And 4 days ago the Swiss Financial Market Supervisory Authority regulator said...
"...The Swiss National Bank SNB and the Swiss Financial Market Supervisory Authority FINMA assert that the problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets. The strict capital and liquidity requirements applicable to Swiss financial institutions ensure their stability. Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If necessary, the SNB will provide CS with liquidity..."
Levine covered this last week. It’s factually accurate in that the US issues are unrelated, though also somewhat damning in that the issues at CS were largely of its own doing due to poor governance and investment decisions spanning multiple years.
“UBS Group AG Chairman Colm Kelleher said he will rein in Credit Suisse Group AG’s investment bank, a unit that has racked up losses in recent years.
“Let me be very specific on this: UBS intends to downsize Credit Suisse’s investment banking business and align it with our conservative risk culture,” Kelleher said Sunday at a press conference announcing the deal.”
But will they close the positions? Let’s be clear. The investing arm of CS isn’t suffering from too many middle managers or bloated salaries. They lent money to profligate gamblers. It’s speculated their losses could be in the hundreds of billions.
Closing out those positions could sway the fortunes of American blue chip stocks and publicly traded companies around the world.
Closing CS’s trading arm could reshape the entire US stock market over night.
Is it time for the Archegos Tranche of swaps to finally come due? That's been the rumor and if the rumors are close, you're right, it's going to be a doozy.
Because there's a part of HN too young to appreciate your comment, it's a reference to a debate in Clerks about independent contractors working on the Death Star II: https://m.youtube.com/watch?v=iQdDRrcAOjA
The Swiss Bundesrat (Alain Berset and Karin Keller-Sutter), Finma (Marlene Amstad), SNB (Thomas Jordan), UBS Group (Colm Kelleher) and CS (Axel Lehmann) will give a media conference at 19:30 Swiss time.
The fact that UBS is present should more or less confirm that there is a deal between CS and UBS.
Latest reports also state that the SNB is going to be providing 100B in liquidity to UBS if they need it.
This deal stinks of panic. I know they’re rushing to calm the market but I think it will have the opposite Streisand effect. Last week it was 30B CHF now they’re throwing 100B CHF to make it work? Something is terribly wrong with CS book.
Yes, and last week the backstop was 30B CHF. So why did they increase that by more than 3x within days? Makes no sense other than UBS finally looked at the books and freaked out.
No, the 100B CHF is just to bridge the liquidity. If they didn't provide this then Credit Suisse might need to sell a big chunk of its bond portfolio for further withdrawals - which would incur a big loss compared to holding the bonds until maturity. Same issue and fix as for Silicon Valley Bank. I don't know the terms for accessing this emergency liquidity but I assume it's not going to be cheap.
At market rates, it should cost the same as selling the bonds now.
And selling the bonds now would put them in the red.
So either they have been given better-than-market rates, or they're pulling some other accounting trick to make it look like there is more of value here than there really is...
UBS cant decide on that. The swiss goverment has to, and apparently it decided to make it more secure, because the market did not trust it's previous safety net.
>> Yes, and last week the backstop was 30B CHF. So why did they increase that by more than 3x within days? Makes no sense other than UBS finally looked at the books and freaked out.
There were likely internal (to CS) marks based on assumptions. The assumptions may have assumed baseline market conditions. External parties came in and didnt want to assume baseline market conditions and/or didnt agree with the assumptions, so they were changed to more conservative figures, and new marks came out. The new marks were significantly lower. They have veto power over the deal and the government was forced to backstop to make the deal happen.
as just confirmed in the press conference, the overall liquidity safety net is actually 200B CHF from SNB. Then 9B of guarantees from the Swiss government to UBS for potential risks
I’m not sure how Streisand effect is relevant here. Sufficiently large backstop removes panic because if the govnmt backstops enough there can’t be a loss for depositors. It’s always a balance between safety of depositors and liability of the government. But increasing backstop just ensures that depositors are ever safer.
They've said in the press conference that SNB is providing 100B CHF in liquidity, and (IIUC) additionally the state is insuring UBS against 9B in losses from the deal.
It's far from clear what this buy/bailout does to "end" the crisis. Was the crisis caused by Credit Suisse being too small?
> The plan, negotiated in hastily arranged crisis talks over the weekend, seeks to address a massive rout in Credit Suisse stock and bonds over the past week following the collapse of smaller US lenders. A liquidity backstop by the Swiss central bank failed to end a market drama that threatened to send clients or counterparties fleeing, with potential ramifications for the broader industry.
This makes more sense. It's an attempt to manipulate world financial markets. But if the deal doesn't address the root cause, the same situation will repeat soon enough.
