Forget Tulips & Bitcoin - Here's The Real Bubble

Tyler Durden's picture

While the broader market for Swiss stocks has risen modestly this year, one 'entity' has outperformed its peers by such a staggering margin, it has left bamboozled market experts struggling for an explanation.

And that company is…the Swiss National Bank.

The price of a share in Swiss National Bank in August rose above 3,000 francs ($3,143) for the first time, more than double the level of a year ago, and up 50% since mid-July, as the Financial Times noted in a story about its performance.

Shares of the SNB trade like any other company listed on the Swiss stock exchange, though because of their price liquidity is somewhat thinner. The Swiss cantons together own 45% of the SNB while 15% is owned by cantonal banks and the remaining 40% by private individuals or companies. The Swiss Federal Government owns no shares.

Given the SNB’s holdings – it has demonstrated a voracious appetite for Apple stock and currently holds more than $80 billion in US stocks – the shareholder-backed hedge fund is also having one hell of a year. Perhaps it’s understandable that shareholders see these gains as a driver of value.

 

And of course, the FT has a few theories about what’s been driving the bank’s astounding gains.

One is that, because of the bank’s stellar P&L, it will almost certainly make a dividend payment this year (it has occasionally failed to do so, like in 2015). Dividend payments are fixed by law at a maximum of 15 Swiss franc per share.

If paid in full, that would amount to a yield of 50 basis points – far superior to the minus 15 basis-point yield on the country’s 10-year bond.

Another is that some German investing newsletter issued what amounts to a “buy” call:

“German investor newsletter Actien Börse encouraged a buying spurt after likening the shares in July to ultra-rare “Blue Mauritius” 19th century postage stamps. Trading in the 100,000 SNB shares is thin, so even modest buying or selling leads to significant price swings.”

Of course, these arguments seem specious: Investors could still probably lock in higher yields by buying Treasurys and hedging their exposure, as one example. And the influence of that newsletter sounds like it’s being overstated.

However, the FT hints at one possible driver that’s probably closer to the truth: Private investors are trying to front-run a possible share buyback by the central bank. As the FT notes, the SNB wouldn’t be the first central bank to buy back its shares.

“Another theory is that investors are speculating they might be bought out. Central bank buybacks have happened before. In the early 2000s, the Basel-based Bank for International Settlements — which acts as a bank to central banks — bought out its private shareholders so it could focus on its public service functions, rather than the interests of financial investors.”

Regardless of their motives, the stock’s gains are almost definitely being driven by private shareholders. As we reported last year during a smaller bout of appreciation in the SNB's stock, it’s unlikely that a canton or a cantonal bank would buy the shares en masse because their ownership has been carved in stone for many years.

And as the FT notes…

Harder to explain, however, is why the price of SNB shares has risen so steeply this summer.

 

“Institutional investors do not invest in them, so there is no demand for analysis or coverage,” says Andreas Venditti, bank analyst at Vontobel in Zurich. “Since the impact of even small financial market moves on its financials is so huge, it would be difficult to do a reliable earnings estimate.”

The alternative is that a private investor is quietly buying up all the stock available. The single largest private shareholder is a German national called Theo Siegert, a German business leader and professor at Munich University. He owns 6.7% of the Bank, more than any Swiss canton except Bern. Still, if the buyer was Siegert, he would have to file a new report as a large shareholder once he crosses a 10% threshold.

While buybacks are unlikely, and a leveraged buyout of the central bank woud be impossible - though it'd make for an interesting case study - there’s only one probable conclusion left: The SNB is pushing global stock prices up, in the process creating the next bubble. And now private traders are gobbling up shares of the bank itself, adding a dangerous feedback loop to the equation.

The SNB isn’t the only central bank that trades publicly. Both the Bank of Japan and the Bank of Greece are publicly traded, as is the Bank of Belgium; but when it comes to massive wealth-multiplying asset purchases, the BOJ is the real master.

And we all know how that turned out. 

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Linus2011's picture

stinkin swiss cheese again

Escrava Isaura's picture

Forget Tulips & Bitcoin - Here's The Real Bubble

The Bs behind all financial bubble.

 

philipat's picture

Yes, the world's largest "Hedge Fund". However, why are "We the people" not asking, first WHY central Banks have become Hedge Funds and, second, why Central banks are trading securities of ANY description outside of their charters? Clearly, Central Banks should NOT be doing this.

