When the facts change, I change my mind. What do you do? -- John Maynard Keynes

Tuesday, January 20, 2015

Swiss Francs, Euros, Black Swans

Goldman Sachs Chief Financial Officer Harvey Schwartz said that this was something like a 20-standard-deviation event, and while the exact number of standard deviations is of course a subjective matter, that's the right ballpark... problems extend beyond retail brokers. Deutsche Bank had "approximately $150 million in losses," Barclays had "tens of millions of dollars of in losses," and Citi also seems to be out more than $150 million. But you have to feel a little for the traders who racked up those losses. They were not taking crazy risks. A $150 million loss translates into a position equivalent to something like 700 million euros against the franc, not that huge against Deutsche Bank's 1.7 trillion euro balance sheet. The historical daily standard deviation of such a position would be about half a million to $1.2 million... (source: Bloomberg, infra).

The Big Picture

Financial Crisis - The Telegraph

JohnTheCrowd.com | The Sailing Website

Craig Newmark - craigconnects