There's also this from a different article:
> The deal caps a highly volatile week for Credit Suisse, most notably on Wednesday when its shares plunged to a record low after its largest investor, the Saudi National Bank, said it wouldn’t invest any more money into the bank to avoid tripping regulations that would kick in if its stake rose about 10%.
So maybe there's something to be gained by making UBS/CS bigger. It allows investment by other private parties that would have otherwise triggered onerous provisions.
I am a bit surprised and a bit unhappy that last week SNB said they gave a credit line to credit suisse after which i put a bit of money. And in one day after that, they did this merger without a shareholders vote. I would have honestly been happier as a swiss taxpayer and investor in both UBS and CS to lose my money in CS and let this piece of junk fail instead of bundling it to ubs now. Now i get UBS share to ratio 22.48 CS shares to 1 UBS. First thing every investor (including me) in UBS will do tomorrow is to get out of UBS, so even though currently i get say .74 chf per share, i won't be surprised if UBS is down 20% tomorrow or even 50 or who knows how much.
I would have been happier, if they just nationalized the bank and unwound it, even if i got less pennies per dollar invested or even zero. Now we will get another bank that will be holding the baggage. Amazing :|
I fully agree, no question about the risk. I would honestly have the investors lose it than depositors.
The thing i am unhappy about, to reiterate myself, is bundling CS to UBS. I am invested in UBS as well, and guess what, i will lose way more on that investment due to this forced merger.
If the govt. just unwound the assets slowly, it won't affect a relatively healthy bank, which was saved in 2008.
I hope i am wrong, but i feel like ubs prices are gonna fall like a knife at the opening tomorrow, unless the SNB starts buying it.
From a distance (I don't live in Switzerland and I'm not invested in any shares) this looks like a drowning man (CS) risking to drown its own "saviour" (UBS).
Bondholders in an otherwise well-capitalised bank being wiped will be interesting. It makes sense. But it also means you should dump bank debt, even if the bank is safe, if they’re vulnerable to idiot Saudis mouthing off.
This is what blows my mind, i did not expect that. Normally would have expected to get the last crumbs to stockholders. This whole spiel honestly feels super rushed and done in panic.
Of course, I can't blame anyone. Its easy for me to say anything chilling on a couch behind a screen. Cant imagine the stress the regulators and board went through to get this out before monday morning to plug the disaster waiting to happen if CS just went belly up blocking businesses and everyone involved with CS.
Cocos should have converted to shares, which would have probably doubled / trebbled / more the float, then the proceeds of the sale disbursed. Either way would have been ~10c in the dollar for all parties? Either way a CoCo is not the same product (from the perspective of a buyer) as it was assumed to be last week.
It does look a bit like they have just done the full cycle of insolvency to bankruptcy to selling off the pieces and distributing the proceeds in a 48 hour window. UBS are (effectively) not buying "Credit Suisse", they are buying the post bankruptcy assets (which somehow had a market cap of ~7bn at the close of market trading and Friday).
Obviously for a to-big-to-fail bank you cant go through all the steps.
They will be paying just 9% of the market cap from a week ago.
EDIT: This is likely wrong, it's probably more like 20+%, I was using the $.27 a stock from an earlier price of about 1 billion. It appears that the actual price is more than 2 billion.
Indeed. I think a lot of people are unaware or misinformed than hundreds of banks are insolvent right now. Something like 700B in deposits were pulled last week and that will accelerate.
50% of existing mortgages were written between 2020 and 2022 at around 3% interest at 30 years. The banks holding all those are underwater as interest rates on much safer treasuries are higher. Imagine if we start to see a bit of defaulting on those mortgages!
Mix in all the long dates treasuries they’re sitting on.
The FDIC doesn't have enough money to even cover the <250k deposits at the hundreds of banks that are insolvent when marked to market.
So we’ll either see emergency rate cuts which will increase inflation or we see the fed ignite it and the system collapses. Or they print money to backstop it all resulting in more inflation. Possibly hyper inflation.
Housing prices haven’t cratered yet - the banks wouldn’t mind some of those loans defaulting, because they could sell and get the principal out there at higher rates.
Worse for the banks, those on low rate loans will sit tight.
I don't know about other borrowers but my 2.5% 2020 mortgage was sold to (government owned) Fannie Mae (or Freddie Mac, I forget which) more or less immediately.
That’s maybe half of existing mortgages but the problem has been that banks sell to Freddie to get cash to loan. Well, loan demand was incredibly low. So they bought bonds and held onto mortgages.
Also keep in mind many mortgages are non-conforming so Freddie can’t buy them.