Manthong's picture

 

Well said .....

..and  F me….

….don’t they own a whole bunch of the US equity market ?????

 

Manthong's picture

 

Yellen, Carney, Draghi, Kuroda…..

All need to be declared  “Enemies of the State”

..they are private bankers with profit motives that are against the interest of society.

 

add Dimon and  Goldfein too.....

 

yogibear's picture

Because Central banksters transfer wealth to their members. 

Indebt the 99% and enrich the 1%. 

They really should be treated like the Nazi war criminals. 

youngman's picture

Because they like the power and the fame too.....

Consuelo's picture

 

 

Probably something like self-preservation, maybe...?

Because if they weren't doing what they've been doing...

illuminatus's picture

Oh yea? Well what'cha gonna do about it? ( Punk)?

Money Mantra's picture

Another bubble. Oh no. How high will the markets go now. ZH keeps trying this and it is working. Dow has tripled. 

SHEPWAVE is still the only analysts getting markets right without all the BS.

PleasedToMeatYou's picture

MM: Somehow, after all this time, you are the sidewalk's pile of dogshit that no Tyler has stepped on, yet. 

frontier's picture

SNB can not be compared to the japan bank. the SNB is the owner of the nasdaq, free, and how much crisis, more power. actions per 1.

Grandad Grumps's picture

SNB Satan's National Bank. He owns many banks through proxies, but Switzerland seems to be his home country.

Bro of the Sorrowful Figure's picture

man ZH has had so many clickbait articles about the cryptos. i laugh reading through the comments, unbelieably polarizing subject with this crowd.but ive got a bone to pick with everyone.

let me preface this by saying i have a huge stack of ag/au that i lost in a boating accident and continue to lose in boating accidents regularly, but i have some advice for all the anti-crypto crowd: do your research on crypto. i thought this was a well educated and open minded crowd but i have never seen such a zealous denial of the opportunity that is the cryptocurrency revolution.

everyone who is bashing crypto needs to take a deep breath, and do what ZHer's are supposed to do--and ulitmately what fight club is all about--which is make a well reasoned argument from an objective and WELL RESEARCHED standpoint. i have been investing in cryptos for about 2 years now, i still stack as much as i can, and i am STILL amazed at how little i know about the cryptos. ive read multiple books and constantly watch youtube videos and read as much info online as i can. guess what, if you can't put aside your preconceived notions about cryptos and pick up a fucking book then you don't deserve to be a member of fight club. this website is supposed to be about improving your understadning of the world from a point of view outside of the echochamber that is the MSM. it's supposed to be about liberating yourself from the chains of our slavemasters, breaking out of the matrix, getting out of debt and understanding the true nature of finance and geopolitics.

i've got bad news for the haters. all of the arguments i see against crypto show a total lack of understanding of crypto and are often fundamentally incorrect. stop bashing something you don't undrestnad, pick up a book about it, and then come back here and make a logical post so the crypto clickbait message boards don't dissolve so quickly into retarded shit slinging contests. you're missing out on the biggest opportunity in history because of your obtuse refusal to do what you implicitly claim to respect by your very presence on this website, objective analysis of all sides of an argument and the notion that we win an argument by the merit of the content and facts of your position instead of by incessant ad hominem.

The central planners's picture

First  bitcoin was sold with a bunch of lies like its was untrackable that government could do anything against it or it was a threat to governments and now you see governments supporting it and the FBI arresting crypto veterans not the average crypto guy. Another lie its the decentralization with the exponential growth of the blockchain every year less and less people will be able to "mine" bitcoin wich will lead to a kind of centralization.

hestroy's picture

But hey! Some parasites makes money on it and some imbeciles will gladly change the real money for nothing. Just another sophisticated ponzi scheme.

chuckymcgee's picture

No one working on Bitcoin ever claimed it was untrackable- just the opposite. The blockchain is a public ledger, derp, the whole point is that coins are constantly tracked so you know coins aren't being counterfeited!

 

The blockchain isn't growing exponentially. And the growth of the blockchain doesn't make mining infeasible anyways. A $50 hard drive today will hold the blockchain for years, for $100 it'll hold it for a decade.

