Jump to content
House Price Crash Forum

Swiss Nat Bank Ends Peg To Euro!


Recommended Posts

  • Replies 317
  • Created
  • Last Reply

Top Posters In This Topic

Will there be wider damage, retail/investment banks for instance?

Not sure. To some extent FX brokers have been working like unregulated banks where people put money in and try and earn 'interest' by playing some giant online 'poker game' against each other with real money.

Its not particularly socially useful but then again its not exactly harmful, unlike say buying several hundred houses on borrowed money, in Kent in order to front run first time buyers.

Only thing now is whether we now have zombie FX brokers in addition to zombie banks and a zombie housing market.

Edited by aSecureTenant
Link to comment
Share on other sites

You have to ask yourself why now, the reason probably has much wider implications.

Was it Greece, was it ecb QE or was it the oil price.

I suspect a combination of 1 and 2 the euro is obviously a mess.

Yes people will lose a lot of money as they will with oil

Personally I think it is just another domino.

Link to comment
Share on other sites

So, as well as it being the fault of the trader for overtrading versus the potential risk, it can be argued that the broker is also to blame for allowing traders to have such large leverage and small deposits for the trading they do. Just as Northern Rock could be to blame for lending people 125% at silly salary multiples.

It is a risky business and far too many people enter into far too lightly imo - that has been proved (once again) by the events of Thursday.

Where I trade the risks were plastered all over the place, in process of opening an account (which no one dragged me into). I'm sick of this world of excuses. I've taken significant losses where I've subsequently punched myself in the jaw in reaction to my own stupid mistakes, and gone on to improve and not repeat mistakes ... and thankfully also having gains I've been happy about. However never have I chased the ultimate, with too much money at risk from the sharpest move, for I don't want to become insolvent or bankrupt. Markets aren't there to just make you win. Take the king losses. You can't just brag about your WINS. Don't be involved at all if you don't have a stomach. Too many people trying to destroy capitalism.

Leaving yourself exposed to massive losses on a trade looking for the wins, (there is always someone on opposite side of the market to gain vs your losses) is you own responsibility. You must pay at last your own debt. If you are wise, you will dread a prosperity which only loads you with more.

Next it will be how older BTLers currently paying silly high prices, to capture the young, are victims eh. The Blairs and their latest Mcr area investment eh. Northern Rock got carried away as did others (Gov and regulators included) - here is some m-king news... some of us didn't buy for houses were overvalued and we didn't want 125% mortgages.. we were saving deposits, but being outbid by the only goes up crowd. We've bailed them out in the boom (QE/0.5%).. and they often had big reflation on top.

Near the end of a major credit expansion, few creditors expect default, which is why they lend freely to weak borrowers. Few borrowers expect their fortunes to change, which is why the borrow freely. Deflation involves a substantial amount of involuntary liquidation because too few expect deflation before it starts.

Market participants make their own decisions... victim involved in high risk market trading?

What was I posting last year 13/-14??????

The outspoken CEO of the $29 billion fund, noted "all my friends who are money managers.. are much closer to the sell button than they ever were before," adding that "everyone's holding cash," since if they start to get nervous "volatility will come back instantly." Simply put, he concludes, "you know when this ends, it's gonna get ugly."

Something for people who may not realise it.... there are people on this forum who are renting-saving, in expectation of a House Price Crash. Get rid of all your excuses out now for those buying at high prices today, and those complacently believing extreme values won't fall, whilst they count their HPI, and inventory on market is pathetically low. Not after the crash.

Link to comment
Share on other sites

http://www.forexfactory.com/news.php?do=news&id=522201

sorry if already posted

Swiss Franc Trade Is Said to Wipe Out Everest’s Main Fund

i3PXcm1AtbVU.jpg

Wonder what the damage is? And who the money they were managing belongs to. He's been around quite some time, and seen crisis after crisis. Including Russia default... doesn't seem the type to close funds if they don't have to.... Soros seems to have backed him last time.

Bragging about some big gains, from their wider funds, late last year.

Maybe they will have enough money left over to treat themselves to a box of Ferrero Rocher (... ok that's Italian maker, but nevertheless).

Here he is

August 2010: http://www.institutionalinvestor.com/Article.aspx?ArticleID=2585796&p=1

...For Dimitrijevíc, 2008 was an historic anomaly not unlike the Russian ruble crisis ten years earlier — the last time that Everest lost nearly $1 billion in less than a month, for being overexposed to Russia just as the country defaulted on its debt and devalued its currency.

