Swiss Franc: Still A Safe Haven?

[renewable]

Re: Swiss Franc: Still A Safe Haven?

UK Property Prices:


Iceland Property Prices:


US Property Prices:


Japanese Property Prices:


And again, Swiss Property Prices:


Cl1ue: are you not putting the chicken before the egg: The crashes in Japan, and to a lesser extent Switzerland, resulted in abnormally low IRs in the crashed countries, who exported their (re)inflation to the US & UK through the carry trade?

[c1ue]

Re: Swiss Franc: Still A Safe Haven?

Renewable:

The data you use is more than a little suspect given that it is a real estate site.

For example - looking at rental yields: Switzerland is somehow at par with the Ukraine.

Now I'm sure if you take every farm and alpine lodge and average out against the major cities, the result might be low - but I somehow doubt that Swiss property prices and rents are anywhere near what you see in the Ukraine.

The rent graph shows Switzerland being lower than France. Well, my firsthand experience in Geneva was of many people living in France and commuting to Geneva to work. Certainly Geneva is also a major financial center, but these people were riding a train 30 km or more; surely there is Swiss farmland somewhere in that span?

In any case - the point I am stressing is not that Switzerland is in a real estate bubble. What I am saying is that Switzerland is a FIRE economy - if perhaps more FI than RE - and the effects of a debt collapse on FI can be just as brutal as a combined FRE collapse as we see in Iceland and the UK.

[renewable]

Re: Swiss Franc: Still A Safe Haven?

Renewable:

The data you use is more than a little suspect given that it is a real estate site.

.....

In any case - the point I am stressing is not that Switzerland is in a real estate bubble. What I am saying is that Switzerland is a FIRE economy - if perhaps more FI than RE - and the effects of a debt collapse on FI can be just as brutal as a combined FRE collapse as we see in Iceland and the UK.

The data seems adequate to demonstrate that the situation in Switzerland is not the same as in Iceland - Switzerland does not seem structurally much closer to Iceland than the UK in the economic sense - apart from banking being far too big a component of 2 relatively small economies (a tiny one in the case of Iceland). Iceland had to raise IRs to cool a RE bubble - which cause massive inflows of carry trade money.

The situation in Switzerland seems unique: very low IRs caused by a RE crash (more like Japan than anywhere else). Which caused vast overlending. It will be interesting if the Swiss are as good as the Japanese at getting their carry trade back, or not...

[c1ue]

Re: Swiss Franc: Still A Safe Haven?

Renewable,

Iceland and Switzerland are structurally different countries - true.

Cod and hydro/geothermal power vs. offshore banking. Island vs. mountainous landlocked nation. Homogenous population vs. multi-lingual/ethnic.

But whether their present economies are based on truly different things: leverage and 'hot money' - time will tell.

As the American example shows - too much easy money can bubble up in different ways: the Internet stock market bubble followed by real estate, 10 years prior to that the overlending to Latin America.

It is the latter which may apply the most to Switzerland...

[renewable]

Re: Swiss Franc: Still A Safe Haven?

I think, as you alluded to earlier:

- The US, UK & Iceland are FIRE economies
- Switzerland (and I suppose Japan) are FI economies that lent too much to FIRE and RE economies - maybe Switzerland can be described as a 'HI FI' economy

It will be interesting to see which type blows up more spectacularly!

[renewable]

Re: Swiss Franc: Still A Safe Haven?

http://fora.tv/2008/10/21/Geopolitic..._Credit_Crisis

Video comparing US financial situation with Europe. Confirms c1ue's point about massive over-reliance on the banking sector in Iceland, the UK & Switzerland.

Half way through: "Switzerland is first in line - don't put your money into Swiss francs, please"

Grrrr..... my francs have done so well so far.... now I've got to decide what to change them into :confused:

[Charles Mackay]

Re: Swiss Franc: Still A Safe Haven?

Better than gold?...:eek:

No, but I don't think gold can really be considered a currency. It's a way to store pure wealth over time and then is converted to currency when you need to buy something. It's really too valuable to use as a currency! ;)

[Guest]

Re: Swiss Franc: Still A Safe Haven?

With respect, C1ue may be a little out on a limb on this assertion. The highest liability is in direct Swiss loans to EE. The rest, liability to EE in CHF denominated loans made by other country's banks is not plausible - at least not to me. Or it would require a fairly intricate interbank map evidencing the liabilities linking back to Switzerland's banks, which I'll venture to guess none of us have?

[Guest]

Re: Swiss Franc: Still A Safe Haven?