PleasedToMeatYou's picture

Bro, thanks for waking against the very strong winds here.  Insightful post. 

bshirley1968's picture

"Insightful"?  Really?  Which part?  The part about admitting after 2 years he is just going to insert head up ass and keep moving forward or the part where he doesn't understand why we don't all join him?

Help me, help you understand.......Bro.

DjangoCat's picture

So I suppose the subject of the article, the Swiss National Bank, is your idea of a solid enterprise?  They print up fake money, buy USD and then soak up stocks in the US of A, and that is more real than crypto currencies?  More moral perhaps?  Not a real ponzi?

I am not sure what bee has got under your bonnet, but methinks you do protest too much.

hestroy's picture

It's incredible how much it is possible to brainwash somebody.

SubjectivObject's picture

i regret that I have only one upvote to give

tmosley enjoys being contemptuous, but few credible arguments are raised to challenge any understanding/interpretation/presumptions he may have

i own zero crypto because i'm ignorant about it

bshirley1968's picture

Well, isn't that sweet?  Regretting only one up vote to give......to some jackass that admits that after 2 years of wasted time he still doesn't understand crypto-currency. .......but HEY! he's buying more.  How about I just go Baaaahhhh,  baaaahhhh!  You got an up vote for me?  Cause I just said something as meaningful. ......in your native tongue.

Some of you really need to go back in time and try and figure out where you left your balls.

bshirley1968's picture

"i have been investing in cryptos for about 2 years now, i still stack as much as i can, and i am STILL amazed at how little i know about the cryptos. ive read multiple books and constantly watch youtube videos and read as much info online as i can."

2 years?  Really?  And you openly admit you are amazed how LITTLE you know about crypto......after 2 years of hard study?  And you wonder why Fight Club has a problem with the digital ponzi called crypto-currency?  Stop being an idiot!  Go make all you can on crypto.....more power to ya.  Why you trying so hard to be a salesman for that shit and convince everyone here to get some?  Cause you care so much for us?  You don't know shit about it because you aren't suppose to know shit about it..........other than its 1. Perfectly safe 2. Untraceable 3. Freedom from The Man. And 4. You can make a lot of money by "trading " it.   Shit!  I guess you could say it's PERFECT!  What more do you need to know........sheeple boy?

Now, go clean up, get someone to fix that broken nose I just gave you, and by all means buy some more crypto. .......it'll make you feel better.

LMAO! 2 years studying something that passes itself off as "currency"!  What a frickin joke!  Can no one around your dumbass see the insanity of that statement?  Keep walking towards the light sheeple boy,  if you are lucky you will just get sheared and not slaughtered.  "Block Chain" what a fitting name for the ultimate enslavement of mankind. 

bshirley1968's picture

COME ON!  YOU CRYPTO-PUSSY-BASTARDS!  Let's hear you defend that shit.  Put some meaningful logic to your digital shit storm and down votes!  Oh, I know, I know, "Look how much it has gone up!"  "You're just mad cause you missed out."  Blah, blah, blah!

It's just like everything else in thus shit hole world, the only reason you give a shit about it is because it makes you more shitty worthless dollars.  As long as it does that, who cares about anything else, right? That is your worthless, ultimate,  fucking litmus test on everything.......if it makes more dollars, well, it's gotta be good......right?

And then you dumbasses look at the world around you and say, "What happened?!"  Stupid is as stupid does.......and you can't fix stupid........here's your sign.........and nd all those other statements that talk about how stupid people are.

E-Knight's picture

I thought all there was in this world was (((making money)))?

DjangoCat's picture

Wiff, swing and a miss.  Back to your corner shirley and get your eyeglasses adjusted.

silverer's picture

It's simply called risk balancing. I've always maintained that there will be volatility with Bitcoin, because there is nothing to truly measure the value of nothing. A gold backed crypto would be very interesting, but it would also show no or little to no volatility. So the question remains: What really makes crypto attractive?

The central planners's picture

The speculation of making yourself rich like the very first that joined the ponzi scheme.

DjangoCat's picture

Lots of cryptos are on the official dead list, and many more will follow.  This whole thing is an evolving ecosystem, where the good ideas will thrive and the poor ones die off.  Welcome to the real world.

DjangoCat's picture

Gold backed crypto exists, as does USD backed crypto, tether, for instance.  The problem is, who audits the backup?

You are back to a trust based system.  True crypto requires no trust.  It just is.

