Fog Of War

- Jordon is playing defense. He has promised to hold a line in the sand regardless of the consequences. So Jordon must now stand and take on all comers. The circumstances in Switzerland are today 180 degrees opposite to that of England twenty-years ago. That said, this story is looking a hell of a lot like the devaluation of the Pound. Who can really say, “I’ll take em all on at once!”

- There is a “stink’ feature to the CHF peg policy. The benefits to the Swiss economy from the peg are at the expense of the French, Italian and Spanish economies.

- The peg policy has the support of the Swiss Parliament – for now.

- The Macro story outside of Switzerland is piling up on the SNB:

* Draghi has promised that a decent sized bazooka will go off at the next ECB meeting (1/22/15). One of Draghi’s objectives will be to cheapen the Euro – exactly what Jordon does not want to hear.

* The ongoing Russian story is a factor that increases the need for a safe haven for hot money. Zurich and Geneva have always been a destination for money looking for a safe harbor.

* Greece is going to go down to the wire on December 29 with the final vote. It will be very close. There is a real possibility that GREXIT comes back onto the table. This development would bring with it huge pressure on the EURCHF.

* The Yen is the worst place to hold reserves. Some of the money leaving Japan is headed to Switzerland. There is no safe haven left – but the CHF still comes close. All those Francs will have to be sold by Mr. Jordon – there are no other sellers.

The one thing that Jordan can’t do in this war is appear to be weak. He has to be decisive if he is to win. He has to take on the FX market and beat it to submission.  Mr. Jordon is off to a bad start – I think he pulled a weak move this morning.

The SNB announced that it was going NIRP. For a few minutes there was some market shock and awe. But the new SNB rate will be -0.5% – that’s nothing! The new SNB measures will not take effect until 1/22/15. This coincides with the Draghi bazooka. What the SNB has done is create a beacon that is shining on a date that is only sixteen trading days from today. The SNB should have made the measures immediate, and more costly if it wanted to win a skirmish in the war. But it chose to let the players off easy.

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