Why Owning Swiss Francs Can Help You Make Money

Since 2016, 46% of the world’s dollars have been printed without generating wealth and the Swiss franc can help us generate a better CAGR

It is not news to see newspaper front pages with headlines talking about oncoming inflation, nor is it news to see the latest data on YoY inflation from the US, which is the highest in the last 29 years. And this is where the question comes in, ‘So, where can I invest my money?’

The answer is not simple, there are several backtests that show that both Real Estate and gold have served as a hedge against inflation, and the latter, despite being very volatile in the short term, tends to be tremendously stable in the long term.

As I explained in my first article, I strongly believe in the asymmetric portfolio and in the importance of minimizing losses, for this, it is key to have uncorrelated assets. In this way, I propose to have between 60–80% of the portfolio in assets with very little risk (short-term bonds, gold, silver or different currencies) and more now that inflation and the tapering of the FED are around the corner.

One of the currencies that could help us generate an extra profit with very low risk could be having Swiss francs (CHF), these are the main reasons:

1. The money supply of Swiss francs is not increasing exponentially

As we already know, both the FED and the ECB are printing banknotes as if there were no tomorrow, remember the ‘Whatever it takes…’. However, many central banks have not done the same as that of Switzerland. While the US has increased the money supply (M2) by 45% since 2016, Switzerland has only increased it by 14%.

2. Higher national savings rate

The increase in the money supply is being translated into much lower interest rates, this means that the incentive to save has decreased in these countries, causing the personal and national debts of these countries to increase.

3. One of the biggest government reserves in the world

Reserve assets are assets that are readily available to and controlled by monetary authorities for direct financing of payment imbalances. Switzerland is one of the most robust developed countries globally, even bigger than the US, which makes it very antifragile (we will enter in detail the following point).

4. Antifragile country with weak central state and decentralized society

Swiss cantons are also very small bottom-up decision-making units, even boasting a weak or non-existent central state. For Taleb, de-bureaucratized and decentralized societies offer a better base for business.

Conclusion

The article explains several reasons why having either Swiss francs or companies listed in that currency seems tremendously beneficial to obtain a better performance in our portfolio. To give an example, Nestle’s shares have risen +29% since mid-March 2020 (not including the dividend, which was approximate +5%), simply due to the fact that they had the investment in CHF, we would have increased a 6% return on this investment in just one year.

This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.

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