It is very strange that the bondholders are wiped out, while the shareholders get 2 billion. The bondholders should have a superior claim to any recovery to the shareholders. It is true that the shareholders are getting only 10% of the share price they had a mere week ago and much less of the price years ago, but still they are getting something.
This question was asked at the end of the press conference, the answer (in english translation) sounded like garbled nonsense.
> It is very strange that the bondholders are wiped out
They are not. The holders of some particular kind of bond designed to be wiped out when some capital thresholds are triggered are wiped out. (It may be debatable if what happened here was or not a trigger event though.)
(I mean, it’s true that they would be converted to equity in some scenarios when capital levels are triggered - my comment was misleading - but it’s also true that they are wiped out in other scenarios and it’s the FINMA’s call in this case.)
"In UBS’s deal to buy Credit Suisse, shareholders are getting something (about CHF 3 billion worth of Credit Suisse shares) and Credit Suisse’s AT1 holders are getting nothing: The Credit Suisse AT1 securities are getting zeroed. This is not, to be clear, exactly because Credit Suisse’s CET1 capital fell below 7%; instead, there is a separate clause of the AT1s allowing them to be zeroed if the bank’s regulator decides that zeroing them is “an essential requirement to prevent CSG from becoming insolvent, bankrupt or unable to pay a material part of its debts as they fall due.” Plus, in a situation like this, the banking regulators get to do a certain amount of ad hoc stuff, and they do. (They got rid of the shareholder vote on the deal!) Zeroing the AT1s while preserving a little value for the common does seem to have been done in an ad hoc way; my point is just that it follows very logically from the terms and function of the AT1s."
All very true, however, if they still had 14% CET1 capital ... they didnt need a bail out, or to be sold etc.
If however, they required a bail out ... then they cant have had that much capital left. It is not compatible to be bankrupt, but have 40bn of capital, while also only being worth 2bn - one of the statements has to be false.
“There has also been some confusion about solvency being equal to viability. Viability is about the ability to operate viably and independently without any form of extraordinary state support, whereas solvency is merely the ability to pay debts as they fall due. So, one can be non-viable at one point, and still be solvent at that point, which may have been the case for Credit Suisse. Viability asks will the bank last on its own, and solvency asks can they pay their debts.”
Yes I agree it's unorthodox. Something big must have happened. Possibly CS became undercapitalised or was about to, in a way which would have taken out shareholders and forced bondholders to take a haircut, which is why the central bank have to indemnify UBS against future losses? but I don't know. The details will come out.
Surely you see how that might be concerning from the perspective of the parties that would normally be involved in the bankruptcy. It seems like some liquidity lenders to the bank are being pulled through on the deal and some are not
> lenders to the bank are being pulled through on the deal and some are not
No lenders or shareholders are in the room at all - shareholders dont get a say on if they want to sell their shares that were worth 7 billion on friday for 2 billion either.
I'm pretty sure that governmental loans are being respected.
Would you be upset if you loan me 10B on thursday, Bob lends me 10B on Friday, then Monday the Bob says the business will be sold to UBS who will honor his loans but not yours?
Interbank loans, which will be far larger than the government or shareholder or bondholder liabilities, will almost certainly be respected as well.
> if you loan me 10B on thursday, Bob lends me 10B on Friday, then Monday the Bob says the business will be sold to UBS who will honor his loans but not yours
In your example, Bob is getting back 2bn of his 10bn and I am getting back 0. The term of neither agreement are being respected, people are just being told you get what you get and if you dont like it you can have less. Everyone has been served up a shit sandwich for dinner.
My reading is that Bob also happens to be the bankruptcy judge aka the state. Bob says that he is still owed $10 billion dollars but everyone else takes their lumps.
In plain terms, money lent from the government is not discharged in bankruptcy. It all has to get paid back with interest. Private lenders of emergency liquidity and get zeroed out.
While it might not be fair this is commonly referred to as Market Risk for investors. Failures like SVB or CS are rare which makes them so much more painful.
No, you get paid interest because money now has less value than money in the future. Hence why you pay interest to a bank on a loan or mortgage, but if you fail to repay they don't just write it off saying "oh at least we got some interest!"
The US government gets to pay x% interest because they can theoretically always service a debt denominated in USD. Every other borrower in USD pays (x+y)%, where y amongst other things represents the risk that they will default.
What is happening right now is the byproduct of governments not wanting to face an economic crisis and a health crisis at the same time.
Now the health crisis is over (or better yet the panic around COVID has subsided) now we have to face the economic crisis that comes with closing down the world for 2 years.
