Swiss Franc: Still A Safe Haven?

[renewable]

http://uk.reuters.com/article/ousiv/...51N02K20090224

For decades, the Swiss franc has been viewed as the world's safest currency in times of uncertainty, thanks to the Alpine country's once vast gold reserves, low inflation, political neutrality and laws protecting banking confidentiality.

.....

"The Swiss will now have to become much more compliant with global banking laws," said Boris Schlossberg, director of currency research at GFT Forex in New York.

"That will make Swiss banks much less desirable as a safe haven for people who want privacy and there could be potentially a huge capital outflow from the Swiss banking system," he said.

http://jsmineset.com/index.php/2009/...e-swiss-franc/

As a result of both number one and two much of the media and expert commentary on the Swiss Franc is the use of media for dirty tricks as this is the major tool of these large funds and governments in conflict.

I would suggest in this case decision on the future of the Swiss Franc is better made on the 35 year technical price analysis. A short seeking to cover, which generally seems quite correct now amongst the weak versus dollar units, should and is taking place.

Negative media and short covering has gone hand in hand in this bear market. Was it not the same in all recent major market failures?

I'd like to ask the board's views on the future of the Swiss Franc. Is Jim Sinclair correct and the latest scare stories are just MSM manipulation by the shorts? What does he mean by the 35 year price analysis? CHF against the USD?

Are the outstanding Swiss Franc mortgages in Eastern Europe a problem for the currency - or will things like the history of stability, and the fairly large amount of gold held by the SNB mean the Swiss Franc will remain a safe haven?

[grapejelly]

Re: Swiss Franc: Still A Safe Haven?

the Swiss Franc is as doomed as the rest, and perhaps worse. The latest breach of privacy is just another nail in the coffin. The Swiss banking system is terribly unsound right now and their problems in relation to GDP are worse than they are in most places. There is demand for the franc for a few years just to pay back loans, same reason there is a bid on the USD and the Yen.

[Charles Mackay]

Re: Swiss Franc: Still A Safe Haven?

The Swiss courts have forbade UBS to accommodate the U.S. DOJ and IRS insuring banking secrecy stays intact. The swiss could pay off their entire net external debt by selling a small amount of their gold if they had to. SF is still the best currency in the world today.

It is fair to say that much of what is being promulgated as truth by the media is far from accurate. Example: The UBS versus U.S. situation. The North American media has reported and focused upon "the fact" that UBS has been ordered to release 52,000 new client names. However, very little has been said much less written about UBS' refusal to comply with the second U.S. request linked to the 52,000 UBS clients and its further decision to go to court to defend its case - a U.S. court at that - but far more importantly that late Friday last, Swiss time, a Swiss Administrative Court formally forbade UBS to proceed as demanded by the U.S.; once again backing our thesis that funds cannot leave Switzerland unless a Swiss court so orders.

[KGW]

Switzerland is broke!

It's not looking good:

http://moneynews.newsmax.com/streett...utm_medium=RSS

Economist Warns Switzerland Could Go Broke

Monday, February 23, 2009 10:05 AM By: Julie Crawshaw Article Font Size

Economist Artur Schmidt says Switzerland could go broke because Swiss banks extended billions in credit to Eastern European countries which now can't pay back the money. “Switzerland, like Iceland, is threatened with a potential national bankruptcy,” Schmidt told the Swiss daily Tagesanzeige. Loans made in Swiss francs stimulated rapid economic growth in many Eastern European countries, Schmidt says, making Swiss currency very important. Swiss banks lent francs to local banks, which in turn lent them to their customers. Such loans were especially attractive because interest rates were much lower than required for loans in local currency. The system worked as long as exchange rates between Swiss and Eastern European currencies remained reasonably stable. Now Eastern European currencies are falling and more borrowers are having problems repaying their loans. “Because of the devaluations of the national currencies, the debt to Switzerland has increased by more than one-third,” Schmidt notes. “Many of the Eastern European countries have serious payment difficulties and are virtually bankrupt.” Schmidt says the value of Switzerland’s currency could drop severely or its credit rating could be massively downgraded, creating economic trauma in a country traditionally regarded as a stronghold of financial stability. “The franc could become an unstable, soft currency,” Schmidt says. “Then Switzerland would perhaps be forced to abandon the franc and take on the euro.” According to a report from the Bank for International Settlements, worldwide franc-denominated loans of about $675 billion are in circulation, with about $150 billion of that total from Switzerland. © 2009 Newsmax. All rights reserved.

[Charles Mackay]

Re: Swiss Franc: Still A Safe Haven?

