We may be splitting hairs here, but I think the claim that the Euro peg was going to end is both trivially true (nothing lasts forever) and unhelpful.
I think we're going to have to agree to disagree here because while it's true that nothing lasts forever it was fairly obvious to many observers that the peg wasn't going to last. The political pressures on the SNB were building and would not survive ECB quantitative easing. And QE in the eurozone was clearly coming.
(Disclaimer: I was long CHF, so I made a little money on this move. I did it in actual physical banknotes--Switzerland has some pretty cool-looking ones--so it hardly counts as "investment" as opposed to "holding onto some Swiss francs so I can get out of the airport without hitting a price-gouging cash machine on my next visit to Zurich".)
In any case, this isn't the only possible fx move that would blow them up, and they still allow low-margin positions, even now. Their business model doesn't make sense unless they give punters lots of leverage, because no one will play in their casino without it. The NFA just tightened it down to "only" 20:1 for CHF and 33:1 for SEK and NOK (and only in the States). But all other currencies? Unchanged.
Shorter answer is that their business model doesn't make sense without gamblers. So maybe it isn't so much as a "screw-up" as that the whole model is prone to occasional volatility events, and therefore needs much more capital than they planned for.
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Date: 2015-01-23 11:45 am (UTC)I think we're going to have to agree to disagree here because while it's true that nothing lasts forever it was fairly obvious to many observers that the peg wasn't going to last. The political pressures on the SNB were building and would not survive ECB quantitative easing. And QE in the eurozone was clearly coming.
(Disclaimer: I was long CHF, so I made a little money on this move. I did it in actual physical banknotes--Switzerland has some pretty cool-looking ones--so it hardly counts as "investment" as opposed to "holding onto some Swiss francs so I can get out of the airport without hitting a price-gouging cash machine on my next visit to Zurich".)
In any case, this isn't the only possible fx move that would blow them up, and they still allow low-margin positions, even now. Their business model doesn't make sense unless they give punters lots of leverage, because no one will play in their casino without it. The NFA just tightened it down to "only" 20:1 for CHF and 33:1 for SEK and NOK (and only in the States). But all other currencies? Unchanged.
Shorter answer is that their business model doesn't make sense without gamblers. So maybe it isn't so much as a "screw-up" as that the whole model is prone to occasional volatility events, and therefore needs much more capital than they planned for.