We have only just pulled that forward. There is no free lunch.
However, governments used monetary policy much too aggressively (printing money) whereas they should have been using fiscal policy (taxing rich people). Now comes the reckoning.
I've heard the same thing 15 years ago, when they bailed out UBS. Now, here we are again. They're even invoking emergency law to ship this deal.
We ought to amend the constitution, in two ways: clawbacks for variable compensation in too-big-to-fail banks and add such irresponsible behavior to the criminal code.
It is time for prison for those responsible for this fiasco.
Neither of those two things have a place in the Swiss constitution. One is a criminal matter for the Swiss Criminal Code, and the other is just a banking regulations update.
The only way to change the later is by putting it in the constitution in the first place. It's not nice, but it would work. What has the parliament done in the past 15 years? Nothing of substance, otherwise we wouldn't be in the same situation again.
Do you mean the American constitution? Do you have any IDEA what the process is even like to get an amendment in? This suggestion with the knowledge of that process is completely absurd. It will never happen.
Also, one nations constitution isn't going to prevent this issue with another nations bank lol.
I love the Bloomberg headline. It does not say "... in Historic Deal to End the Credit Suisse Crisis." Instead, it says "... in Historic Deal to End Crisis." On the remote chance that you thought there might be some sort of global bank crisis, Bloomberg tells you that it is already ending. Since Bloomberg tries to manipulate people's perception so openly (most people do not read beyond the headline), this makes me even more worried. What else its out there that they don't want me to know?
Mainstreams are the Journal and Financial Times, but practically every genre has droves of researchers cranking out everything from the questionable to prescient. (Almost universally, free blogs are the former.)
You are not saying that WSJ has anything to do with truthful reporting or investigative journalism? FT used to be better, but I think now descended to the same level. You can used them to gauge the current market sentiment or the sentiment they are trying to push, but certainly not the financial reality/truth. You get periodic bright spots like Theranos reporting, but that’s rare.
Skip the opinion section and headlines. The meat of both papers is solid, with ongoing investigative journalism. After that, you need to pay up for industry periodicals, et cetera.
My guess is the exposure is directly related to the 100b/200b (seeing the later now being reported) in backing on the deal should things go south. The real question is, will that be enough if the (swaps) are as bad as /r/superstonk and other believe them to be?
I'm going to pop some popcorn and watch it play out either way.
People have be “predicting” or more like coming to an educated guess using the plethora of public data on these subreddits for many years. I used to be an active poster on wallstreetbets years before the meme stock stuff and there was always people like you who would come after the fact and be like I can’t believe you predicted the future, but they never showed up when I was wrong. It’s only a weird timeline because you probably joined these subreddits after the hype not before.
Impressive. You managed to not answer any of my questions.
Reddit can and does create echo chambers. But that doesn't mean I wasn't willing to fully acknowledge and concede that this Reddit community was /right/ about this.
Dial back your sensitivity. We're on the same side.
This is the problem with banking - they mess up, get bought buy a competitor to sweep the problem under the carpet and kick the can down. this reduces competitors in the marketplace. Eventually there is a state bailout
There is already a state bailout. CS got loaned $54B. UBS got guaranteed another $100B loan for buying CS - and I read from another post (https://news.ycombinator.com/item?id=35222147) the state will cover up to $9B in losses from the buyout.
I wonder if there’s anything to learn from the Canadian banking industry, which, through regulation, basically didn’t participate in the 2008 collapse and seems to be in fine shape during all this. (Or maybe it’s not and we’re up next!)
Bear Stearns collapsed on March 16, 2008. Lehman Brothers on Sept 15, 2008. It took 6 months from the first major one to widespread carnage and bailouts. I can't tell what will be but I wouldn't assume we're out of the woods by any measure. The first dominos to fall are the ones holding most risk (SBV, CS), but the "safe" ones aren't really safe either.
I wonder what the Fed will do next i.e. conform to market expectations of a cooling off of QT and hikes and let inflation possibly rise or continue at 6%, or be resolute in raising rates to control inflation at the risk of a systemic failure.
Maybe, maybe not. The Fed has wiped out 6 months of QT's impact within a week. They might temporarily slow rate hikes but I am not convinced they will stop. I see this more as them plugging a hole in the economy. It will take a collapse for them to pivot and admit defeat to inflation.
The Fed had to know that as they kept pushing, more serious stress would show up in the financial system as they went higher. This is exactly what they have been looking for. To the Fed this means what they have been doing is working (their goal has rather openly been to slow the US economy, and to a lesser extent the global economy, to bring down inflation via demand destruction). Nothing quite brings economic growth to a halt like a large banking crisis and the corresponding panic.
