Thursday, January 15, 2015

Swiss Abandon Euro Peg

As expected, the Swiss's peg to the Euro has failed. The Swiss, buying vast quantities of Euro as it declined to protect the Swiss franc, was essentially doubling down on a losing trade. These types of decision, regardless secondary motivations, bankrupt not only investors but also nations.

The move, a serious blow to the Euro and Eurozone, will encourage others reevaluate their allegiance to the cause. Who will be the first to leave the Euro? It's only a matter of time.

Headline: Swiss sucker punch global markets

Stock futures on a roller coaster ride this morning because of something the Swiss did. Really. The Swiss National Bank (SNB) said they were abandoning the Franc -- Or "swissie" -- link to the euro. Analysts are still figuring out what this means on a global basis. The knee-jerk reaction was a 2% drop in U.S. stock futures before rebounding. If you think that's aggressive consider it in the context of a 30% spike in the price of a swissie tracked by the CurrencyShares Swiss Franc ETF (FXF) and an absolutely devastating drop in the Swiss stock market tracked by iShares MSCI Switzerland Capped (EWL)



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