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There seems to be an increasing number of events that throw the markets into a frenzy. Those ranges sound very extreme for a currency, especially a sound one like the Swiss Franc.
Once again, Gundlach had quite a bit to say about Europe in his webcast. A lot of turmoil if my recollection is correct.
Note: priced in dollars if you own the ADRs for these companies, they will be up, given the currency move, despite the move lower for the original shares on the Swiss index. If you own the Swiss shares priced in Francs, they will be down. For example, the ADR shares for Novartis are up around 4% in the US pre-market. The Swiss shares are down around 10%.
This isn't just a stunner, this is crazy. From what I've read the Swiss have been outspoken not only about their intent to keep the CHF from appreciating relative to the EUR but their ability to defend that intent. To turn around and go the exact opposite direction with no rumors or hints in the preceding days/weeks/months is not normal. I'd want to be checking who had big positions on either side of this trade in search of why they chose to do things in a way that makes some rich and others bankrupt. Luckily only a very small part of my portfolio is in Switzerland but I still find this reprehensible.
To do what they did in the fashion they did it makes me wonder what they know that we do not.
Well that could make some sense but then it was apparently what they didn't know they everyone else in the world did. Of course maybe we'll find out next week that the ECB is not only going to do something but do something really big after 6 months of talking a lot and only taking a few baby steps of real action.
But should that be much of a surprise to anyone including the Swiss? In terms of Europe, I'm a little worried that expectations have become so big that no matter what the ECB does the EUR will strengthen and the stock market will fall. "Buy the rumor, sell the news" as the saying goes.
Asset allocation specialist Brian Singer, who runs the William Blair Dynamic Allocation fund, has capitalised on the fall to add back to some of the positions he was shorting last week.
Across the market and from our perspective, that was an unexpected event. We have been short the euro and the Swiss franc, and last week we reduced both of these positions. What’s happening today is a panic response in the market place, an unwarrantedly large response.
This creates an opportunity for us to add back to some of the positions we reduced last week. We need to understand how much of what the Swiss National Bank has done was in anticipation of an ECB’s quantitative easing programme: there’s probably a little bit of that.
Also, there is possibly a healthy amount of abandoning of carry trades. Interest rates in Switzerland are very low. The ceiling on the Swiss franc made it an easy currency to borrow from and then lend in a higher interest rates currency.
We are thinking about selling a little bit more of Swiss franc, buying some Eastern European currencies and buying the euro itself. We’ll also look at European peripherals equities and add to some of our existing positions Source: Frantic franc: six top investors react to the Swiss peg action By Chris Sloley, Emily Blewett, Silvia Sciorilli Borrelli , Eugenio Montesano, Luca Rossi on 15 January 2015 http://citywireglobal.com/news/frantic-franc-six-top-investors-react-to-the-swiss-peg-action/a793214
Comments
Once again, Gundlach had quite a bit to say about Europe in his webcast. A lot of turmoil if my recollection is correct.
Those three names are about 15% of WGRNX.
http://www.businessinsider.com/swatch-ceo-on-swiss-national-bank-exchange-rate-decision-2015-1
Note: priced in dollars if you own the ADRs for these companies, they will be up, given the currency move, despite the move lower for the original shares on the Swiss index. If you own the Swiss shares priced in Francs, they will be down. For example, the ADR shares for Novartis are up around 4% in the US pre-market. The Swiss shares are down around 10%.
It appears WGRNX owns the foreign shares.
http://www.zerohedge.com/news/2015-01-15/crude-gold-jump-after-goldman-says-snb-action-hints-massive-ecb-qe
But should that be much of a surprise to anyone including the Swiss? In terms of Europe, I'm a little worried that expectations have become so big that no matter what the ECB does the EUR will strengthen and the stock market will fall. "Buy the rumor, sell the news" as the saying goes.
Asset allocation specialist Brian Singer, who runs the William Blair Dynamic Allocation fund, has capitalised on the fall to add back to some of the positions he was shorting last week.
Across the market and from our perspective, that was an unexpected event. We have been short the euro and the Swiss franc, and last week we reduced both of these positions. What’s happening today is a panic response in the market place, an unwarrantedly large response.
This creates an opportunity for us to add back to some of the positions we reduced last week. We need to understand how much of what the Swiss National Bank has done was in anticipation of an ECB’s quantitative easing programme: there’s probably a little bit of that.
Also, there is possibly a healthy amount of abandoning of carry trades. Interest rates in Switzerland are very low. The ceiling on the Swiss franc made it an easy currency to borrow from and then lend in a higher interest rates currency.
We are thinking about selling a little bit more of Swiss franc, buying some Eastern European currencies and buying the euro itself. We’ll also look at European peripherals equities and add to some of our existing positions
Source:
Frantic franc: six top investors react to the Swiss peg action
By Chris Sloley, Emily Blewett, Silvia Sciorilli Borrelli , Eugenio Montesano, Luca Rossi on 15 January 2015
http://citywireglobal.com/news/frantic-franc-six-top-investors-react-to-the-swiss-peg-action/a793214