BobEore's picture

Bro--man o LA MANCHA, you just arrive here after a tour of inspection of the planets of the outer galaxy? Lay down shit like

do what you implicitly claim to respect by your very presence on this website, objective analysis of all sides of an argument and the notion that we win an argument by the merit of the content and facts of your position instead of by incessant ad hominem...

I don't give a rat's ass bout your cyrptos, I gots enuff cyrptos of another kind pon my plate... but this naive and touching call out to another time an place takes me back... when the site rocked with guys n gals who knew their p's n q's and had their ducks all in rows... around 2011 or so...

when the boyz who manage things here were pointing a finger towards a dude at a desk in the Basel Building of da Beast, as being the ultimate place to blame for the incessant gold manipulation wese were all growing to love...  to loath... and a line like todays'

the Basel-based Bank for International Settlements — which acts as a bank to central banks — bought out its private shareholders so it could focus on its public service functions, rather than the interests of financial investors.”

could only have appeared as the most ridiculous sarc. Public service functions?

But that was then... and this is now. And to expect your interlocutors here to be capable of raising the bar of debate above the level of the lowest form of "tranny mud wrastlin mud slingin" is touchingly naive... and out o touch. But I likes yur style... takes me back to a kinda kinder, gentler me... so lemme give ya a brief history of the DEVOLUTION of GOLDBURG ... into a steaming cesspool of inarticulate angst, malice, and envy. To which point ... this BIS thing is central... ya see...

back in the day,,, there really were ... top flight investigators, advocates, street-fightin, bitchin warriors o the word what knew how to put serious FEAR into the BANKSTER GANGSTERS of the BIS n other scamster central to our modern system of crony capitalism gone beserk. Two of the most prominent being REG HOWE... and his buddy BOB LANDIS. Reg took on the BIS in a legendary lawsuit confrontation AND battled them to a draw... over their refusal to pay fair market value for withdrawing shares amongst many other things(see link)and conclusively demonstrated the role of that body in collusive serial market manipulations. LANDIS was equally masterful at reading over eye glazing bs from scamsters like Barrick... spotting the serial criminality hiding behind the accountant style bafflegab... and parsing the motivations and methods behind a blizzard of buzz words designed to conceal more than reveal the financial data.

THOSE. WERE. THE. DAYS. THOSE WERE MEN. Their time has passed.

Bout the end of the first decade of this new millennia... with the giants worn down and used up... we entered the alleged 'bull market' of 2010... and a new Klondike style gold rush of new smart guys looking to score from the upsurge of investor interest in shiny things. A raft of poseurs... with no real knowledge of metals, markets, or meritorious communication, stepped up to steal the mike and bombard us with bullshit which would turn out to have been at the behest of the very "manipulators" who they loved to scream loudest at! BACK UP THE TRUCK@NEVERBEENABETTERTIME.CON

A whole generation of gullible investors led down the garden path by a phalanx of pretend friends ALL WORKIN FOR DA MAN! Who turned out to be a Panda in a three piece suit with a Harvard MBA and a desk at the PBOC... workin the phone all day with his allies at JPM to turn the big wheel o fortune eastwards ho... at the expense of the wretches of the west and their dying polities.

Gold is real. I got's me some... then I GOTS outta Dodge... for good... and sat back to watch the show. Endless scamming bullshit investment advice from fake experts on the payrolls of serial con artists. That was the precious metals thing. Seven years o pain no gain and the gomers here never tire of comin back for MOAR!

And somehow... you think the next thing got invented to turn folks into bagholders... "crypto currencies"... is gonna turn out different huh? You'll get no ad homs from me... I just watch and wonder...

is there any limit at all to the gullible and naive acceptance of the oldest shell games recycled over and over by the usual suspects? Can their victims ever learn to avoid the siren call of 'the next big thing?" Have fun here dude... I certainly do... but drop your expectations of your interlocutors down... way down... from your starting point here... in order to learn to do so. Ain't been no 'fight club' here for many a moon.

hestroy's picture

LOL! So many words about nothing. But you must feel like incredibly clever man now, right?

"liberating yourself from the chains of our slavemasters, breaking out of the matrix"

It's pure bullshit, BTW. Crypto currencies are now only for parasitic speculants.

venturen's picture

I don't have much faith in the currencies of the USA, less in Europe, China and Japan.....but I have a lot less faith the value in a "bit". This will go down as the largest con job ever. 

