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Switzerland Has Lost It... Where's the Next Safe Haven?By
Wednesday, October 19, 2011
"Switzerland has lost it – it's no longer the safe haven it once was," asset manager Adrian Day said over dinner Friday night in Dallas.
"The new Switzerland might just turn out to be China."
The idea sounded crazy – at first.
Switzerland has a longstanding reputation of being a safe haven... staying "neutral" in war, respecting privacy rights, and maintaining the world's strongest currency.
But the guys at the table understood what Adrian meant right away...
"I'm flying from here to Hong Kong," Michael Checkan responded to Adrian. Michael is a precious metals dealer. "We're looking at setting up a precious metals storage facility outside the U.S. and in Hong Kong."
"My plane just arrived from Hong Kong earlier today," Geoff Anandappa of Stanley Gibbons, a collectibles firm, chimed in. "We're opening up an office there."
Switzerland has now lost its credibility with this crowd...
As I said, Switzerland's currency used to be considered the world's strongest, with a significant gold backing. But Switzerland has been selling its gold.
And worse, Switzerland recently promised to print as much money as necessary to keep the Swiss franc from getting stronger versus the euro. The Swiss are purposely weakening their currency. That's a big change from the Switzerland of old. Take a look:
 Switzerland has had a longstanding reputation as a safe haven for your assets, away from intrusive governments. Swiss banks (and their vaults) are stuff of legend. But in recent years, the famous Swiss banks have repeatedly broken their privacy promises, bowing to demands from the U.S. government.
So Adrian Day is right – Switzerland has lost it. It's no longer what it was.
But where is the safe haven of the future?
"China is the last place on earth that will stand up to the U.S.," Adrian said. "The last place that won't bow to U.S. demands."
I hadn't thought of Hong Kong as a safe haven like Switzerland before... But I need to change my thinking.
The U.S. and Europe have held many "monopolies" in world finance for nearly a century. But times are changing.
The West (namely Europe and the U.S.) is struggling under huge debt loads and entitlement promises that can never be fulfilled. Meanwhile, the East is rising.
It used to be that if the U.S. sneezed, the rest of the world would catch a cold. But that's not true anymore. Countries like India and China can keep growing without relying too much on the U.S. to buy their goods.
The world is not the same place it was even a few years ago. The incredible changes we've seen in Switzerland in just these few short years are a perfect example of the changes in the West. And you already know the incredible growth stories of the East.
I hadn't thought of it before... but China (through Hong Kong) may become the next Switzerland – the next safe haven.
As you consider where to invest your retirement or where to open an international bank account, keep this little story in mind.
Good investing,
Steve
Further Reading:
"This situation never happens..." On Monday, Steve told DailyWealth readers about another idea he picked up at the Asset Strategies conference. "It's a crazy situation in a metal you might not have considered before... But it's worth checking out right now." Get the details here.
Earlier this year, Doc Eifrig wrote about a way to protect your wealth from the comfort of your living room. This opportunity "gets you exposure to rapidly growing emerging markets," he writes, "and still gives you plenty of 'sleep at night' peace of mind." Get the full story here: How to Easily Diversify Your Wealth Overseas... and Collect Super Safe Income.
Market NotesA SLIVER OF DAYLIGHT FOR THE FINANCIALS Financial stocks are finally getting a sliver of daylight.
Most readers know big financial firms like Bank of America, Citigroup, and Goldman Sachs are suffering a dark 2011. The sector is plagued with increased regulation, customer hatred, and a declining mortgage market. All this has caused 50% declines in many of the sector's biggest names.
Yesterday, leading Wall Street investment bank Goldman Sachs told investors that it lost hundreds of millions of dollars last quarter. It's "not so great" news compared to the "great" news Goldman typically reports.
But as you can see from today's chart, this bad news isn't harming Goldman shares. It's helping it. The stock staged a powerful rally to reach its highest level in three weeks. There are still plenty of valid concerns about U.S. financial firms, but this super price action is a ray of sunlight. These days, the likes of Goldman Sachs will take every bit of that it can get.
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