Today we got a buy signal from the Swiss franc – and I’m happy to jump back in. I only wish I could have jumped in at a lower price…but I had to honor the new system. Rules are rules, you know. And I don’t have the luxury of ignoring the rules of system like the Fed has the luxury of ignoring the rules of basic economics!
As previously mentioned, Jim Rogers is a huge fan of the Swiss franc, which should be enough to put it on the radar screen of any sophisticated investor. He believes the carry trade will unwind someday in a big way, which will send the Swiss franc soaring.
Back to basics – why is this important? The carry trade involves borrowing “cheap” currencies (with low interest rates) and investing in currencies with high interest rates. The carry trade currencies of choice are the Swiss franc and the Japanese yen, which many (including Rogers) believe have been unfairly pounded down by this trade. The reasoning is that someday the music will stop, people will have to unwind this trade (we’ve seen this in fits and starts since the credit crunch), and the yen and Swiss franc will soar.
Chuck Butler, author of the Daily Pfennig on why he likes the Swiss francs fundamentals:
OK… Back to currencies… The Bhutto assassination reminded us that Swiss francs are still considered “safe assets” as we saw Swiss francs rise steadily during the day after the Bhutto news was printed. Gold also gained… And so did U.S. Treasuries… All considered to be “safe assets” in times of turmoil…
I like Swiss francs… I think they’ve been held down too long by the Carry Trade…. Good fundamentals… And no sub prime exposure!