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Assuming markets will act smoothly?
Old 01-15-2015, 06:24 PM   #1
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Assuming markets will act smoothly?

They don't and we've had a good lesson today on the futility of that thinking. Link here to story: Mayhem Erupts on Trading Floors After Swiss Central Bank Removes Cap on Franc - Bloomberg

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Outbursts of obscenities and confusion followed the Swiss central bankís surprise decision to abolish its three-year-old policy of capping the Swiss franc against the euro, according to traders in Londonís financial district. The U-turn sent the franc as much as 41 percent up against the euro, the biggest gain on record, a move that one trader estimated may cause billions of dollars of losses for banks and their customers.
Hope nobody was the wrong way here.
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Old 01-15-2015, 06:28 PM   #2
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Outbursts of obscenities and confusion....
On the flip side I'm sure there were a lot of "Yipee"s going on too. I'm in neither camp.
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Old 01-15-2015, 07:06 PM   #3
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Any guesses as to what's going to come of this? How does this bode for the Euro/gold/developed market index funds/etc?
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Old 01-15-2015, 07:09 PM   #4
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I think the Swiss want to be detached from any decisions made by the ECB wrt QE and wrt the Greek vote. This month will be quite volatile. Things could go either way, so there is no clear way to play anything. I've hunkered down myself, so I will probably lose money.
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Old 01-15-2015, 07:24 PM   #5
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The whopper is any Swiss citizen who has cash in a Swiss money market or bond fund, with that at the close the Euro value, where most of the Swiss can easily purchase their goods just got a 20 percent increase in value, the Swiss stock market was down about 10 percent in Swiss Franc terms but that too was up about 8 percent in Euro terms. As you can imagine everything they pay for from foreign governments oil, foodstuffs, etc just dropped 20 percent in price.

As the United States dollar is a smaller version of the safe haven Swiss Frank, the possibility for large gains in the dollar is there, but no means assured. This causes foreign goods to be much cheaper leading to deflationary pressures.
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Old 01-15-2015, 08:14 PM   #6
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An opinion piece on the subject which echoes some of the thoughts expressed already in this discussion: Why the Swiss have just let their currency explode | Chris Bailey's tumblr
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Old 01-15-2015, 08:49 PM   #7
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The main lesson here for me is that huge international markets had NOT anticipated this development. There were bets and they all set the price level. But the actual news made those bets change and now the price level is entirely different.

There will be many stories about what happened, why it happened, and how it might play out going forward. But the fact is people do not know the future -- not even me .
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Old 01-21-2015, 03:17 PM   #8
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I am starting to see a few articles detailing the staggering losses suffered by currency traders and hedge funds that were caught on the wrong side of the Swiss franc trade. I wonder how many more there will be. Probably there won't be too many more that lost almost 100% - that kind of news can't be kept quiet for long - but I bet there will be lots of smaller losses showing up on investors' next quarterly statements.

A Hedge Fund With $830 Million In Assets Went Bust After The Swiss Franc Surge - Business Insider

Quote:
Hedge fund manager Marko Dimitrijevic is closing his largest hedge fund, Everest Capital's Global Fund, having lost almost all its money after the Swiss National Bank (SNB) scrapped its three-year-old cap on the Swiss franc against the euro, Bloomberg news reported on Saturday.
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Old 01-21-2015, 03:44 PM   #9
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Originally Posted by Walt34 View Post
On the flip side I'm sure there were a lot of "Yipee"s going on too. I'm in neither camp.
Don't you mean, "Wheeee!"s?
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Old 01-21-2015, 05:55 PM   #10
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I consider currency trading to be one of the riskiest form of gambling. My BIL took seminar (paid) & bought SW to dabble in currency trading. I sure hope he (and folks in this forum) wasn't hurt by the Swiss' move. Speaking of the move, I think what Swiss did borders on crime and stupidity.
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