SNB Loses 14 Billion Swiss Francs On Euro's Fall

At least they have managed to make a few Hungarian home owners (temporarily) happy.... ;-)

Immerhin hat die SNB es geschafft etlichen ungarischen Immobilienbesitzern ( vorübergehend ) Freude zu bereiten.....;-)

Marketwatch

The Swiss National Bank on Wednesday said the sharp rise of the Swiss franc, particularly against the euro, resulted in exchange-rate losses of more than 14 billion Swiss francs ($13.3 billion)in the first half of 2010.

But income from foreign-currency and Swiss franc positions and the steep rise in the price of gold limited the central bank's first-half loss, which is expected to total around 4 billion Swiss francs, the SNB said.

The SNB, which had intervened heavily in an effort to brake the decline of the versus the Swiss franc, said it increased foreign-currency investments by around 132 billion francs in the first half of 2010, with the bulk placed in euro-denominated investments

Swiss National Bank Confirms Massive FX Intervention Losses, As Spike In M3 Reported via ZH

Following such a massive losses for the small country (nearly 2% of GDP) it was only a matter of time before the other 26 Swiss cantons, which share in the profits and losses of the SNB, said enough.

"The SNB said last month it had stopped intervention. Its official reason was because deflationary risks from the surging currency had declined, but most economists ascribed the move to growing concerns about the risks from the massive foreign currency holdings."

The "success" to weaken the Swiss Franc can be clearly be seen in this chart......

Der "Erfolg" den Anstieg des Schweizer Franken zu verhindern wird im nächsten Chart eindrucksvoll veranschaulicht......

If they continue to fight the inevitable the SNB is on track to beat even their ""GOLDen Masterpiece"....

Sollte die SNB weiterhin versuchen das Unvermeidliche durch Interventionen zu verhindern bzw zu verlangsamen bestehen gute Chancen selbst Ihr bisheriges "Meisterstück" in Sachen GOLD noch zu toppen....

The Fed Blinked.....Let The Bailout Begin.....Got GOLD :-)

Golden times ahead.... Things must be really ugly ( read Bank Run on CFC )...... First higher than usual repos, then taking MBS as collateral for the repos, now the discount rate cut, next week...... Havn´t found the word "CONTAINED" in the release :-)

Goldene Zeiten .... Die Dinge dürften wirklich nicht zum Besten stehen ( siehe Bank Run on CFC ) ...... Zuerst die erhöhte Aktivität der Repos, dann die ungewöhnliche Maßnahme auch ABS als Sicherheit zu akzeptieren, nun die Senkung des Discountsatzes, nächste Woche.... Konnte das Wort "CONTAINED" nicht in dem veröffentlichten Text finden.... :-)

Thanks to Wall Street Follies

Fed Cuts Discount Rate to 5.75% to Ease Credit Crunch
The Federal Reserve unexpectedly cut the discount rate and said it's prepared to take further action to ``mitigate'' damage to the economy from the rout in global credit markets.

The central bank reduced the rate at which the Fed makes direct loans to banks by 0.5 percentage point to 5.75 percent. Policy makers kept their benchmark federal funds rate target unchanged at 5.25 percent. Today's action is the first reduction in borrowing costs between scheduled meetings of the Federal Open Market Committee since 2001 and Ben S. Bernanke's first as Fed chairman.

``Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth,'' the FOMC said in a statement released in Washington. ``The downside risks have increased appreciably.''

The committee is ``prepared to act as needed to mitigate the adverse effects on the economy arising from disruptions in financial markets,'' the statement said. The Fed's Board of Governors released a separate statement announcing the discount- rate cut

Adding Funds
Until today, the Fed had been injecting extra funds into the banking system to meet rising demand for cash. That didn't help companies much in getting access to capital. The amount of commercial paper outstanding, a key financing tool, has fallen the most since the 2001 terror attacks.

The Fed said in cutting the discount rate, it was approving requests from the boards of directors of the New York and San Francisco district banks. Among the New York Fed's directors are JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, Lehman CEO Richard Fuld and General Electric Co. CEO Jeffrey Immelt.

Thanks again to Wall Street Follies

Via the WSJ Explaining the Discount Window
The discount window is a channel for banks and thrifts to borrow directly from the Fed rather than in the markets. Until a few years ago, the discount rate was set below the fed funds rate and loans were subject to numerous conditions. Banks were reluctant to access the window because it was associated with a stigma usually reserved for distressed banks. A few years ago the Fed overhauled the discount window to try and alleviate that stigma; the rate was then set one percentage point above the funds rate and subject to far fewer conditions. In spite of that, discount window borrowing has remained paltry. Discount lending averaged just $11 million in the week ended Aug. 15. Although that was up from $1 million in the prior week it was puny compared to the billions of dollars the Fed has regularly injected into the financial system through open market operations.

