Black box funds among losers in Swiss franc shock

Reuters ^ | Sep 6, 2011 | Laurence Fletcher

[Aquamarine]

(Reuters) - 'Black box' computer hedge funds and managers who bet on global markets are likely to be among those hardest hit by Switzerland's shock intervention on Tuesday to reverse profitable bets on the franc's 'safe haven' status.

The Swiss National Bank surprised investors with an exchange rate cap on Tuesday, saying it would no longer tolerate a rate below 1.20 francs to the euro and would defend the target by buying other currencies in unlimited quantities.

The news sent the franc tumbling 8 percent against the euro. More

[Palter]

The Swiss populace just lost 8% of their purchasing power. Yeah, they are gonna love this.

[cuban leaf]

Unless I am mistaken, is there not a race by the world’s governments to ensure their currency is valued lowest?

Looks like the Franc is a good investment now, anyway...

[Aquamarine]

The Swiss populace just lost 8% of their purchasing power.

As did everyone else who was holding swiss francs.

[mamelukesabre]

I’m confused.

switzerland will not tollerate an exchange rate below 1.2 francs per euro so they announce a plan to buy unlimited amounts of foreign currency and this sends the franc tumbling?

None of this makes any sense to me.

[Vigilanteman]

The Swiss are more dependent on export markets than any other country, with the possible exception of Singapore.

They love getting paid on time (or early) more than any place which I've ever dealt with. Any criticisms leveled about the Japanese for being export driven or merchantalistic apply at least double to the Swiss.

[Free Vulcan]

This article is for anyone who thinks hedge fund guys are whiz kids. It’s amazing how they can’t see macro trends right in front of their face.

The Swiss have been bitched more than once about what the rising price of gold was doing to their currency. At some point they were going to have to do something. Hedge fund dudes might have wanted to lighten up a bit in anticipation.

[mamelukesabre]

WHAT?!

Are you telling me little tiny switzerland has enough money to buy foreign currency in such huge amounts that it will drive up the value of the foreign currencies?

That doesn’t seem possible.

[bert]

-——is there not a race by the world’s governments to ensure their currency is valued lowest-——

Perhaps, but the Swiss Franc was super strong. In his report several weeks just past, John Maudlin reported on a conference he attended in Switzerland. He paid US$12 for a diet coke and a short cab ride cost US$70.

They were undoubtedly feeling heat and the action noted is the result.

[Vigilanteman]

Switzerland is nowhere near as big as Japan by any measure. Japan's foreign currency buying has mixed success, at best. But any country is perfectly capable of manipulating their own currency through buying and selling, particularly when they consistently rank near the top of the world in per capita GDP, as Switzerland does.

Even those at the bottom of the dung heat can manipulate their own currency value by inflation printing, Zimbabwe being the current poster child in that regard.

[cuban leaf]

—He paid US$12 for a diet coke—

Ever see the movie “Running Man”? It’s an 80’s movie of a “near future”. The scene your post reminded me of was when a woman, at a sports arena goes to a coke machine to get a coke. The subtle joke of the scene was the price she had to pay. When the movie was released, the price was absurdly unthinkable. I mean, ridiculously, “not for at least a century” price increase.

It was $5.

It is amazing what water temperatures the frog will endure if you turn up the temperature slow enough.

[RegulatorCountry]

Well, their purchasing power has soared over the past several months, to the point that exports were tanking, so I suspect the Swiss are not too terribly upset. Safe haven currency investors are, though, especially those who got in late.