I think it's very likely to be worse (certainly drastically more risky). The Fed has a history of hard landings.
There was a level at which more modest rates would have gradually bent inflation downward over time, and it would have taken a while (a year or two longer, say). IMO the Fed was too aggressive in trying to stop it asap. They went too far too fast and we'll see a rolling fallout from it for several years yet. Lower rates with elevated inflation for a bit longer, would have been the more prudent choice, than cranking the volume fast and risking a financial crisis.
They haven’t abandoned QT yet, Treasuries mature twice a month, mid month and end. Last week 7.1 billion in 3 year notes rolled off which was the only asset scheduled. There is a larger roll off end of month.
The “QE” money on the books is a loan as of right now which isn’t QE.
Now will QT continue? Probably not, we’re hitting a liquidity floor. I see rate hikes may continuing though.
The Fed injects money into the economy by buying US Treasuries or GSE MBS traditionally from the open market (QE).
During continued QE the Fed will re-purchase these assets when their existing ones mature. During QT on maturity rather than buy assets again they write them off and liquidity (money) is removed from the market.
They need to cut at least 100bps. This is the only way to bring all those mortgage and treasury bonds back a bit and not be so under water.
This may or may not restart inflation but it’s the only option that will be effective.
The Fed has been cargo-culting Volkner in the 80’s without considering this is a different beast. They needed to raise rates but they needed to do it far more deliberately and cautiously. And of course should have started sooner.
We need to accept multiple years of 6-10% (possibly more) inflation or collapse everything and create carnage no one wants to live in.
This round of rate rises seem so political. They know they were slow out of the gate so now seem to want to compensate, appear strong and even actively cause some damage to prove their commitment.
And all of this with the context that most of the inflation is supply side so interest rate rises are anaemic anyway.
I don’t see a pivot unfortunately even though it seems they are playing with fire here.
I have been arguing for years that they'd never get rates back to where they were pre-GFC as so much debt has been taken on at low rates. Increasing rates to pre-GFC levels will have a massive impact on the ability of borrowers to service debt and push down asset prices.
Now that they're trying to put rates back to pre-GFC levels we can see that playing out. If they choose to continue of this path it will lead to a significant recession.
Thanks for the support. I think in general people are tired of doom and gloom predictions and analysis. Downvoting, even if you know it to be possibly right, feels good.
I’m not trying to doom and gloom though. I’m just saying the Fed did not consider the time aspect of all the bonds/etc and have haphazardly raised rates too fast. If they slow it down it’s not such an issue since bonds respect time. It has been too much too fast. Erratic. Especially since just over a year ago they guided totally differently.
So they need to cut. We need to deal with reasonable inflation for at least 4 more years and then we can aggressively hike rates if need be as the mountain of low interest bonds will be turning the corner.
Deflation? Are you even understanding what’s going on right now? With 200+ banks insolvent basically? Hyper inflation is the risk right now. That it total anarchy as we see 40% unemployment. Pick your poison.
When deposits are destroyed, that causes deflation. Deposits aren’t being destroyed. But wealth, in the form of banks’ non-deposit liabilities, is.
The Fed would welcome such deflation (though not its cause). But that doesn’t seem to be likely. That said, nothing which is happening right now is inflationary other than, potentially, the Fed pausing its rate increases.
I'd argue deposits are being destroyed as banks no longer have the assets to make depositors whole. Of course central banks seem to be adopting the position that no depositors will lose any money and everyone will be bailed out.
> central banks seem to be adopting the position that no depositors will lose any money and everyone will be bailed out
Not the Fed per se. And that’s the point. Quantity of deposits in the system is preserved. Wealth down. Fed support of banks up. How this balances is uncertain, but nothing is unilaterally inflationary.
Bear Stearns was a very different case. Instead of a run on deposits, their credit disappeared. Bear operated on a system of continuous credit. They would pick up the phone and call some other place and borrow. Everyone else collectively decided to just stop lending to them, quite suddenly. They had been writing down a lot of losses but when their guy went on CNBC in March 2008 to announce that his bank had plenty of liquidity, the next day literally nobody on the street would lend them anything. Then the Fed had to bail them out on Saturday. It was really a completely different type of thing.
Everything is different at a granular level but similar at a higher abstraction. In all cases (SVB, BS), banks ran out of liquidity and had paper losses on current investments that would see them go under. Ultimately, if you run out of money, you're bankrupt as a country/company(even banks)/individual
What most people don't account for is that we're not in a classical inflation scenario - we're, at least fundamentally, in an energy cost inflation scenario where the countries with more than enough of oil and gas to spare jack up the prices just because they can.