But confidence in Dimitrijevíc, even back then, ran deep. In early 1999, Hungarian-born investing guru George Soros, who’d had money with Everest since 1992, handed Dimitrijevíc an additional $500 million. Today, Everest’s 50-year-old founder says he never considered shuttering the funds, but clearly the vote of confidence came at a critical time.

August 2012 http://www.institutionalinvestor.com/article/3065027/five-questions-everest-capital-founder-and-ceo-marko-dimitrijevi.html

September 2014 http://www.bloomberg.com/news/2014-09-17/everest-capital-gains-on-vibrant-middle-east-black-hole-.html

Link to comment
Share on other sites

I am not saying that stops should be honoured. I know they aren't (unless they are of the guaranteed nature). But you can be as sure as sure can be that plenty of traders that owe money to their brokers are using the fact they had a stop in place as a reason for not honouring their debt

So I have been paying a premium for guaranteed stop losses, on many hundreds, possibly 1000+ trades, for no reason? Where's my compo also yes? I hope the brokers are able to enforce debt owed to them by clients... where the terms and conditions for each broker is fully clear about the risks.

Where I hold my account, it was made very clear the difference between a stop loss, and a guaranteed stop loss. Never traded a market without a Guaranteed Stop Loss, (and there have been some markets I would have liked to trade, but where Guaranteed Stop Losses are not available.. but never risked it, where others have).

Stop Loss/Stop Order (etc etc etc)

Please note that Market Gapping may occur. This is explained in more detail below.

Market Gapping and Slippage

Market Gapping occurs when prices literally gap between one price and the next, without trading at the prices in between.

A standard Stop Loss Order does not fully protect your trading risk. As outlined earlier, a Stop Loss Order is set at a specified price which, when reached, automatically triggers an Order to close your position. The closing trade is executed at the next available price immediately after the Order is triggered. This can be at the same, a better or a worse price than the specified execution level. In cases of severe gapping, the execution price may be at a substantially worse price than your Order price.

Guaranteed Stop Loss Orders (GSLO): A Guaranteed Stop Loss Order ensures that the level at which an order will be executed is the exact level that's been specified by the trader, regardless of any gapping in the market.

Link to comment
Share on other sites

It seems that everyone short the franc. Even GS were caught on the wrong side of the trade. You'd need a heart of stone not to laugh. :D

In our portfolios with currencies, we have been short the CHF on the grounds that it was an expensive currency which we expected would experience capital outflows as European growth normalized. We were surprised by the sudden removal of the peg. Although the CHF real effective exchange rate is lower than during the European crisis of 2011, it has actually appreciated in recent months.

As of Jan. 16, we have generally exited our CHF position and are monitoring the situation closely.

https://assetmanagement.gs.com/content/gsam/us/en/advisors/market-insights/gsam-insights/2015/snb-removes-exchange-rate-floor.html

Link to comment
Share on other sites

I am not saying that stops should be honoured. I know they aren't (unless they are of the guaranteed nature). But you can be as sure as sure can be that plenty of traders that owe money to their brokers are using the fact they had a stop in place as a reason for not honouring their debt

Market gaps are a well known issue, and it is made very clear by brokers to clients that stop loss orders cannot protect against market gaps. A client that tries to use that argument will get nowhere.

I think the main problem is that clients simply cannot cover their losses, due to the very large levels of leverage available from many FX brokers - I've seen some offer 200:1 leverage, with few offering less than 30:1 for medium level currencies like Swissies. With leverage like that you could deposit £20k, and short £2 million notional of CHF. With a gap like Thursdays, you could be sitting on a loss of £400k, which you simply have no chance of covering.

Some of the bigger FX brokers will, as part of your application for a retail margin account, ask for a full balance sheet - i.e. cash at bank, ISAs, other investments, property equity, etc. They will then base your margin limit on both the amount of wealth available for liquidation, and on the amount of money deposited as collateral.

A number of brokers are also now nursing huge losses from writing guaranteed stop orders for clients. In a GSLO the broker takes on the risk of a market gap, and this has badly hurt quite a few - no doubt they will be reviewing their policies on GSLOs in the near future.

That said, who in their right mind would try to trade a pegged currency? The market is 100% manipulated. The price doesn't change because of the peg, so there is virtually no money to be made. However, the risk of major dislocation due to a change in the peg policy is high. Trading a market like that on leverage is suicidal.

