Skip to content

This weekend’s trade is CS and UBS

So, the talk is that UBS is being lined up to take over CS.

Given that markets are closed (well, not really, but, you know) we are free to speculate without anyone running off and putting the pension down on green or red.

So, the usual trade in a takeover is to buy the target, sell the buyer. They always overpay is the market reaction. So, CS at $2 (the US quote) and UBS at $19 (ditto). Buy CS and have an equal amount of money selling UBS short.

But that assumes that a bank, in extremis, takeover is like a normal takeover. Maybe the Swiss are going to claim that CS is headed for zero by Wednesday. Therefore UBS should pay 1CHF for the whole thing. At which point, obviously CS plunges and UBS soars having got a very grand deal there.

Or even, UBS gets CS for 1 CHF and everyone thinks this is Lloyds buying HBOS all over again and sells out of everything.

My belief – belief, on no inside knowledge at all – is that UBS has to pay a premium to the current CS price to clinch the deal. So, CS rises, UBS falls on announcement.

We’re about to find out, aren’t we? Also, lucky the markets are closed to that no one can put the pension on this.

13 thoughts on “This weekend’s trade is CS and UBS”

  1. I heard this on the wireless this morning. But surely UBS is likewise screwed ? This is like a drowning man being pulled onto a raft with a huge hole in it. Anyway first result is 10,000 job losses.

    I’ve heard surprisingly little about Deutsche, I thought that they were teetering on the edge and just needed a gust of wind…

  2. Well, if it’s not a pension fund decision, then it’s a gamble. And the key to gambling is working out the odds on offer and comparing them against the probabilities of the events happening. I think that the key here is the former – working out what the actual odds on offer are in this case. How high do you think the share price of a bank in as much distress as CS can possibly rise in the event of a successful, conventional takeover by UBS? Because the possibility of a one franc offer by UBS being accepted means that the possible short-term gains from selling CS might be way bigger than the possible short-term gains from buying CS.

    In other words, if you sell CS you’ve got the cushion of betting at very big odds, and you don’t have to be right every time to show a long-term profit that way. But if you buy CS, you’re basically backing the favourite, and you have to be right a lot more often in that case.

  3. I’ve just heard another report from a different station. Apparently, UBS is being forced to take over CS by the Berne govt.

    Two men forced onto a leaky raft by a bloke in a boat.

  4. Surely the thing to do is bet against the Swiss Franc? (And probably the Euro too.)

    Can anyone tell me how I should do it? Since exchange rates are relative: bet on what? Singapore dollars?

    I’d love to see the GBP rise substantially against the Euro just to enjoy the wailing from the quislings.

  5. Maybe place your bet according to whether the Credit Suisse head of global markets turns up to work dressed as bloke or woman; i.e. put your pension elsewhere altogether.

  6. I think you’re right, dearieme.
    Spaffing 6% of Swiss GDP on a zombie bank does not look like a good idea. Even Gordon Brown would have hesitated.

  7. Bloke In North Dorset

    “ I’ve heard surprisingly little about Deutsche, I thought that they were teetering on the edge and just needed a gust of wind…9

    I saw one report that claimed there had been a flight to quality and named DB. I did raise a snort at that one.

  8. Bloke in the Fourth Reich

    Owning Credit Suisse might well be an extremely terrible idea, even if it only costs you 1 franc.

  9. DB have been ‘teetering on the brink’ for a couple of decades, it feels like. “Too big to fail”?

  10. Don’t forget that CS is an example of fractional reserve banking that our host tells us makes us richer. I think that the people of Switzerland who have just backed the new UBS/CS bank to the tune of $100bn in liquidity loans might beg to differ……..thats $10m for every man woman and child in Switzerland.

  11. “$100 billion / 10 million (people) … ”

    I read the figure somewhere, I knew I should have double checked it!

    Well even at $10k each its still hardly making the Swiss richer……

  12. Bloke in North Dorset

    “ DB have been ‘teetering on the brink’ for a couple of decades, it feels like. “Too big to fail”?”

    I presume they’re still loaded up on Greek debt? Maybe not systemically too big to fail but certainly politically.

Leave a Reply

Your email address will not be published. Required fields are marked *