Fed officials hope that reducing the penalty rate associated with the window and lengthening the term of loans to 30 days from one further lifts the stigma and gives it a tool to supplement open market operations for reliquefying markets. Open market operations, under which the Fed buys and sells securities to adjust the supply of bank reserves and keep the federal funds rate on target, primarily operate through a network of primary dealers, some of whom are large banks. Thus, they have only indirect impact as a supply of funds for the thousands of banks that are not active in the money market. The discount window however is available to any bank or thrift, and the terms are easier than for fed funds loans. For example, banks may submit mortgage loans, including subprime loans that aren’t impaired, as collateral, and many probably will.

> The yield on the 10 year just spiked 9 points......

> Die Rendite der 10 Jahresanleihen ist gerade um 9 Punkte gen Norden gesprungen

Disclosure: Long Gold, Goldmines (HUI), NAK , Short KBW Mortgage Finance Index (including Countrywide), Homebuilder (Index), WCI, REITs (Index)

"Club Deals" from Sovereign Wealth Funds

This is to my knowledge one of the first so called "club deals" in which two or more state owned or controlled entities are teaming up for a takeover or merger. This is a very significant event which if it succeeds should be very positive for equity markets overall.

It will be interesting to see how ABN and the Dutch public will react to this Barclay's/Temasek/China Development Bank offer. I think it is very difficult "politically" speaking for SVF to make bigger takeovers without a "strategic" partner like in this case Barclay's. But this "indirect" approach could be a way to dampen the "fear" that the "Chinese", "Emirates" or "Russians" are buying brand names or "national icons".

We in Europe have this discussion right now with the tendency to create a "golden share" that gives the countries a veto. The rule today is only in place for defence related companies but the trend is to open the gates and include utilities etc......

This would be the exact opposite what the EU was praying for the past decade.....excluding France...:-) . This deal could give us a first hint

Das ist meinem Kenntnisstand nach einer der ersten gößeren Deals in dem sich zwei staatlich kontrollierte Unternehmungen zusammenschließen um eine Übernahme zu stemmen. Das könnte der Anfang eines Trends sein der die Aktienmärkte bei Erfolg wohl nachhaltig unterstützen dürfte.

Ich bin besonders auf die Reaktion von ABN und der holländicshen Öffentlichkeit gespannt. Ich denke das es "politisch" immer noch sehr schwer für die SVF ist größere Übernahmen von "Brand Names" in Eigenregie durchzuführen. Der jetzt eingeschlagenen Weg den Anfang mit einem strategischen Partner wie in diesem Falle Barclay´s zu machen könnte die Furcht vor den Chinesen, Russen, oder Arabern evtl. etwas lindern.

Das ganze wird umso brisanter als wir in Europa ja gerade die Diskussion um die mit einem Vetorecht ausgestattete "goldene Aktie" führen. Bisher greift diese Regelung nur bei Aktien die mit dem Verteidigungssektor zu tun haben. Die aktuelle Diskussion läßt erahnen das eine Ausweitung auf andere Sektoren ( Versorger) durchaus im Bereich des möglichen liegt.

Das wäre das genaue Gegenteil von dem was die EU seit Jahren predigt....... mit Ausnahme von Frankreich :-). Dieser Deals könnte einen ersten Aufschluß geben wie die Stimmungslage ist.

Barclays Raises ABN Offer on China, Singapore Funding

July 23 (Bloomberg) -- Barclays Plc, vying to buy ABN Amro Holding NV in the biggest banking takeover, raised its offer to 67.5 billion euros ($93.4 billion) after securing investments from the governments of China and Singapore.

China Development Bank will invest 2.2 billion euros in Barclays, and a further 7.6 billion euros if the bid for ABN Amro succeeds. Singapore's Temasek Holdings Pte, the city-state's investment arm, will invest 1.4 billion euros initially, and an additional 2.2 billion euros upon the purchase of ABN Amro.

A merger of ABN Amro and Barclays would create a bank with a market capitalization of more than $160 billion. The Royal Bank- led group's offer, which will end Oct. 5, is 93 percent in cash.

``China and Singapore, especially through Temasek, have always had a long-term ambition within the global markets,'' said Lok Yim, head of fixed income and equity for Deutsche Bank AG's private wealth management group, based in Hong Kong. ``As the renaissance of Asia comes into full fruition, it is only natural that foreign exchange reserves are deployed differently.'' ....

> taken from Temasek Holdings

China Development Bank is one of the nation's so-called ``policy banks,'' which support the government's development and political agenda by lending for public works and to targeted industries. The government is planning to reorganize all three into commercial, profit-oriented banks.

Temasek's investment in banks, including stakes in Bank of China Ltd. and China Construction Bank, helped bolster its earnings. Its full-year profit surged 71 percent to a record S$12.8 billion ($8.2 billion) in the year ended March 31, 2006, according to its annual report. Investments overseas account for 56 percent of the $85 billion of assets Temasek manages, the report said.