And unfortunately, on top of that comes profiteering. The price hikes of everything that went far and beyond reasonable increases due to rising energy costs are insane - and outside of Spain which has introduced serious price controls and other counter-inflationary measures and Hungary where Orban misdirects EU funds into bribing his voters, no major Western government is doing anything about that.
At least the French are bringing out the pitchforks.
Markets don't arbitrarily inflate prices across asset classes (stocks, crypto, commodities, real estate). Classifying widespread worldwide inflation as energy cost inflation OR profiteering is (subjectively) an excuse for policy failure. Single family home owners in San Diego don't collude with condo owners in Vietnam. They do respond to bidders outbidding each other, flush with cash from asset values rising as a consequence of money printing worldwide. The core reason is money printing. The rest is noise. See charts for Fed balance sheet, M1 and M2 money supply for 10 years worth of printing in a year. The Cantillon effect makes people close to the money spigot richer at the expense of the masses.
The Fed knows it too, else QT and interest rate hikes wouldn't be used as weapons against inflation. Political messaging is oriented around not taking responsibility and blaming the pandemic, supply chain issues, Ukraine war etc. These reasons do play a role to be clear, but not to the extent that $ printing does.
Well, the Massachusetts Fed found that pass-throughs are 25% higher in a highly concentrated market, that these price increases last for longer, and that industries in the US are 50% more concentrated than they were in 2005.
So essentially, in more concentrated markets cost shocks are more likely to result in extended periods of inflation.
Why are things more concentrated? A lot of reasons, but a big one is that there were almost no effective antitrust actions for decades, and courts weakened the ability of the DOJ and FTC to enforce competitive guidelines. At the same time, Congress weakened the regulatory controls.
I removed this sentence as it is subjective and distracts from the original point. That said, the US supplies Ukraine with weapons and Intel, instead of making strong efforts to bring all parties to the negotiating table. China is now supplying weaponry to Russia. This is escalatory and takes us further from peaceful resolution. Of course, I don't have any insider information so this opinion is weakly held
It’s no use negotiating when the parties can’t come to a conclusion.
Russia wants to take Ukrainian territory, Ukraine wants to keep it and neither wants any compromise there between.
Also they probably are trying to get them to negotiate a ceasefire anyway, even if those talks aren’t being advertised, but I don’t have any inside info on that either.
If you're going to analyze the Ukraine war in terms of US policy then you'll have to take into account more than the financial world. The US's position in Ukraine affects a number of other policy positions like our political alliance's, how much we want to let Russia grow its power in opposition to our own, and even to Taiwan and how we want China to feel about any possible US responses to invasion there.
Maybe, maybe not. Crushing Russian forces helps sell weapons and also helps take down an adversary while having Ukraine fight the war. The incentives behind blowing up the pipeline also appear to align with the US cause. I would take the media's reporting on this with a large grain of salt.
The US is in the fortunate position where doing the right thing serves their geopolitical goals. That does happen sometimes. All the more reason to supply Ukraine with a lot of weapons quickly.
I agree but my devil's advocate response = I suspect that without enough incentive for a peaceful resolution, the more right thing (=seeking peace) falls out of favor. I know we've been told that Putin doesn't want to negotiate but I find it naive to take that message at face value, similar to how the US claims Russia blew up the pipeline while the US is the biggest beneficiary. Without going tinfoil hat, there is enough precedent for US lies (WMDs in Iraq, Libya etc) that I would question the messaging even though I agree Putin sucks.
Pursing peace at any cost is not the right thing. If the US has more incentive to encourage Ukraine to defend vigorously rather than paying Danegeld, well, that's no bad thing for the long term stability of the world as a whole. The only case I'd worry about the kind of thing you're suggesting is if the US were pushing Ukraine to counteratack hard into Russian territory and turn down an offer of a return to pre-2014 borders, and that seems unlikely so far - if anything so far it seems to be the US holding Ukraine back.
> Maybe. Russia's population is falling and Putin is getting older to the extent that such a war may not have happened 5-10 years from now.
We've been trying the "wait them out" strategy with North Korea and it's gone very badly IMO. At some point it's better to grasp the nettle, especially when you're lucky enough to get as clear-cut a conflict as this. There will probably never be a better time to draw the line and hold it.
> I am more worried about escalation, nukes, forever wars etc. Ukraine fighting for pre 2014 borders is one case that triggers this, among many others
Accepting peace on anything less than a return to pre-2014 borders would doom the world in the long term. It would set a clear precedent that anyone with nuclear weapons can take what they want with no downsides, and there's no coming back from that.