And don't tell me you understand it. It goes up 50% on nothing and then down 20% on nothing! Bitcoin et al...are a joke rife with fraud and abuse!

a Smudge by any other name's picture

Might be OT but if you have a coinbase wallet....try selling some coin and take the funds down into your bank account.

You might find out that....you can't.

If you can, pull it all out of coinbase. Now.

any_mouse's picture

A run on coinbase?

And the effect on the distributed ledger.

aloha_snakbar's picture

...it's supposed to be about liberating yourself from the chains of our slavemasters

You may have read some BTC/Crypto books (I have) but you may want to go back to the library and pick up a few history books. What kind of world do you envision that has fully embraced cryptos? Will we all be lounging around in silken robes, listening to harp music, peeling grapes for each other, with not a care in the world? If only. In a crypto world, I believe, as do many people smarter than I am, that you might be throwing off the old chains, only to voluntarily don a new, far more insidious set of virtual chains, that will allow the same people that crypto fans rail against, *unpresidented and unlimited* control over every aspect of your life. In such a 'utopian' world how might they *value* cryptos? How about President Zuckerberg signs an executive order stating that the value of YOUR cryptos is tied to the number of your 'likes' on Facebook? Sound crazy? Sure it does. But not any crazier than having that dangerous fool as a president in the first place. My whole point is that they will have the tools to do that, or pretty much anything they want. And YOU will have handed that power over to them. Total and complete domination, just a few keystrokes away.

Your entire post is a passive aggressive ad hominem attack. If you want to invest in cryptos, no one cares. I absolutely do not. I would only agree with you that there is a lot of misinformation, disinformation and general lack of knowledge floating around, and all participants would be well served to take the time to educate themselves better, but having said that, this IS as you pointed out, the Fight Club, and not the Mensa Club, but we would not have it any other way. Some of us take a larger view of things, and see a bigger picture with cryptos, one that goes beyond the mere instant gratification of our bank accounts or bottom lines.

I think that the blockchain is interesting technology and will have uses going forward, cryptos, not so much. I see cryptos as a purely speculative play, no more, no less. The IRS, Australia, and I would assume most developed countries have already designated them as 'assets', for purposes of establishing the ever important revenue stream from .govs wallet to yours. They are not currencies, they have none of the qualities that would make them suitable as a currency. Price stability for one...anything that can rocket down 500 to 1000% in a DAY because some Chinese guy somewhere sets up a manipulation play, removes it from consideration as a currency.

strangeglove's picture

Could it be that the Value of the Money used to value shares collapsed? Causing the share price rise? Idk but it seems to be happening a lot lately.

silverer's picture

Since when has investing in a bank ever been a bad idea? Because no matter how poorly they are managed, they always seem to be rolling in money.

PumpherDumper's picture

Sorry but that return doesn't even come close to Bitcoin.  Bitcoin was about $600 last year at this time.  It is up seven times that now.

Blue Steel 309's picture

" “Another theory is that investors are speculating they might be bought out. Central bank buybacks have happened before. In the early 2000s, the Basel-based Bank for International Settlements — which acts as a bank to central banks — bought out its private shareholders so it could focus on its public service functions, rather than the interests of financial investors.”
"

Is this when FT started buying ocean front property in Arizona?

East Indian's picture

Bank issues shares out of thin air.

Bank issues "money" out of thin air.

Bank uses this "money" to buy its own shares.

Bank uses this "money" buy up the whole share market.

Share prices go up.

Bank's share price also goes up.

People rush to buy these shares.

Share prices go up.

Bank issues more shares.

................

Ad infinitum.

 

Soon we will be all billionaires. And an apple will sell for $100,000.

I don't foresee any problem with this model.

Totally_Disillusioned's picture

Neither did the sock puppets of the Weimar Republic

DjangoCat's picture

Easy peasy, while we will all be knocking zeros off the USD to not look stupid, the Bitcoiners will be pushing the decimal point downstream.

Totally_Disillusioned's picture

You've got to wonder how real all this Bitcoin rage is...   Read an article stating if I had bought $1000 worth of Bitcoin last year, I would have amassed $90Million in wealth.  If that's so, why are people not cashing out - where's the trading?