Edited by ChumpusRex
Link to comment
Share on other sites

http://www.bloomberg.com/news/2015-01-17/swiss-franc-trade-is-said-to-wipe-out-everest-s-main-fund.html

Marko Dimitrijevic, the hedge fund manager who survived at least five emerging market debt crises, is closing his largest hedge fund after losing virtually all its money this week when the Swiss National Bank unexpectedly let the franc trade freely against the euro, according to a person familiar with the firm.

Everest Capital’s Global Fund had about $830 million in assets as of the end of December, according to a client report. The Miami-based firm, which specializes in emerging markets, still manages seven funds with about $2.2 billion in assets. The global fund, the firm’s oldest, was betting the Swiss franc would decline, said the person, who asked not to be named because the information is private.

Does this mean they've lost nearly a $1bn or just cut the losses by closing the fund??

Link to comment
Share on other sites

It seems that everyone short the franc. Even GS were caught on the wrong side of the trade. You'd need a heart of stone not to laugh. :D

\o/

Took me a moment to realise who it was - the domain wasn't immediately obvious and I read it all before looking at the logo. :lol:

In our portfolios with currencies, we have been short the CHF on the grounds that it was an expensive currency which we expected would experience capital outflows as European growth normalized. We were surprised by the sudden removal of the peg.

...Implications of the SNB action are negative for the Swiss economy, as gains in the CHF will weigh on Swiss exports, but the rate cut is an easing move and may lead to greater consumption on the part of Swiss consumers experiencing a “wealth effect.” The move also shows that central banks are not out of policy options and suggests the ECB may have further room to cut interest rates should it so decide.

That said, who in their right mind would try to trade a pegged currency? The market is 100% manipulated. The price doesn't change because of the peg, so there is virtually no money to be made. However, the risk of major dislocation due to a change in the peg policy is high. Trading a market like that on leverage is suicidal.

Makes sense to me. I've never made any FX trades; don't know enough and wary of being caught out with moves... surprises me the leverage you set out there, but no one forced anyone to open accounts and trade.

Link to comment
Share on other sites

Makes sense to me. I've never made any FX trades; don't know enough and wary of being caught out with moves... surprises me the leverage you set out there, but no one forced anyone to open accounts and trade.

You wouldn't be trading but speculating. Most people in FX trades are not trading they are speculating for profit. The risks are huge and as has happened here it can easily wipe you out if you get the timing wrong. Utterly stupid to speculate on the FX markets.

Link to comment
Share on other sites

retail fx is indeed dominated by speculators: the majority of traders consistently lose

when an event like this happens, it really does show up the shortfalls of the market:

retail speculators that don't understand what they are agreeing to when they open an account

brokers that don't understand enough about the customers they are giving accounts (with leverage) to

leverage's double edged sword being demonstrated beautifully

and a lot of crying over spilt milk

I, for one, can't wait until the markets open again tonight!

Link to comment
Share on other sites

No doubt they expect to get wind of any policy changes in advance and swap horses in advance of any change.

This time it was apparently so close to their chests that the likes of Lagarde didn't know.

I'm not suprised. If Christine Lagarde had got wind of it she would have phoned all her mates and it would have been all over Paris in a few hours.

Link to comment
Share on other sites

Credit Suisse to charge large companies for franc deposits

ZURICH - Credit Suisse said on Sunday it planned to start charging institutional and large corporate clients for Swiss franc accounts following a move by the Swiss National Bank to introduce negative interest rates.

Swiss finance minister says economy will withstand loss of cap

ZURICH - Swiss officials sought to reassure the country on Sunday that a shock decision by the central bank to scrap its cap on the franc would not destabilise the economy ahead of a crucial week in which the European Central Bank could announce a massive bond-buying programme.

Poland may help Swiss franc mortgage holders - deputy PM

WARSAW - The Polish government may support borrowers with mortgages in Swiss francs if that currency stays above the 4 zloty level in the longer term, Deputy Prime Minister Janusz Piechocinski said on Sunday.

Poland bails out it's mortgage holders. Property is everything in the new global economy!

Link to comment
Share on other sites

So what is the plan fon this week?

Is EU QE an almost certainty or will Darghi just wind up everyone again and not deliver?

If he QEs then, presumably, the Euro strengthens? Money goes into European stockmarkets? US Dollar weakens compared to the Euro and commodities go up? That simple?

No EU QE and the Euo tanks further, USD goes higher?