All the MSM out of the U.S. and the U.K. are Swiss bashers. TPTB in those countries don't like people having personal freedom and privacy. All freedoms are only to be awarded by the state don't you know?

They twist the figures like looking at stuff like debt to GDP ratios which is meaningless in Switzerland because 40% of the world's private wealth is there and they are dividing the debt over the tiny population of Switzerland. Totally misleading the reader.

Here's Sinclair's take:

Please be advised on the following concerning the Swiss Franc:

1. There is an ongoing battle between the US/GB and Switzerland over the full disclosure of the total 19,000 names on the books of UBS wherein tax evasion is said to have been solicited and abetted. In truth, very few of these accounts have been fully revealed and the US/GB wants all 19,000.

2. Since hedge funds pry on each other we are getting few very fat international hedge funds. They play the currency market in a big way as it is one of the few markets now able to absorb their interest.

As a result of both number one and two much of the media and expert commentary on the Swiss Franc is the use of media for dirty tricks as this is the major tool of these large funds and governments in conflict.

I would suggest in this case decision on the future of the Swiss Franc is better made on the 35 year technical price analysis. A short seeking to cover, which generally seems quite correct now amongst the weak versus dollar units, should and is taking place.

Negative media and short covering has gone hand in hand in this bear market. Was it not the same in all recent major market failures?

Why should currency be any different?

[don]

Re: Swiss Franc: Still A Safe Haven?

At least we finally got a look at B of A's books:

[renewable]

Re: Switzerland is broke!

Schmidt says the value of Switzerland’s currency could drop severely or its credit rating could be massively downgraded, creating economic trauma in a country traditionally regarded as a stronghold of financial stability.

I'm a bit confused by this - if the franc drops, back to say where it was, won't the Eastern Europeans find the loans much easier to pay and the problem will be solved. Maybe that's oversimplifying the situation.

According to a report from the Bank for International Settlements, worldwide franc-denominated loans of about $675 billion are in circulation, with about $150 billion of that total from Switzerland.

OK, it looks as though there are no figures available for how much Switzerland had lent EE. Switzerland has apparently lent the world $150 billion. Let's take a wild guess and say 50% of that was to EE: $75 billion. Now let's put a high default rate of 25% in. Plucking a figure out of the air, $18.75 billion is going to vanish - call it $20 billion.

https://www.cia.gov/library/publicat.../print/sz.html
Swiss GDP is $309.9 billion
The (completely guessed at) amount that could vanish seems pretty small compared to Switzerland's GDP.

https://www.cia.gov/library/publicat.../2187rank.html
Swiss current account balance is +$40.8 billion
The (completely guessed at) amount that could vanish is about 50% of Switzerland's current account balance

The SNB has 1154 tonnes of gold
http://en.wikipedia.org/wiki/Swiss_N...#Gold_reserves
1145 tonnes = 40 388 686.4 ounces = About $40 billion.
The (completely guessed at) amount that could vanish is about 50% of Switzerland's gold reserves

http://www.google.com/finance?q=UBS The market cap of UBS is $25 billion
http://www.google.com/finance?q=VTX%3ACSGN The market cap of Credit Suisse is $26 billion
The (completely guessed at) amount that could vanish is about the same as the market capitalisation of one of Switzerland's biggest banks
(but market cap of a bank is probably a very random figure nowadays)

I'd be grateful if anyone has any better figures, guesstimates or any more relevant comparisons.

edit: found this: http://www.wieninternational.at/en/node/11449 says:

Bank Austria, Raiffeisen, Erste Group and others are sitting on a mountain of loans totalling EUR 224 billion in Eastern Europe alone. In absolute figures, the volume of these loans is easily the biggest in the whole of Europe. For comparison: major countries in the EU have lent much less to Eastern Europe. Germany and Italy have each granted loans of around EUR 180 billion each, and France EUR 135 billion. Switzerland has only lent about EUR 50 billion in Eastern Europe.

50 billion Euros is about 64 billion dollars

[KGW]

Re: Swiss Franc: Still A Safe Haven?

All the MSM out of the U.S. and the U.K. are Swiss bashers. TPTB in those countries don't like people having personal freedom and privacy. All freedoms are only to be awarded by the state don't you know?

They twist the figures like looking at stuff like debt to GDP ratios which is meaningless in Switzerland because 40% of the world's private wealth is there and they are dividing the debt over the tiny population of Switzerland. Totally misleading the reader.

Here's Sinclair's take:

Please be advised on the following concerning the Swiss Franc:

1. There is an ongoing battle between the US/GB and Switzerland over the full disclosure of the total 19,000 names on the books of UBS wherein tax evasion is said to have been solicited and abetted. In truth, very few of these accounts have been fully revealed and the US/GB wants all 19,000.

