocks. How is it anyone cannot see what a sham this whole monetary sytem really is.
Did you know over the last four thousand years, this is the only period in which humanity has not consistently based its currency in metal.
(http://www.forbes.com/sites/briandomitrovic/2011/08/14/august-15-1971-a-...)
When some can print paper and turn that into assets while everyone else is taxed to pay for that paper sooner or later folks figure out they are stooges.
Guess I'm Mo.
I'm still trying to figure out are we dealing with a global zero sum game here or are we all just fucked. And if so, let's reset this weekend....because this shit is ridiculous.
So we have privately banks via their central banks around the world printing fiat at will to buy government bonds and corporate stocks. I wonder how many companies the Fed and the others have controlling interest in? We already know they own governments.
And the average 'murican is pissed off that some guy shot a lion in Zimbabwe.
We truly live in the dark ages.
Thank goodness that Apple stock, like real estate, never goes down.
The point which strikes me is that the zero sum nature of these sorts of transactions means the Swiss Natonal Bank has transferred 52 B of its money into the hands of someone else-- presumably a private counterparty player.
I'm certain, of course, that these counterparties are all complete strangers who have no familial, social, or business connection whatsover with the guys who just managed to "lose" 52 B in public funds that were entrusted to their "management".
"The point which strikes me is that the zero sum nature of these sorts of transactions means the Swiss Natonal Bank has transferred 52 B of its money into the hands of someone else-- presumably a private counterparty player.
I'm certain, of course, that these counterparties are all complete strangers who have no familial, social, or business connection whatsover with the guys who just managed to "lose" 52 B in public funds that were entrusted to their "management". "
It is nothing but simple counterfeiting and fraud.
Central Banks are created to emit credit against their host Nation's Bonds, not foreign equities and defaulted liar-loans.
The Central Banks are no longer managers of a host Nation's monetary policy but conduits for wealth confiscation via counterfeiting, fruadulent rehypothecation and off-balance sheet schemes.
These aren't 'hedge funds' these are Enrons.
It would be better for the Citizenry of these host nations if the printing resulted in a ceasure or refund of taxes, funding of public works, distribution of medical care, energy and conservation regimes, well considered education initiatives, etc...
No bank ever cares about losing money on a paper asset.
1. Even if they did ever mark it to market (which most likely they do not), they don't care about paper losses.
2. They can always print more guaranteed monopoly fiat-trash-money. They have no competition for money and so whatever they decide to print never affects them negatively.
Articles such as this are used to scam people ... just like articles about governments paying back debt. Governments never have to pay back the principle on their debt. They just have to cover the payments and roll the debt over.
Exactly - this is why the SPX and the like are held up - yellen keeps buying with more print.
Problem arises when the CBs own 100% of the markets, but that would never happen, right?
How do I get a bid from the fed desk? I mean What's an honest guy have to do to sell some Stock around here?
For Gnomes, never bright confident morning again after the EUR/CHF train wreck.
Their central banker is well to the flakey side of Mario.
BWAHAHAHAHAHAHAHA!!!!!!
Well, well, well, do I have to say it...of course i will... I TOLD YOU SO.
Let the BANZAI PRINTING BEGIN!!
Ladies and Gentlemen of the Central Banks of the world, start your print engines!
Let the printing begin!
We are on the verge of the most monumentus rise in equities in the history of the world and for the next 1,000 years!
DOW 100,000....BAH!! 500,000! Maybe....MAYBE....DOW 1,000,000!
Ah yes, FED, BOJ, SNB, ECB...gather up boys and girls, gather round! Take what ever 3 letter acronym you can muster, and watch the money spew out, as if all the volcanoes on Earth were erupting!
BANZAI PRINTING...ALL OVER THE WORLD!
The corrupt governments and central banks have all cornered themselves into going 1 direction....FORWARD....FORWARD...MORE PRINTING...FORWARD TO MORE PRINTING.
For how long this will go, only God and Devil know!
But one thing is for sure, when it ends, it will make the 1930's Depression look like a fancy Sunday School picnic.
There are only two options we have today:
OPTION 1) The Honest Solution: Increase interest rates to where they should be, and suffer a major correction, wiping out many billions around the world!
OPTION 2) Delay To End: Thus keep on printing, and the end will be total annihilation of the economy of the world....begeting revolution with guillotines, with mass starvation around the world; while the only people eating, that is, the top 1% are literally going to lose their heads!
And what have these CROOKS in the Central Banks and Governments and Financial Institutions have chosen? Why of course, its, OPTION 2! How can that be you ask, for they will surely lose their heads?
Because those in upper echelons of power and social elite, think the are too smart and too powerful to be touched. Don't you love arrogance!
SO LET IT BE...OPTION 2...IT IS!
WTF I hope they get what they deserve. Anybody can buy stocks with printed money, you would have thought that if you are going to rig the market you would rig your own market! There is no price/value discovery when you have fat fingers like this. Its immoral. We SO need a massive shakedown.
Here is an interesting question for you economic geniuses out there, you know, you guys that win the Noble Prize...
If every Central Bank in the world prints ad infinitum, with each Central Bank trying to devalue its currency with respect to the others, how does any currency devalue? You know you morons, like now! Hey Krugman you listening this includes you too, you imbecilic moron!
That's why Central Banking CAN'T WORK...YOU IDIOTS! Central Banking will always require some countries to pay the price more than anothers, but how do you square that in an egalitarian world?
Central Banking IS WRONG!
And now the world is going to learn a very painful lesson.
I just hope when the time comes, you economists, central bankers, financial experts including bankers, corrupt governments (virtually all of you) and fund managers, will be the first in the beheading queue! You deserve to be there!
To everyone else, enjoy the rise, and when it all collapses...its every "man" for themselves.
ponders why central banks think that holding bankrupt government bonds in the US, UK, Japan, Canada (and Switzerland) is any better than investing in 3d printers or WIRELESS ELECTRICTY!!!!
http://www.momentumdynamics.com/momentum-dynamics.html
My dear Hooligan,
For a Hooligan you seem to have well intensions, alas, those intensions are sorely miss placed.
3D Printers: How can this be good? You are giving then every person in the world the chance to become a viable and effective manufacturer, this is contrary to what Central Bankers want, for they are, remember really just a Government acolyte, thus they would prefer to protect and thus invest in the old ways of manufacturing. You know kind of like how the music and movie and book industry feels that eventhough we have a way to distribute and mass produce digital content that is basically costless (i.e Digital Tech, and the Internet) we have to still pay as if it was manufactured the old ways (i.e Vinyl, Tape and Disc).
Wireless Electricity: Oh now you are really going to get into trouble. Imagine, if it where really possible to do this enmass, like how Tesla envisioned, you would be putting out of business many electric utilities around the world, where most of them are owned by the government and reign in indirect taxes, they would never allow it!
No you see Hooligan, the hooligans of the world will not allow you Hooligan to operate in such novel and useful ways that would benefit The People. This is one time Hooligan, when, Hooligan is a good man, and the real hooligans are in government and the Central Banks.
Keep being a good Hooligan, Hooligan2009. And watch out for those other hooligans!
Purchased with debt collateralized by US sovereign garbage?
if they start to print, will they buy more stocks or PM?
Remember when the Swiss had a repution for being smart and prudent with money, gained over a few hundred years.
Then for some reason they ditch their famed independance and join the global circle jerk of central bankers. Look what's happened since, a botched and naive currency peg and then triple botched cancellation of the peg. Now this with stocks.
Seems there's a new guaranteed trade in the markets, copper whatever the Swiss are doing.