> I bet you the rebuilding phase will also involve American cos.
It probably will, and there will probably be corruption and looting and backhanders. It's going to suck, but there's no scenario in which the next ten or twenty years of being Ukraine doesn't suck. Kicking out Russia quickly and getting on with the rebuilding, ideally with international support for all the waste that that will involve, is the least-bad future.
> I agree but my devil's advocate response = I suspect that without enough incentive for a peaceful resolution, the more right thing (=seeking peace) falls out of favor. I know we've been told that Putin doesn't want to negotiate but I find it naive to take that message at face value
Well, you are right that cutting off military assistance to Ukraine would force it to "negotiate" (quotes because result would be more like a capitulation, considering the list of Russian demands). However, what would be the motivation for Putin to commit to peaceful resolution in such case instead of continuing the conquest of (weakened, out of arms and ammo) Ukraine?
Interesting turn of phrase, and one used heavily in Russian propaganda to remove any agency from the Ukrainian people. If the Ukrainian government had listened to their western allies Zelensky would have been on an evacuation flight shortly after the first missile hit.
I'm quite sure they are not "having to fight" against Russia for anyone except themselves, and to ensure the continued existence of their country.
I don't mean that the US instigated the war or that Ukraine is somehow a puppet, but it is convenient for the US to not have to fight it and let Ukraine use US's weaponry, drones etc to fight this war. I am not Russian or a sympathizer, but also not blind to US incentives to sell weaponry in Europe, and hurt an adversary in Russia. It is true that everybody underestimated Ukraine.
How are the US and NATO's actions escalating any further than that? Last i checked there was no Russian territory occupied by Ukrainian forces, let alone any hint of NATO involvement in achieving such an escalation.
>introduced serious price controls and other counter-inflationary measures
Price controls are not effective in curbing inflation [1] And they have a deleterious effect on production. For example: no farmer is gonna sell his produce at a price that is less than his cost to produce. So if you control the price, there will be nothing on the shelf.
Credit Suisse was a bit special. In the words of someone who's worked at several of the large banks there, "Credit Suisse was always a bit more more aggressive about risks".
If you mean whether the panic will move on to the next bank with a similar reputation, then…
>> was always a bit more more aggressive about risks
Isn't there always a handful of banks that are like that and isn't there always a handful of other banks that are invested? And isn't there always another set of banks that are invested in them? But is there really no chance of a devastating, cascading event? Should we really not panic? The only thing that holds banking together, is it that we don't panic? Because if so, then...
Maybe, but credit suisse was a mess even back in the "good days", since at least 2018. They went from blunder to blunder, even when other banks were doing just fine. The only other bank I can think of that has struggled as much is probably Deutsche Bank. In comparison, most other banks are very well capitalized even in the current situation.
Bank runs are psychological in modern times; my next worry is that the news machine has begun to nibble on midsize banks, so that may be the next victim that gets devoured for content.
There are a few other large banks that have also their lot of challenges. At this stage, as you say, it is an irrational panic. CS was well capitalised by any modern standard and it would have required massive losses before creditors and depositors were seriously exposed. But no bank can resist a large enough bank run.
that's interesting, and exactly what regulators should expect. in a certain sense, the crisis starts when the bank starts taking in large uninsured deposits
To be pedantic, this was managed money, not deposited.
You can go to CS and say "Here, I have a million, please buy and sell some shares for me so my children will have two million each", or "here, we sell much in the runup to Christmas but our costs are evenly spread over the year, please manage our spare cash so we'll earn something when we can".
your warning makes me think "wait till a bank and a media company start relying on the same AI for advice" - chatGPT, for the lulz
of course, employees of various companies in a place like NYC socialize together after work (in NY, everybody goes out after work on the regular, who wants to go home to a teeny airshaft apartment?) so they're basically engaging in a large game of telephone about what happened each day, might have the same effect.
Officially, Boeing bought McDonnell-Douglas, but in the end the engineers at Boeing got pushed out and the bean counters at M-D were in charge and ran it to the ground.
The question is will prudent people run the new UBS? Or the same sort of people who got CS in the trouble that it is in?
No, to me it doesn't feel like 2008. It's kind of in that direction, but this is nowhere near as bad. In 2008, I was on a hair trigger. Then, I was prepared to take emergency action within 24 hours. This time around, I'm not there... yet.
I'm glad they managed to get something done before Asia wakes up. We are pretty much dependent on a relatively stable financial market. TBH I'm a bit scared that a financial meltdown is imminent and many of us will lose jobs in a sudden.