Great discussion between C1ue and Renewable. Very informative. One one point I'd suggest this much: If you find yourself automatically disqualifying the USD for the next 24 months, take another close look at your "bedrock assumptions".

http://fora.tv/2008/10/21/Geopolitic..._Credit_Crisis

Video comparing US financial situation with Europe. Confirms c1ue's point about massive over-reliance on the banking sector in Iceland, the UK & Switzerland.

Half way through: "Switzerland is first in line - don't put your money into Swiss francs, please"

Grrrr..... my francs have done so well so far.... now I've got to decide what to change them into :confused:

[laurenta]

Re: Swiss Franc: Still A Safe Haven?

Renewable:

The rent graph shows Switzerland being lower than France. Well, my firsthand experience in Geneva was of many people living in France and commuting to Geneva to work. Certainly Geneva is also a major financial center, but these people were riding a train 30 km or more; surely there is Swiss farmland somewhere in that span?

Hi c1ue!

the reasons there are so many cross-border commuters are:
- agricultural land close to Geneva is on communes that are mostly UDC-led. (far right) they want no foreigners and zone accordingly.
- work-permits: companies employing EU nationals can get a cross-border permit much easier than a residency permit. (depending on skills/qualifications)
- geography (to the north a noisy airport, to the south road traffic is snail paced, to the west: mountains, to the east: the lake)

Cheers

[renewable]

Re: Swiss Franc: Still A Safe Haven?

Still fairly confused about the swiss franc. 3 things happened recently:
- The SNB selling CHF for EUR (apparently on the 9th of March according to http://www.snb.ch/ - reported on the 12th?)
- The relaxing of the secrecy laws (reported on the 12th)
- Cutting of interest rates (on the 12th March)

All this virtually simultaneous actions 'only' resulted in a (slightly under) 4% fall in the franc. Although that's a largish move in currency terms, it still seems a relatively small reaction to these 3 actions. Suppose the relaxing of the secrecy laws could have already been priced in to some extent.

From the following article, CB intervention is very unusual: http://www.ft.com/cms/s/0/30f7df5c-0...0779fd2ac.html

The Swiss National Bank moved to weaken the Swiss franc yesterday, the first time a leading central bank has intervened in the foreign exchange markets since Japan sought to weaken the yen in 2004.

Possibly seems more like a currency struggling to keep up with everyone else's global competitive devaluation than anything else...

Marc Faber is very scathing about the SNB, but doesn't their unusual action in selling CHF mean they see little risk of CHF devaluation?

[renewable]

Re: Swiss Franc: Still A Safe Haven?

Another possibility is that the SNB are trying to devalue the swiss franc vis a vis the Eastern European currencies, in an attempt to avoid defaults? :confused:

[c1ue]

Re: Swiss Franc: Still A Safe Haven?

Renewable,

I hope for many people's sake it is not true - but everything happening now has the earmarks of a UK style devaluation.

The UK had a property and financial services bubble; Switzerland's will likely turn out to be an Eastern European lending and offshore banking bubble.

The switch on privacy policies bodes poorly not just for EU and US citizen's accounts; the African dictator and drug lord money is also likely uneasy.

If one or more $trillion of offshore banking money (out of the estimated $7t) leaves Switzerland for whatever reason, that can't be good.

[rjwjr]

Re: Swiss Franc: Still A Safe Haven?

For what it's worth, John Williams of ShadowStats just this morning issued a subscriber alert that the Swiss Franc is still a very good hedge against the US$ and other currencies. I don't want to post much since I am unfamiliar with copyright issues as it pertains to piad subscriber services, but here is a small portion in his words,

"Underlying currency fundamentals for the Swiss franc not only outshine those of the United States, but also those of most of other major currencies. Accordingly, the Swiss franc continues to hold its relative top ranking versus the greenback, euro and pound sterling."

[santafe2]

Re: Swiss Franc: Still A Safe Haven?

For what it's worth, John Williams of ShadowStats just this morning issued a subscriber alert that the Swiss Franc is still a very good hedge against the US$ and other currencies. I don't want to post much since I am unfamiliar with copyright issues as it pertains to piad subscriber services, but here is a small portion in his words,

"Underlying currency fundamentals for the Swiss franc not only outshine those of the United States, but also those of most of other major currencies. Accordingly, the Swiss franc continues to hold its relative top ranking versus the greenback, euro and pound sterling."

Seems reasonable considering the $USD is up over 20% and the $XSF is down over 15% in the last 9 months. Afterall, they're both currencies undergoing the same general stresses. That said, I exited the Franc a week ago due to uncertainty with regard to their near term banking issues.