Sunday, October 2, 2022

Credit Suisse

 Credit Suisse is a fiduciary institution. Fiduciary is a word derived from the Latin fides, ie trust. The word Credit prominent in its name also derived from Latin: credo means belief.  Like any financial institution, it bases its entire existence on the widespread belief that it can be trusted.

When the market prices its CDS (credit default swap) as in the chart below, it signals that it believes that it can’t be trusted.  Any other explanation, like using Credit Suisse CDS as a vehicle for hedging the investment banking industry in general, while partly true, doesn’t begin to negate the overwhelming conclusion: Credit Suisse is in trouble.

Another pretty obvious conclusion: when the chairman/CEO of a bank has to distribute a memo to all employees to proclaim that all is well…. All is not well.

I hear CS private bankers have been working the phones furiously, contacting customers to reassure them their money/securities are safe.  OK…. put yourself in a customer’s position: you get such a phone call from your advisor/PB. What’s your first thought? 

Unfortunately, the demise of Lehman, et al is not so long ago in the past as to be shrouded in the mists, in the Lethe of history.

1 comment:

  1. DB or CS? With what's coming this winter my bet would be on DB going first.