Edited by The Masked Tulip
Link to comment
Share on other sites

Morals of the Story

  1. Don't borrow money in other currencies, especially long-term mortgages.
  2. Don't expect currency interventions to work forever.
  3. Don't believe statements made by central bankers. They are not the economic wizards they are made out to be, and they often lie when it suits their purpose.
  4. It only takes one wrong macro bet with leverage to make a fortune or wipe you out.
  5. When you are speculating with other people's money, especially when you take in a 20% performance fee, there is a huge incentive to make leveraged bets.

http://globaleconomicanalysis.blogspot.com/2015/01/quote-of-day-currencies-dont-move-that.html

Thank Central Banks

The funniest story to date is without a doubt FXCM, but also consider It Only Takes One: Hedge Fund Manager Who Survived Five Debt Crises Wiped Out Overnight on Swiss Franc.

And this is what it has come to: Central banks have so suppressed volatility, that hedge funds need to leverage to get suitable returns to justify their 20% fee on profits.

And so they do. And this is the result. Hmmm. I sense another moral to the story here.

Still I'm sure he won't be disappointed after all extracting your 20% yearly fee will have proved very profitable even if you did lose all the money on a FX bet.

Link to comment
Share on other sites

Curse of the Hammers....

http://macro-man.blogspot.co.uk/2015/01/weekend-interlude-curse-of-hammers.html

(actually that should be 'the curse of football sponsorship'...remember Manc U with AIG plastered all over their shirts before blowing up the world!)

Northern Rock

RBS

AIG

Tons of them.....even before all the crooked billionaire owners!

Link to comment
Share on other sites

So what is the plan fon this week?

Is EU QE an almost certainty or will Darghi just wind up everyone again and not deliver?

If he QEs then, presumably, the Euro strengthens? Money goes into European stockmarkets? US Dollar weakens compared to the Euro and commodities go up? That simple?

No EU QE and the Euo tanks further, USD goes higher?

Eurozone QE is about as close to a nailed-on certainty as you can get with these sorts of things given all the leaks that have come out, the only thing that is unclear is whether Draghi's going to stick with the €500 bn punt that's been mooted or join the playas and go for something in the trillions. I'd expect it to weaken the euro rather than strengthen it, though - QE is effectively printing money...

Link to comment
Share on other sites

These investment fund management firms don't seem so quick to update their websites to offer any reassurance to clients.

Everest, based in Miami, will stay open and continue to run more than $2 billion in other of the firm's funds that don't have exposure to the Swiss franc, a person familiar said. (Hmmm)

....Other hedge funds that have suffered amid the Swiss turmoil, according to people familiar with the situation, are..........

http://www.marketwatch.com/story/everest-to-close-fund-after-losses-on-swiss-franc-2015-01-18

Link to comment
Share on other sites

Lightweight article questioning future contagion.

The quote of the day

“The 15/1/15 will be remembered for many years to come as a day that ended many a trader’s career, and saw the collapse of numerous financial institutions and smaller hedge funds. Accountants, liquidators and regulators are hard at work calculating the fallout of the Titanic move and probably still will be for weeks to come.” — Rocky Muddar, trader, TradeNext, on the Swiss fallout.

in full http://www.marketwatch.com/story/what-could-get-creamed-as-swiss-move-snowballs-2015-01-16

Link to comment
Share on other sites

It depends on the size of the bet, but in general, as a private individual, I would simply stay away from forwards/futures that are non-optional, and if it is a European option, it should be automatically cash-settled. Any speculative positions, I usually assume the possibility of a complete write-off, and indeed this has happened to me before (I mean a substantial 100% loss). I have never blamed anyone for these losses. Not even myself, because I wanted that risk and was fully aware of it. :D Non-speculative wealth I exclusively keep in assets that cannot go to zero value, which essentially is gold and silver bullion only. Anything else (levered property, GBP, USD, EUR, stocks of any kind) seems way too risky.

Puts on CHFEUR, anyone?

Link to comment
Share on other sites

The quote of the day

“The 15/1/15 will be remembered for many years to come as a day that ended many a trader’s career, and saw the collapse of numerous financial institutions and smaller hedge funds. Accountants, liquidators and regulators are hard at work calculating the fallout of the Titanic move and probably still will be for weeks to come.” — Rocky Muddar, trader, TradeNext, on the Swiss fallout.

It always starts from relatively small beginnings. Like in 2007 first some problems with Bear Stearns and then it's suddenly all apparent.

You can see it now - some accountant, liquidator or regulator suddenly stumbling on the real problem and then it's "Crikey look what I've found :o ".

They've probably got the movies in the pipeline already.

Edited by billybong
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
 Share

  • Recently Browsing   0 members

    No registered users viewing this page.





×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.