The Swiss Helvetia Fund, Inc. (SWZ) issued its quarterly report. Here are Rodolphe Hottinger and Rudolf Millisits' thoughts on our current economic situation--and it's not a pretty sight:
It is now apparent that the so-called "debt super-cycle" of the the U.S. economy has gone into reverse and that, consequently, savings must be rebuilt. As a result, much lower consumption levels have to be expected for years to come.
Mssrs. Hottinger and Millisits take a dim view of recent government intervention:
While government efforts are addressing the liquidity issue for now and some of the solvency issues, these efforts have not yet resulted in making private credit more available.
I kept waiting for the silver lining, but to no avail:
The world economic order is being structurally re-balanced away from growth driven by the U.S. consumer. The current process of de-leveraging is the result of a reduction in the U.S. current account deficit, a condition that had been pushed to the extreme. During this adjustment period, accidents are prone to happen.
As more investors seek safe havens, the Swiss franc (FXF) may receive a boost. This would allow Swiss companies to increase M&A activity, strengthening their future competitiveness. Roche's expected acquisition of Genentech (DNA) is one example.
If you're looking to invest in Swiss shares, the iShares Switzerland ETF (EWL) has outperformed SWZ over the last two years. Today, for example, SWZ dropped over 3%, while EWL declined by less than 1%. As it happens, I own SWZ. I am unsure whether to add to my SWZ positions, or open a new position in EWL.