2. Since hedge funds pry on each other we are getting few very fat international hedge funds. They play the currency market in a big way as it is one of the few markets now able to absorb their interest.

As a result of both number one and two much of the media and expert commentary on the Swiss Franc is the use of media for dirty tricks as this is the major tool of these large funds and governments in conflict.

I would suggest in this case decision on the future of the Swiss Franc is better made on the 35 year technical price analysis. A short seeking to cover, which generally seems quite correct now amongst the weak versus dollar units, should and is taking place.

Negative media and short covering has gone hand in hand in this bear market. Was it not the same in all recent major market failures?

Why should currency be any different?

Quite a valid point, Charles.

[c1ue]

Re: Swiss Franc: Still A Safe Haven?

The Economist noted that there is an estimated $1.7T lent to Eastern Europe, and that 60% of all Polish mortgages are denominated in Swiss Francs.

http://www.economist.com/opinion/dis...ry_id=13144925

These numbers could easily mean an amount of bad debt equal to parity or half of parity of Swiss GDP.

Since Swiss are using their GDP to eat, to heat their homes, and to travel about and work, any amount of bad debt in those numbers don't bode well.

As for the Swiss Franc falling, well, it isn't falling as fast as the EE currencies.

Finally the numbers the Economist notes are also hardly set in stone. Russia's commercial debt number keep spiralling upward: originally it was $300B, but now it is said to be $500B, with further upward revisions possible.

However the possibility of massive liquidity pool attacks on the SCB is not out of the question. Of course, these attacks would not have been possible had Switzerland not allowed the use of its banks and currency in such aggressive lending practices.

So net net - no innocent parties here except the usual: the people of Eastern Europe and Switzerland.

[renewable]

Re: Swiss Franc: Still A Safe Haven?

The economist noted that there is an estimated $1.7T lent to Eastern Europe, and that 60% of all Polish mortgages are denominated in Swiss Francs.

These numbers could easily mean an amount of bad debt equal to parity or half of parity of Swiss GDP.

How do you work this out? The article linked to above clearly states: "Switzerland has only lent about EUR 50 billion in Eastern Europe" ($63 billion)

Even if the default rate is 100%, this is equal to 20% of Swiss GDP.

Assuming this article is correct, isn't the important figure the amount that Switzerland itself has actually lent?

[c1ue]

Re: Swiss Franc: Still A Safe Haven?

Because Swiss Francs were being lent by Austrian, Swedish, Italian, and other banks.

Switzerland itself didn't do much lending to Eastern Europe, true. But its banks will still fail if the loans said banks extended to other European banks aren't repaid.

[renewable]

Re: Swiss Franc: Still A Safe Haven?

Because Swiss Francs were being lent by Austrian, Swedish, Italian, and other banks.

Switzerland itself didn't do much lending to Eastern Europe, true. But its banks will still fail if the loans said banks extended to other European banks aren't repaid.

I'm struggling to understand what the effect of Austrian banks lending too much money (denominated in CHF) to EE will have on the Swiss economy and the CHF. Would have thought that it would have little effect on the economy. I don't know what it would do to the swiss franc.

The article by Schmidt above seems to be simply wrong - the Swiss themselves have not lent much to EE. Which makes me question everything he goes on to assert.

UBS and Credit Suisse seem to have lost much more already on US subprime mortgages than they will lose on EE mortgages.

[cjppjc]

Re: Swiss Franc: Still A Safe Haven?

I'm struggling to understand what the effect of Austrian banks lending too much money (denominated in CHF) to EE will have on the Swiss economy and the CHF. Would have thought that it would have little effect on the economy. I don't know what it would do to the swiss franc.

The article by Schmidt above seems to be simply wrong - the Swiss themselves have not lent much to EE. Which makes me question everything he goes on to assert.

UBS and Credit Suisse seem to have lost much more already on US subprime mortgages than they will lose on EE mortgages.

I think what Clue1 is saying is that the Swiss banks (a) lent to other banks (b) who lent to EE. Should EE default those banks (b) will have difficulty paying back the Swiss banks (a).

[renewable]

Re: Swiss Franc: Still A Safe Haven?

I think what Clue1 is saying is that the Swiss banks (a) lent to other banks (b) who lent to EE. Should EE default those banks (b) will have difficulty paying back the Swiss banks (a).

Ahhh, thanks for explaining. So all CHF loans are, in the end, the liability of commercial swiss banks?

[cjppjc]

Re: Swiss Franc: Still A Safe Haven?

Ahhh, thanks for explaining. So all CHF loans are, in the end, the liability of commercial swiss banks?

It all seems to be a giant clusterf...