Anyone have more information on the "emergency measures" that the Swiss govt used to skip the 6-week shareholder approval period? Couldn't find more information in English apart from the fact that they were being used and it seems very unlike Switzerland which has a reputation for very slow moving politics in general.
Interesting ongoing Twitter space with several Financial Industry veterans discussing this. Going as of 1:30 Central and will probably go at least another 2 hours. Mario usually gets some fairly large names to show up.
What just happened? On Friday CS was borrowing money from the Swiss national bank to buy back it's own debt and their stock seemed stable. They had just published a quarterly report showing a 14.1% CET1 ratio. Why sell at less than half Friday's closing price? Was a bank run in progress?
Pretty scary that our financial system can't take a few weeks of deliberation and the deal needs to rushed during the weekend.
Instead of general ranting I would like to learn who exactly goes bust if we allow the uncertainty for a few weeks? Is it more than just a gift to shareholders and market speculators?
CS probably goes bust as everyone pulls their money out, and has to sell all of their assets at fire sale prices. If they lose more than their capital buffer then people may not get their money back. That then has knock on effects which are harder to predict but might include other small banks with exposure to CS (and in the worst case, even other large banks).
Man, this was more serious than I thought. They rushed to get the whole thing done during the weekend and pushed it through bypassing all the shareholders.
This year is getting worse by the minute. Insane inflation killing many industries. AI threatening to take jobs - and probably actually taking a few art jobs. Now cascading bank runs and the end of one of the oldest banks in the world as an independent entity.
Just take note that mergers of CS and UBS have been discussed a few times over the past 20 years. Don’t be fooled into thinking that there wasn’t a lot of planning/analysis already done for this. In fact it might even have happened the other way around in 2008 and again there was no doubt planning for that too!
I heard shipping containers have been piling up at China’s ports and China exports are way down - with quite a few factory suspending operations. Supposedly the US stopped buying because inflation means people focus on the necessities like food.
The thought experiment then is to ask "What mechanisms connect Chinese exports with inflation?"
To get a better understanding of that, one might "rewind" time to look back at what those containers were carrying when there was a container shortage.
Since containers are a mechanism for moving goods, one might look at supply and demand of goods to try to understand what that relationship is.
Historically, when supplies are tight, retailers order the same order from multiple suppliers in the hope that one of them will come through. This typically results in adding production capacity to meet this "shadow" demand (there are orders for 300 widgets but the retailer on the other end really only wants 100 widgets, they have just ordered 100 from three different distributors who each passed on that order to the factory).
When the factories ramp up to cover that shadow demand, they put a lot of product into the distribution channel but retailer cancels their other two orders after one is filled. As a result there is now 2x the "demand" level sitting in distribution. The next time the retailer orders, their orders are satisfied out of existing stock.
Until the distributors have worked through this "excess" they don't order anything from the factories and the factories have nothing to do and don't need to ship anything so the containers sit there empty.
This "boom" and "bust" cycle is an oscillation that occurs in systems that are not critically damped (a term from systems analysis). During the 2020/2021 years a lot of demand was unmet and we had the "supply chain crisis." Once things ramped up, it is expected to have an "over supply" crisis.
Container movement has been erratic since 2020. I would look deeper before inferring causes for piles of them. (Once you actually get evidence of piles of them, because it seems you don't have that yet.)
There are many people that track actual goods. It's better than looking for a proxy.
In the space of 12 weeks, AI seems to have come from nowhere to now having the skills to replace lots of knowledge workers and creatives. Though there is some way to go, I think it’s pretty bleak and scary for employment prospects.
The vast majority of artists don’t make a living selling the “generic art” that enthusiasts are so sure AI will disrupt (and if they do, certainly not individual pieces to hotels/coffee shops/etc, but bulk licensing through agencies)
At most it would be replacing one licensing middleman for another.
CS has been lurching from crisis to crisis for as long as I can remember. The tide doesn't have to go out very far when they've been swimming naked for years now.
They probably didn't snd still don't. If JPM buying Bear Sterns is any metric, I would be worried that the government would 'ask' me to rescue another bank, and then take me to court over it for the next decade.
It's understandable people are mad at the banks and don't want taxpayer money propping up for-profit institutions. But what is the rationale for coaxing companies into taking risks at their behest that they basically know is going to be worse than you think going in?
Yes, they are acquiring a whale of a company at a low price with a lot of government support behind the deal. Imagine how it must feel to acquire your biggest rival in these circumstances.
Just writing down here as a memoir looking back at this news in 10 years, as we look back now on the fall of Lehman in 2008 - we can say that “we were there…”
