Posts Tagged ‘SWF’

Notes From Underground: SNB Fights the Battle of the Bulge and Thomas Jordan Says Nutz to a Sovereign Wealth Fund

November 28, 2012

The Chairman of the Swiss National Bank delivered a speech today in Bern, “SNB monetary and investment policy and the impact of the strong Swiss Franc.” The investing world knows that the Swiss have pegged the franc to the euro at 1.20 more than a year ago and have been successful in keeping the floor of the EUR/CHF in place. The result has been a massive growth in the Swiss foreign reserves as the SNB has had to diversify out of some of the euros and into other currencies. Mr. Jordan made it clear that the SNB was “prepared to buy foreign currency in unlimited quantities.” The Swiss will continue to keep the EUR/CHF floor in place as part of its mandate on monetary policy for an overly strong FRANC has a deflationary impact on the Swiss economy.

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Notes From Underground: A Market Pregnant With Fear Suffers A Contraction From A Confusing Headline

October 25, 2011

The global markets are on tenterhooks waiting for the European leaders to come to some definitive plan of action to secure the European banking sector and provide relief to the problem of sovereign solvency issue of the so-called PIIGS. This problem has plagued the financial landscape since January 2010, when the Chinese SWF failed to buy a Greek 25 billion euro bond offering. When China didn’t fund Greece, the spotlight was directed to the European debt markets and the result has been a steady decay in the value of the sovereign debt of the European peripheries. After previous crisis meetings to stem the debt crisis, the time has come for the EUROCRATS and their political leaders to provide a program that has some genuine credibility.

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Notes From Underground: an update to Notes’s March 1 piece

May 28, 2010

In a developing story, it appears the U.K.’s PRUDENTIAL PLC¬†is trying to renegotiate its previous deal for AIG’s Asian insurance unit,AIA. We originally thought that PRU was paying a rediculous amount for the AIA unit, especially since they were using an already badly depreciated currency: the POUND. We only point to the story as being an influence on the POUND. If the deal fails to consummate, previous short STERLING positions, which were put in place to fund the deal, will have to be unwound. This will have an impact on the U.K. currency, both outright and on several crosses. We just want our readers to be aware of the implications of this potentially ill fated deal. (more…)

Notes From Underground: AIG is selling the crown jewels to get itself into the Tower of LONDON

March 1, 2010

The unfortunate news from the weekend was the disasterous earthquake that shook Chile. We await more news on the devastation and the human misery that accompanies all such events and hope that it is minimal. The markets reacted to the copper as it is the market’s job to do. The short copper positions ran for cover as they were correctly afraid of a short squeeze because copper could have short-term supply problems, even though the Chileans said that the mines were going to run as usual and the ports seemed to be running for exports. The copper markets will be on edge as the news will continue to trickle out about the overall damage.

Traders should be cognizant of other global producers to meet short -term demand. It is well known that China is sitting on massive stockpiles of copper and should be able to weather any disruption. Production from Australia will be ramped up if need be. Speaking of Australia, we want to remind readers that there is a central bank announcement tonight at 9:30 CST. The market is leaning toward a tightening of 25 basis points as the RBA chose not to move at the last meeting. The Aussie is one of the only central banks that is currently ahead of the curve and this has made it a favorite of the currency carry crowd. If the RBA holds at 3.75% on its overnight rates, we expect to see a selloff in the Aussie but you should be prepared with support levels.

The biggest financial story over the weekend was that AIG is planning to sell its Asian insurance unit to Prudential of the U.K.for $35 billion. This has led to weakness in the British pound as the market is anticipating the buying of dollars to do the deal. This transaction bothers us for several reasons. First, the U.K. insurer is using a weak currency to do the transaction. Where are the potential buyers who could use a strong currency and therefore pick up better value?

Secondly, why did the Chinese not try to make this deal as they have a long history of involvement with AIG? The insurance conglomerate has had a long presence in China–AIG was established in Shanghai in 1923. By buying AIG’s Asian operation, China could have put their massive DOLLAR stockpile too good use. Lastly, when a company is selling off its best businesses to finance its mere existence, we begin to wonder what their strategy is going forward. The huge wealth held in sovereign wealth funds makes us question why the SWFs are hoarding rather than spending.

Something that also caught our eye was the Italian bond futures. As traders we look for the disconnects in the market that take us from what ought to be happening to what is happening. When the Greek debt problems and the Dubai debt news arrived on everyone’s radar screens simultaneously¬†Thanksgiving weekend, we noted that the only way we had to play in the European debt arena was through the newly listed Italian bond futures. The fact that the Italian bonds became the proxy for all the PIIGS made us pay close attention. We find it interesting that with all the talk about contagion in the European debt markets that the Italian bond futures are now trading above when the severity of the Greek problems made the headlines. As usual we will point out divergence when it occurs. This is why we always believe that 2+2=5!