the most curious “bubble” are not shares, but the Swiss National Bank (SNB).
In March investors ran away from tech stocks putting their money on the SNB that is overloaded with tech stocks.
World’s biggest financial bubble
Orsolya Harkai
We are living in a world of bubbles that are inflating in the financial system continuously. Only their scale and growth rates are different and, of course, the information background that accompanies all this activity. The financial markets are more and more like bubbles, but the most curious “bubble” are not shares, but the Swiss National Bank (SNB).
The technological bubble has been inflating for many years, but there were events in March that scared investors. The scandal with Facebook, the collapse of Amazon and Apple, crash of Tesla car, as well other events seriously shaken the position of the most valuable companies in the world.
Overall, technological shares lost a significant share of capitalization over the past month.
Another “bubble”, young enough, but also very active, is the cryptocurrencies. In fact, it started to inflate last year, but this year, however, the trend turned, the cost of the basic digital currency – the Bitcoin, fell by about 65-75%. We can say that the bubble has already burst, although perhaps there will be another wave of inflating. But so far, prices fall quickly.
By the way, this year almost all stock assets do not feel very well, even the shares of the most popular and big ones in the IT sector, FANG (Facebook, Amazon, Netflix and Google) are depreciating.
But all this cannot be compared with the main “bubble” in the global financial system at the moment – the Swiss National Bank. While the other “bubbles” are slowly exhaling, Swiss National Bank continues to increase. The central bank has earned 32 times more money than the 85 largest private banks in the country. Moreover, SNB holds US stocks worth 100 billion USD.
In other words, the Swiss National Bank holds a large number of US companies’ shares on behalf of every country’s resident. Simply, the monetary regulator has taken the courage to invest its money not in sovereign debt or even in corporate bonds, but in the most risky segment of the market – the stocks. It is averaged that for every Swiss resident there are risk investments of 11,589 USD.
But the most curious thing that few people know is that the Swiss National Bank is not only a central bank – a regulator of monetary and credit policy, its shares are traded on the stock market. And their value has jumped since the beginning of the year by 93%. It is difficult to even imagine a central bank being traded as an ordinary company, but it is.
In March, when almost all markets were down, investors put money into Swiss National Bank stocks, believing them to be a safe asset in times of uncertainty.
Undoubtedly, it looks like some absurdity.
By the way, assuming the US Federal Reserve also decides to invest in the US stock market and invests the same 11,589 USD per capita, it will have to buy shares for 3.75 trillion USD, in practice, to double its balance sheet. |
