Wednesday, October 5, 2011

Are There Safer 'Safe Havens' Than Gold? Part II

 Precious metals have gotten a lot of attention as a safe haven over the past few years, and with good reason: They've had a great run at a time when the stock market has just been crazy.
But while gold is mighty alluring, its sharp run upward in recent years leaves me worried about a potential bubble. That has me looking for alternatives.
Since the other precious metals don't appear to be any safer a haven than gold, it's time to shift focus away from all that glitters.
But there are other places to put money that offer some measure of safety in uncertain economic times while still giving you the opportunity to make your money grow.
One of those is foreign currency.
There are ETFs tracking the Euro (FXE), the British Pound (FXB) the Japanese Yen (FXY), even the Mexican Peso (FXM).
But the one that truly has had my interest as a good hedge against a bad market is the Swiss Franc.

Change in course
Nothing is ever a no-brainer, but the Swiss Franc ETF (FXF) seemed like a real low-brainer to me a month or so ago.
From July 2007 to July 2011, the Swiss Franc was up 52 percent.
It weathered the market crash of 2008 with just a 15 percent drop and a quick rebound.
What's more, the Franc had turned upward with growing economic turmoil.
It nearly matched gold from July 2010 to July 2011.
The FXF looked like the hedge I'd been seeking.
But then ...
In early September, the Swiss National Bank dropped a bombshell. The safe harbor currency was suddenly going to be tethered to the value of the Euro.
Here's a look at what happened to the Franc ETF since speculation about a Euro-based cap on the Franc's value surfaced.
Not very encouraging.
But with all the economic trouble in Europe, who can blame investors for turning away from the Franc?

Other currencies
Over the past few weeks, I've read numerous articles about other "safe haven" currencies that could replace the Swiss Franc. The British Pound, Japanese Yen, Australian Dollar (FXA), even the Norweigan Kroner have turned up as good alternatives.
Granted, my research is by no means professional. I'm a lay investor.
But I tend to agree with this article, penned a couple months before the Swiss Franc took a turn downward. Other countries' currencies could not stand up to the Franc simply because the countries were all carrying major debt, or had a history of monetary tinkering that the Swiss did not.
It was the only true safe haven currency then. And now that its value is leashed to the Euro, it's no longer the safe haven it once was.

So, my quest for a better safe haven than gold continues.
As always feel, free to offer suggestions.

See my portfolio here.

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