Francogeddon

Big change last night when the Swiss National Bank removed its commitment to defend a pricing floor against the Euro of around 1.20 to the Euro. With that gone, the currencies are basically now at parity.

Nick Hayek, head of Swatch Group, said the collapse of the floor would cause havoc. "Words fail me. Today's SNB action is a tsunami; for the export industry and for tourism, and for the entire country"

The impact is that of course that, assuming the currencies stay where they are, prices of Swiss watches will increase in Europe....yes, we've been here before in the '70s with major consequences.

In the short term there will be little impact (hedging), but clearly if nothing changes there will be price movements....which could make Biver's focus on the more affordable end of the market look like a stroke of genius 😉

I presum the Swiss National Bank had its reasons for doing this. There will be an inevitable price rise but that's not any different that what I have witnessed aver the past 41years. I guess this is a hot topic and will remain so for sometime.

This is an open letter sent to Mr. Thomas Jorda, President of the Swiss National Bank, on Behalf of Entrepeneurs from H. Moser Watches.

Neuhausen am Rheinfall, January 15th, 2015

Dear Mr. President,

I wanted to personally and publicly thank you, regarding your dramatic move releasing the minimum Swiss Franc exchange rate of 1.20 to the Euro.

When I woke up that morning I had a strange feeling. As I checked the news, I wondered, "What am I going to do today?" aside from our usual business in January. There was no new conflict, no big news about emerging markets slowing down, and thank goodness, no new terror attack.

I am an entrepreneur, and I own a small watch manufacture called H. Moser & Cie, based in Schaffhausen, Switzerland. Very Rare is our tagline at H. Moser & Cie. Very Rare, because we produce 1,000 watches, we are entrepreneurs in an independent, family-owned business that employs 55 people, and because we are a manufacture in the true sense of the word, developing and producing our own ingenious watches.

As an entrepreneur in a small Swiss company, I like a challenge; whether it's the pressure from the big luxury groups in supply or distribution. Or, a fight to do more with small budgets against the avalanche of big advertising and marketing. Well, today, Mr. President, your dramatic move helped step it up a notch: over 95% of our watches are sold to people outside of Switzerland, and the first retailers called the same day to cancel orders.

So this morning at 10:38 when my CFO sent me an email titled "Breaking News", I thought "aha, finally something to do". Something that forces me to find smart solutions to continue our growth and improving profitability and to ensure continuity for H. Moser & Cie. and the jobs for 55 people working for me.

In fact, one thought crossed my mind: why not just move 2 kilometres into Germany and continue business as usual in the EU? I'll even beat that other restriction on permits for workers from the EU that came up in February 2014 around 20% of my employees are German.

Let me make my appeal clear to you, on behalf of the many small and mid-size businesses that employ so many Swiss people: I trust you have a strong plan that will help all of us make it through with you over the long term. Because otherwise, along with many other wonderful Swiss creations, H. Moser watches may just have become very, very, very rare.

Sincerely,

Edouard Meylan
CEO of H. Moser & Cie.

It's a clever letter from M. Meylan, but moving to Germany is not such a big deal given the brand's long connection with Schaffhausen!

Actually, I can understand why the Swiss have done this- it was put in place on a temporary basis in 2011 when the Euro collapsed and was clearly unsustainable...you can't hold back the market tide forever. You could argue that this is the 'natural' price of the Franc and the only reason that the fall was so steep is because it was artificially deflated for so long

I will be following this with vested interest.

agreed! If he truly believes his beef is with a central banker (though venting was likely the primary objective), it would be foolish to head into a territory ruled by the ECB who's current activity is that catalyst behind the SNB's move!

As you said above though, it was just to be a temporary move back in 2011. Since not many things in government end up being temporary, I can understand people's surprise.

Will certainly be interesting to watch how this plays out. This kind of thing generally hurts the little guys the most. In this case 'little guys' would be defined as independents, suppliers and employees.

It does seem like an over-reaction from the watch brands (although it will hurt them). The currency crisis back in the 70s was much more severe, because it impacted their largest market- the US. Back then, there were really only two large markets- "Europe" and the US.

But this move only impacts the Euro- no other currency. Yes, sales made in the monetary EU zone (so not sales to the UK) are still a very important market for Swiss watches, but with the emergence of Russia, India, China and other markets, the reliance on the EU monetary countries is not what it used to be.

I read today in Forbes that the Swiss National Bank "stands accused of putting its reputation for reliability at stake, and some players in the financial markets lost their shirt while others could order a new luxury watch."

"For Swiss exporters it is a “tsunami” in the words of watch emperor Nick Hayek, for importers a boon and for French cross-border workers a nice little extra earner."

I'm thinking winners and losers.