Most disturbing chart of the year YOU CAN’T DO THAT


This 64′ Lennon tune is said to explore a jealous and possessive streak he felt towards women at the time, not really an uncommon insecurity.

Flirting with the very foundation of free markets and capitalism is a different matter altogether and unfortunately become an all too common central bank insecurity.  Are they destroying the very financial system they purport to protect?


Because I told you before, you can’t do that

Much has been written about central bank money printing and how QE is a policy of augmented reality via massive price distortion.  Centrally planned markets are not what we think of when we think of commerce, free enterprise and capitalism.   And with their questionable results,  central bankers have pitched some phantom revisionist justification that goes something like this…”you’ve no idea how bad it would’ve been if we didn’t do this.”


The invaluable messages normally contained within freely priced government yield curves are being distorted by design.  What are real bond market inflation expectations?  Bond supply and demand dynamics?  What would be the real premiums demanded for perceptions of sovereign credit quality, budgetary  prudence or even political risk without the trillions cumulatively printed by what is tantamount to a banking cartel?

And so we know the price of everything gets indirectly manipulated – stocks, corporate debt, commodities, equities, real estate.  Corporate stock buybacks, certainly bolstered by QE, have become a primary source of demand for US stocks.

If this grand manipulation hasn’t sufficiently crossed your line of what you believe capitalism and free market price discovery should be, then what of the BOJ’s direct purchase of equity ETFs, indirectly giving them ownership in Japan’s largest corporations.

Remember, an equity investor is a business owner, has vote on key management and directorship and say in important business developments like acquisitions or divestitures.  They share in distribution of corporate earnings via dividends.  BOJ yen created out of thin air commingles with real money skin in Japan’s equity game. Pension and mutual funds and the hard-earned money of individual savers, those making investment decisions for outlook and rate of return reasons have a forced fundamental to guage, the BOJ’s manipulative motivations.

Or how about the ECB’s purchase of corporate bonds, manipulating corporate cost of capital.  Hypothetically, how should shareholders of a company elsewhere in the world feel about a debt financed take-over bid from a European entity?  Why should Euro bond issuers enjoy capital advantages other global companies elsewhere whose central banks  won’t or can’t print similarly?  Where are we in the moral hazard spectrum when a Volkswagen can get locked out of the bond market over their emmission scandal only to see the ECB subsequently scoop up their issuance?  No bond market crime no fowl because the central bank says so?


The most disturbing chart of the year?

Without a doubt, special recognition for a central bank assaulting the free market capitalism  we used to know goes to the Swiss National Bank.   It’s stock price is up 58%, my disturbing chart of the year.

screen-shot-2016-12-26-at-12-55-26-pmYes, unlike other central banks, it is a public company with 40% of its float available for trade on the Swiss stock exchange.  It pays a dividend.

As per their website,  “Movements in the price of the SNB share resembles those of risk-free long-term bonds rather than shares (as the dividend is limited to 6% of the share capital by law).”

Do they?  The irony of Swiss banking reputation as safe haven of prudence should not be lost.  The SNB has spent years buying foreign currencies to keep the Swiss franc down and Swiss watches and chocolates moving.  Proportionately, their expanding balance sheet via QE is the world’s most aggressive,  now 100% of GDP.




Some might argue that given their relatively smaller contribution to the global magic money QE pool, SNB actions are insignificant.  This would be wrong because what they’ve done has crossed that line.  They aren’t just flirting with the notion of QE buying of equity ETFs, or corporate debt, they are buying individual company stock, taking an ownership of commerce and a voting right with money produced out of fresh Swiss air.

Some might argue that the value of their US equity holdings going from $US27B to $41B to $64B over 2 years is just 12% of their foreign currency investments, or that these ammounts are a rounding error next to the ECB’s current pace of QE, printing Euros at an 80B/mo clip.  No, actually $64B is still alot of money.  Coming from Canada, that’s over 1/4 of my country’s $C300B social pension plan.

Anyways, should messing with capitalism be measured by size or reach?  The issue is not how much they are buying with QE as much as what they are willing to buy…specific individual public companies.

$64B worth of US stocks have been purchased with money printed out of thin Swiss air because they want to manipulate their currency lower.  They can do that?  How is there not more outrage over this attack on the basic tenets of capital formation and free markets in one country because of the desperate whims of a central bank of another?

Apple’s Tim Cook has been CEO for 5 yrs, a leader within the company for 18 yrs and reportedly amassed a net worth of $500mm.  Its arguably America’s most iconic modern-day institution that has revolutionized personal computing, the music industry and the smart phone industry.  SNB owns $1.8B of Apple with money printed out of thin Swiss air.

Rex Tillerson of Exxon has $250mm of stock earned as CEO and after a 41 yr career there.  SNB owns almost 5x that amount of Exxon because the Swiss would like their currency lower.

Screen Shot 2016-12-26 at 6.11.11 PM.png


Top 10 SNB holdings as per filing, Nasdaq.


The collective outrage is mute.   Central banks are printing and investing for non rate of returnFed Baseball Cards.jpg reasons, manipulating prices and polluting the waters for the rest of the world’s real money.  If this reach into buying public equities isn’t rebelled against, then what next?  QE for private companies?  For my imaginary start-up?  Why not print cheques for everything on Kickstarter?

Where is the moral hazard line?   It is long crossed.  Capitalism is being corrupted… at the moment, the only difference between the notion of a central bank arbitrarily manipulating the price of anything and everything and what the SNB is doing, is a cusip number.


So SNB’s stock price rallies 58% in a year.  I guess when you are a public company that can also print money, their dividend must be pretty safe too.  Capitalism lost to some central self-appointed license print money?   You can’t do that.